The proxy battle over the future of Republic First Bank pits two of South Jersey’s most prominent businessmen, and former colleagues turned foes, George Norcross and Vernon Hill, against each other, in an unprecedented, come-full-circle fight. The prolonged dispute triggered a wild few months of legal action leading to a 4-4 board stalemate and delaying the bank’s annual meeting.
How did the standoff develop? Well, its origins go back decades – to the waning days of one of the most high-flying financial institutions in the Northeast.
Republic Bank is led by South Jersey businessman Vernon Hill, who joined the company in 2008 and was named CEO, succeeding founder Harry Madonna, in February 2021. Hill was previously the president and CEO of Commerce Bank, which was once a highly regarded business. Since his arrival, Hill is credited with helping to grow Republic First Bank from $700 million in assets to $5.6 billion and increasing the number of branches from eight to 33.
George Norcross — who needs no introduction — is leading an activist investor group, which includes his brother, Phillip — CEO of law firm Parker McKay — along with longtime ally, and former TD Bank CEO Greg Braca. The group began buying shares of Republic Bank stock in November, amassing nearly a 10% stake.
The bank, which has a big presence in South Jersey, has adopted many of the hallmarks from the Commerce Bank days, such as free checking, coin-counting machines, longer hours and pet treats.
But Hill carries a cloud of controversy stemming from his departure from Commerce Bank, which he founded in 1973. He left in 2007 after federal regulators raised concerns about transactions involving the bank and its executives. In fact, the Federal Reserve Bank of Philadelphia, the Office of the Comptroller of the Currency, and the Commerce Bank board placed limits on the bank’s activities, according to published reports at the time. At issue were deals allegedly involving property leases and the purchase of architectural services from a business run by his wife, Shirley. No charges were filed, however. The bank was sold months later to TD for $8.5 billion.
Norcross was a member of the Commerce board that curbed the bank and also helped to negotiate the sale. Braca was an executive under Hill at Commerce, who stayed on at TD Bank, eventually becoming U.S. CEO in 2017.
Now, the trio’s paths cross once more. And the fight has grown even more bitter over the last few months, coming to a head in recent weeks. Norcross’ group has demanded certain changes be made to boost the firm’s bottom line and stock price, including replacing Hill with Braca as CEO.
The Norcross-Braca group first requested company records on Feb. 16, followed by several subsequent actions, including filing for an injunction.
“Norcross needs access to documents relating to the related third-party transactions he identified in his books and records demand and supplemental demand to ensure that a thorough examination by an independent party is conducted and breaches of fiduciary duty by Hill and other officers and directors can be properly remedied and redress,” the request stated. “This is a quintessential proper purpose under the Pennsylvania books and records statute.”
As the bank refused to turn over the requested records, the tension ratcheted up further. At one point, the Norcross group, which is represented by Sullivan & Cromwell partner H. Rodgin Cohen — offered to invest $50 million in Republic Bank and to spend as much as $106 million to acquire a majority stake. While not all details were provided, the group said in a statement that the investment would be used to expand and improve business, with funds being put toward operations.
Norcross’ offer is valued at between $5.20 and $5.50 per share. The bank’s stock traded below $2.00 per share in April 2020; shares closed at $4.96 on April 20, 2022.
The proxy battle triggered a series of crises at the bank, including a deadlocked board. In March, four of the eight board members, led by Harry Madonna, wrote a public letter expressing concern about possible self-dealing and related party transactions by Hill and his allies. The letter called out alleged new payments to a design firm controlled by Shirley Hill, new expenses related to the opening of new branches, and a plan to offer golden parachutes for Hill and his allies. The bank responded with a statement saying they are “deeply troubled” that the directors “would seek to publicize a letter that is both factually and legally unfounded.”
As the calls grew from the Norcross team to more closely examine Hill’s dealings, late last month, Republic Bank’s parent company requested an independent audit into “related party matters.” That request was made in connection with the firm’s 2021 financial statement. The bank has said it cannot predict the duration or outcome of that investigation but does not believe it will have a material adverse effect on the company’s financial conditions or results of operations. Republic Bank plans to use an independent legal counsel to conduct the investigation.
The uncertainty of that audit has essentially paralyzed the process. As a result, Republic Bank has indefinitely delayed its annual meeting.
The investigation also means that the company is unable to file its required 10-K annual report. That also has led to NASDAQ notifying the bank that without its annual report, it is no longer in compliance with market listing rules.
The paralysis led the Norcross group to call for the appointment of a monitor to break the 4-4 board stalemate.
Members of the Norcross group declined to comment for this story. Vernon Hill could not be reached.
And that is the current state of play in the proxy battle, which has evolved into a feud between two of New Jersey’s most successful financial services executives. What happens next is uncertain.
As the sides continue digging in, the ship has seemingly sailed for any possible amicable resolution. Absent legal relief that Norcross’ side seeks, both factions are at the mercy of the investigation, which has ground the process to a halt.
One thing is certain. The outcome of this unprecedented, high-stakes, high-profile proxy fight will have long-lasting ramifications that will reverberate through South Jersey, and maybe the entire region. Battles between such high-profile figures are not commonplace.
And if the last few weeks have been any indicator, buckle up for a wild next chapter.