U.S. Chipping In $1.8 Billion : Phoenix Firm to Acquire 15 Insolvent Texas Thrifts
The Federal Home Loan Bank Board on Thursday announced the consolidation of 15 financially troubled Texas savings and loan associations, marking the rescue of more than half the 109 insolvent thrift institutions in that state under the agency’s Southwest Plan.
The 15, located in small communities throughout the state, are being acquired by CFSB Corp., a holding company headed by James M. Fail, a Phoenix investor who runs a chain of insurance firms.
The board said Fail will provide $120 million in new capital for the S&Ls.; In return, the Federal Savings and Loan Insurance Corp., the arm of the bank board that insures thrift deposits, will provide assistance worth $1.8 billion.
The new association, to be known as Consolidated Federal Bank FSB, will take over operation of all 59 branches of the 15 insolvent institutions this morning. The arrangements were completed late Thursday.
In addition, the board also approved the acquisition of the Glen Ellyn Savings & Loan of Glen Ellyn, Ill., by Citicorp Mortgage of St. Louis, which in turn will be merged with Citicorp Savings of Illinois, based in Chicago.
That rescue effort will involve $13.9 million in federal assistance.
The new consolidations are the latest in a series of rapid-fire actions by the bank board to rescue or bolster financially troubled S&Ls.; The industry in the Southwest has been jolted by falling oil prices and a collapsing real estate market, which have soured many loans, especially in Texas.
So far this year, the board has bailed out 175 thrifts--147 by helping to arrange mergers or acquisitions, 27 by paying off depositors in cases where the institutions have closed and one by recapitalizing the cash-strapped association.
M. Danny Wall, the board’s chairman, said he hopes to complete arrangements for the rescue of several more insolvent institutions by year-end.
In the Texas case announced Thursday, FSLIC will issue a 10-year note of $836.7 million to restore the institutions’ net worth and will underwrite losses on some of the associations’ assets.
Tax Benefit to FSLIC
In return, the agency will receive 25% of the tax benefits that the new consolidated institution will realize and will be issued warrants for 20% of Consolidated’s common stock.
The 15 institutions to be acquired by Fail’s group include Commodore Savings of Dallas, Mesquite Savings & Loan of Mesquite, Mineral Wells Savings & Loan of Mineral Wells, Sentry Savings of Slaton, Interwest Savings of Ft. Worth, Metroplex Federal Savings of Hurst, North Park Savings of Richardson, Southern Federal Banc SLA of Lancaster, First Western Savings & Loan of Colorado City, First Federal Savings & Loan of Big Spring, Hi-Plains Savings & Loan of Hereford, Reliance Savings of Houston, Vista Savings of Odessa, Home Savings of Lufkin and LaMesa Federal Savings & Loan of LaMesa.
In the Glyn Ellyn case, the board said that the institution had run into problems as a result of “unsafe and unsound lending practices” involving loans made in Florida under an earlier management.