Norcross George E III Sent A Letter To The Board Of Directors Of Republic First Bancorp Inc
$FRBK
Dear Directors:
We write today incredibly disappointed and deeply concerned regarding the lack of engagement displayed by the Board of Directors (the “Board”) of Republic First Bancorp, Inc. (“Republic First” or the “Company”) with respect to our non-binding proposal submitted to the Company’s financial advisors on January 7, 2023, where we proposed to provide an investment of up to $100,000,000 through the purchase of newly-issued common shares to be issued after receipt of all required approvals, an equity investment we believe the Company so desperately needs. We have received little to no substantive engagement from the Board with respect to our proposal in almost a month – the only meaningful response was an initial interest in a meeting to discuss the proposal further after a limited non-disclosure agreement was entered into between the parties. However, once we submitted a very simple non-disclosure agreement, it took over two weeks to receive a mark-up from the Company’s counsel, a markup that included a standstill provision which we had repeatedly conveyed to the Company was unacceptable before we even had an initial meeting. As we have repeatedly stated, if the Company would actually have a meeting and show some willingness to engage, we would of course consider agreeing to a process that is appropriate in those circumstances. However, it’s been a year and from what we can tell, the only thing the Company actually engages in seems to be taking steps to entrench the Board, impede investment and thwart shareholders’ ability to engage meaningfully with members of the Board and management.
We struggle to understand how the Company can continue to fail to even schedule a simple meeting with us when we all are aware of how badly the Company needs a very substantial capital injection. We fear that the Company dislikes us so much that it would be willing to accept a below market deal from another investor that will create even greater losses for shareholders and put the Company in an even worse position – we hope the Board, in accordance with its fiduciary duties, would never consider accepting a below market deal or deal that doesn’t fully solve the Company’s serious capital issues while our proposal goes unanswered. As we expressed in our very first letter to the Board on January 31, 2022, we believe the Republic First franchise can form the basis of a meaningful competitor in its market. However, Republic First cannot unlock this value without the Board meaningfully engaging before the Company runs out of time. Further, we now understand why the Company is in this position in the first place – it continually fails to confront serious problems with the urgency that is necessary and the Board appears to be consistently deadlocked without a CEO who has been empowered to act in the best interests of the Company and its shareholders.
The Company’s stakeholders have suffered immeasurably over the last year as a result of the turmoil created through Board upheaval and its misguided policies. Over the summer, we, like many others, thought many of those matters were hopefully on their way to resolution. Unfortunately, recent events and revelations strongly suggest otherwise and we believe the Company and its wholly-owned subsidiary, Republic Bank (the “Bank”) to be in a very serious situation.
The Bank’s most recent Call Report as of 12/31/22 also confirmed for the public what unfortunately you and the investment community have known all along. The Bank’s operating performance is abysmal with significant decline in earnings in this most recent quarter and many, if not all, of its key operating metrics being well below its peers. This troubling lack of earnings also contributes to the sharp decline in capitalization. These failing grades include:
1) return on assets well below peer group
2) return on equity well below peer group
3) net income significantly lower than peers of similar size
4) worst efficiency ratio (measuring expenses to revenue ) in the peer group
5) weak loan originations relative to deposits
6) higher cost of deposits relative to all
Perhaps most concerning is, however, the continued evaporation of capital. Last year, the Bank and Company, under the watch of legacy members of the Board (including Messrs. Madonna, Cohen, Wildstein and Jacobs), made the fateful decision to recalibrate its multi-billion dollar investment portfolio and to purchase securities with significantly longer durations. That decision was made at a time when many experts acknowledged and predicted a very significant likelihood of increasing interest rates in the foreseeable future. A year has now passed and interest rates, as those experts (and many others) had correctly predicted, have almost doubled. It is also very apparent that earnings are under significant pressure due to these bad business decisions and the Company will be under significant pressure for earnings in future quarters. With earnings continuing to decline, interest rates continuing to rise and the inability to run off higher deposits without available liquidity, we fear the Bank is in bad situation with no way out. Most telling, a mark to market of the Bank’s investments today would, in fact, result in the Bank having negative equity. This alarming information greatly concerns us, but should equally, if not more so, concern you with respect to rapidly declining capitalization. The failure to engage in meaningful discussions with us is in breach of the Board’s duty to repair what may likely be the fatal blow to the Bank’s future.
The Company, the Company’s employees and the Company’s shareholders continue to suffer with no action taken by the Company. We ask that you please take the necessary steps to meet with us regarding our proposal as soon as possible – we will continue to do whatever it takes in order to save this Company and continuing to ignore us while the Company further sinks is not something we will sit by and let happen.
Sincerely,
George E. Norcross, III
Philip A. Norcross
Gregory B. Braca
Source:
https://www.sec.gov/Archives/edgar/data/834285/000119312523024548/d445059dsc13da.htm