þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended June 30, 2008 |
o | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Transition Period From to |
Delaware (State or other jurisdiction of incorporation or organization) |
74-2421034 (I.R.S. Employer Identification Number) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Number of common shares outstanding | ||
Class | as of June 30, 2008 | |
Common Stock (par value $1.00 per share) | 44,630,751 |
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Unaudited | ||||||||
June 30, | December 31, | |||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
ASSETS |
||||||||
Cash and cash equivalents |
$ | 184 | $ | 277 | ||||
Restricted cash |
79 | 107 | ||||||
Loans held for sale |
1 | 16 | ||||||
Loans, net of allowance for losses of $250 at
June 30, 2008 and $118 at December 31, 2007 |
9,995 | 9,928 | ||||||
Securities available-for-sale |
1,357 | 1,882 | ||||||
Securities held-to-maturity |
3,241 | 3,642 | ||||||
Investment in Federal Home Loan Bank stock |
264 | 256 | ||||||
Property and equipment, net |
235 | 233 | ||||||
Accounts, notes, and accrued interest receivable |
81 | 97 | ||||||
Goodwill |
144 | 144 | ||||||
Other intangible assets |
24 | 26 | ||||||
Deferred income taxes |
235 | 72 | ||||||
Other assets |
191 | 116 | ||||||
TOTAL ASSETS |
$ | 16,031 | $ | 16,796 | ||||
LIABILITIES AND EQUITY |
||||||||
Deposits |
$ | 9,160 | $ | 9,375 | ||||
Federal Home Loan Bank borrowings |
5,553 | 5,743 | ||||||
Other liabilities |
142 | 125 | ||||||
Subordinated notes payable to trust |
314 | 314 | ||||||
Subordinated debentures and other borrowings |
76 | 101 | ||||||
TOTAL LIABILITIES |
15,245 | 15,658 | ||||||
STOCKHOLDERS EQUITY |
||||||||
Preferred stock, par value $0.01 per share, 25
million shares authorized, none issued |
| | ||||||
Common stock, par value $1 per share, 200
million shares authorized, 44.6 million shares
at June 30, 2008 and 35.4 million shares at
December 31, 2007 issued and outstanding |
45 | 35 | ||||||
Additional paid-in-capital |
934 | 902 | ||||||
Retained earnings |
141 | 236 | ||||||
Accumulated other comprehensive loss, net |
(334 | ) | (35 | ) | ||||
TOTAL
STOCKHOLDERS EQUITY |
786 | 1,138 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 16,031 | $ | 16,796 | ||||
1
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions, except per share) | ||||||||||||||||
INTEREST INCOME |
||||||||||||||||
Loans and loans held for sale |
$ | 131 | $ | 175 | $ | 282 | $ | 346 | ||||||||
Securities available-for-sale |
28 | 10 | 55 | 18 | ||||||||||||
Securities held-to-maturity |
41 | 57 | 88 | 117 | ||||||||||||
Federal Home Loan Bank stock dividends |
2 | 3 | 5 | 7 | ||||||||||||
Other earning assets |
| 2 | | 2 | ||||||||||||
Total interest income |
202 | 247 | 430 | 490 | ||||||||||||
INTEREST EXPENSE |
||||||||||||||||
Deposits |
(60 | ) | (86 | ) | (136 | ) | (169 | ) | ||||||||
Borrowed funds |
(42 | ) | (66 | ) | (96 | ) | (131 | ) | ||||||||
Total interest expense |
(102 | ) | (152 | ) | (232 | ) | (300 | ) | ||||||||
NET INTEREST INCOME |
100 | 95 | 198 | 190 | ||||||||||||
(Provision) credit for credit losses |
(99 | ) | | (157 | ) | 2 | ||||||||||
NET INTEREST INCOME AFTER (PROVISION) CREDIT FOR
CREDIT LOSSES |
1 | 95 | 41 | 192 | ||||||||||||
NONINTEREST INCOME |
||||||||||||||||
Insurance commissions and fees |
17 | 16 | 36 | 32 | ||||||||||||
Service charges on deposits |
15 | 13 | 28 | 25 | ||||||||||||
Operating lease income |
1 | 2 | 3 | 4 | ||||||||||||
Other |
8 | 7 | 16 | 16 | ||||||||||||
Total noninterest income |
41 | 38 | 83 | 77 | ||||||||||||
NONINTEREST EXPENSE |
||||||||||||||||
Compensation and benefits |
(48 | ) | (43 | ) | (99 | ) | (91 | ) | ||||||||
Occupancy |
(9 | ) | (7 | ) | (17 | ) | (13 | ) | ||||||||
Information systems and technology |
(4 | ) | (4 | ) | (9 | ) | (7 | ) | ||||||||
Charges related to asset impairments and severance |
(3 | ) | | (3 | ) | | ||||||||||
Other |
(35 | ) | (40 | ) | (70 | ) | (76 | ) | ||||||||
Total noninterest expense |
(99 | ) | (94 | ) | (198 | ) | (187 | ) | ||||||||
(LOSS) INCOME BEFORE TAXES |
(57 | ) | 39 | (74 | ) | 82 | ||||||||||
Income tax expense |
(28 | ) | (15 | ) | (21 | ) | (31 | ) | ||||||||
NET (LOSS) INCOME |
$ | (85 | ) | $ | 24 | $ | (95 | ) | $ | 51 | ||||||
(LOSS) EARNINGS PER SHARE |
||||||||||||||||
Basic and diluted |
$ | (2.24 | ) | n/a | $ | (2.59 | ) | n/a | ||||||||
AVERAGE NUMBER OF SHARES OUTSTANDING |
||||||||||||||||
Basic and diluted |
38.0 | n/a | 36.8 | n/a |
2
Six Months Ended June 30, | ||||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
CASH PROVIDED BY (USED FOR) OPERATIONS |
||||||||
Net (loss) income |
$ | (95 | ) | $ | 51 | |||
Adjustments: |
||||||||
Depreciation and amortization |
11 | 9 | ||||||
Depreciation of assets leased to others |
3 | 3 | ||||||
Amortization of core deposit and other intangible assets |
2 | 3 | ||||||
Amortization and accretion of financial instrument discounts
and premiums and deferred loan fees and origination costs, net |
(2 | ) | 10 | |||||
Provision (credit) for credit losses |
157 | (2 | ) | |||||
Deferred income taxes |
(2 | ) | (6 | ) | ||||
Changes in: |
||||||||
Loans held for sale |
15 | 3 | ||||||
Other |
(20 | ) | (7 | ) | ||||
69 | 64 | |||||||
CASH PROVIDED BY (USED FOR) INVESTING |
||||||||
Securities available-for-sale: |
||||||||
Purchases |
| (425 | ) | |||||
Principal payments and maturities |
66 | 64 | ||||||
Securities held-to-maturity: |
||||||||
Purchases |
| (142 | ) | |||||
Principal payments and maturities |
396 | 790 | ||||||
Federal Home Loan Bank stock: |
||||||||
Purchases |
(11 | ) | | |||||
Redemption |
8 | 58 | ||||||
Loans originated or acquired, net of collections |
(262 | ) | 125 | |||||
Sale of loans |
14 | 22 | ||||||
Capital expenditures |
(13 | ) | (23 | ) | ||||
Other |
8 | (3 | ) | |||||
206 | 466 | |||||||
CASH PROVIDED BY (USED FOR) FINANCING |
||||||||
Deposits, net |
(215 | ) | 46 | |||||
Repurchase agreements and short-term borrowings, net |
(112 | ) | (60 | ) | ||||
Payments of long-term Federal Home Loan Bank and other borrowings |
(78 | ) | (434 | ) | ||||
Issuance of subordinated notes payable to trust |
| 172 | ||||||
Redemption of preferred stock issued by subsidiaries |
| (305 | ) | |||||
Proceeds from sale of common stock |
38 | | ||||||
Dividends paid to Temple-Inland Inc. |
| (35 | ) | |||||
Other |
(1 | ) | | |||||
(368 | ) | (616 | ) | |||||
Net decrease in cash and cash equivalents |
(93 | ) | (86 | ) | ||||
Cash and cash equivalents at beginning of period |
277 | 372 | ||||||
Cash and cash equivalents at end of period |
$ | 184 | $ | 286 | ||||
Interest paid |
$ | 228 | $ | 303 | ||||
3
Accumulated | ||||||||||||||||||||||||
Other | ||||||||||||||||||||||||
Common | Additional | Comprehensive | Total | |||||||||||||||||||||
Shares | Paid-in | Retained | (Loss) Income, | Stockholders | ||||||||||||||||||||
Outstanding | Common Stock | Capital | Earnings | net | Equity | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Balance at December 31, 2007 |
35 | $ | 35 | $ | 902 | $ | 236 | $ | (35 | ) | $ | 1,138 | ||||||||||||
Net loss first quarter 2008 |
| | | (10 | ) | | (10 | ) | ||||||||||||||||
Other comprehensive loss: |
||||||||||||||||||||||||
Unrealized losses on
available-for-sale
securities |
| | | | (365 | ) | (365 | ) | ||||||||||||||||
Associated deferred taxes |
| | | | 128 | 128 | ||||||||||||||||||
Comprehensive loss for three
months ended March 31, 2008 |
(247 | ) | ||||||||||||||||||||||
Share-based compensation,
share-settled awards |
| | 2 | | | 2 | ||||||||||||||||||
Issuance of shares upon
vesting of restricted stock units |
