8-K

 
                                   FORM 8-K


                      Securities and Exchange Commission
                            Washington, D.C.  20549



                                CURRENT REPORT


                    Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934


Date of Report (date of earliest event reported): April 1, 1998


                          Surety Capital Corporation
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            (exact name of registrant as specified in its charter)



    Delaware                        33-1983                         75-2065607
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(State or other             (Commission File Number)               (IRS Employer
jurisdiction of                                                   Identification
incorporation)                                                        Number)



            1845 Precinct Line Road, Suite 100, Hurst, Texas  76054
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                   (address of principal executive offices)



Registrant's telephone number, including area code:  817-498-8154



                                Not applicable
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         (Former name or former address, if changed since last report)

 
ITEM 2.  ACQUISITION OF ASSETS

    Effective April 1, 1998, Surety Capital Corporation ("Surety") acquired
TexStar National Bank, a national banking association located in Universal City,
Texas ("TexStar").

    Surety, Surety's subsidiary, Surety Bank, National Association ("Surety
Bank"), TexStar and certain shareholders of TexStar (the "Shareholders") entered
into (i) that certain Reorganization Agreement dated October 10, 1997 (the
"Reorganization Agreement") and (ii) that certain Agreement to Merge TexStar
National Bank With and Into Surety Bank, National Association Under the Charter
of Surety Bank, National Association and Under the Title of Surety Bank,
National Association, providing for the merger of TexStar with and into Surety
Bank.

    On April 1, 1998 (the "Effective Date"), TexStar was merged with and into
Surety Bank, with the shareholders of TexStar receiving cash in exchange for
their shares of common stock of TexStar (the "Merger").  Pursuant to the Merger,
Surety Bank paid a total of $9,672,000, of which $400,000 was paid into an
escrow account to indemnify Surety and Surety Bank, and their respective
officers, directors, employees, agents, successors and assigns against any
claims connected with or arising out of a breach of warranty or
misrepresentation or a breach of covenant by TexStar under certain provisions of
the Reorganization Agreement.  The escrowed funds will be paid to the
shareholders of TexStar if not used to defend against or satisfy indemnified
claims of Surety and Surety Bank.  The purchase price paid by Surety pursuant to
the Merger was $9,500,000 (based on approximately 168.2% of the book value of
TexStar as of September 30, 1997), plus a performance percent equal to $172,000
based on fifty percent (50%) of net earnings of TexStar from September 1, 1997
to the date of closing in excess of $100,000.

    In connection with the Merger, all of the assets of TexStar were transferred
and conveyed to Surety Bank and Surety Bank assumed all of the liabilities of
TexStar.  Surety Bank continues to conduct its business as a national banking
association from its main office located at 1845 Precinct Line Road, Suite 100,
Hurst, Texas 76054; from its existing established branches at U.S. Highway 287,
Chester, Texas 75936; at Broadway and Main Streets, Kennard, Texas 75847; at 600
S. First, Lufkin, Texas 75901; at 310 N. Ninth, Midlothian, Texas 76065; at 104
North Elm, Waxahachie, Texas 75165; at U.S. Highway 69, Wells, Texas 75976; and
at 2500 Highway 82 East, Whitesboro, Texas 76273; and from its new branches
acquired through the Merger at 600 Pat Booker Road, Universal City, Texas 78148;
at 9154 FM 78, Converse, Texas 78109; at 1012 IH 35 South, New Braunfels, Texas
78130; at 426 Wolfe, San Antonio, Texas 78216; and at 420 Schertz Parkway,
Schertz, Texas 78154.

    Surety financed the Merger through a private placement of $4,350,000
aggregate principal amount of its 9% Subordinated Convertible Notes due 2008,
which closed on March 31, 1998.  Upon

                                     -1-

 
completion of the private placement, Surety made a capital contribution in the
amount of $4,000,000 to Surety Bank to enable Surety Bank to consummate the
Merger.

    There are no material relationships between the parties to the Merger or any
of their respective affiliates, other than Byron K. Bexley, former president of
TexStar, who is serving as a branch manager of Surety Bank.

ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS

    (a)  Financial Statements

         Audited financial statements of the acquired bank, if determined to be
         required by Rule 3-05 of Regulation S-X, will be filed within sixty
         (60) days.

