Friday, July 24, 2009

Guaranty Financial: Probably "Not be able to continue as a going concern"

by Calculated Risk on 7/24/2009 08:02:00 AM

To start BFF off ...

Guaranty Financial Group filed an 8-K with the SEC last night (ht Russ). Here are a few excerpts:

[T]he Company no longer believes that it will be possible for the Company or the Bank to raise sufficient capital to comply with the Orders to Cease and Desist described in the Company’s Current Report on Form 8-K filed on April 8, 2009. In light of these developments, the Company believes that it is probable that it will not be able to continue as a going concern.
emphasis added
That is more than your typical 'going concern' warning.

Current stockholders will get nothing:
The Company continues to cooperate with the OTS and the FDIC as they pursue potential alternatives for the business of the Bank. Any such transaction would not be expected to result in the receipt of any proceeds by the stockholders of the Company.
The bank has consented to be seized:
[T]he OTS has directed that the Board of Directors of the Bank consent to the OTS exercising its statutory authority to appoint the FDIC as receiver or conservator for the Bank. ... The Board has complied with the OTS demand for such consent, but the appointment of a receiver or conservator has not yet occurred.
Its subsidiary, Guaranty Bank, is deep in the hole:
[T]he Bank’s core capital ratio stood at negative 5.78% as of March 31, 2009. The Bank’s total risk based capital ratio as of March 31, 2009 stood at negative 5.52%. Both of these ratios result in the Bank being considered critically under-capitalized under regulatory prompt corrective action standards.
It is just a matter of when. Guaranty Financial will be the largest bank failure this year with approximately $14 billion in assets.

Here is a story from Brendan Case at the Dallas Morning News: Guaranty Bank may face federal control