| | (1 | ) | | | (1 | ) | ||||||||||||||||
Restricted stock grants |
2 | 2 | (2 | ) | | | | |||||||||||||||||
Balance at March 31, 2008 |
37 | $ | 37 | $ | 901 | $ | 226 | $ | (272 | ) | $ | 892 | ||||||||||||
Net loss second quarter 2008 |
| | | (85 | ) | | (85 | ) | ||||||||||||||||
Other comprehensive loss: |
||||||||||||||||||||||||
Unrealized losses on
available-for-sale
securities |
| | | | (94 | ) | (94 | ) | ||||||||||||||||
Associated deferred taxes |
| | | | 32 | 32 | ||||||||||||||||||
Comprehensive loss for three
months ended June 30, 2008 |
(147 | ) | ||||||||||||||||||||||
Sale of common stock |
8 | 8 | 30 | | | 38 | ||||||||||||||||||
Share-based compensation,
share-settled awards |
| | 3 | | | 3 | ||||||||||||||||||
Balance at June 30, 2008 |
45 | $ | 45 | $ | 934 | $ | 141 | $ | (334 | ) | $ | 786 | ||||||||||||
Comprehensive loss for six months
ended June 30, 2008 |
$ | (394 | ) | |||||||||||||||||||||
4
5
June 30, | December 31, | |||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Single-family mortgage |
$ | 1,485 | $ | 1,672 | ||||
Single-family mortgage warehouse |
971 | 695 | ||||||
Single-family construction (homebuilders) |
1,223 | 1,510 | ||||||
Multifamily and senior housing |
1,877 | 1,541 | ||||||
Commercial real estate |
1,774 | 1,674 | ||||||
Commercial and business |
1,384 | 1,340 | ||||||
Energy |
1,334 | 1,470 | ||||||
Consumer and other |
197 | 144 | ||||||
Total loans |
10,245 | 10,046 | ||||||
Less allowance for loan losses |
(250 | ) | (118 | ) | ||||
Loans, net |
$ | 9,995 | $ | 9,928 | ||||
6
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions) | ||||||||||||||||
Allowance for loan losses: |
||||||||||||||||
Balance at beginning of period |
$ | 172 | $ | 71 | $ | 118 | $ | 65 | ||||||||
Provision (credit) for loan losses |
97 | | 153 | (2 | ) | |||||||||||
Charge-offs |
(20 | ) | (2 | ) | (23 | ) | (3 | ) | ||||||||
Recoveries |
1 | 3 | 2 | 12 | ||||||||||||
Balance at end of period |
250 | 72 | 250 | 72 | ||||||||||||
Unfunded credit commitments: |
||||||||||||||||
Balance at beginning of period |
9 | 7 | 7 | 7 | ||||||||||||
Provision for commitment-related credit losses |
2 | | 4 | | ||||||||||||
Balance at end of period |
11 | 7 | 11 | 7 | ||||||||||||
Combined allowances for credit losses at end of period |
$ | 261 | $ | 79 | $ | 261 | $ | 79 | ||||||||
Provision (credit) for: |
||||||||||||||||
Loan losses |
$ | 97 | $ | | $ | 153 | $ | (2 | ) | |||||||
Commitment-related credit losses |
2 | | 4 | | ||||||||||||
Combined provision (credit) for credit losses |
$ | 99 | $ | | $ | 157 | $ | (2 | ) | |||||||
June 30, | December 31, | |||||||
2008 | 2007 | |||||||
(In millions) |
||||||||
Accruing loans past due 90 days or more |
$ | 5 | $ | 6 | ||||
Recorded investment in nonaccrual loans |
364 | 166 | ||||||
Restructured troubled loans included in nonaccrual loans |
1 | 1 | ||||||
Impaired loans included in nonaccrual loans |
245 | 118 | ||||||
Allowance for loan losses on impaired loans |
104 | 20 | ||||||
Performing restructured troubled loans |
3 | |
7
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | ||||||||||||||
Cost | Gains | (Losses) | Fair Value | |||||||||||||
(In millions) | ||||||||||||||||
At June 30, 2008: |
||||||||||||||||
Available-for-sale |
||||||||||||||||
Mortgage-backed securities: |
||||||||||||||||
U.S. Government |
$ | 12 | $ | | $ | | $ | 12 | ||||||||
U.S. Government Sponsored Enterprises (FNMA,
FHLMC) |
507 | 4 | (3 | ) | 508 | |||||||||||
Non-agency |
1,347 | | (514 | ) | 833 | |||||||||||
1,866 | 4 | (517 | ) | 1,353 | ||||||||||||
Equity securities |
4 | | | 4 | ||||||||||||
$ | 1,870 | $ | 4 | $ | (517 | ) | $ | 1,357 | ||||||||
Held-to-maturity |
||||||||||||||||
Mortgage-backed securities: |
||||||||||||||||
U.S. Government |
$ | 50 | $ | | $ | (1 | ) | $ | 49 | |||||||
U.S. Government Sponsored Enterprises (FNMA, FHLMC) |
908 | 6 | (1 | ) | 913 | |||||||||||
Non-agency |
2,283 | | (902 | ) | 1,381 | |||||||||||
$ | 3,241 | $ | 6 | $ | (904 | ) | $ | 2,343 | ||||||||
At December 31, 2007: |
||||||||||||||||
Available-for-sale |
||||||||||||||||
Mortgage-backed securities: |
||||||||||||||||
U.S. Government |
$ | 14 | $ | | $ | | $ | 14 | ||||||||
U.S. Government Sponsored Enterprises (FNMA,
FHLMC) |
552 | 4 | (4 | ) | 552 | |||||||||||
Non-agency |
1,366 | | (54 | ) | 1,312 | |||||||||||
1,932 | 4 | (58 | ) | 1,878 | ||||||||||||
Equity securities |
4 | | | 4 | ||||||||||||
$ | 1,936 | $ | 4 | $ | (58 | ) | $ | 1,882 | ||||||||
Held-to-maturity |
||||||||||||||||
Mortgage-backed securities: |
||||||||||||||||
U.S. Government |
$ | 57 | $ | | $ | | $ | 57 | ||||||||
U.S. Government Sponsored Enterprises (FNMA, FHLMC) |
1,172 | 4 | (3 | ) | 1,173 | |||||||||||
Non-agency |
2,413 | 1 | (213 | ) | 2,201 | |||||||||||
$ | 3,642 | $ | 5 | $ | (216 | ) | $ | 3,431 | ||||||||
8
| The securities cannot be settled at maturity or through prepayment in a way precluding recovery of substantially all of our recorded investment. We do not have significant purchase premiums on the securities. | ||
| We have no specific plans to sell these securities and we have the ability and intent to hold them until repayment. | ||
| We believe, based on our current estimates of cash flows on the securities, we will receive all stated interest and principal. Each of the non-agency securities is credit-enhanced by subordinate tranches not owned by us, which will absorb credit losses of the underlying loans until those tranches are depleted. We currently estimate the credit losses on the underlying loans will not exceed those subordinate tranches and, therefore, our securities will not incur credit losses. |
June 30, | December 31, | |||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Noninterest-bearing demand |
$ | 566 | $ | 779 | ||||
Interest-bearing demand |
4,058 | 3,648 | ||||||
Savings deposits |
179 | 172 | ||||||
Certificates of deposit |
4,357 | 4,776 | ||||||
$ | 9,160 | $ | 9,375 | |||||
9
June 30, 2008 | December 31, 2007 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Interest | Interest | |||||||||||||||
Balance | Rate | Balance | Rate | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Short-term FHLB borrowings |
$ | 4,837 | 2.2 | % | $ | 4,949 | 4.3 | % | ||||||||
Long-term FHLB borrowings |
716 | 4.3 | % | 794 | 4.2 | % | ||||||||||
Subordinated notes payable to trust |
314 | 4.5 | % | 314 | 7.2 | % | ||||||||||
Subordinated debentures and other borrowings |
76 | 5.9 | % | 101 | 8.5 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions) | ||||||||||||||||
Short-term FHLB borrowings |
$ | 28 | $ | 48 | $ | 67 | $ | 93 | ||||||||
Long-term FHLB borrowings |
8 | 8 | 16 | 18 | ||||||||||||
Subordinated notes payable to trust |
4 | 5 | 9 | 8 | ||||||||||||
Subordinated debentures and other borrowings |
2 | 3 | 4 | 5 | ||||||||||||
Preferred stock issued by subsidiaries |
| 2 | | 7 | ||||||||||||
$ | 42 | $ | 66 | $ | 96 | $ | 131 | |||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions, except per share) | ||||||||||||||||
Net (loss) income |
$ | (85 | ) | $ | 24 | $ | (95 | ) | $ | 51 | ||||||
Weighted average shares outstanding basic and
diluted |
38.0 | n/a | 36.8 | n/a | ||||||||||||
(Loss) earnings per common share basic and diluted |
$ | (2.24 | ) | n/a | $ | (2.59 | ) | n/a |
10
Weighted | Aggregate | |||||||||||||||
Weighted | Average | Intrinsic Value | ||||||||||||||
Average | Remaining | (Current | ||||||||||||||
Exercise Price | Contractual | Value Less | ||||||||||||||
Shares | Per Share | Term | Exercise Price) | |||||||||||||
(In thousands) | (In years) | (In millions) | ||||||||||||||
Outstanding |
1,609 | $ | 12 | 5 | $ | | ||||||||||
Exercisable |
