Guaranty Financial Group loses $10 million in 1Q
AUSTIN, Texas—Guaranty Financial Group Inc. lost money in the first quarter, the company said Tuesday, as the bank's book of loans to property developers in California suffered from bad credit.
Guaranty Financial lost $10 million, or 28 cents per share, in the first quarter, compared with profit of $27 million in the first quarter last year. The bank did not break down the profit per share from last year's first quarter because the company's stock was not yet publicly traded.
Profit from lending climbed 3 percent to $98 million as the bank, which runs 160 branches in Texas and California, grew its commercial loan portfolio.
The profit margin from lending compressed to 2.49 percent from 2.56 percent.
Bad credit pinched the income from the bank's $10.1 billion loan portfolio. Guaranty Financial set aside $58 million to cover loans the bank does not expect to be repaid. The bank blamed its book of loans to homebuilders in California.
With real estate markets in that state suffering, many property developers are defaulting on their loans.
"Market conditions certainly continued to deteriorate in the first quarter," Chief Financial Officer Ron Murff said in a statement.
Murff said the reserve the bank has established to cover bad loans is sufficient based on the company's outlook for the housing market, which is that it will not recover soon.
The company also recorded $419 million in losses on a $4.9 billion portfolio of bonds backed by mortgages. Though the credit quality supporting these bonds is strong, the liquidity squeeze in the bond market has crimped the value of the investments, the bank said.
rising
falling 