    (b)  Pro forma financial statements and applicable industry guide 3
         disclosures will be filed within sixty (60) days.

    (c)  Exhibits

         The following exhibits are included with this Form 8-K in accordance
         with the provisions of Item 601 of Regulation S-K:

         2.11  Agreement and Plan of Reorganization by and among Surety Bank,
               National Association, TexStar National Bank, Surety Capital
               Corporation, and certain shareholders of TexStar National Bank,
               dated as of October 10, 1997; and Agreement to Merge TexStar
               National Bank with and into Surety Bank, National Association
               Under the Charter of Surety Bank, National Association and Under
               the Title of Surety Bank, National Association, between Surety
               Bank, National Association and TexStar National Bank and joined
               in by Surety Capital Corporation and certain shareholders of
               TexStar National Bank, dated as of October 10, 1997 (1)

         20    Press Release dated April 6, 1998*

_______________

         (1)   Filed with the Company's Form 10-K for the fiscal year ended
               December 31, 1997 and incorporated by reference herein.

         *     Filed herewith.

                                      -2-

 
                                  SIGNATURES


    Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                    SURETY CAPITAL CORPORATION



DATE:  April 7, 1998                By: /s/ B. J. Curley
                                       ----------------------------------------
                                       B. J. Curley, Vice President
                                       and Chief Financial Officer

                                      -3-

EX-20

 
                                                                      EXHIBIT 20

                               **NEWS RELEASE**

                          SURETY CAPITAL CORPORATION
            ---- TexStar National Bank, Universal City Merger ----

FOR RELEASE:  Immediately                                 CONTACT:  C. Jack Bean
Date:  April 6, 1998                                      Chairman of the Board
AMEX Symbol:  SRY                                         1 (800) SRY-5995


Hurst, Texas, April 6, 1998 - Surety Capital Corporation ("Surety Capital"), a
bank holding company located in Hurst, Texas, announced today that it has
completed the acquisition of TexStar National Bank ("TexStar"), Universal City.

The purchase price for TexStar was approximately $19.36 per share of TexStar
common stock outstanding (total cash consideration: $9,772,000), which was paid
to the shareholders of TexStar in connection with the merger of TexStar with
Surety Capital's bank subsidiary, Surety Bank, N.A. ("Surety Bank").  The
acquisition of TexStar was financed through a private placement by Surety
Capital of $4,350,000 in convertible subordinated debt, underwritten by Hoefer &
Arnett, Incorporated, a San Francisco based investment banking firm.  The debt
has a ten (10) year maturity, bears interest at nine percent (9%) per annum,
with interest payable semi-annually, and provides for the payment of principal
on maturity.  The debt is convertible into Surety Capital common stock at a
strike price of $6.00 per share and can be redeemed by Surety Capital, under
various conditions.

As of December 31, 1997, TexStar had total assets of $71,119,150, total deposits
of $64,934,028, total loans net of allowance for credit losses of $32,559,659
and total equity of $5,787,838.  TexStar has five full service banking
facilities located primarily in suburban areas northeast of San Antonio, Texas.
Surety Bank plans to operate all five TexStar locations as full service branches
of Surety Bank.

As of December 31, 1997, Surety Bank had total assets of $170,784,704, total
deposits of $155,271,586, total loans net of allowance for credit losses of
$97,683,110 and total equity of $15,072,628.  The completion of this acquisition
has resulted in Surety Bank increasing its asset size by 41% to approximately
$241,000,000 in total assets.

C. Jack Bean, Chairman of the Board of Surety Capital, stated, "The successful
completion of the acquisition of TexStar should position Surety Capital and
Surety Bank to continue to pursue its aggressive profit and growth oriented
niche banking business plan.  The five TexStar locations open new deposit
gathering and loan origination markets for Surety Bank.  Surety Bank plans to
actively serve the financial needs of this new market, as it has supported the
communities served by its eight existing locations.  Surety Bank is dedicated to
the concept of full service community banking.  TexStar's excess funding
capacity will enable Surety Bank to continue to expand its niche lending
product, insurance premium finance lending and to maximize its capital
utilization.  Management believes that the completion of this acquisition will
prove to be of long-term benefit to both Surety Capital and its shareholders."

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