1,278 | 11 | 5 | |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Federal statutory rate |
35 | % | 35 | % | 35 | % | 35 | % | ||||||||
State taxes, net of federal benefit |
(2 | )% | 3 | % | | 3 | % | |||||||||
Valuation allowance on deferred tax assets |
(80 | )% | | (62 | )% | | ||||||||||
Other |
(2 | )% | | (1 | )% | | ||||||||||
(49 | )% | 38 | % | (28 | )% | 38 | % | |||||||||
June 30, | December 31, | |||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Deferred tax assets: |
||||||||
Allowance for loan losses |
$ | 85 | $ | 41 | ||||
Unrealized losses on available-for-sale securities |
179 | 19 | ||||||
Other |
47 | 39 | ||||||
311 | 99 | |||||||
Deferred tax liabilities: |
||||||||
Investment in FHLB stock |
(19 | ) | (18 | ) | ||||
Other |
(11 | ) | (9 | ) | ||||
(30 | ) | (27 | ) | |||||
Net deferred tax asset before valuation allowance |
281 | 72 | ||||||
Valuation allowance |
(46 | ) | | |||||
Net deferred tax asset |
$ | 235 | $ | 72 | ||||
11
| Commercial banking, | ||
| Retail banking, | ||
| Insurance agency, and | ||
| Treasury, corporate and other. |
12
Treasury, | ||||||||||||||||||||||||
Commercial | Retail | Insurance | Mortgage | Corporate | ||||||||||||||||||||
Banking | Banking | Agency | Banking | and Other | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
For the Three Months Ended June 30,
2008: |
||||||||||||||||||||||||
Net interest income |
$ | 68 | $ | 20 | $ | | $ | | $ | 12 | $ | 100 | ||||||||||||
(Provision) credit for credit losses |
(86 | ) | (1 | ) | | | (12 | ) | (99 | ) | ||||||||||||||
Noninterest income |
7 | 15 | 17 | | 2 | 41 | ||||||||||||||||||
Revenues from other segments |
| 4 | | | (4 | ) | | |||||||||||||||||
Noninterest expense |
(19 | ) | (55 | ) | (16 | ) | (1 | ) | (8 | )(a) | (99 | ) | ||||||||||||
Segment operating income/(loss)
before taxes |
$ | (30 | ) | $ | (17 | ) | $ | 1 | $ | (1 | ) | $ | (10 | ) | $ | (57 | ) | |||||||
Average assets |
$ | 10,287 | $ | 647 | $ | 89 | $ | 31 | $ | 5,309 | $ | 16,363 | ||||||||||||
Goodwill |
| 106 | 38 | | | 144 | ||||||||||||||||||
Depreciation and amortization |
2 | 4 | | | 1 | 7 | ||||||||||||||||||
Capital expenditures |
| 4 | | | 1 | 5 | ||||||||||||||||||
For the Three Months Ended June 30,
2007: |
||||||||||||||||||||||||
Net interest income |
$ | 69 | $ | 30 | $ | | $ | | $ | (4 | ) | $ | 95 | |||||||||||
(Provision) credit for credit losses |
(1 | ) | (1 | ) | | | 2 | | ||||||||||||||||
Noninterest income |
8 | 14 | 16 | | | 38 | ||||||||||||||||||
Revenues from other segments |
| 2 | | | (2 | ) | | |||||||||||||||||
Noninterest expense |
(18 | ) | (53 | ) | (14 | ) | (7 | ) | (2 | )(a) | (94 | ) | ||||||||||||
Segment operating income/(loss)
before taxes |
$ | 58 | $ | (8 | ) | $ | 2 | $ | (7 | ) | $ | (6 | ) | $ | 39 | |||||||||
Average assets |
$ | 9,656 | $ | 609 | $ | 94 | $ | 47 | $ | 5,387 | $ | 15,793 | ||||||||||||
Goodwill |
| 107 | 34 | | | 141 | ||||||||||||||||||
Depreciation and amortization |
2 | 3 | | | 3 | 8 | ||||||||||||||||||
Capital expenditures |
3 | 2 | 1 | | 4 | 10 | ||||||||||||||||||
For the Six Months Ended
June 30, 2008: |
||||||||||||||||||||||||
Net interest income |
$ | 137 | $ | 41 | $ | | $ | | $ | 20 | $ | 198 | ||||||||||||
(Provision) credit for credit losses |
(138 | ) | (2 | ) | | | (17 | ) | (157 | ) | ||||||||||||||
Noninterest income |
14 | 30 | 36 | | 3 | 83 | ||||||||||||||||||
Revenues from other segments |
| 8 | | | (8 | ) | | |||||||||||||||||
Noninterest expense |
(37 | ) | (114 | ) | (34 | ) | (2 | ) | (11 | )(a) | (198 | ) | ||||||||||||
Segment operating income/(loss)
before taxes |
$ | (24 | ) | $ | (37 | ) | $ | 2 | $ | (2 | ) | $ | (13 | ) | $ | (74 | ) | |||||||
Average assets |
$ | 10,139 | $ | 634 | $ | 89 | $ | 32 | $ | 5,529 | $ | 16,423 | ||||||||||||
Goodwill |
| 106 | 38 | | | 144 | ||||||||||||||||||
Depreciation and amortization |
4 | 9 | 1 | | 2 | 16 | ||||||||||||||||||
Capital expenditures |
1 | 10 | | | 2 | 13 | ||||||||||||||||||
For the Six Months Ended
June 30, 2007: |
||||||||||||||||||||||||
Net interest income |
$ | 138 | $ | 60 | $ | | $ | | $ | (8 | ) | $ | 190 | |||||||||||
(Provision) credit for credit losses |
2 | (1 | ) | | | 1 | 2 | |||||||||||||||||
Noninterest income |
17 | 28 | 32 | | | 77 | ||||||||||||||||||
Revenues from other segments |
| 4 | | | (4 | ) | | |||||||||||||||||
Noninterest expense |
(36 | ) | (106 | ) | (28 | ) | (8 | ) | (9 | )(a) | (187 | ) | ||||||||||||
Segment operating income/(loss)
before taxes |
$ | 121 | $ | (15 | ) | $ | 4 | $ | (8 | ) | $ | (20 | ) | $ | 82 | |||||||||
Average assets |
$ | 9,607 | $ | 606 | $ | 93 | $ | 48 | $ | 5,372 | $ | 15,726 | ||||||||||||
Goodwill |
| 107 | 34 | | | 141 | ||||||||||||||||||
Depreciation and amortization |
4 | 7 | 1 | | 3 | 15 | ||||||||||||||||||
Capital expenditures |
3 | 15 | 1 | | 4 | 23 |
(a) | Includes unallocated expenses of: |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions) | ||||||||||||||||
Share-based compensation |
$ | (3 | ) | $ | (1 | ) | $ | (4 | ) | $ | (4 | ) | ||||
Charges related to asset impairments and severance |
(3 | ) | | (3 | ) | | ||||||||||
Expenses allocated to us by Temple-Inland Inc.
but not directly attributable to us |
| (2 | ) | | (5 | ) | ||||||||||
Other |
(2 | ) | 1 | (4 | ) | | ||||||||||
$ | (8 | ) | $ | (2 | ) | $ | (11 | ) | $ | (9 | ) | |||||
13
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions) | ||||||||||||||||
Advertising and promotional |
$ | 4 | $ | 3 | $ | 11 | $ | 7 | ||||||||
Furniture, fixtures, and equipment |
5 | 4 | 11 | 8 | ||||||||||||
Professional services |
5 | 2 | 8 | 4 | ||||||||||||
Travel and other employee costs |
4 | 3 | 6 | 5 | ||||||||||||
Postage, printing, and supplies |
2 | 2 | 4 | 4 | ||||||||||||
Litigation charge |
| 5 | | 5 | ||||||||||||
Depreciation of assets leased to others |
2 | 1 | 3 | 3 | ||||||||||||
Other |
13 | 13 | 27 | 25 | ||||||||||||
Shared services allocation from Temple-Inland Inc. |
| 7 | | 15 | ||||||||||||
$ | 35 | $ | 40 | $ | 70 | $ | 76 | |||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions) | ||||||||||||||||
Restricted stock |
$ | 3 | $ | (1 | ) | $ | 4 | $ | | |||||||
Cash-settled awards |
| 1 | (1 | ) | 2 | |||||||||||
Stock options |
| 1 | 1 | 2 | ||||||||||||
$ | 3 | $ | 1 | $ | 4 | $ | 4 | |||||||||
14
Equivalent | Aggregate | |||||||
Shares | Current Value | |||||||
(In thousands) | (In millions) | |||||||
Awards indexed to Guaranty stock |
81 | $ | | |||||
Awards indexed to Temple-Inland Inc. stock |
244 | 3 | ||||||
Awards indexed to Forestar Real Estate Group Inc. stock |
81 | 2 | ||||||
$ | 5 | |||||||
Aggregate | ||||||||
Shares | Current Value | |||||||
(In thousands) | (In millions) | |||||||
Outstanding at December 31, 2007 |
26 | |||||||
Granted |
1,647 | |||||||
Cancelled |
(22 | ) | ||||||
Outstanding at March 31, 2008 |
1,651 | |||||||
Granted |
56 | |||||||
Cancelled |
(36 | ) | ||||||
Outstanding at June 30, 2008 |
1,671 | $ | 9 | |||||
Weighted | Aggregate | |||||||||||||||
Weighted | Average | Intrinsic Value | ||||||||||||||
Average | Remaining | (Current Value | ||||||||||||||
Exercise Price | Contractual | Less Exercise | ||||||||||||||
Shares | Per Share | Term | Price) | |||||||||||||
(In thousands) | (In years) | (In millions) | ||||||||||||||
Outstanding on Guaranty stock |
313 | $ | 14 | 6 | $ | | ||||||||||
Outstanding on Temple-Inland Inc. stock |
947 | 17 | 6 | 1 | ||||||||||||
Outstanding on Forestar Real Estate
Group Inc. stock |
310 | 22 | 6 | 1 | ||||||||||||
$ | 2 | |||||||||||||||
Exercisable on Guaranty stock |
201 | $ | 12 | 6 | $ | | ||||||||||
Exercisable on Temple-Inland Inc. stock |
610 | 14 | 5 | 1 | ||||||||||||
Exercisable on Forestar Real Estate
