Republic First Bancorp in Philadelphia is raising $125 million in partnership with an investor group led by Castle Creek Capital, a firm with a lengthy track record of investing in community banks.
News of the capital raise comes six months after Republic First initiated a board-level strategic review. At that time, the company said it had received multiple inquiries from groups "expressing interest in one or more potential strategic transactions."
Capital is among the most pressing issues facing the $6 billion-asset Republic First, the parent of 35-year-old Republic Bank. According to the Federal Deposit Insurance Corp., the bank's ratio of equity capital to assets has been in decline for several years. It stood at 3.27% on Dec. 31, 2022 — well below the industry average of 9.34%.
Republic First has been embroiled in a bitter, extended-duration proxy contest that has involved former Chairman and CEO Vernon Hill, two separate investor groups, and a coterie of board members led by the company's founder and current chairman, Harry Madonna. Added capital on the balance sheet gives new CEO Tom Geisel, who joined Republic First on Dec. 22, room to maneuver as he seeks to engineer a turnaround.
"What it does is create optionality," Geisel said. "We're looking at our branch distribution. We're looking at how we deploy technology. We're looking at our securities portfolio. … Having some capital allows you to pull the different levers when it makes sense to pull them versus just doing one thing, waiting for that to germinate and create value, then doing something else.
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One of the investor groups that has been vying for control of Republic First, led by New Jersey insurance executive George Norcross and former TD Bank CEO Greg Braca, offered to provide a $100 million equity infusion in January. Republic First, however, said the offer included a requirement that the company reimburse Norcross and Braca nearly $10 million for its expenses. The group was also seeking the right to appoint multiple directors to Republic First's board.
Republic First said it terminated negotiations when Norcross and Braca refused to sign a nondisclosure agreement.
A spokesman for the Norcross-Braca group had not responded to a request for comment at deadline.
Castle Creek, which has committed to providing $60.7 million of the $125 million total capital raise, is a familiar name in banking circles, having invested a total of $1.7 billion in more than 300 community banks. Its support provides a boost to Republic First's reputation and standing, according to Ted Peters, a Philadelphia-based bank investor who served as CEO of Bryn Mawr Trust Co. from 2001 to 2014.
"Castle Creek has a very good reputation," Peters said. "The fact you have people like that involved is very positive."
In addition to Castle Creek, Cohen Private Ventures, which is linked to New York Mets Owner Steven Cohen, has agreed to provide $30 million. The deal is conditioned on other accredited investors agreeing to commit the remaining $34.3 million.
Under the terms of the deal, Castle Creek and Cohen Private Ventures will each have the right to appoint one member to Republic First's Board.
"When you have experienced, sophisticated investors, it definitely adds credibility to the companies they invest in," Geisel said.
Peters predicts that the pending investments by prominent venture investors increase the likelihood Republic First will eventually be sold. "Obviously they want to get the bank in better shape, but they're not going to come in unless there's a clear-cut exit strategy," Peters said.
Republic First's current shareholders don't appear to mind. The stock was trading up more than 10% at $1.84 Friday afternoon.
