An increasingly bitter contest pitting management at Republic First Bancorp and its chairman, Vernon Hill, against two separate shareholder activist groups has already spawned two lawsuits. Its recent decision to indefinitely delay its 2022 annual meeting may further agitate those groups.
The $5.6 billion-asset Republic First, the holding company for Republic Bank, said it implemented the delay to permit its board's audit committee to engage legal counsel and investigate activist shareholders' claims of improper related party transactions.
Any delay of the Philadelphia company's annual meeting will result in a delay to a shareholder vote that could lead to Hill’s removal, an outcome both activist groups have loudly advocated.
Hill also serves as Republic First’s CEO, a position
Republic First declined to say how long its investigation would take, though it noted in a regulatory filing that the related party claims — instances where the company does business with insiders or their family members — have already been disclosed, are the subject of current litigation, and are unlikely to have a material adverse effect on its financial condition.
Abbott Cooper, founder and managing member of Driver Management Co. and the leader of one of the activist groups, characterized the annual meeting delay as a "tactic" by Hill to buy time to rally support.
“You would think if someone had the votes they needed to win, they would want to get to the election as soon as possible and end the proxy contest,” Cooper said Tuesday in an interview.
As such, Republic First’s decision to delay the annual meeting, along with the filing of its 2021 annual report, probably won’t go unchallenged.
“I don’t think this is the end of the issue,” Cooper said. “My guess is that there will be action taken” to seek a more timely meeting date.
A Republic First spokesman declined to comment, but on Wednesday the company disclosed it had received a notice from the NASDAQ stock market, which lists Republic First’s shares, that its choice to delay filing an annual report is a violation of a requirement for maintaining its listing. Republic First said it has 60 days to either file the report or present a plan demonstrating how it intends to return to compliance.
The company added that it plans to submit its annual report “as soon as practicable.”
A second activist investor group, led by George Norcross, a prominent New Jersey insurance executive, and Gregory Braca, a
In a court filing, Norcross raised concerns about Hill’s dealings with John Silvestri, a longtime friend and business partner, as well as InterArch, a design firm owned by Hill’s wife, Shirley.
The first Norcross-Braca suit, filed March 8, seeks to block Republic First from modifying the employment contracts of the company’s senior management team to provide for outsized severance payouts if Hill is voted off the board or removed as CEO.
Both cases, filed in the Philadelphia Court of Common Pleas, remain active. A spokesman for the Norcross-Braca group did not immediately respond to a request for comment.
On March 4, prior to the filing of the first Norcross-Braca lawsuit, a four-member group of Republic First directors led by the bank’s founder and former chairman and CEO, Harry Madonna,
Republic First, which increased its assets by 11% in 2021 and touts itself as one of the Philadelphia region’s fastest-growing banks, has continued this expansion in 2022. This week, Republic Bank opened a branch, its 34th, in Wayne, Pennsylvania, about 12 miles west of Philadelphia. Last month, Republic First hired two veteran lenders to join its team in New York.
“As we strategically open new locations … expanding our presence in the Philadelphia suburbs remains a continued focus,” Hill said Tuesday in a press release.
In an April 4 letter to Republic First’s board included in a regulatory filing with the Securities and Exchange Commission, Cooper criticized what he described as “a strategy of undisciplined growth.” Cooper said that it could lead to safety-and-soundness concerns if the company fails to add capital, but noted the conflict among Republic First’s directors makes agreement on a capital plan unlikely.
Republic First’s board, composed of eight directors, appears evenly split between Madonna and his allies and a four-director faction led by Hill. “It seems safe to assume that the board deadlock precludes any further capital raises,” Cooper wrote.
Cooper told American Banker the impasse is "Exhibit A for never having a board with an equal number of directors."