Group Inc. stock |
198 | 18 | 6 | 1 | ||||||||||||
$ | 2 | |||||||||||||||
15
June 30, 2008 | December 31, 2007 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Value | Value | Value | Value | |||||||||||||
(In millions) | ||||||||||||||||
Financial assets |
||||||||||||||||
Loans, net |
$ | 9,995 | $ | 9,722 | $ | 9,928 | $ | 9,940 | ||||||||
Mortgage-backed securities held-to-maturity: |
||||||||||||||||
U.S. Government and U.S. Government
Sponsored Enterprises |
958 | 962 | 1,229 | 1,230 | ||||||||||||
Non-agency: |
||||||||||||||||
Internally valued |
2,116 | 1,217 | 2,214 | 2,002 | ||||||||||||
Market quotes |
167 | 164 | 199 | 199 | ||||||||||||
3,241 | 2,343 | 3,642 | 3,431 | |||||||||||||
Financial liabilities |
||||||||||||||||
Deposits |
$ | 9,160 | $ | 9,168 | $ | 9,375 | $ | 9,381 | ||||||||
Federal Home Loan Bank borrowings |
5,553 | 5,562 | 5,743 | 5,747 | ||||||||||||
Subordinated notes payable to trust |
314 | 277 | 314 | 277 | ||||||||||||
Subordinated debentures and other borrowings |
76 | 76 | 101 | 101 | ||||||||||||
Other off-balance sheet instruments |
||||||||||||||||
Commitments to extend credit |
$ | (11 | ) | $ | (11 | ) | $ | (7 | ) | $ | (7 | ) |
| Level 1 is observable prices in active markets. | ||
| Level 2 is observable prices in less than active markets or for different, but similar products, or valuation methodologies using observable data. | ||
| Level 3 is valuation methodologies using data not observable in the markets. |
16
Level 1 | Level 3 | Total | ||||||||||
(In millions) | ||||||||||||
Available-for-sale securities: |
||||||||||||
U.S. Government and U.S. Government
Sponsored Enterprises
mortgage-backed securities |
$ | 520 | $ | | $ | 520 | ||||||
Non-agency mortgage-backed securities |
| 833 | 833 | |||||||||
Equity securities |
| 4 | 4 | |||||||||
$ | 520 | $ | 837 | $ | 1,357 | |||||||
Three Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, 2008 | June 30, 2008 | |||||||
(In millions) | ||||||||
Recorded amount at beginning of the period |
$ | 942 | $ | 1,316 | ||||
Change in unrealized losses for the period included in other comprehensive loss |
(94 | ) | (459 | ) | ||||
Principal payments |
(11 | ) | (20 | ) | ||||
Recorded amount at end of period |
$ | 837 | $ | 837 | ||||
Level 2 | ||||
(In millions) | ||||
Impaired loans |
$ | 141 | ||
Foreclosed assets |
42 | |||
$ | 183 | |||
Three Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, 2007 | June 30, 2007 | |||||||
(In millions) | ||||||||
Information technology support |
$ | 4 | $ | 8 | ||||
Legal, human resources, and other administrative costs |
1 | 3 | ||||||
Accounting, finance, and other |
2 | 4 | ||||||
Share-based compensation (included in compensation expense) |
1 | 4 | ||||||
$ | 8 | $ | 19 | |||||
17
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
| 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; | ||
| costs or difficulties related to transitioning as a stand-alone public company following our spin-off from Temple-Inland Inc. in December 2007; |
18
| 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, or oil and gas prices, either nationally or regionally; | ||
| natural disasters in primary market areas that may result in prolonged business disruption or 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 and other intangible impairment assessments, that 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 any 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 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. |
19
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
June 30, | March 31, | December 31, | September 30, | June 30, | June 30, | June 30, | ||||||||||||||||||||||
2008 | 2008 | 2007 | 2007 | 2007 | 2008 | 2007 | ||||||||||||||||||||||
(Dollars in millions, except per share) | ||||||||||||||||||||||||||||
For the period: |
||||||||||||||||||||||||||||
Net interest income |
$ | 100 | $ | 98 | $ | 102 | $ | 99 | $ | 95 | $ | 198 | $ | 190 | ||||||||||||||
(Provision) credit for credit losses |
(99 | ) | (58 | ) | (33 | ) | (19 | ) | | (157 | ) | 2 | ||||||||||||||||
Net (loss) income |
(85 | ) | (10 | ) | 6 | 21 | 24 | (95 | ) | 51 | ||||||||||||||||||
Net (charge-offs) recoveries |
(19 | ) | (2 | ) | (6 | ) | | 1 | (21 | ) | 9 | |||||||||||||||||
Return on average assets |
(2.08 | )% | (0.24 | )% | 0.15 | % | 0.53 | % | 0.61 | % | (1.16 | )% | 0.65 | % | ||||||||||||||
Return on average stockholders equity |
(37.12 | )% | (3.65 | )% | 2.28 | % | 8.06 | % | 9.38 | % | (18.43 | )% | 9.94 | % | ||||||||||||||
Net interest margin |
2.54 | % | 2.49 | % | 2.59 | % | 2.65 | % | 2.55 | % | 2.51 | % | 2.55 | % | ||||||||||||||
Period-end: |
||||||||||||||||||||||||||||
Loans, net |
$ | 9,995 | $ | 10,099 | $ | 9,928 | $ | 9,561 | $ | 9,470 | ||||||||||||||||||
Non-performing assets |
406 | 284 | 179 | 130 | 36 | |||||||||||||||||||||||
Non-performing assets ratio |
3.95 | % | 2.76 | % | 1.78 | % | 1.35 | % | 0.38 | % | ||||||||||||||||||
Capital/Equity (actual): |
||||||||||||||||||||||||||||
Guaranty Bank tier 1 leverage ratio |
7.63 | % | 7.58 | % | 7.74 | % | 7.79 | % | 8.07 | % | ||||||||||||||||||
Guaranty Bank tier 1 risk-based ratio |
9.36 | % | 9.38 | % | 9.63 | % | 9.94 | % | 10.00 | % | ||||||||||||||||||
Guaranty Bank total risk-based
capital ratio |
10.60 | % | 10.61 | % | 10.54 | % | 10.68 | % | 10.61 | % | ||||||||||||||||||
Tangible equity/tangible assets |
3.90 | % | 4.45 | % | 5.82 | % | 5.36 | % | 5.60 | % | ||||||||||||||||||
Tangible equity/per common share |
$ | 13.85 | $ | 19.38 | $ | 27.36 | n/a | n/a | ||||||||||||||||||||
Capital/Equity (proforma)(1): |
||||||||||||||||||||||||||||
Guaranty Bank tier 1 leverage ratio |
9.49 | % | n/a | n/a | n/a | n/a | ||||||||||||||||||||||
Guaranty Bank tier 1 risk-based ratio |
11.64 | % | n/a | n/a | n/a | n/a | ||||||||||||||||||||||
Guaranty Bank total risk-based
capital ratio |
14.62 | % | n/a | n/a | n/a | n/a | ||||||||||||||||||||||
Tangible equity/tangible assets |
5.86 | % | ||||||||||||||||||||||||||
Tangible equity/per common share |
$ | 8.74 | n/a | n/a | n/a | n/a | ||||||||||||||||||||||
Credit reserves: |
||||||||||||||||||||||||||||
Allowance for loan losses |
$ | 250 | $ | 172 | $ | 118 | $ | 91 | $ | 72 | ||||||||||||||||||
Allowance for loan losses to total
loans |
2.44 | % | 1.67 | % | 1.17 | % | 0.94 | % | 0.75 | % | ||||||||||||||||||
Allowance for loan losses to
non-performing loans |
69 | % | 66 | % | 71 | % | 75 | % | 248 | % | ||||||||||||||||||
Total deposits |
$ | 9,160 | $ | 9,248 | $ | 9,375 | $ | 9,376 | $ | 9,532 | ||||||||||||||||||
Average interest-bearing deposits |
8,405 | 8,588 | 8,609 | 8,794 | 8,777 | $ | 8,496 | $ | 8,704 | |||||||||||||||||||
Total branches |
162 | 158 | 158 | 159 | 156 |
(1) | Proforma capital/equity ratios at June 30, 2008 reflect the effect we anticipate of the proceeds from our issuance of mandatorily convertible preferred stock and subordinated debt in July 2008, and present those amounts as if the preferred stock had been converted to common stock. |
20
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Return on
assets (net (loss)
income divided by
average total
assets) |
(2.08 | )% | 0.61 | % | (1.16 | )% | 0.65 | % | ||||||||
Return on equity
(net (loss) income
divided by average
stockholders
equity) |
(37.12 | )% | 9.38 | % | (18.43 | )% | 9.94 | % | ||||||||
Dividend payout
ratio (dividends
declared divided by
net income) |
| 146 | % | | 69 | % | ||||||||||
Equity to asset
ratio (average
stockholders
equity divided by
average assets) |
5.60 | % | 6.48 | % | 6.28 | % | 6.52 | % | ||||||||
Net interest margin
(net interest
income divided by
average earning
assets) |
