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Fdic Friday: Guaranty Bank Goes Under In The U.s.

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Third largest bank failure of 2009 announced

Texas-based Guaranty Bank is bought by Spanish bank. Regulators also seize institutions in Alabama and Georgia, bringing this year's tally to 81.

By Ben Rooney, CNNMoney.com staff writer

Last Updated: August 21, 2009: 8:48 PM ET

NEW YORK (CNNMoney.com) -- Guaranty Bank was closed by federal regulators Friday in the third largest bank failure this year bringing the total number of failures to 81 in 2009.

The Federal Deposit Insurance Corporation was named receiver of the Austin, TX-based thrift, which had approximately $13 billion in assets and $12 billion in deposits as of June.

BBVA Compass, a U.S. subsidiary of Spanish bank Banco Bilbao Vizcaya Argentaria, agreed to assume all of Guaranty's deposits and will buy $12 billion of its assets. The FDIC said it would share losses on $11 billion of the failed bank's assets.

The 162 branches that Guaranty operated in Texas and California will reopen Monday as branches of BBVA Compass, which is based in Birmingham, Ala.

Guaranty was the third largest bank to fail in 2009. It tied for the title of 11th largest bank failure in U.S. history with First City Bancorporation, which failed in 1988.

The estimated cost of Guaranty's failure to the FDIC is $3 billion.

Three other banks fail

Earlier in the day, regulators closed Birmingham, Ala.-based CapitalSouth Bank, which operated ten branches and had $617 million in assets and deposits of about $546 million.

Iberiabank, which is based in Lafayette, La, will assume all of the CapitalSouth's deposits and will purchase $589 million of its assets.

In Georgia, regulators closed Newnan-based First Coweta and arranged for United Bank, of Zebulon, to take over its four branches.

United Bank will pay the FDIC a premium of 1% to assume all of the First Coweta's $155 million in deposits and will buy $155 million of its assets.

Georgia regulators also closed the sole branch of Atlanta-based ebank, which will reopen on Monday as a branch of Stearns Bank.

St. Cloud, Minn.-based Stearns, which has bought a number of failed banks this year, will purchase the bulk of the failed bank's $143 million in assets and will assume all of its $130 million in deposits.

So far this year, 18 banks have failed in Georgia.

Friday's closure brings the total number of bank failures this year to 81, compared with a total of 25 in all of 2008.

The failures of CapitalSouth, First Coweta and ebank will cost the FDIC an estimated $262 million on top of the $3 billion from the failure of Guaranty Bank. Over the next five years, the agency expects roughly $70 billion in losses due to the failure of insured institutions

http://money.cnn.com/2009/08/21/news/econo...sion=2009082119

Colonial (biggest failure of 2009) last week and now Guaranty straight in at number 3 this week. The FDIC is officially bust.

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http://money.cnn.com/2009/08/21/news/econo...sion=2009082119

Colonial (biggest failure of 2009) last week and now Guaranty straight in at number 3 this week. The FDIC is officially bust.

The FDIC should NOT be bust.

they are supposed to move into a bank BEFORE it goes down.

trouble is, the balance sheet they use should show that everything can be balanced out, assets sold and creditors paid...sadly, banks lie about the value of their assets and its not until they come to sell the assets that the overvaluation is discovered.

this mark to model is ALL thats keeping the banking system going.

It IS bust. It IS unstable with around 6% of its loans bad.

the problems are still here.

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The FDIC should NOT be bust.

they are supposed to move into a bank BEFORE it goes down.

trouble is, the balance sheet they use should show that everything can be balanced out, assets sold and creditors paid...sadly, banks lie about the value of their assets and its not until they come to sell the assets that the overvaluation is discovered.

this mark to model is ALL thats keeping the banking system going.

It IS bust. It IS unstable with around 6% of its loans bad.

the problems are still here.

Theres a way to go yet - first they have to run up against the hard wall of not being able to print existing notes fast enough, then introducing a new set of higher denominations and then shortly after comes the repudiation.

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We really need Alan Fluff Freeman doing the countdown each week.........

And straight in at this week's Number 3 Pop Pickers, it's Texas Guaranty Bank.

Put it on the tab would you..........

Edited by For no one

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So 4 banks in total this week failed.

http://www.fdic.gov/bank/individual/failed/banklist.html

Looking at the list here it certainly seems to have become a constant 3 or 4 a week failing.

