Business Notes BANKING

The sound of collapsing banks has echoed through the depressed Texas oil fields for two years now, but the crash heard last week was the loudest of all. Federal regulators disclosed that they would pledge $4 billion to rescue Dallas-based First RepublicBank (assets: $32.5 billion), the state's largest banking firm. The initial federal commitment is second in size only to the $4.5 billion bailout of Chicago's Continental Illinois in 1984.

As part of the plan, management of First RepublicBank will be taken over by NCNB Corp., a Charlotte, N.C.-based institution (assets: $28.6 billion) that won a bidding war with several other potential buyers, including New York City's Citicorp and San Francisco's Wells Fargo. The North Carolina bank will pay at least $210 million for a 20% stake in the bank and will have a five- year option to buy the rest from the Federal Deposit Insurance Corporation, which guarantees bank deposits and will put up most of the money for the rescue.

The size of the bailout is the result of a failed gamble by federal regulators, who last year allowed RepublicBank to take over its crosstown rival, the struggling InterFirst, in the hope that the two institutions could shore each other up. But the combined company, First RepublicBank, lost nearly $2.3 billion in the first half of this year and showed no signs of recovery. Last week's huge commitment, coming on top of earlier Texas rescues, is likely to stir debate over the adequacy of the FDIC's $18 billion insurance fund.