Texas Bank Expected to Post Another Big Quarterly Loss : Citicorp Looking at Books of Troubled First RepublicBank

Citicorp, the nation’s largest bank holding company, emerged Tuesday as a possible suitor for First RepublicBank Corp., the Texas institution troubled by bad real estate loans.

But First Republic Chairman Albert V. Casey offered shareholders few details about Citicorp’s intentions at the company’s annual meeting, although he told them to brace themselves for another big loss in the second quarter.

The Texas company has run into serious problems because of real estate loans and has been trying to find a solution, such as through a proposed recapitalization plan. Earlier this year, First Republic received emergency aid from FDIC in the form of a cash loan.

A team of about 20 Citicorp employees arrived Monday to examine the books, a spokesman for First Republic said.

Casey told shareholders that the second-quarter loss would not be as large as the first quarter’s $1.5-billion deficit, but he would not say how the figure would compare to the $313.2-million loss in the 1987 second quarter.

Few Details Offered

He blamed the losses on incorrect appraisals of the value of real estate against which the bank made loans. “The appraisals were not accurate, they were bad,” he said. But he added that there was no indication of any illegal activity on the part of bank officers.

Casey told reporters after the meeting that New York-based Citicorp was the only outside bank he had worked with on the possible recapitalization plan but he would not offer any other information.

Citicorp spokeswoman Susan Weeks said that as a matter of corporate policy the company had no comment on the reports.

Casey told reporters that he did not know whether Citicorp would offer a plan, and he backed away from an earlier assertion at the annual meeting that it would. “If I mislead you, I’m sorry,” he said.

Last year another big New York money center bank, Chemical Corp., bought Texas Commerce Bancshares.

New ‘Special’ Bank

In a memo distributed to First RepublicBank employees, Casey said he believed that the bank’s own plan would be the one approved.

Casey said Tuesday that the bank’s plan would involve setting up a unit, either a separate bank or a division of the existing bank, to handle First Republic’s bad loans. Stockholders would “get a very modest amount of stock in the new corporation.”

Under the plan, the bank holding company would place bad loans into a special bank. FDIC would own a controlling stake in the new special bank.

Casey said FDIC’s deadline for submitting plans was Thursday and added that he expected a “fairly quick response” from FDIC, “perhaps as early as Friday, July 8.”

First RepublicBank sought federal assistance in the first quarter following massive losses and a run on its deposits. FDIC has already loaned it $1 billion and has been working on a bailout plan.

In his statement to First Republic employees, Casey said if the bank’s own recapitalization proposal is accepted, it plans to file a registration statement with the Securities and Exchange Commission in August, with the sale of securities coming as soon as December. Under the plan, the bank holding company wants to raise $1 billion through the sale of common and preferred shares.

The meeting was not an easy one for Casey, who faced a batch of angry shareholders. “I feel like I was cheated, I was defrauded,” said one former InterFirst Corp. stockholder referring to the bright prospects outlined by bank officers last June when Republic Bank Corp. acquired InterFirst to become First Republic. First RepublicBank Corp. is not affiliated with San Francisco-based First Republic Bancorp.