Thank god jobs losses aren't increasing.

Yeah, but recently there were many more banks failing per week (in fact, I think one Friday alone recently, 4 banks failed on that single day) so GREEN SHOOTS. :lol:

What with the FDIC being one more example of 'creative accounting and funny money' one wonders how much longer they can keep up the charade that fiat money is actually worth something.

I wonder are we seeing signs of those in the know dumping cash for assets, in the recent 'recovery' in commodities and equities?

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A little follow on from the initial poster:

Foreign banks can't save everyone

A big Spanish bank bought the remains of failed Texas thrift Guaranty. But most overseas giants have their own problems.

NEW YORK (Fortune) -- Foreign banks are starting to nibble at America's failed-bank buffet. But don't expect them to clean it out.

Spain's Banco Bilbao Vizcaya Argentaria (BBV) has emerged as the winning bidder for the remains of Texas thrift Guaranty Financial Group (GFG).

Guaranty was seized by federal regulators late Friday. With $13 billion in assets, Guaranty is the third-biggest bank failure of 2009 and tied for the 11th-largest ever.

The arrangement makes BBVA the first overseas-based bank to buy a troubled institution this year from the Federal Deposit Insurance Corp. It may not be the last, given that dozens of additional failures are expected over the next year.

Even so, a big wave of foreign bank investments probably isn't on the horizon, given the problems most of those institutions are dealing with at home and the poor results many have reported on previous forays into the U.S. market.

"The Europeans are suffering from the same problems as we are," said Robert DeYoung, a finance professor at the University of Kansas business school. "Everyone is trying to recapitalize, which means less money for expansion."

BBVA is based in the northern Spanish port city of Bilbao, but it already operates the fourth-biggest banking chain in Texas, by deposits, following a series of Lone Star state acquisitions at mid-decade. BBVA followed up those deals with the acquisition of Alabama-based Compass Bancshares in 2007 for $9.1 billion.

Guaranty, which operates more than 150 branches in Texas and California, would fit in perfectly with BBVA's so-called retail footprint -- a factor that DeYoung says is one of the leading drivers of bankers' decision making.

"Geography matters a lot in banking, because acquiring retail deposits is a cheap way to grow," he said. "A lot of these banks have niche markets, and this is a way to add to that."

BBVA isn't the only foreign bank dipping a toe in the failed bank waters. The TD Bank unit of Toronto Dominion (TD) bid in May for failed Florida thrift BankUnited but lost out to a private equity group led by former NorthFork Bank chief John Kanas.

A number of other big foreign banks have significant U.S. operations. BBVA's Spanish rival Santander (STD) bought Pennsylvania's Sovereign Bank this year, and Britain's HSBC (HBC) owns more than 400 branches, mostly in New York.

But while the big foreign banks clearly have the scale to handle acquisitions, their impact probably will be muted by their own problems and the mixed results of earlier investments here.

In Spain, for instance, unemployment is running well into the double digits and house prices are falling. While Spanish banks have been lauded for their conservative loan loss reserve policies, further declines in property prices -- and defaults by property developers who have been big borrowers -- could expose the likes of Santander and BBVA to damaging losses.

Meanwhile, foreign owners of U.S. banks haven't been universally pleased with the returns their investments have brought in. Royal Bank of Canada (RY), which operates 442 branches in the Southeast, posted a $142 million loss last year in its international banking operations, which are mainly U.S.-focused.

"Our U.S. banking operations have been significantly impacted by the ongoing stress in the U.S. housing market and the weakening U.S. economy," CEO Gordon Nixon told shareholders in February. "It has been the weakest of all of our businesses."

The Guaranty deal comes as the FDIC, facing mounting bank failures in the wake of a massive housing bubble, seeks to draw new capital into the banking system.

Most failed banks are sold, in whole or in part, to domestic banking institutions. But with 77 banks having failed in 2009 and dozens more expected to collapse, regulators are preparing for an onslaught of nontraditional buyers -- notably leveraged buyout firms and other private investors.

The FDIC is expected to rule next week on the terms under which buyers outside the banking system may operate banks.

"The private equity talk tells you how serious the situation is," said DeYoung. "That's really a symptom of how desperate the regulators are to find buyers."

http://money.cnn.com/2009/08/21/news/compa...sion=2009082119

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