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Depositors May Have Saved $80 Million Through Withdrawals Before Seizure

November 4, 1992

HOUSTON (AP) _ Publicity about the amount of uninsured deposits at First City Bancorporation’s weakest banks before they were declared insolvent may have saved depositors as much as $80 million, a bank research executive said Wednesday.

When First City’s Houston, Dallas, San Antonio and Austin banks were seized Friday, they reported $260 million in uninsured deposits, said Alan Whitney, spokesman for the Federal Deposit Insurance Corp.

That’s less than half the $651 million they reported June 30, said Paul Bauer, president of Bauer Financial Reports, a Coral Gables, Fla., bank research firm.

Depositors whose accounts exceeded the FDIC’s $100,000 limit at those four banks will receive only 80 percent of the uninsured amount, meaning a potential loss of $52 million.

But if First City had failed on June 30, uninsured depositors could have lost as much as $130 million, Bauer said.

The Wall Street Journal and The Houston Post reported Bauer’s estimate of First City’s uninsured deposits two weeks before regulators seized the bank. Bauer said Wednesday he believed the news reports may have prompted large investors to withdraw tens of millions of dollars.

″The combination of just that exposure, that wide exposure I think, precipitated that action ... and saved a lot of people a lot of money,″ Bauer said.

″Of course, in the interim, I’m sure that a lot of the more sophisticated depositors also became aware of that″ without the articles, he said.

Regulators did not mention large withdrawals as a factor in First City’s collapse.

Banking experts also cautioned against assuming that $391 million - the difference between the June 30 estimate and the FDIC’s number - actually left the bank.

First City held tens of millions of dollars in government deposits that were technically uninsured but collateralized with securities, plus trust accounts that also were backed by securities, a source told The Post.

The actual amount of deposits exposed to losses probably was 25 percent to 50 percent less than the $651 million estimated on June 30, said the source, who was not identified.

Meanwhile, First Union Corp., a large bank holding company based in Charlotte, N.C., said it does not intend to acquire First City Bancorporation or any of its former banking subsidiaries.

It said it made the statement in response to inquiries. Banking analysts had speculated that it might be a possible First City suitor.

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