Industrial Giant's Texas S&L Wins Bid for Southwest Fed

DALLAS - A marginally profitable thrift controlled by a Texas paper and construction-products company is the winning bidder for the failed Southwest Federal Savings Association, Dallas, sources said Friday.

The Resolution Trust Corp. has agreed to sell Southwest to Guaranty Federal Savings Bank, the sources said. The deal could close as early as this week.

BankAmerica Not Chosen

San Francisco-based BankAmerica Corp. had been viewed as a front-runner in the sweepstakes to take over Southwest, which has $3 billion in deposits and 67 branches.

Guaranty, a $3.2 billion-asset thrift based in Dallas, is owned by Temple-Inland Inc. The company also owns the fast-growing Kilgore Federal Savings and Loan Association in eastern Texas. With $2.4 billion of revenues, Temple-Inland ranked 189 in the 1990 Fortune 500. Acquiring Southwest would give Temple-Inland control of about $7.3 billion of deposits and 140 branches in the state.

Southwest and Guaranty were created three years ago under the so-called Southwest Plan, a controversial federal rescue program in which dozens of failed thrifts were merged and sold to investors.

Guaranty Federal, with about 52 branches and $2.9 billion of deposits, has earned only modest profits since its inception. The thrift reported a profit of $8.3 million last year, representing a paltry 0.22% return on assets. It earned $1.7 million in the first quarter.

Southwest was placed under RTC control in May 1990, exactly two years after it was formed from the remains of five failing thrifts at an estimated cost of $2 billion.

It is understood that most of Southwest's deposits and branches will go to Guaranty, with a small remainder going to another bidder. The RTC will place a major portion of Southwest's $3.9 billion of assets under private contractors for disposition.

BankAmerica, which has publicly stated that it wants to expand its Texas presence, was expected to get control of Southwest. The banking company has considerable expertise bidding on RTC-owned thrifts, and has bested many offers on some of the agency's choice institutions.

Did BankAmerica Bid?

Although BankAmerica examined Southwest, it was not clear whether BankAmerica submitted a formal bid. A BankAmerica spokesman declined to comment.

BankAmerica recently bought a failed bank and thrift in Houston and is looking at several other Texas institutions, including ailing First City Bancorporation of Texas.

Temple-Inland would have the makings of a Texas power-house after the Southwest acquisition, according to consultant William Ferguson.

The only thing preventing the merger of Guaranty, Kilgore, and Southwest is an RTC requirement that owners of Southwest Plan institutions must house their purchases in separate subsidiaries until completion of a Congressional investigation into the program.

Table: A Growing Franchise In Lone Star State Temple-Inland Inc.'s thrift holdings (dollars in billions)

Deposits Branches

Guaranty

Federal $2.9 52

Kilgore

Federal 1.4 21

SouthwestFederal * 3.0 67Total $7.3 140

* Temple-Inland has struck a tentative agreement to buy Southwest from the Resolution Trust Corp. Source: Company reports

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