Coastal-GSC combination to create largest Houston-based securities firm.

HOUSTON--(BUSINESS WIRE)--March 19, 1996--Houston-based Coastal Securities, a broker-dealer in fixed income securities as well as a market-maker in municipal bonds and NASDAQ equities, and Government Securities Corporation (GSC), a securities broker-dealer based in Houston and specializing in the secondary market for government-guaranteed loans and pools, have agreed in principle to combine operations.

Terms of the transaction were not disclosed.

Dave Master, chairman and chief executive officer of Coastal, said that based on a memorandum of understanding signed by the two firms, the combination should be complete within 45 days. No staff reductions are anticipated.

The resulting company will carry forward the Coastal Securities name and become the largest securities firm domiciled in Houston. It will have approximately 150 employees and access to more than $25 million in capitalization.

Master will be co-chairman and chief executive officer of the newly created firm. Joining him as co-chairman will be Christopher LaPorte, currently chairman and president of GSC. Dwayne Whitehead, president and chief operating officer of Coastal, and Frank Klaus, executive vice president of GSC, will assume the same duties with the new firm.

"I believe that all of us connected with Coastal and GSC -- employees, clients, business associates of all types -- have reasons to feel positive about the blending of our two firms," said Master. "Our combination creates a new and distinctive force in this marketplace -- a company with greater depth, broader service potential and very bright prospects."

"The capabilities of the combined firms far exceed those of either firm alone," said LaPorte. "I look forward to offering these capabilities to customers and prospective customers." He added that no staff changes are anticipated because the two firms provide highly complementary services and financial products.

The new firm will continue clearing its transactions through the Pershing Division of Donaldson, Lufkin and Jenrette Securities Corporation.

GSC, founded in 1979, is one of the nation's largest dealers in the secondary market for Small Business Administration loans, having cleared approximately $10 billion in such transactions since 1980. In 1993 GSC played a central role in the first Overseas Private Investment Corporation financing for a joint venture between U.S. and Russian corporations. Last year GSC provided financing for the first Agency for International Development (AID) guaranteed loan to the nation of South Africa.

In the early 90s GSC encountered regulatory scrutiny after certain customers accused the firm of failing to make sufficient disclosure concerning the risks associated with complex derivative securities. The problems did not involve GSC's proprietary government-guaranteed loan and pool products. All customer claims were settled expeditiously to each customer's satisfaction. GSC made substantive managerial and staff changes as well as procedural changes in response to these events.

Coastal Securities specializes in five areas of service, including the sale, trading and underwriting of tax exempt securities; the sale and trading of taxable securities, such as government, agency, corporate and mortgage-backed securities and collateralized mortgage obligations (CMOs); public finance services, with an emphasis on Texas and the Southwest; wholesale trading in NASDAQ over-the-counter securities, and investment portfolio analytics.

GSC's offices are at 1160 Dairy Ashford in western Houston. Coastal's headquarters are at 500 Dallas Street in One Allen Center, downtown. Coastal also has offices in Dallas and Austin, both of which will be retained.

CONTACT: Coastal Securities

David Master, 713/646-6800 or

Christopher LaPorte, 713/558-8855