2.54 | % | 2.55 | % | 2.51 | % | 2.55 | % |
| Net loss was $85 million, a decline of $109 million from second quarter 2007, primarily a result of credit loss provisions and a deferred income tax asset valuation allowance. | ||
| Net interest income increased 5% compared to second quarter 2007. Net interest margin was approximately the same as second quarter 2007, with decreases in lower-margin single-family mortgage loans and mortgage-backed securities offsetting an increase in nonaccrual loans. | ||
| We recorded $99 million in credit loss provisions compared to an insignificant net provision expense in second quarter 2007. Approximately half of the second quarter 2008 provision for credit loss related to homebuilder loans, with the majority of the remainder related to single-family mortgage loans and an energy loan. | ||
| We recorded a $46 million valuation allowance against deferred tax assets, principally associated with allowances for credit losses, because of uncertainty regarding our ability to realize those assets. | ||
| We recorded $3 million in severance costs related to a 135 person reduction-in-force. |
21
Three Months Ended June 30, | ||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
Cash equivalents |
$ | 82 | $ | | 2.27 | % | $ | 79 | $ | 2 | 5.08 | % | ||||||||||||
Loans held for sale |
1 | | | 19 | | 7.31 | % | |||||||||||||||||
Loans |
10,332 | 131 | 5.09 | % | 9,573 | 175 | 7.32 | % | ||||||||||||||||
Securities |
5,187 | 69 | 5.26 | % | 5,024 | 67 | 5.31 | % | ||||||||||||||||
Investments in Federal Home Loan Bank stock |
259 | 2 | 3.07 | % | 208 | 3 | 5.61 | % | ||||||||||||||||
Total earning assets |
15,861 | $ | 202 | 5.10 | % | 14,903 | $ | 247 | 6.61 | % | ||||||||||||||
Unrealized (losses) gains on
available-for-sale securities |
(405 | ) | 1 | |||||||||||||||||||||
Other assets |
907 | 889 | ||||||||||||||||||||||
Total assets |
$ | 16,363 | $ | 15,793 | ||||||||||||||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||||||
Interest-bearing deposits: |
||||||||||||||||||||||||
Interest-bearing demand |
$ | 3,817 | $ | 18 | 1.88 | % | $ | 3,699 | $ | 26 | 2.81 | % | ||||||||||||
Savings deposits |
178 | 1 | 0.78 | % | 190 | 1 | 0.72 | % | ||||||||||||||||
Certificates of deposit |
4,410 | 41 | 3.75 | % | 4,888 | 59 | 4.87 | % | ||||||||||||||||
Total interest-bearing deposits |
8,405 | 60 | 2.84 | % | 8,777 | 86 | 3.91 | % | ||||||||||||||||
Short-term Federal Home Loan Bank borrowings |
5,112 | 28 | 2.22 | % | 3,645 | 48 | 5.27 | % | ||||||||||||||||
Long-term Federal Home Loan Bank borrowings |
735 | 8 | 4.27 | % | 934 | 8 | 3.51 | % | ||||||||||||||||
Subordinated notes payable to trust |
314 | 4 | 4.54 | % | 315 | 5 | 7.04 | % | ||||||||||||||||
Subordinated debentures and other borrowings |
100 | 2 | 8.15 | % | 105 | 3 | 8.34 | % | ||||||||||||||||
Preferred stock issued by subsidiaries |
| | | 74 | 2 | 8.01 | % | |||||||||||||||||
Total borrowings |
6,261 | 42 | 2.67 | % | 5,073 | 66 | 5.16 | % | ||||||||||||||||
Total interest-bearing liabilities |
14,666 | $ | 102 | 2.77 | % | 13,850 | $ | 152 | 4.37 | % | ||||||||||||||
Interest rate spread |
2.33 | % | 2.24 | % | ||||||||||||||||||||
Noninterest-bearing demand deposits |
641 | 703 | ||||||||||||||||||||||
Other liabilities |
140 | 217 | ||||||||||||||||||||||
Stockholders equity |
916 | 1,023 | ||||||||||||||||||||||
Total liabilities and stockholders equity |
$ | 16,363 | $ | 15,793 | ||||||||||||||||||||
Impact of noninterest-bearing funds |
0.21 | % | 0.31 | % | ||||||||||||||||||||
Net interest income/margin |
$ | 100 | 2.54 | % | $ | 95 | 2.55 | % | ||||||||||||||||
22
Six Months Ended June 30, | ||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Average | Yield/ | Average | Yield/ | |||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
ASSETS |
||||||||||||||||||||||||
Cash equivalents |
$ | 73 | $ | | 2.74 | % | $ | 86 | $ | 2 | 5.06 | % | ||||||||||||
Loans held for sale |
5 | | 3.49 | % | 20 | | 7.47 | % | ||||||||||||||||
Loans |
10,147 | 282 | 5.56 | % | 9,514 | 346 | 7.27 | % | ||||||||||||||||
Securities |
5,306 | 143 | 5.38 | % | 5,062 | 135 | 5.32 | % | ||||||||||||||||
Investments in Federal Home Loan Bank stock |
255 | 5 | 3.66 | % | 217 | 7 | 5.94 | % | ||||||||||||||||
Total earning assets |
15,786 | $ | 430 | 5.45 | % | 14,899 | $ | 490 | 6.57 | % | ||||||||||||||
Unrealized (losses) gains on
available-for-sale securities |
(231 | ) | 1 | |||||||||||||||||||||
Other assets |
868 | 826 | ||||||||||||||||||||||
Total assets |
$ | 16,423 | $ | 15,726 | ||||||||||||||||||||
LIABILITIES AND EQUITY |
||||||||||||||||||||||||
Interest-bearing deposits: |
||||||||||||||||||||||||
Interest-bearing demand |
$ | 3,745 | $ | 40 | 2.15 | % | $ | 3,585 | $ | 49 | 2.75 | % | ||||||||||||
Savings deposits |
176 | 1 | 0.75 | % | 191 | 1 | 0.71 | % | ||||||||||||||||
Certificates of deposit |
4,575 | 95 | 4.16 | % | 4,928 | 119 | 4.83 | % | ||||||||||||||||
Total interest-bearing deposits |
8,496 | 136 | 3.20 | % | 8,704 | 169 | 3.88 | % | ||||||||||||||||
Short-term Federal Home Loan Bank borrowings |
4,922 | 67 | 2.72 | % | 3,543 | 93 | 5.24 | % | ||||||||||||||||
Long-term Federal Home Loan Bank borrowings |
757 | 16 | 4.23 | % | 1,015 | 18 | 3.56 | % | ||||||||||||||||
Subordinated notes payable to trust |
314 | 9 | 5.44 | % | 238 | 8 | 6.85 | % | ||||||||||||||||
Subordinated debentures and other borrowings |
104 | 4 | 8.32 | % | 106 | 5 | 8.23 | % | ||||||||||||||||
Preferred stock issued by subsidiaries |
| | | 191 | 7 | 7.30 | % | |||||||||||||||||
Total borrowings |
6,097 | 96 | 3.14 | % | 5,093 | 131 | 5.12 | % | ||||||||||||||||
Total interest-bearing liabilities |
14,593 | $ | 232 | 3.18 | % | 13,797 | $ | 300 | 4.34 | % | ||||||||||||||
Interest rate spread |
2.27 | % | 2.23 | % | ||||||||||||||||||||
Noninterest-bearing demand deposits |
657 | 712 | ||||||||||||||||||||||
Other liabilities |
142 | 191 | ||||||||||||||||||||||
Stockholders equity |
1,031 | 1,026 | ||||||||||||||||||||||
Total liabilities and stockholders equity |
$ | 16,423 | $ | 15,726 | ||||||||||||||||||||
Impact of noninterest-bearing funds |
0.24 | % | 0.32 | % | ||||||||||||||||||||
Net interest income/margin |
$ | 198 | 2.51 | % | $ | 190 | 2.55 | % | ||||||||||||||||
23
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
Increase | Increase | |||||||||||||||||||||||
2008 | 2007 | (Decrease) | 2008 | 2007 | (Decrease) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Insurance commissions and fees |
$ | 17 | $ | 16 | $ | 1 | $ | 36 | $ | 32 | $ | 4 | ||||||||||||
Service charges on deposits |
15 | 13 | 2 | 28 | 25 | 3 | ||||||||||||||||||
Commercial loan facility fees |
3 | 4 | (1 | ) | 7 | 10 | (3 | ) | ||||||||||||||||
Operating lease income |
1 | 2 | (1 | ) | 3 | 4 | (1 | ) | ||||||||||||||||
Mutual fund and variable annuity
sales commissions |
2 | 1 | 1 | 3 | 3 | | ||||||||||||||||||
Other |
3 | 2 | 1 | 6 | 3 | 3 | ||||||||||||||||||
$ | 41 | $ | 38 | $ | 3 | $ | 83 | $ | 77 | $ | 6 | |||||||||||||
Percent increase for the period |
8 | % | 8 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
Increase | Increase | |||||||||||||||||||||||
2008 | 2007 | (Decrease) | 2008 | 2007 | (Decrease) | |||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||
Compensation and benefits |
$ | 48 | $ | 43 | $ | 5 | $ | 99 | $ | 91 | $ | 8 | ||||||||||||
Occupancy |
9 | 7 | 2 | 17 | 13 | 4 | ||||||||||||||||||
Information systems and technology |
4 | 4 | | 9 | 7 | 2 | ||||||||||||||||||
Advertising and promotional |
4 | 3 | 1 | 11 | 7 | 4 | ||||||||||||||||||
Furniture, fixtures, and equipment |
5 | 4 | 1 | 11 | 8 | 3 | ||||||||||||||||||
Professional services |
