1406081--2/29/2008--Guaranty_Financial_Group

related topics

{loan, real, estate}

{stock, price, share}

{stock, price, operating}

{tax, income, asset}

{investment, property, distribution}

{control, financial, internal}

{capital, credit, financial}

{interest, director, officer}

{competitive, industry, competition}

{loss, insurance, financial}

{system, service, information}

{regulation, government, change}

{debt, indebtedness, cash}

Declining real estate values, particularly in California, may cause borrowers to default on loans and leave us unable to fully recover our loans. If our allowance for loan losses is not sufficient to cover actual loan losses, our profitability could decrease. Our loan portfolio lacks diversity, which exposes us to a greater risk of loss from isolated events and individual market adjustments. We have not acquired a significant amount of mortgage loans from our correspondent mortgage warehouse borrowers since we commenced this activity in 2007, and have experienced decreases in our mortgage-backed securities investments; if this continues, our earning assets and interest income could decrease. Current market conditions may limit our ability to raise regulatory capital. Recent volatility in the credit markets could limit our ability to grow our earning assets and could increase our credit losses. As a savings bank pursuant to the Home Owners Loan Act, or HOLA, Guaranty Bank is required to maintain a certain percentage of its total assets in HOLA-qualifying loans and investments, which limits our asset mix and could limit our ability to increase the yield on our earning assets. Our business strategy of shifting our asset mix to reduce the residential mortgage loan portfolio and increase commercial and consumer loans exposes us to greater credit risk. The business segments in which we operate are highly competitive and competitive conditions may negatively affect our ability to maintain or increase our market share and profitability. We operate in a highly regulated environment and may be adversely affected by changes in federal and local laws and regulations. We may not be able to pay dividends if we are not able to receive dividends from Guaranty Bank. Our information systems may experience an interruption or breach in security that could expose us to liability or loss. We may be unable to achieve some or all of the benefits that we expect to achieve from being a stand-alone public company. We have very little operating history as an independent, publicly-traded company upon which you can evaluate our performance and, accordingly, our prospects must be considered in light of the risks that any newly independent company encounters. Our agreements with Temple-Inland and Forestar may not reflect terms that would have resulted from arm s-length negotiations among unaffiliated third parties. Our historical financial information is not necessarily indicative of our results as a separate company and, therefore, may not be reliable as an indicator of our future financial results. If the spin-off is determined to be taxable for U.S. federal income tax purposes, we and our stockholders could incur significant U.S. federal income tax liabilities. We must abide by certain restrictions to preserve the tax-free treatment of the spin-off and may not be able to engage in desirable acquisitions and other strategic transactions following the spin-off. The ownership by our chairman, our executive officers and some of our other directors of common stock, options or other equity awards of Temple-Inland or Forestar may create, or may create the appearance of, conflicts of interest. Risks Relating to Our Common Stock Our common stock has limited trading history. The market price of our shares may fluctuate widely as a result of our short history as a stand-alone company. Substantial sales of our common stock may occur for several months following the spin-off, which could cause our stock price to decline. Your percentage ownership in our common stock may be diluted in the future because of existing equity awards on our common stock, and future capital raising activities.

Full 10-K form ▸

1406081--2/29/2008--Guaranty_Financial_Group_Inc.