Temple-Inland Inc. Announces Transformation Plan

Austin, Texas, USA, 26 February 2007 --(BUSINESS WIRE)-- Temple-Inland Inc. (NYSE:TIN) announced today that its board of directors has approved a transformation plan to unlock shareholder value through the separation of Temple-Inland into three focused, stand-alone, public companies and the sale of its strategic timberland. The plan includes
* retaining its manufacturing operations - corrugated packaging and building products,
* spinning off its financial services operation,
* spinning off its real estate operation, and
* selling its strategic timberland.

The board and management of Temple-Inland "have constantly maintained a focus on maximizing shareholder value and over the years have evaluated a long list of strategic alternatives, including all of the elements of the transformation plan announced today," said Kenneth M. Jastrow, II, chairman and chief executive officer.

"Taking advantage of current market conditions, this transformation plan will unlock shareholder value in a very tax efficient manner and provide our shareholders ownership in three outstanding businesses. Each of the three public companies - manufacturing, financial services, and real estate - will be well positioned in the marketplace, will have an appropriate capital structure, and will benefit from greater strategic focus," Jastrow said.

"We have made great progress at Temple-Inland," Jastrow continued. "Over the past five years, we have generated total shareholder return of 107%, compared with 39% for the S&P 500 and a negative 5% for our peer group median. We have returned USD 710 million to shareholders over the past two years through share repurchases and dividends and have increased the dividend each of the past five years. Despite this progress, we are implementing this bold plan to transform our Company in order to unlock shareholder value and provide a platform to continue to provide shareholders with superior long-term returns. We are very excited about the future."

Three Ongoing Businesses

Temple-Inland - Corrugated Packaging and Building Products

Upon completion of the transformation plan, Temple-Inland will be a low-cost, highly efficient manufacturing company focused on corrugated packaging and building products. Corrugated Packaging operating income has improved more than 1000% since 2003 and our building products operation has achieved record earnings each of the past three years.

"Our corrugated packaging operation has made significant progress, driven by execution of strategic initiatives, focusing on full integration and increasing asset utilization. Since 2003, we have generated USD 225 million in business improvement, and we expect to generate an additional USD 75 million by focusing on manufacturing excellence within our box plant system and further operational efficiency in our containerboard mills," said Jastrow.

"Our building products operation manufactures a diverse line of products for new home construction, commercial, and repair and remodeling markets. Our facilities are state-of-the-art, low-cost and well-located to serve areas of the country projected to experience the highest rate of demand growth."

Corrugated packaging operation includes:
Capacity
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-- 5 linerboard mills 3.2 million tons
-- 1 corrugating medium mill 0.3 million tons

-- 64 converting facilities 3.7 million tons of production

Building products operation includes:
Capacity
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-- 5 lumber mills 1,070 mmbf
-- 4 gypsum wallboard plants 2,100 mmsf
-- 5 particleboard plants 880 mmsf
-- 1 fiberboard plant 460 mmsf
-- 2 medium density fiberboard plants 300 mmsf

"Going forward, Temple-Inland will be a focused, leading manufacturing company positioned to continue to drive return on investment (ROI) through increasing asset utilization, lowering operating costs and improving efficiency. We will also continue to be a market-driven, customer-oriented company. We are confident the new Temple-Inland is well positioned for the future," Jastrow said.

Financial Services

"Financial Services achieved record earnings in 2006 of USD 222 million, a record for the third consecutive year. Over the past ten years, Financial Services has earned USD 1.8 billion and averaged a 20% ROI. Guaranty Bank has consistently grown its deposit base by focusing on customers who value high-touch, high-service. The Bank's branch network is located in Texas and California, the largest and most rapidly growing deposit markets in the U.S. Guaranty is a national lender, with single-family mortgages in every state and a wide range of loan products targeted in over 30 markets nationwide. Financial Services is ideally positioned to continue to serve its targeted customers and has a solid foundation for growth and continued strong financial performance," said Jastrow.

