It’s tough enough for a bank to have to deal with one activist investor challenge. Republic First Bancorp in Philadelphia is contending with two.
On Monday, an investor group that includes Gregory Braca, the former president and CEO of the TD Bank’s U.S. unit, released a letter urging directors at the $5.6 billion-asset Republic First to make a series of changes that include replacing Chairman and CEO Vernon Hill with Braca.
In addition to Braca, the group includes New Jersey insurance executive George Norcross and his brother, Philip Norcross, the managing shareholder and CEO of the Parker McCay law firm in Mount Laurel, New Jersey. The group has accumulated a 6.6% stake in Republic First, the holding company for Republic Bank. It plans to continue buying shares, according to Braca.
In its letter, which was part of a Jan. 31 Securities and Exchange Commission filing, the Braca-Norcross group cited several years of what it termed “subpar performance” as contributing to Republic First’s depressed stock price.
The bank’s efficiency ratio runs higher than industry norms and its return on average assets, which was 0.56% for 2021, is below that of comparable banks.
“Collectively, these results over the last several years have been so poor as to suggest an immediate re-evaluation of strategy,” the group stated in its letter.
Hill had not responded to requests for comment by late Wednesday.
The letter comes barely six weeks after another Republic First investor, Driver Capital Management
Driver’s managing member, Abbott Cooper, sought to block Republic First’s plans to raise additional equity, calling instead for a sale of the company.
Braca said in an interview that his group is not affiliated with Driver.
For his part, Cooper said the emergence of a second group critical of Republic won’t affect his plans. Earlier this month, Driver launched a proxy contest, nominating three candidates for seats on the First Republic board.
While agreeing with the Braca-Norcross group’s criticisms of First Republic’s business model, Cooper said his board challenge will go forward. “There’s nothing that’s altered,” Cooper said Wednesday. “We’ve nominated three fantastic candidates who will be better at serving the interests of the shareholders than anyone the current board might put forward.”
Beyond replacing Hill with Braca, the Braca-Norcross group wants Republic First to expand commercial lending in its Mid-Atlantic footprint and to increase spending on technology while cutting expenses overall. It’s also advocating for First Republic to take a leadership role in minority and low-income communities.
“We believe we could help the company to develop and implement a reimagined strategy, in light of the vast experience of Mr. Braca as a community banker and Mr. George Norcross as a community leader and philanthropist,” the group wrote.
“The letter speaks for itself and we look forward to the board’s response,” Braca said Tuesday.
For the quarter that ended Dec. 31, Republic First reported net income of $6.1 million, a 50% increase from a year earlier. Net income for all of 2021 totaled $25.2 million, up nearly 400% year over year.
But the full-year efficiency ratio was 76%. Through the first nine months of 2021, the average efficiency ratio for banks with $1 billion to $10 billion of assets was 58%, according to the Federal Deposit Insurance Corp. data.
In a conference call with investor analysts last month, Hill called 2021 “a very successful year,” pointing to the increased profits, as well as strong growth in assets, loans and deposits.
“We’re excited about the opportunities for growth we see unfolding,” Hill said.
Hill, who built the Cherry Hill, New Jersey-based Commerce Bancorp into a $48 billion-asset powerhouse before its sale to TD Bank in 2008, is famous for his retail banking prowess — including a strong emphasis on deposit gathering.
Hill, 75, has put a similar scheme to work at Republic, and the bank has seen its deposits increase by 18% since he
Critics have pointed to Republic’s deposit portfolio as part of the problem, claiming the bank has struggled to convert that cash into earning assets. Its loan-to-deposit ratio was at 48% on Dec. 31. Through the first nine months of 2021, the average was 73% for banks with $1 billion to $10 billion of assets.
Republic First’s shares have traded below $4 for much of the past year, though the recent shareholder activism has given the stock a boost. The shares are up nearly 50% since Jan. 20 and were trading at $5.24 a share late Wednesday.