5 | 2 | 3 | 8 | 4 | 4 | ||||||||||||||||||
Travel and other employee costs |
4 | 3 | 1 | 6 | 5 | 1 | ||||||||||||||||||
Postage, printing, and supplies |
2 | 2 | | 4 | 4 | | ||||||||||||||||||
Litigation charge |
| 5 | (5 | ) | | 5 | (5 | ) | ||||||||||||||||
Depreciation of assets leased to
others |
2 | 1 | 1 | 3 | 3 | | ||||||||||||||||||
Other |
13 | 13 | | 27 | 25 | 2 | ||||||||||||||||||
Shared services allocation from
Temple-Inland Inc. |
| 7 | (7 | ) | | 15 | (15 | ) | ||||||||||||||||
96 | 94 | 2 | 195 | 187 | 8 | |||||||||||||||||||
Charges related to asset
impairments and severance |
3 | | 3 | 3 | | 3 | ||||||||||||||||||
$ | 99 | $ | 94 | $ | 5 | $ | 198 | $ | 187 | $ | 11 | |||||||||||||
Percent increase for the period,
excluding charges related to
asset impairments and severance |
2 | % | 4 | % |
24
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(In millions) | ||||||||||||||||
Commercial banking |
$ | (30 | ) | $ | 58 | $ | (24 | ) | $ | 121 | ||||||
Retail banking |
(17 | ) | (8 | ) | (37 | ) | (15 | ) | ||||||||
Insurance agency |
1 | 2 | 2 | 4 | ||||||||||||
Mortgage banking |
(1 | ) | (7 | ) | (2 | ) | (8 | ) | ||||||||
Treasury, corporate and other |
(10 | ) | (6 | ) | (13 | ) | (20 | ) | ||||||||
$ | (57 | ) | $ | 39 | $ | (74 | ) | $ | 82 | |||||||
25
26
June 30, 2008 | December 31, 2007 | |||||||||||||||
Percent of | Percent of | |||||||||||||||
Balance | Total Loans | Balance | Total Loans | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Single-family mortgage |
$ | 1,485 | 14 | % | $ | 1,672 | 17 | % | ||||||||
Single-family mortgage warehouse |
971 | 9 | % | 695 | 7 | % | ||||||||||
Singe-family construction (homebuilders) |
1,223 | 12 | % | 1,510 | 15 | % | ||||||||||
Multifamily and senior housing |
1,877 | 18 | % | 1,541 | 15 | % | ||||||||||
Commercial real estate |
1,774 | 17 | % | 1,674 | 17 | % | ||||||||||
Commercial and business |
1,384 | 14 | % | 1,340 | 13 | % | ||||||||||
Energy |
1,334 | 13 | % | 1,470 | 15 | % | ||||||||||
Consumer and other |
197 | 3 | % | 144 | 1 | % | ||||||||||
Total loans |
10,245 | 100 | % | 10,046 | 100 | % | ||||||||||
Less allowance for loan losses |
(250 | ) | (118 | ) | ||||||||||||
Loans, net |
$ | 9,995 | $ | 9,928 | ||||||||||||
June 30, 2008 | December 31, 2007 | |||||||||||||||
Unpaid | Total | Unpaid | Total | |||||||||||||
Principal | Delinquency | Principal | Delinquency | |||||||||||||
Balance | > 30 days | Balance | > 30 days | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Option ARMs |
$ | 407 | 21.04 | % | $ | 502 | 10.80 | % | ||||||||
Intermediate ARMs |
589 | 5.53 | % | 709 | 3.27 | % | ||||||||||
Other first liens |
342 | 8.86 | % | 279 | 8.00 | % | ||||||||||
Repurchased loans |
33 | 42.00 | % | 35 | 41.64 | % | ||||||||||
Second liens |
114 | 1.86 | % | 147 | 1.54 | % | ||||||||||
$ | 1,485 | 11.09 | % | $ | 1,672 | 6.97 | % | |||||||||
27
By Issuer
|
By Type
|
|
28
Net | ||||||||||||||||||||
Unrealized | Net Unrealized | |||||||||||||||||||
Losses on | Losses on Held- | |||||||||||||||||||
Amortized | Available-for- | Carrying | to-Maturity | |||||||||||||||||
Cost | Sale Securities | Value | Securities | Fair Value | ||||||||||||||||
(In millions) | ||||||||||||||||||||
U.S. Government
and U.S.
Government
Sponsored
Enterprises |
$ | 1,477 | $ | 1 | $ | 1,478 | $ | 4 | $ | 1,482 | ||||||||||
Non-agency: |
||||||||||||||||||||
Internally valued |
3,459 | (514 | ) | 2,945 | (899 | ) | 2,046 | |||||||||||||
Market quotes |
171 | | 171 | (3 | ) | 168 | ||||||||||||||
$ | 5,107 | $ | (513 | ) | $ | 4,594 | $ | (898 | ) | $ | 3,696 | |||||||||
29
Subord- | Unpaid | |||||||||||||||||||||||||||||
Delinquency% | ination | Principal | Carrying | |||||||||||||||||||||||||||
Issuer and Underlying Asset Type | Tranche | Cusip | Total | >60 day | % | Loan Originator | Balance | Value | Fair Value | |||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||
12MTA Option ARMs |
||||||||||||||||||||||||||||||
Structured Asset Mortgage
Investment II Trust 2007-AR6 |
Class A2 | 86364RAB5 | 16 | % | 12 | % | 11 | % | American Home Mortgage Corp |
$ | 412 | $ | 206 | $ | 206 | * | ||||||||||||||
RALI 2007-QO5 Trust |
Class A | 74924AAA3 | 18 | % | 11 | % | 11 | % | Homecomings Financial |
206 | 140 | 140 | * | |||||||||||||||||
Alternative Loan Trust 2005-81 |
Class A-4 | 12668BBR3 | 26 | % | 21 | % | 13 | % | Countrywide Home Loans |
143 | 145 | 79 | ||||||||||||||||||
Structured Asset Mortgage
Investment II Trust 2005-AR8 |
Class A-5 | 86359LSB6 | 29 | % | 23 | % | 13 | % | Countrywide Home Loans |
136 | 137 | 68 | ||||||||||||||||||
Alternative Loan Trust 2006-OA2 |
Class A-7 | 126694V88 | 35 | % | 29 | % | 16 | % | Countrywide Home Loans |
131 | 134 | 65 | ||||||||||||||||||
Alternative Loan Trust 2005-76 |
Class 1-A-2 | 12668BDD2 | 32 | % | 27 | % | 17 | % | Countrywide Home Loans |
127 | 129 | 64 | ||||||||||||||||||
Alternative Loan Trust 2005-58 |
Class A-3 | 12668AWK7 | 29 | % | 23 | % | 15 | % | Countrywide Home Loans |
123 | 125 | 72 | ||||||||||||||||||
Alternative Loan Trust 2005-51 |
Class 3-A-1 | 12668ACW3 | 27 | % | 22 | % | 17 | % | Countrywide Home Loans |
126 | 127 | 60 | ||||||||||||||||||
Alternative Loan Trust 2005-62 |
Class 1-A-2 | 12668ATP0 | 33 | % | 28 | % | 18 | % | Countrywide Home Loans |
118 | 119 | 79 | ||||||||||||||||||
RALI Series 2005-QO5 Trust |
Class A-3 | 761118QP6 | 29 | % | 23 | % | 15 | % | Homecomings Financial Network, SCME, Mortgage IT, Other |
99 | 100 | 46 | ||||||||||||||||||
RALI Series 2005-Q01 Trust |
Class A-4 | 761118ER5 | 21 | % | 15 | % | 17 | % | Homecomings Financial Network, Other |
90 | 92 | 53 | ||||||||||||||||||
Alternative Loan Trust 2005-38 |
Class A-2 | 12667GZ22 | 27 | % | 23 | % | 19 | % | Countrywide Home Loans |
71 | 73 | 50 | ||||||||||||||||||
Alternative Loan Trust 2005-41 |
Class 2-A-1 | 12667GR96 | 27 | % | 21 | % | 21 | % | Countrywide Home Loans |
68 | 69 | 38 | ||||||||||||||||||
Structured Asset Mortgage
Investments II Trust 2006-AR3 |
Class 12A4 | 86360KAH1 | 33 | % | 27 | % | 14 | % | Countrywide Home Loans, Bank of America, and other |
70 | 71 | 44 | ||||||||||||||||||
Harborview Mortgage Loan Trust 2005-8 |
Class 2A3 | 41161PRT2 | 22 | % | 19 | % | 20 | % | Countrywide Home Loans |
61 | 63 | 39 | ||||||||||||||||||
Greenpoint Mortgage Funding
Trust 2005-AR5 |
Class I-A-2 | 39538WEC8 | 37 | % | 30 | % | 22 | % | Greenpoint Mortgage Funding |
54 | 56 | 35 | ||||||||||||||||||
Structured Asset Mortgage
Investments II Trust 2005-AR4 |
Class A2 | 86359LMA4 | 31 | % | 26 | % | 23 | % | Countrywide Home Loans |
55 | 57 | 33 | ||||||||||||||||||
WaMu Mortgage Pass-Through
Certificates, Series 2005-AR9 |
Class A2A | 92922FU97 | 8 | % | 6 | % | 19 | % | One or more approved institutions |
51 | 52 | 30 | ||||||||||||||||||
Structured Asset Mortgage
Investments II Trust 2005-AR7 |
Class 5A2 | 86359LQT9 | 22 | % | 18 | % | 18 | % | Southstar
Funding LLC/Opteum Financial Services LLC, First Horizon, BOA, other |
41 | 41 | 19 | ||||||||||||||||||
Greenpoint Mortgage Funding
Trust 2006-AR3 |
Class 4A3 | 39538WHH4 | 28 | % | 23 | % | 15 | % | Greenpoint Mortgage Funding |
38 | 39 | 26 | ||||||||||||||||||
Harborview Mortgage Loan Trust
2005-16 |
Class 4A1B | 41161PZD8 | 25 | % | 22 | % | 20 | % | Countrywide Home Loans |
32 | 32 | 19 | ||||||||||||||||||
IndyMac INDX Mortgage Loan
Trust 2005-16IP |
Class A3 | 45660LUF4 | 20 | % | 16 | % | 20 | % | IndyMac Bank, F.S.B. |
27 | 28 | 18 | ||||||||||||||||||
2,279 | 2,035 | 1,283 |
* | Security designated as available-for-sale |
30
Subord- | Unpaid | |||||||||||||||||||||||||||||
Delinquency % | ination | Principal | Carrying | |||||||||||||||||||||||||||