Guaranty Bank is a federally-chartered stock savings bank that provides consumer and commercial banking activities through 100 banking centers in Texas and 53 in California, and lends nationally in diverse geographic markets. The Texas banking centers are concentrated in the metropolitan areas of Houston, Dallas/Fort Worth, San Antonio, and Austin, as well as the central and eastern regions of the state. The California banking centers are concentrated in southern California and the Central Valley. In addition, Guaranty's insurance operation is the 30th largest in the United States with offices in Texas and California, and provides a wide range of insurance products and risk management services to its customers.

Real Estate ("Forestar")

"Our real estate activities include over 236,000 acres, 85 projects in eight states and 12 markets. Our strategy for real estate is value creation. We have currently identified over 215,000 acres of high-value land located in growth corridors, thus providing the opportunity to create value through entitlement and real estate development. Securing entitlements creates the largest proportional increase in value and in 2006, we entitled five projects totaling 2181 acres and began the entitlement process on another 4890 acres. The most significant concentration of our real estate holdings is around Atlanta, Georgia, with over 205,000 acres of real estate property. Atlanta is the largest homebuilding market in the U.S., and over time its projected growth will create significant real estate development opportunities. We believe there is substantial opportunity to accelerate the creation of shareholder value by operating this business as an independent public company," Jastrow said.

The real estate business, which operates under the name Forestar Real Estate Group, is focused on real estate investment and development activities which include single-family residential, commercial, mixed use and multi-family housing projects.

Business to be Sold

Timberland

"Our strategic timberland is located in some of the best fiber demand markets in the U.S. and represents a very valuable resource base. Fiber growth on our timberland is accelerating, and we expect fiber growth to increase 50% over the next ten years and double over the next 30 years. The mix of sawtimber versus pulpwood is also expected to increase," said Jastrow.

Our timber holdings consist of approximately 1.8 million acres of timberland located in Texas, Louisiana, Alabama, and Georgia. In connection with our timber holdings, we also own mineral rights on 388,000 acres in Texas and Louisiana and 351,000 acres in Alabama and Georgia.

As part of the transformation plan, we anticipate consummating appropriate fiber supply agreements and transferring approximately 100,000 acres of our strategic timberland into Forestar Real Estate Group.

Transformation Process

The sales process for the company's strategic timberland is expected to begin immediately. The majority of proceeds from the sale will be returned to shareholders. A portion of the proceeds will be used to establish appropriate capital structures for each of the ongoing stand-alone businesses to ensure financial flexibility for shareholder value creation in the future. The proposed separations of Financial Services and Real Estate are intended to be tax-free distributions to shareholders. Until the separations of Financial Services and Real Estate are completed, the Company expects to continue to pay a quarterly dividend of USD 0.28 per share.

Final terms of the proposed separations and sale have not yet been determined and will be announced at a later date. Completion of the proposed separations is subject to approval of the final terms by Temple-Inland's board of directors; favorable rulings from the Internal Revenue Service, and/or favorable opinions of tax counsel; and the filing and effectiveness of registration statements with the Securities and Exchange Commission with respect to the common stock of each of the spun-off entities, and other approvals. The transformation plan is anticipated to be completed by calendar year-end.

The company has engaged Goldman, Sachs & Co. and Citigroup Global Markets Inc. as its financial advisors and Skadden, Arps, Slate, Meagher & Flom as its legal counsel.

The company will host a conference call at 11:00 a.m. Eastern time on 26 February 2007 to discuss the transformation plan. Replays of the call will be available for two weeks following the completion of the live call and can be accessed at 1-888-286-8010 in North America and at 1-617-801-6888 outside North America. The password for the replay is 89029753.

Temple-Inland Inc. operates four business segments: corrugated packaging, forest products, real estate and financial services. The company's 1.8 million acres of forestland are certified as managed in compliance with ISO 14001 and in accordance with the Sustainable Forestry Initiative(R) (SFI) Standard of the Sustainable Forestry Board to ensure forest management is conducted in a scientifically sound and environmentally sensitive manner. Temple-Inland's common stock (TIN) is traded on the New York Stock Exchange. Temple-Inland's address on the World Wide Web is www.templeinland.com.

This release includes non-GAAP financial measures. The required reconciliations to GAAP financial measures are located on the Temple Inland Web site, www.templeinland.com.