The main bank subsidiary of the biggest banking company in Texas lost almost 7 percent of its deposits in three weeks as the result of a silent run that has raised fears that the federal government may have to organize a bailout.
About $583 million was withdrawn from First RepublicBank of Dallas between Jan. 6 and Jan. 27, according to the Federal Reserve Bank of Dallas, and the bank's deposits have continued to decline since then.
First RepublicBank of Dallas is the lead bank of First RepublicBank Corp., which was the 12th-largest bank holding company in the nation as of last June 30, with assets of $34.4 billion. The holding company, which has reduced its size substantially since last summer, was at that time slightly larger than Continental Illinois National Bank of Chicago, the largest bank in the nation ever to fail. Continental received a $4.5 billion federal bailout in 1984.
Widespread reports in Texas that a merger or government rescue of First Republic was imminent were denied yesterday by the bank and the three government bank regulatory agencies -- the Federal Reserve, the Federal Deposit Insurance Corp. and the Comptroller of the Currency.
First Republic officials said the sharp drop in deposits was in large part due to seasonal factors, which traditionally lead to an increase in deposits around the first of the year.
"We have had some deposit decline, but they have been of manageable proportions," said Raleigh Hortenstine, managing director of the bank's funds management group.
He said the lead bank of the holding company has only about one-third of the total assets and deposits of the company's more than three dozen Texas banks. "At the corporate level, the decline has been significantly less on a percentage basis" than the 7 percent drop at the main bank, he said.
"We have incurred some outflow," Hortenstine said, "but nothing disruptive."
He said 80 percent of the holding company's deposits come from Texas and the Southwest and the biggest loss has been in foreign deposits, which account for a small fraction of all deposits.
He said there was no acceleration of the deposit loss Friday after The Fort Worth Star Telegram and The Wall Street Journal carried reports suggesting the bank's financial condition was worsening.
First Republic reported a loss of $656.8 million last year as the result of massive bad loans, most of them in real estate. The bank reported it had $3.9 billion in nonperforming loans as of year-end, a staggering 15.9 percent of its loans.
The bank's losses are the result of the collapse of the Texas real estate market, which has already bankrupted more than 100 savings and loan associations in the state and led to federal bailouts of two of Texas' 10 largest banks.
A year ago, the FDIC arranged a $150 million restructuring of BancTexas of Dallas. Last fall, the FDIC announced plans to pour almost $1 billion into FirstCity Bancorp of Houston in a federally subsidized purchase of the bank by a group of investors lead by Chicago banker Robert Abboud. That transaction was scheduled to be completed in December, but has been delayed several times and now is set for completion next month.
First Republic was created last year by the merger of two of Dallas' oldest and biggest banks -- Interfirst and RepublicBank. The merger was supposed to strengthen the two institutions, but since then First Republic's finances have steadily deteriorated.
Banking analysts project that the holding company could lose $400 million or more this year as more and more real estate developers become unable to pay their loans. Losses of that magnitude would wipe out almost half of First Republic's $812 million in common shareholders' equity, which is a bank's ultimate cushion against losses. The bank's nonperforming loans already amount to about 1.5 times its total capital.
Spokesman Joseph Bowles said yesterday the holding company is working with Morgan Stanley & Co., its investment banking firm, to raise additional capital, but said no merger talks are under way.