Issuer and Underlying Asset Type | Tranche | Cusip | Total | >60 day | % | Loan Originator | Balance | Value | Fair Value | |||||||||||||||||||||
(Dollars in millions) | ||||||||||||||||||||||||||||||
Hybrid Option ARMs (5Y Fixed/12MTA) |
||||||||||||||||||||||||||||||
RALI 2007-QH8 Trust |
Class A | 74924EAA5 | 15 | % | 10 | % | 12 | % | Homecomings Financial |
482 | 313 | 313 | * | |||||||||||||||||
COFI Option ARMs |
||||||||||||||||||||||||||||||
WaMu Mortgage Pass-Through Certificates 2007-OA4 |
Class 2A | 93364CAC2 | 14 | % | 10 | % | 30 | % | Washington Mutual Bank |
135 | 94 | 94 | * | |||||||||||||||||
Washington Mutual Mortgage Pass- Through Certificates WMALT 2007- OA3 Trust |
Class 5A | 939355AE3 | 19 | % | 14 | % | 14 | % | Washington Mutual Bank or others, Mortgage IT |
120 | 120 | 87 | ||||||||||||||||||
WaMu Mortgage Pass-Through Certificates 2007-OA5 |
Class 2A | 93364BAC4 | 14 | % | 11 | % | 30 | % | Washington Mutual Bank |
107 | 75 | 75 | * | |||||||||||||||||
WaMu Mortgage Pass- Through Certificates 2006-AR9 |
Class 2A-1B | 93363DAC1 | 8 | % | 6 | % | 10 | % | Washington Mutual Bank |
85 | 84 | 51 | ||||||||||||||||||
WaMu Mortgage Pass -Through Certificates 2006-AR9 |
Class 2A | 93363DAB3 | 8 | % | 6 | % | 36 | % | Washington Mutual Bank |
53 | 53 | 37 | ||||||||||||||||||
WaMu Mortgage Pass- Through Certificates 2006-AR11 |
Class 2A-1B | 93363TAC6 | 11 | % | 8 | % | 10 | % | Washington Mutual Bank |
42 | 43 | 26 | ||||||||||||||||||
WaMu Mortgage Pass Through Certificates 2006-AR13 |
Class 2A-1B | 93363RAC0 | 11 | % | 7 | % | 10 | % | Washington Mutual Bank |
37 | 37 | 25 | ||||||||||||||||||
WaMu Mortgage Pass- Through Certificates 2006-AR15 |
Class 2A-1B | 93363QAD0 | 10 | % | 8 | % | 10 | % | Washington Mutual Bank |
31 | 31 | 19 | ||||||||||||||||||
WaMu Mortgage Pass- Through Certificates 2006-AR17 |
Class 2A-1B | 92925DAE0 | 10 | % | 7 | % | 10 | % | Washington Mutual Bank |
24 | 24 | 15 | ||||||||||||||||||
WaMu Mortgage Pass- Through Certificates 2006-AR19 |
Class 2A | 933638AD0 | 10 | % | 9 | % | 39 | % | Washington Mutual Bank |
20 | 20 | 14 | ||||||||||||||||||
WaMu Mortgage Pass- Through Certificates 2006-AR19 |
Class 2A-1B | 933638AE8 | 10 | % | 9 | % | 9 | % | Washington Mutual Bank |
13 | 13 | 8 | ||||||||||||||||||
Home Savings of America |
1988-7A | 436904AG1 | | | 103 | % | Not Available |
1 | 1 | 1 | * | |||||||||||||||||||
Home Savings of America |
1988-8A | 436904AJ5 | | | 99 | % | Not Available |
2 | 2 | 2 | * | |||||||||||||||||||
Home Savings of America |
1988-10A | 436904AK2 | | | 102 | % | Not Available |
1 | 1 | 1 | * | |||||||||||||||||||
Home Savings of America |
1988-11A | 436904AL0 | | | 102 | % | Not Available |
1 | 1 | 1 | * | |||||||||||||||||||
672 | 599 | 456 | ||||||||||||||||||||||||||||
5/1 LIBOR |
||||||||||||||||||||||||||||||
Banc of America Mortgage Securities, Inc. Mortgage Pass-Through Certificates, Series 2004-H |
Class 2A1 | 05949ARD4 | 3 | % | 2 | % | 7 | % | Bank of America, N.A. |
40 | 40 | 38 | ||||||||||||||||||
GSR Mortgage Loan Trust 2004-11 |
Class 2A1 | 36242DFS7 | 4 | % | 3 | % | 9 | % | Various Lenders |
42 | 43 | 41 | ||||||||||||||||||
Banc of America Mortgage Securities, Inc. Mortgage Pass-Through Certificates, Series 2003-K |
Class 2A2 | 05948XZH7 | 1 | % | 1 | % | 6 | % | Bank of America, N.A. |
33 | 33 | 32 | ||||||||||||||||||
Banc of America Mortgage Securities, Inc. Mortgage Pass-Through Certificates, Series 2003-H |
Class 2A2 | 05948XTH4 | 1 | % | 1 | % | 6 | % | Bank of America, N.A. |
25 | 26 | 24 | ||||||||||||||||||
GSR Mortgage Loan Trust 2003-9 |
Class A2 | 36228FWS1 | 2 | % | 2 | % | 8 | % | Various Lenders |
18 | 18 | 18 | ||||||||||||||||||
Banc of America Mortgage Securities, Inc. Mortgage Pass-Through Certificates, Series 2003-D |
Class 2A3 | 05948XBU4 | 3 | % | 2 | % | 7 | % | Bank of America, N.A. |
7 | 7 | 7 | ||||||||||||||||||
Banc of America Mortgage Securities, Inc. Mortgage Pass-Through Certificates, Series 2003-A |
Class 2A1 | 05948LAE7 | 5 | % | 2 | % | 8 | % | Bank of America, N.A. |
2 | 2 | 2 | ||||||||||||||||||
167 | 169 | 162 | ||||||||||||||||||||||||||||
20 | % | 16 | % | 16 | % | $ | 3,600 | $ | 3,116 | $ | 2,214 | |||||||||||||||||||
* | Security designated as available-for-sale |
California |
60 | % | ||
Florida |
12 | % | ||
Arizona |
3 | % | ||
Other |
8 | % | ||
Not available |
17 | % | ||
100 | % | |||
31
June 30, 2008
|
December 31, 2007 | |
32
June 30, | December 31, | |||||||||||||||
2008 | 2007 | |||||||||||||||
(Dollars in millions) | ||||||||||||||||
Non-performing loans |
$ | 364 | $ | 166 | ||||||||||||
Foreclosed real estate |
42 | 13 | ||||||||||||||
Non-performing assets |
$ | 406 | $ | 179 | ||||||||||||
Non-performing loans as a percentage of total loans |
3.55 | % | 1.65 | % | ||||||||||||
Non-performing assets divided by total loans and foreclosed real estate |
3.95 | % | 1.78 | % | ||||||||||||
Allowance for loan losses as a percentage of non-performing loans |
69 | % | 71 | % | ||||||||||||
Allowance for loan losses as a percentage of total loans |
2.44 | % | 1.17 | % | ||||||||||||
Single-family mortgage loan delinquencies as a percentage of
single-family mortgage loans |
11.09 | % | 6.97 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Balance at beginning of period |
$ | 181 | $ | 78 | $ | 125 | $ | 72 | ||||||||
Provision (credit) for credit losses |
99 | | 157 | (2 | ) | |||||||||||
Net (charge-offs) recoveries |
(19 | ) | 1 | (21 | ) | 9 | ||||||||||
Balance at end of period |
$ | 261 | $ | 79 | $ | 261 | $ | 79 | ||||||||
Allowance for loan losses |
$ | 250 | $ | 72 | $ | 250 | $ | 72 | ||||||||
Commitment-related reserves |
11 | 7 | 11 | 7 | ||||||||||||
$ | 261 | $ | 79 | $ | 261 | $ | 79 | |||||||||
Provision (credit) for: |
||||||||||||||||
Loan losses |
$ | 97 | $ | | $ | 153 | $ | (2 | ) | |||||||
Commitment-related credit losses |
2 | | 4 | | ||||||||||||
Combined provision (credit) for credit losses |
$ | 99 | $ | | $ | 157 | $ | (2 | ) | |||||||
Nonaccrual loans |
$ | 364 | $ | 29 | $ | 364 | $ | 29 | ||||||||
Accruing loans past-due 90 days or more |
$ | 5 | $ | 6 | $ | 5 | $ | 6 | ||||||||
Net charge-offs (recoveries) as a percentage
of average loans outstanding |
0.74 | % | (0.03 | )% | 0.41 | % | (0.18 | )% |
33
June 30, 2008 | December 31, 2007 | |||||||||||||||
Allowance | Allowance | |||||||||||||||
as a % | as a % | |||||||||||||||
of Loan | of Loan | |||||||||||||||
Allowance | Category | Allowance | Category | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Single-family mortgage |
$ | 24 | 1.62 | % | $ | 9 | 0.54 | % | ||||||||
Single-family mortgage warehouse |
5 | 0.51 | % | 6 | 0.86 | % | ||||||||||
Single-family construction (homebuilders) |
136 | 11.12 | % | 48 | 3.18 | % | ||||||||||
Multifamily and senior housing |
9 | 0.48 | % | 6 | 0.39 | % | ||||||||||
Commercial real estate |
6 | 0.34 | % | 6 | 0.36 | % | ||||||||||
Commercial and business |
22 | 1.59 | % | 15 | 1.12 | % | ||||||||||
Energy |
19 | 1.42 | % | 6 | 0.41 | % | ||||||||||
Consumer and other |
1 | 0.51 | % | | | |||||||||||
Incurred but
not yet identified losses |
28 | | 22 | | ||||||||||||
$ | 250 | 2.44 | % | $ | 118 | 1.17 | % | |||||||||
Lots and Land | ||||||||||||||||
Single-Family | Acquisition and | |||||||||||||||
Houses | Development | Other | Total | |||||||||||||
(In millions) | ||||||||||||||||
California |
$ | 120 | $ | 250 | $ | 48 | $ | 418 | ||||||||
Texas |
91 | 24 | | 115 | ||||||||||||
Florida |
46 | 41 | 1 | 88 | ||||||||||||
Arizona |
17 | 28 | 38 | 83 | ||||||||||||
Colorado |
47 | 28 | | 75 | ||||||||||||
Other |
121 | 164 | 159 | (a) | 444 | |||||||||||
$ | 442 | $ | 535 | $ | 246 | $ | 1,223 | |||||||||
