Another community bank takes bottom-line hit tied to Signature failure

As if things aren't tough enough for Republic First Bancorp in Philadelphia.

The $6.2 billion-asset Republic First disclosed Monday it was forced to write down an investment in Signature Bank preferred securities. The $3.1 million pretax loss generated by the write-down was a major contributor to the $9.7 million first-quarter loss Republic First reported. The other big contributor: $5.5 million in fees, tied primarily to Republic First's ongoing dispute with an investor group over control of the company. 

Monday's report marked the first time Republic First, holding company for Republic Bank, had filed a quarterly earnings report since Jan. 22, 2022.

"The results aren't where we want them to be yet, but I am proud of our colleagues' commitment to Republic's customers and their ongoing efforts to weather the current environment and lay the foundation for a successful future," CEO Thomas Geisel said Monday in a press release.

Chief Financial Officer Michael Harrington called Monday's earnings release "a critical milestone in our ongoing efforts to bring Republic current on its quarterly and annual filings with the Securities and Exchange Commission."

Republic First is the second community bank in less than a week to report losses tied to the failure of Signature Bank. The $1.1 billion-asset BayFirst Bancorp stated Thursday that it lost $1.6 million in loan sale proceeds after the planned sale of $60 million in Small Business Administration 7(a) loans to New York-based Signature was canceled. Though BayFirst found a replacement buyer, market conditions had deteriorated by the time the second deal was finalized leading to a reduced gain on sale. 

Beyond the loss tied to Signature, Republic First's first-quarter results were impacted by significant spending on legal, professional and audit fees resulting from an ongoing dispute with an investor group led by New Jersey Insurance executive George Norcross. There is some indication relations between Norcross' group, which controls 9.9% of Republic First's outstanding shares, and management may be thawing. 

Republic First announced last week that it had agreed to reopen the nominations for director candidates to be considered at its yet-to-be held 2022 annual meeting. Furthermore, the company agreed not to object to the group nominating Philip Norcross, George Norcross's brother, or Gregory Braca, a former CEO at TD Bank in Cherry Hill, New Jersey, for board seats. 

In November, Republic First had notified the Norcross group that it intended to block Braca's planned nomination. A lessening of tensions between Republic First and Norcross's investor group could lead to a reduction in legal costs. 

A spokesman for the Norcross group declined to comment Tuesday.

Republic First reported total deposits of $4.88 billion on March 31, down 2.7% on a linked-quarter basis, but added that it grew deposit balances in April, though it did not reveal by how much. Total loans of $3.14 billion were up about $6 million from the Dec. 31, 2022, level. At the same time, asset quality remained solid, with the bank reporting $8,000 of recoveries for the quarter, while nonperforming loans of $18.6 million amounted to 0.61% of total loans.  

More importantly, perhaps, plans to inject $125 million of fresh capital into the bank appear to be on track. Republic First announced the capital raise, which is being led by Castle Creek Partners, in March. Last month, Castle Creek filed an application with Pennsylvania's Department of Banking and Securities to acquire more than 10% of a newly created class of nonvoting preferred stock. 

This Florida community bank took a hit when Signature failed

Republic First has been under pressure since late 2021, when an investor group led by prominent bank investor Abbott Cooper announced plans to challenge then-CEO Vernon Hill. The Norcross Group launched an independent campaign against Hill a few months later. Hill, who had previously been removed as chairman of Republic First's board, stepped down as CEO in July. Cooper's group signed a cooperation agreement with Republic First in September 2022, ending its proxy campaign. 

The turmoil triggered a series of legal challenges, and caused Republic First to delay filing its 2022 10-K annual report, as well as a series of 10-Q quarterly reports with the Securities and Exchange Commission. 

Geisel, however, remains convinced Republic First is making progress toward a return to profitability. 

"We are highly focused on executing our strategy to restore profitability, improve capital levels and enhance shareholder value and are seeing signs of progress as we move through the company's legacy headwinds," Geisel said Monday.