Guaranty Bank (Texas)
| Company type | Public (before failure) |
|---|---|
| Industry | Banking and financial services |
| Predecessor | Guaranty Federal Savings and Loan Association, Delta Savings Association, First Federal Savings and Loan |
| Founded | 1988 |
| Defunct | 2009 |
| Fate | Failed and acquired by BBVA Compass |
| Headquarters | Austin, Texas , United States |
Area served | Texas, California |
Key people | Kenneth R. Dubuque (former CEO), John T. Stuart III (interim CEO), Kevin J. Hanigan (president and COO) |
| Products | Consumer and commercial banking, property and casualty insurance, fixed annuities |
| Parent | Guaranty Financial Group Inc. (after 2007) |
Guaranty Bank was a prominent financial institution headquartered in Austin, Texas, which ultimately failed in 2009. Established in 1988 as a division of Temple-Inland, it became an independent entity in 2007. At the time of its failure, Guaranty ranked as the second largest bank in Texas, operating 162 branches throughout Texas and California, and managing assets worth $13 billion alongside deposits totaling $12 billion. Notable investors included billionaire Carl Icahn and hospitality magnate Robert Rowling, who together injected $600 million into the bank in 2008.
History
The origins of Guaranty Bank trace back to 1938 with the founding of Guaranty Building and Loan in Galveston, Texas, initially known as Guaranty Federal Savings and Loan Association. In 1988, Temple-Inland consolidated three financial entities—Guaranty Federal Savings and Loan Association, Delta Savings Association, and First Federal Savings and Loan—to form Guaranty. During the 1990s, the bank expanded its footprint into California by acquiring Stockton Savings Bank and Hemet Federal Savings & Loan.
In November 2007, Temple-Inland announced a corporate restructuring that divided the company into three separate publicly traded firms:
- Temple-Inland Inc.
- Guaranty Financial Group Inc.
- Forestar Real Estate Group Inc.
Following this split, Guaranty Financial Group Inc. emerged as an independent financial holding company operating through its subsidiaries: Guaranty Bank and Guaranty Insurance Services, Inc. Guaranty Bank functioned as a federally chartered savings institution with consolidated assets surpassing $16 billion, delivering consumer and commercial banking services across roughly 150 branches in Texas and California. Meanwhile, Guaranty Insurance Services specialized in property and casualty insurance along with fixed annuities through 17 locations in both states, including within Guaranty Bank branches.
In November 2008, Kenneth R. Dubuque stepped down from his roles as president and CEO after a tenure beginning in 1998. John T. Stuart III, a board member, assumed the positions of interim CEO and chairman. Kevin J. Hanigan was promoted to president and COO; he had previously served as senior executive vice president and chief banking officer.
Collapse
As a thrift institution, Guaranty Bank was required by its charter to maintain at least 70% of its assets invested in housing-related sectors, which left it vulnerable during the US housing market downturn of 2008.
In April 2009, the Office of Thrift Supervision compelled the bank to record a $1.5 billion writedown on mortgage-backed securities holdings, which caused its Tier 1 capital ratio to fall below regulatory minimums. The bank acknowledged that it was likely undercapitalized and faced significant risks to its continued operation. Consequently, its stock price dropped sharply from $18.50 to less than 15 cents per share.
On August 21, 2009, the Federal Deposit Insurance Corporation (FDIC) assumed control of the failed institution. This event represented the tenth largest bank failure in United States history and was the second largest among over 140 bank failures occurring nationwide in 2009.
The FDIC promptly arranged for BBVA Compass—the American subsidiary of Banco Bilbao Vizcaya Argentaria (BBVA), Spain’s second largest banking group—to acquire the bank’s assets. This transaction marked the first time in nearly two decades that the FDIC had facilitated a deal involving a foreign-affiliated bank. Under this agreement, losses were shared between FDIC and BBVA Compass, with the FDIC’s Deposit Insurance Fund expected to absorb approximately $3 billion in losses. Subsequently, Guaranty Bank was merged into BBVA Compass operations, with all branches rebranded under the BBVA Compass name.
Further reading
- Markham, Jerry W. A Financial History of the United States: Covering Enron-Era Scandals through the Subprime Crisis (2004-2006) and Extending to the Great Recession (2006-2009) (2015)