Guaranty Bank

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Not to be confused with First Guaranty Bank. ‹See Tfd›

Not to be confused with Guaranty Bank (WI), Guaranty Bank (MO), Guaranty Bank (MS), or Guaranty Bank (LA). Guaranty Bank (TX) is the only bank this article concerns.

Guaranty Bank was a major bank based in Austin, which collapsed in 2009.[1]

Formed in 1988[2] and part of Temple-Inland until 2007 when it was spun off as a standalone company, Guaranty was the second largest bank in Texas, with 162 branches across Texas and California,[3] and at the time of its failure had $13 billion in assets and held $12 billion in deposits.[1] Major shareholders included billionaire investor Carl Icahn and hotel tycoon Robert Rowling, who jointly invested $600 million in the bank in 2008.[2][4]

Collapse[edit]

As a thrift bank, its charter required it to keep 70% of its assets in housing-related investments, leaving it exposed to the 2007 US housing crash[2]

In April 2009, the Office of Thrift Supervision ordered the bank to take a $1.5 billion writedown on the value of the mortgage-backed securities it held. This in turn left the bank with an inadequate Tier 1 capital ratio, with the bank issuing a statement saying that it was likely to be too undercapitalized to continue as a going concern.[5] The bank's share price collapsed from $18.50 to less than 15 cents.[4]

On August 21, 2009, the bank failed and was taken over by the Federal Deposit Insurance Corporation.[1] This was the 10th largest bank failure in US history, and the second largest of the 140 bank collapses of 2009 (behind Colonial Bank).[6]

The assets of the bank were immediately sold by the FDIC to BBVA Compass, the US-based subsidiary of Banco Bilbao Vizcaya Argentaria (BBVA), the second biggest bank in Spain.[1] This was the first deal between the FDIC and an institution bank tied to a foreign bank for almost 20 years.[7] Under the agreement, the FDIC and BBVA Compass shared the losses of the bank, with the costs to the FDIC's Deposit Insurance Fund estimated to be $3 billion.[1][6] Guaranty Bank was absorbed into its new parent company, with its branches being rebranded as BBVA Compass outlets.[8]

References[edit]

  1. ^ a b c d e FDIC Press Release on failure of Guaranty Bank
  2. ^ a b c Big Texas bank on verge of failure - CNN/Fortune, July 31, 2009
  3. ^ Regulators Shut Guaranty Bank, 2nd Largest Failure - ABC News/AP, August 21, 2009
  4. ^ a b Guaranty Bank warns that it's on the verge of failure - LA Times, July 25, 2009
  5. ^ Guaranty Financial On The Brink - TheStreet.com, July 24, 2009
  6. ^ a b Guaranty Bank bought by BBVA Compass - The Herald Sun, August 24, 2009
  7. ^ BBVA Compass stays busy rebranding with Guaranty Bank buy - Houstin Business Journal, August 28, 2009
  8. ^ BBVA Compass welcomes Guaranty customers