Center City-based Republic First, a lender with $6 billion in assets, has found itself in financial purgatory recently, but unlike First Republic Bank, which was in a similar situation this spring, its depositors have largely remained loyal, writes Jonathan Weil for The Wall Street Journal.

Like First Republic, Republic First incurred heavy paper losses that, under the accounting rules, do not count on its balance sheet, and if they did, they would wipe out its equity, or net worth. Both banks also attempted to raise capital and failed.

But while First Republic saw an exodus of depositors causing its demise, Republic First recorded a drop in deposits of just ten percent as of June 30.

Still, investors have fled the bank which resulted in the stock being delisted last month from NASDAQ.

The current situation will certainly put the faith of Republic First depositors to the test, as around 60 percent of its deposits were uninsured as of June 30. If the bank was shut down by regulators without an acquirer in place, uninsured depositors would incur significant losses.

Regulators are worried that such a failure could result in runs on other banks.

“With Republic First, we’re just worried about pure contagion,” said Lawrence J. White, an economics professor at New York University and former banking regulator. “The uninsured depositors at Republic First running, and that then causing other uninsured depositors at other somewhat similar banks running, and then the contagion grows.”

Read more about Republic First in The Wall Street Journal.

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Read Thomas Geisel, Republic First’s president & CEO, letter to the bank’s customers regarding The Wall Street Journal story.

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