Management turmoil, dysfunction contributed to Republic First failure

Republic First Bank failed in April largely because of a “dysfunctional” management and board that made it difficult for regulators to get a handle on the Philadelphia bank’s financial condition and capital-raising plans.

The bank was closed by regulators and substantially all of its deposits and assets were sold to Fulton Bank.

A material loss review commissioned by the Federal Deposit Insurance Corp. noted that the dysfunction dates back to when the company was run by Vernon Hill. While the report didn’t name Hill, it noted that related-party transactions concerned certain directors and led to friction.

That friction eventually led to a shareholder lawsuit, proxy battle and significant management turnover. Hill resigned in August 2022, but battles still ensued between the new management and an investor group that at one point tried to buy the bank.

Harry Madonna briefly returned as CEO, only to be succeeded by Tom Geisel. An investor group that included George Norcross III, Philip Norcross and Gregory Braca, which had openly sparred with Hill, continued to take issue with the new leadership.

Because of those distractions “examiners struggled to obtain information related to the bank’s strategic and capital planning efforts,” the review observed. The strategic plan that the bank eventually shared with examiners was deemed “to be insufficient.”

A plan to raise capital fell through after the March failures of Signature Bank and Silicon Valley Bank. The new management team, however, did not initiate the bank’s contingency funding plan in its liquidity policy, which led to an interim downgrade to the liquidity component of the bank’s CAMELS rating, the report said.

By June 2023, examiners had determined that the bank’s condition “left the new management team with few options to make material changes to the balance sheet.”

Though the FDIC raised the management component of Republic First’s CAMELS rating in November 2023, the material loss review determined that the agency failed to document evidence to back the upgrade. Around that time, the FDIC also replaced the bank’s consent order with an informal enforcement action.

“The limited information documented did not provide a clear trail of decisions and supporting logic,” the report found. “The available evidence we reviewed suggested that downgrades of other component ratings and sustainment of the management rating may have been warranted at the time the FDIC upgraded Republic bank’s management component rating.”