Big Arizona Bank Will Take Over 2 Ailing Texas S
In the latest move to find buyers for crippled Texas savings and loan associations, federal regulators announced Wednesday that a large Arizona bank has acquired two ailing savings institutions in Texas.
In return for $83 million worth of federal help, Merabank of Phoenix took control of First Financial of El Paso and Brownfield Federal Savings of Brownfield. Merabank, a federal savings bank with 66 offices in Arizona and seven branches in Texas, also promised to buy another insolvent Texas S&L; later this year.
The transaction was announced just a day after the Federal Home Loan Bank Board reported massive losses of $4.4 billion for the first three months of 1988 among the nation’s 314 insolvent S&Ls.; The bath of red ink involving a comparative handful of S&Ls; produced an overall loss of $3.8 billion for the entire industry of 3,118 S&Ls.;
The bank board, which regulates the thrifts, where deposits are insured up to $100,000, is seeking to dispose of more than 100 insolvent S&Ls; in Texas, where the combination of bad management and a distressed economy has made some real estate portfolios virtually worthless.
The bank board’s “Southwest Plan,” as its effort to find buyers for struggling S&Ls; is called, involves finding healthy S&Ls;, banks or other investors to acquire the sick institutions without dipping into deposit insurance funds.
“Investors will be chosen on the basis of management capabilities and the willingness to infuse new capital into the area,” Greer said.
More deals like the Merabank transaction will be announced soon. M. Danny Wall, the bank board chairman, “wants to move forward on the Southwest Plan as rapidly as possible,” bank board spokesperson Betsy Greer said Wednesday.
Wall’s goal is to dispose of the bank board’s caseload--the list of insolvent institutions that are not expected to regain their financial health--by the end of next year, Greer said. In Wednesday’s deal, the federal regulators will supply Merabank Texas, a new subsidiary of the Phoenix bank, with a $38.2-million, 10-year note. Other federal guarantees, including protection against losses from the sale of problem assets, could raise the total contribution from Washington to $83 million.
The Federal Savings and Loan Insurance Corp. will own 20% of the new Texas-based Merabank unit and will get profits from the sale of problem assets. Merabank will contribute $8.8 million in cash as its share of the deal.
“Merabank is a financially strong, well-managed institution, and we believe its expansion in Texas through this acquisition will benefit Texas, the thrift industry and FSLIC,” Wall said. “It is further recognition of . . . the opportunities in Texas.”
Meanwhile, Senate Banking Committee Chairman William Proxmire (D-Wis.) is “looking into ways to beef up the ability of the bank board to deal with the problem” of ailing thrifts, a committee spokesman said.
One possibility is an increase in the volume of notes authorized for the bank board to sell to raise capital without worsening the federal budget deficit.
Congress has given the bank board permission to sell $10.8 billion in notes. There are fears in Congress and the S&L; industry, however, that the bank board’s resources--the notes and the fees collected from healthy institutions--may be insufficient to provide the funds needed to attract takeover partners for the sick S&Ls.;
Wednesday’s transaction was the third announced under the Southwest Plan, which now has disposed of 10 ailing S&Ls.;
First Financial, with assets of $345 million, was based in El Paso and had 14 branches. Brownfield had $40 million in assets. All branches will now be operated as part of Merabank Texas.
MERABANK FEDERAL at a Glance
Merabank Federal Savings Bank, based in Phoenix, is a subsidiary of Pinnacle West Capital Corp. Founded in 1925, Merabank is Arizona’s largest thrift and the state’s second-largest financial institution. It is the 25th-largest thrift in the United States. New Texas acquisitions: First Financial Savings of El Paso, with assets of $345 million; Brownfield Federal of Brownfield, with assets of $49 million.
Assets $6.6 billion
Deposits $4 billion
Branches 73 (before acquisitions)
Employees About 2,000
Equity-to-assets ratio 6.5%
Source: Company reports
PINNACLE WEST at a Glance
Pinnacle West Capital Corp., parent of Merabank, also owns 29% of the Palo Verde nuclear project and is Arizona’s largest corporation. Pinnacle’s main subsidiary is Arizona Public Service Co., which provides electricity to nearly half of Arizona’s population.
Operating revenue Net income (billions) (millions) 1987 $1.31 $301 1986 $1.25 $273 1985 $1.17 $324
Employees 11,900
Stockholders 113,544
Shares outstanding 83 million
Source: Standard & Poor’s