(a) | Principally unsecured loans to national homebuilders |
% of | % of | |||||||
Commercial | Total Loan | |||||||
Real Estate | Portfolio | |||||||
Office |
47 | % | 8 | % | ||||
Retail |
27 | % | 5 | % | ||||
Industrial |
14 | % | 2 | % | ||||
Land |
12 | % | 2 | % | ||||
100 | % | 17 | % | |||||
34
Distribution of | ||||||||||||
Credit | ||||||||||||
Relationships | ||||||||||||
Exceeding | ||||||||||||
Commitment | Outstanding | $100 Million | ||||||||||
(Dollars in millions) | ||||||||||||
Commercial real estate construction |
$ | 641 | $ | 400 | 6 | |||||||
Energy |
259 | 215 | 2 | |||||||||
$ | 900 | $ | 615 | 8 | ||||||||
| Operating cash flows; | ||
| New deposits; | ||
| Ability to borrow from the FHLB; and | ||
| A portfolio of assets, including marketable mortgage-backed securities, which we can pledge as borrowings or sell or securitize if necessary. |
35
Payments Due or Expiring by Period | ||||||||||||||||||||||||
Total | 2008 | 2009-10 | 2011-12 | Thereafter | Indeterminable | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Items on our balance sheet: |
||||||||||||||||||||||||
Transaction and savings
deposit accounts |
$ | 4,803 | $ | | $ | | $ | | $ | | $ | 4,803 | ||||||||||||
Certificates of deposit |
4,357 | 2,681 | 1,557 | 105 | 14 | | ||||||||||||||||||
Federal Home Loan Bank
borrowings |
5,553 | 5,119 | 309 | 125 | | | ||||||||||||||||||
Subordinated notes payable
to trust |
314 | | | | 314 | | ||||||||||||||||||
Items not on our balance sheet: |
||||||||||||||||||||||||
Contractual interest payments |
548 | 49 | 103 | 51 | 345 | | ||||||||||||||||||
Operating leases |
44 | 4 | 16 | 14 | 10 | | ||||||||||||||||||
Processing contracts |
17 | 6 | 9 | 2 | | | ||||||||||||||||||
$ | 15,636 | $ | 7,859 | $ | 1,994 | $ | 297 | $ | 683 | $ | 4,803 | |||||||||||||
June 30, | December 31, | |||||||
2008 | 2007 | |||||||
(In millions) | ||||||||
Single-family mortgage loans |
$ | 107 | $ | 87 | ||||
Unused lines of credit |
1,854 | 1,959 | ||||||
Unfunded portion of credit commitments pledgeable |
2,876 | 3,866 | ||||||
Unfunded portion of credit commitments non-pledgeable |
941 | 621 | ||||||
Commitments to originate loans pledgeable |
95 | 337 | ||||||
Commitments to originate loans non-pledgeable |
185 | 417 | ||||||
Letters of credit |
338 | 359 | ||||||
$ | 6,396 | $ | 7,646 | |||||
36
For Categorization as | Regulatory | |||||||||||||||||||
Actual | Well Capitalized | Minimum | ||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
Total Risk-Based Ratio (Risk-based Capital/Total Risk-weighted Assets) |
$1,391 | 10.60 | % | $ | 1,311 | ³10.00% | $ | 1,049 | ³ 8.00% | |||||||||||
Tier 1 (Core) Risk-based Ratio (Core Capital/Total Risk-weighted Assets) |
$1,228 | 9.36 | % | $ | 787 | ³ 6.00% | $ | 525 | ³ 4.00% | |||||||||||
Tier 1 (Core) Leverage Ratio (Core Capital/Adjusted Tangible Assets) |
$1,228 | 7.63 | % | $ | 805 | ³ 5.00% | $ | 644 | ³ 4.00% | |||||||||||
Tangible Ratio (Tangible Capital/Tangible Assets)
|
$1,228 | 7.63 | % | n/a | n/a | $ | 322 | ³ 2.00% |
37
Increase (Decrease) in | ||||||||
Income Before Taxes | ||||||||
Change in | June 30, | December 31, | ||||||
Interest Rate | 2008 | 2007 | ||||||
(In millions) | ||||||||
+1% |
$ | 14 | $ | (6 | ) | |||
-1% |
(17 | ) | (12 | ) |
| the average time to maturity of our certificates of deposit lengthened during the first half of the year, delaying the responsiveness of the costs of those deposits to market rate changes; and, |
| we expect the interest rates on our money market and checking account deposit liabilities will be less responsive to changes in interest rates because of the current low level of interest rates. |
38
39
Election of directors to three year terms, expiring 2011 | For | Against | Withheld | |||||||||
David W. Biegler |
28,701,406 | 1,723,769 | 2,786,215 | |||||||||
Leigh M. McAlister |
26,869,720 | 3,558,083 | 2,783,587 | |||||||||
Edward R. McPherson |
30,050,444 | 375,798 | 2,785,148 | |||||||||
Raul R. Romero |
26,957,444 | 3,469,458 | 2,784,488 | |||||||||
Bill D. Walker |
26,982,086 | 3,446,050 | 2,783,254 | |||||||||
| Kenneth R. Dubuque, | |
| Kenneth M. Jastrow, II, | |
| Larry R. Faulkner, | |
| Robert V. Kavanaugh, | |
| Robert D. McTeer, | |
| John T. Stuart, and | |
| Larry E. Temple. |
40
For | Against | Abstain | Non-Votes | |||||||||||||
30,316,692 |
120,090 | 2,774,608 | | |||||||||||||
Exhibit | ||||
Number | Exhibit Description | |||
3.1 | Certificate of Designations, Preferences and Rights of
Series B Mandatory Convertible Perpetual Cumulative
Preferred Stock (incorporated herein by reference to
Exhibit 3.1 to the Companys Form 8-K as filed with the
Commission on July 11, 2008) |
|||
4.1 | Form of Subordinated Note (incorporated herein by reference
to Exhibit 4.1 to the Companys Form 8-K as filed with the
Commission on June 9, 2008) |
|||
10.1 | Investment Agreement, dated May 26, 2008, between the
Company and TRT Financial Holdings, LLC (incorporated
herein by reference to Exhibit 10.1 to the Companys Form
8-K as filed with the Commission on May 27, 2008) |
|||
10.2 | First Amendment to Investment Agreement, dated May 29,
2008, between the Company, the Investor and the Investor
Affiliates (incorporated by reference to Exhibit 10.18 to
Amendment No. 4 to the Companys Registration Statement on
Form S-1 as filed with the Commission on May 30, 2008) |
|||
10.3 | Investment Agreement dated June 7, 2008 by and between the
Company and TRT Financial Holdings, LLC (incorporated
herein by reference to Exhibit 10.1 to the Companys Form
8-K as filed with the Commission on June 9, 2008) |
|||
10.4 | Investment Agreement dated June 7, 2008 by and between the
Company and Icahn Partners, LP (incorporated by reference
to Exhibit 10.2 to the Companys Form 8-K as filed with the
Commission on June 9, 2008) |
|||
10.5 | Form of Investment Agreement entered into by the Company
and investors other than Icahn Partners and TRT
(incorporated herein by reference to Exhibit 10.3 to the
Companys Form 8-K as filed with the Commission on June 9,
2008) |
|||
10.6 | Purchase Agreement dated June 7, 2008 by and among the
Company and the purchasers named therein (incorporated
herein by reference to Exhibit 10.4 to the Companys Form
8-K as filed with the Commission on June 9, 2008) |
|||
10.7 | Letter Agreement dated June 7, 2008 by and between the
Company and Icahn Partners, LP (incorporated herein by
reference to Exhibit 10.5 to the Companys Form 8-K as
filed with the Commission on June 9, 2008) |
41
Exhibit | ||||
Number | Exhibit Description | |||
10.8 | Letter Agreement dated June 7, 2008 by and between the
Company and TRT Financial Holdings, LLC (incorporated
herein by reference to Exhibit 10.6 to the Companys Form
8-K as filed with the Commission on June 9, 2008) |
|||
10.9 | Agency Agreement between the Company, Guaranty Bank and
Keefe, Bruyette & Woods, Inc. (incorporated herein by
reference to Exhibit 10.7 to the Companys Form 8-K as
filed with the Commission on June 9, 2008) |
|||
31.1 | Certification of Kenneth R. Dubuque pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange
Act, as amended |
|||
31.2 | Certification of Ronald D. Murff pursuant to Rule 13a-14(a)
and Rule 15d-14(a) of the Securities Exchange Act, as
amended |
|||
32.1 | Certification of Kenneth R. Dubuque pursuant to 18 U.S.C.
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
|||
32.2 | Certification of Ronald D. Murff pursuant to 18 U.S.C.
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
42
Guaranty Financial Group Inc. (Registrant) |
||||
By: | /s/ Craig E. Gifford | |||
Executive Vice President and | ||||
Date: August 11, 2008 | Principal Accounting Officer | |||
43