The bank had some of the same problems as the ones that failed in 2023 By Gina Heeb , Lauren Thomas and Justin Baer April 26, 2024 5:39 pm ET PHOTO: BREANNA DENNEY/THE WALL STREET JOURNAL Regulators are set to seize the troubled Philadelphia bank Republic First Bancorp FRBK -60.00%decrease; red down pointing triangle and are near a deal to sell it to another lender, the fourth high-profile bank failure since last spring. The failure and deal could be announced as soon as Friday, people familiar with the matter said. The identity of the expected buyer couldn’t be learned, and it is still possible the deal could collapse. Republic First faced some of the same problems as the three regional banks that failed last year: paper losses on bonds that lost value as interest rates rose and high proportions of uninsured deposits that can quickly flee. Regulators had been prepared to seize Republic First late last year, people familiar with the matter said, before the bank announced it had reached a deal with investors to shore up its balance sheet. After that deal collapsed this March, the Federal Deposit Insurance Corp. resumed efforts to seize and sell the bank. Republic First operated branches in Pennsylvania, New Jersey and New York under the name Republic Bank. It had around $6 billion in total assets at the end of 2023. People familiar with the matter said several banks had been exploring making offers. The most interested were expected to be midsize banks with established beachheads in or near Republic First’s network of branches that dot the Philadelphia suburbs and stretch across the Delaware River into western New Jersey. The lender’s relatively small footprint didn’t move the needle enough for larger regional banks, including PNC Financial Services Group and Citizens Financial, the people said. This bank failure is distinct from the ones that set off a monthslong crisis in 2023. Republic First is much smaller than Silicon Valley Bank, Signature Bank and the similarly named First Republic, which had between roughly $100 and $200 billion in assets each. Since there is expected to be a buyer, the government likely won’t be left with the decision over whether to backstop deposits over the FDIC limit of $250,000, as it did with SVB and Signature. The long drawn-out failure also gave depositors more time to prepare, as compared with the rapid collapses of last year. A relatively orderly deal should prevent the failure from sparking a wider crisis in confidence. But regional banks are still on shaky ground. Two years of higher rates have forced them to pay more interest on deposits, which has increasingly eaten into profits. It will be harder for them to absorb the costs of potentially stricter regulatory requirements and technology updates, compared with megabanks like JPMorgan Chase. And some hold high concentrations of loans on offices and other commercial real estate that are under pressure. A larger regional bank, New York Community Bancorp, fanned concerns about commercial real estate earlier this year after it revealed problems in its multifamily loan book. Those loans are concentrated in a niche area of the market: rent-stabilized buildings in New York that have dropped in value. NYCB got a rescue infusion from investors in March. Republic First had for months struggled to stay afloat. Around half of its deposits were uninsured at the end of 2023, according to FDIC data. Its total equity, or assets minus liabilities, was $96 million at the end of 2023, according to FDIC filings. That excluded $262 million of unrealized losses on bonds that it labeled “held to maturity,” which means the losses hadn’t counted on its balance sheet. Its stock, which was delisted from Nasdaq in August, had been near zero. And it was in a proxy fight with an investor group led by George Norcross III, Philip Norcross and Gregory Braca. In October, the Norcross group agreed to a deal to inject $35 million as the bank sought additional investors. Republic First disclosed in February that it dismissed its auditor, Crowe, which had flagged “material weaknesses” in bank controls at the end of 2022. The investor group terminated the agreement last month because Republic First didn’t complete its 2022 annual securities filing with regulators or schedule a required shareholder meeting. The stock on Friday traded at around 1 cent.