- Current report filing (8-K)
June 29 2009 - 6:05AM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 27, 2009
GUARANTY FINANCIAL GROUP INC.
(Exact name of registrant as specified in its charter)
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Delaware
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Commission File Number
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74-2421034
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(State or other jurisdiction of
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001-33661
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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1300 MoPac Expressway South
Austin, Texas 78746
(Address of principal executive offices) (zip code)
Registrants telephone number, including area code:
(512) 434-1000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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Guaranty Financial Group Inc. (the Company) is filing this Current Report on Form 8-K to update
information disclosed in a Notification of Late Filing on Form 12b-25 filed on May 14, 2009, with
respect to the quarter ended March 31, 2009, and in other previous disclosures.
Item 8.01 Other Events
Based on the current status of discussions involving its principal stockholders, other sources of
financing, and certain regulatory authorities, the Board of Directors and management of the Company
believe that the only remaining means by which the Company might possibly raise sufficient capital
for it and its wholly-owned subsidiary, Guaranty Bank (the Bank), to comply with the Orders to
Cease and Desist issued by the Office of Thrift Supervision (OTS) described in the Companys
Current Report on Form 8-K filed on April 8, 2009, is through a plan for open bank assistance
(Open Assistance). The Open Assistance plan, which the Company is discussing with the Federal
Deposit Insurance Corporation (FDIC) and the OTS, would involve a significant equity capital
infusion from private investors, including the Companys current principal stockholders, and an
agreement under which the FDIC would absorb a portion of any losses associated with a pool of
certain of the Companys assets.
An Open Assistance plan must be approved by the FDIC. Before the FDIC can provide Open Assistance
to the Bank, it must establish that the assistance is the least costly to the deposit insurance
fund of all possible methods for resolving the financial condition of the Bank. The FDIC may
deviate from the least cost requirement only in limited circumstances to avoid serious adverse
effects on economic conditions or financial stability or systemic risk to the banking system.
An additional condition to Open Assistance is that the OTS and FDIC must also determine that the
Banks management is competent, has complied with all applicable laws, rules, and supervisory
directives and orders, and has not engaged in any insider dealings, speculative practices, or other
abusive activity. The FDIC may not approve an Open Assistance plan if it would benefit any
stockholder or affiliate of the Company. As a result, the Company expects that the implementation
of any Open Assistance plan would essentially eliminate the value of any of the Companys currently
outstanding equity interests, including shares of the Companys common stock.
Open Assistance has historically been used extremely rarely by the FDIC, and there is no assurance
that it would be available to the Company or the Bank in this case. In addition, while the Company
has received expressions of interest from private investors with respect to the necessary capital
infusion from private investors, it has not received capital commitments from any of these
investors. Accordingly, the Company has not yet formally submitted to the FDIC its plan for Open
Assistance, and it may ultimately not be able to do so. If a plan is formally submitted, the FDIC
may choose not to approve it.
If the FDIC does not approve a plan for Open Assistance, the Company will no longer have the intent
and ability to hold its mortgage-backed securities portfolio to recovery of unrealized losses, and,
consequently, there would be substantial doubt that the Company would be able to continue as a
going concern. In such case, the Company would be required to take material charges relating to
the impairment of assets, in which case the preliminary financial information provided by the
Company in previous Forms 12b-25 for the periods ended December 31, 2008 and March 31, 2009 should
not be relied upon.
The Company is discussing with its independent public accounting firm the extent of these potential
impairments and their effect upon the Companys financial statements, should the FDIC not approve a
plan for Open Assistance. In that circumstance, the Company currently estimates as follows:
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the three principal assets to be adjusted would be the carrying value of the
mortgage-backed securities, the related deferred tax asset and goodwill;
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the Company would no longer have the intent and ability to hold the mortgage backed
securities portfolio to recovery of unrealized losses, and would therefore record an
additional impairment of approximately $1.4 billion to reduce the carrying value of these
assets to an estimate of their fair value at December 31, 2008; and
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the Company would also reduce the deferred tax assets related to the unrealized losses
on the mortgage-backed securities by approximately $250 million at December 31, 2008, and
it would also reduce the carrying value of goodwill by approximately $100 million at
December 31, 2008.
