Magazine article American Banker

Coastal Drops Government Aid 4 Years Early

Magazine article American Banker

Coastal Drops Government Aid 4 Years Early

Article excerpt

Houston's Coastal Banc Savings Association this month got out of its Southwest plan contract four years early.

"In six years, we have transformed ourselves from a predominantly government-assisted balance sheet," said chief executive Manuel J. Mehos, a former Wall Street tyoe who engineered Coastal's unlikely success since 1988.

"This agreement was planned for a 10-year life, and we've done most of the work in six years."

With the deal done, Mr. Mehos" and the savings and loan debacle is just about over. Having survived the Texas recession and the bad PR associated with the Southwest plan, Mr. Mehos is mapping out an aggressive plan for Coastal that, if executed, could make it one of Texas, major financial institutions.

"Coastal is one of those few Southwest plan thrifts that really worked its way through remarkably," said William Strunk, a Houston bank consultant.

"It's one of the true survivors of the thrift business in this state."

Southwest Plan

Coastal Savings had $60 million assets in 1988 when it became the first exciting institution to buy an S&L franchise in what became known as the Southwest plan. The old Federal Savings and Loan Insurance Corp. used it to resolve the rash of failed institutions in Texas, in a way that rewarded private buyers, not the government, for liquidating bad assets.

The assets the FSLIC sold to the investors -- in Coastal's case $543.4 million from four thrifts -- were "covered," meaning the buyer's losses on managing and liquidating the assets was reimbursed by the government. Coastal's agreement was scheduled to terminate in 1988.

Overnight, Coastal became a $600 million thrift with branches all over Houston. Over the next six years, culminating with two acquisitions in the last year, Coastal bought more failed S&L assets and deposits. At March 31, it had $2. …

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