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Guaranty Bank warns that it's on the verge of failure

The firm, which has more than 50 branches in California, reports that its capital has been wiped out and that it is unable to raise new funds.

July 25, 2009|Times Staff And Wire Reports

Guaranty Bank, which has more than 50 branches in California, warned that it could become the biggest financial institution to fail this year.

Asset write-downs have wiped out the company's capital, and the firm has been unable to raise fresh funds, parent Guaranty Financial Group Inc. said in a securities filing Thursday.

"The company believes that it is probable that it will not be able to continue as a going concern," the Austin, Texas, firm said Thursday. It said its deposits remained insured by the Federal Deposit Insurance Corp.

The federal Office of Thrift Supervision has directed the bank to turn itself over to the FDIC, the company said.

A failure would be likely to wipe out Guaranty Financial's shareholders, including funds run by billionaire Carl Icahn, who couldn't be reached for comment. Icahn in 2007 pressed Guaranty's former owner, forest products company Temple-Inland Inc., to spin off the thrift when values for financial firms were high.

At the end of 2007, Guaranty Financial reported having $16.8 billion in assets, $9.4 billion in deposits and more than 150 branches, mostly in Texas.

Its stock fell 7 cents Friday to 15 cents, down from $18.50 in December 2007.

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