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The aggregate effect of these adjustments would be to increase the Companys previous preliminary
estimated loss for the year end December 31, 2008 of $444 million, or a loss of $8.84 per diluted
share, to a new estimated loss of approximately $2.2 billion or a loss of $39.92 per diluted share.
These potential adjustments to the December 31, 2008 financial statements, if made, would also
change the previously estimated results for the quarter ending March 31, 2009. The previously
estimated loss of $256 million or a loss of $2.38 per diluted share for the quarter ended March 31,
2009, would then be estimated to be a loss for the quarter ended March 31, 2009 of $308 million or a
loss of $2.82 per diluted share.
The Company had previously disclosed certain agreements with the OTS to meet a core capital ratio
equal to or greater than 8.0% and a total risk based capital ratio equal to or greater than 11.0%
by May 21, 2009. The effect of these potential adjustments discussed above would result in the
Banks core capital ratio as of March 31, 2009 being approximately negative 5.8% and a total risk
based capital ratio as of March 31, 2009 of approximately negative 1.2%. Both of these ratios
would result in the Bank being considered critically under-capitalized under regulatory prompt
corrective action standards.
The foregoing are estimates only and are subject to further change, which could be material, as the
Company works to complete its financial statements.
The Company continues to cooperate with the OTS and the FDIC as they pursue potential alternatives,
which could include a plan for Open Assistance, sale of assets or liquidation. None of these
alternative transactions would be expected to result in the receipt of any proceeds by the
stockholders of the Company.
All customer deposits remain fully insured to the highest limits set by the FDIC.
Note: Certain matters discussed in this Form 8-K may constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are identified by their use of terms and phrases such as believe,
anticipate, could, estimate, likely, intent, may, plan, project, expect, and
similar expressions, including references to assumptions or our plans and goals. Readers should not
place undue reliance on these forward- looking statements. These statements reflect managements
views with respect to events as of the date of the forward-looking statement and are subject to
risks and uncertainties. The Companys actual results or performance may differ materially from
those suggested, expressed, or implied by forward-looking statements due to a wide range of factors
including, but not limited to: general economic, market, or business conditions; demand for new
housing; competitive actions by other companies; changes in laws or regulations and actions or
restrictions of regulatory agencies; deposit attrition, customer loss, or revenue loss in the
ordinary course of business; cost or difficulties related to being a stand-alone public company;
the inability to realize elements of our strategic plans; changes in the interest rate environment
that expand or reduce margins or adversely affect critical estimates and projected returns on
investments; unfavorable changes in economic conditions affecting housing markets, credit markets,
real estate values and oil and gas prices and changes in market and/or general economic conditions,
either nationally or regionally, that are less favorable than expected; government intervention in
the U.S. financial system; changes in the financial performance and/or condition of our borrowers;
natural disasters in primary market areas that may result in prolonged business disruption or
materially impair the value of collateral securing loans; assumptions and estimates underlying
critical accounting policies, particularly allowance for credit losses, mortgage-backed securities
valuation and impairment assessments, ability to realize deferred tax assets, and goodwill
impairment assessments, which may prove to be materially incorrect or may not be borne out by
subsequent events; current or future litigation, regulatory investigations, proceedings or
inquiries; strategies to manage interest rate risk that may yield results other than those
anticipated; a significant change in the rate of inflation or deflation; changes in the securities
markets; the ability to complete merger, acquisition or divestiture plans; regulatory or other
limitations imposed as a result of any merger, acquisition or divestiture, and the success of our
business following any merger, acquisition or divestiture; the final resolutions or outcomes with
respect to our contingent and other corporate liabilities related to our business and any related
actions for indemnification made pursuant to the various agreements with Temple-Inland Inc. and
Forestar Group Inc. (formerly Forestar Real Estate Group Inc.); the ability to maintain capital
ratios acceptable to the Office of Thrift Supervision; and changes in the value of real estate
securing our loans. The Company disclaims any obligation
to subsequently revise or update any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated or unanticipated
events.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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GUARANTY FINANCIAL GROUP INC.
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Date: June 29, 2009
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By:
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/s/ Ronald D. Murff
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Name:
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Ronald D. Murff
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Title:
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Senior Executive Vice
President,
Chief Financial Officer
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