Could two star-crossed Pennsylvania banks revisit an attempted union that died in regulatory limbo the first time?

Executives of Republic First Bancorp (FRBK) in Philadelphia may be interested in seeking a merger partner again, perhaps a second try with Metro Bancorp (METR) in Harrisburg, Pa., says one analyst.

"We got the sense that this could again be something of interest for [Republic First] to pursue as from their standpoint the deal made sense in 2009 and the reasons for it then would still hold true today," Sandler O'Neill's Frank Schiraldi wrote in a research note Wednesday, after meeting recently with Republic First executives.

The matter is timely as efforts to revive old deals could become more frequent, investment bankers say. Savvy chief executives know which banks would be a natural fit for their institution. The economic downturn derailed some conversations or agreements, but sometimes companies just have to wait for better timing.

"There are situations were companies may have flirted, but the market conditions were not right," says Charles Crowley, a managing director in Boenning & Scattergood Ohio office. "Those banks could consider talking again."

Of course, the last few years have prompted a lot of soul-searching among banks, so some old flames may have gone in a completely different direction since then.

"Times are different, and strategic objectives have changed for some banks and maybe a deal doesn't make as much sense today as it did before," Crowley says.

At least from the Republic First side, the deal with Metro still makes sense because both banks have similar business models, Schiraldi says. Schiraldi doesn't cover Metro, so he is unsure of its interest.

Metro and Republic First did not return calls for comment, nor did analysts who cover Metro.

In November 2008, Metro, then known as Pennsylvania Commerce Bancorp, announced it would acquire Republic First for $110 million in stock.

Both companies counted Vernon W. Hill 2nd, the controversial founder of Commerce Bank, as a large shareholder and a major source of influence.

The announcement came roughly a year and a half after Hill resigned from the then $49 billion-asset Commerce Bancorp of Cherry Hill, N.J. Regulators had questioned Commerce's use of companies owned by Hill's family members in building its branches. In July 2008 Commerce was sold to Toronto-Dominion Bank's U.S. banking subsidiary.

Hill remains in banking, but observers long speculated that his involvement was a big reason that the Republic First-Metro deal never gained approval. Hill declined to comment for this story. He is still an investor in Republic First; his current involvement with Metro is uncertain. He co-founded Metro Bank U.K. in London, a separate company which opened in 2010.

Both companies had their share of issues independent of Hill's involvement, too.

"There were regulatory issues at both banks that likely impacted the deal," Schiraldi says. "I don't know if you can pin it down on Vernon."

Republic First's $926 million-asset bank unit was dealing with an elevated level of nonperforming assets, and in 2009 it entered an informal agreement with the state and federal regulators to improve its condition. (It was freed from the order earlier this year.)

Metro tried to strengthen its hand with a highly dilutive $75 million capital raise, but the deal was terminated in March 2010. A month later, Metro entered into consent order with the Federal Deposit Insurance Corp. involving its compliance with the Bank Secrecy Act and anti-money-laundering laws. The $2.6 billion-asset bank was freed from the order in October.

Jeff Marsico, executive vice president of the Kafafian Group, is skeptical that the deal is worth reviving. Republic First should likely look to a larger buyer if it is looking to sell, he says.

"It is an outside possibility," Marsico says. "I don't think a deal with Metro is as likely as a larger buyer with stronger capital, a stronger currency and good regulatory relations buying it."

The banks' businesses are perhaps not as complementary as their common lineage would imply, Marsico says. "Without Vernon, would they have made this connection to each other? I don't think so."

Marsico is based in Pennsylvania and says Republic First had jumped the gun the last time with Metro and had already changed its signs, but temporarily covered them with bags bearing Republic First's logo.

"In order to revisit that deal they would need quite a bit of confidence that it would close," Marsico says. "Maybe they have those signs still in storage."

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