Republic First Bank announces $125M capital raise

Matthew Fazelpoor//March 10, 2023

Republic First Bank announced a $125 million capital raise that will be led by Castle Creek, an alternative asset management firm with more than three decades experience partnering with community banks.

The financial institution said March 10 it entered into an agreement with accredited investors for a private placement of equity securities in that aggregate amount at a purchase price of $2.25 per share of Common Stock equivalent securities. Affiliates of Castle Creek Capital committed to participate in the capital raise for an aggregate amount of $60.7 million.

The firm has made more than 300 community bank investments, totaling $1.7 billion across eight private equity funds.

The raise follows a strategic review process, announced in September, that was overseen by the Strategic Review Committee of Republic First’s board of directors with the assistance of independent advisors. The move was recommended and negotiated by the Strategic Review Committee following that review as well as the evaluation of multiple inquiries form third parties regarding possible transactions and alternative strategies.

Republic says the raise is intended to support its execution of a strategic plan to drive profitability and enhance shareholder value.

Hundred dollar bills — Republic First Bank said the $125 million capital raise led by Castle Creek is intended to support its execution of a strategic plan to drive profitability and enhance shareholder value. – DEPOSIT PHOTOS

“This capital raise, which is a testament to the strength and potential of Republic First’s brand and business, positions us to accelerate execution of a strategic plan that targets profitability and enhanced value for stakeholders,” said Thomas Geisel, president and chief executive officer of Republic First Bank, in a statement. “We appreciate the confidence that Castle Creek has shown in our reconstituted leadership team and new vision. Partnering with an experienced bank investor allows us not only to improve our balance sheet but also draw on Castle Creek’s extensive community banking acumen and success.”

As part of the raise, Castle Creek will have the right following the closing to appoint a director or an observer to the board and any subsidiary bank board.

“We look forward to supporting Tom, the team, and the board of directors,” said Tony Scavuzzo, managing principal of Castle Creek. “Our unique operating experience plus decades of investing in community banks prepares us well to help drive value creation going forward.”

Cohen Private Ventures has also committed to participate on the same terms for an aggregate amount of $30 million.

“We are also fortunate that Cohen Private Ventures, which is a meaningful current investor, believes in our vision and opportunity by committing to significantly add to its investment,” said Geisel. “Although we have significant work in front of us, completing our strategic review and strengthening Republic First’s financial position are important milestones on the path to long-term value creation.”

The consummation of the raise is conditioned on other accredited investors committing to purchasing an additional $34.3 million on those same terms as well. Additional investors will come from a pool identified by the bank and its advisors.

Keefe, Bruyette & Woods is serving as exclusive placement agent and Vinson & Elkins LLP and Luse Gorman PC are serving as legal advisers to Republic, while Squire Patton Boggs LLP is serving as legal adviser to the placement agent. Sidley Austin LLP is serving as legal adviser to Castle Creek.

George Norcross, — George Norcross – AARON HOUSTON

The capital raise, which is expected to close in May, comes against the backdrop of continued war of words and board standoff with an activist investor group led by George Norcross, Philip Norcross and Greg Braca. That standoff has been extensively reported on and chronicled by NJBIZ. (See the bottom of this story for an index of NJBIZ’s complete coverage of this ongoing story.)

In January, the Norcross-Braca Group filed an injunction to hold off a long-delayed annual shareholder meeting until some contentions were resolved, resulting with a judge issuing an order postponing that meeting until May 31. The group also made an offer to inject $100 million of capital to improve the bank’s operations in exchange for a just-under 50% stake and two board seats. The group has said that proposal was ignored by the bank’s board, as well as previous offers.

Things came to a bit of a head after that.

Republic First accused the Norcross-Braca Group of relying on disingenuous claims and litigation to try to force it to accept the investment proposal, which the bank says requires nearly $10 million in expense reimbursements and provides the group the right to appoint or approve nearly half of the bank’s board.

“In contrast, other parties have signed customary non-disclosure agreements and are working through our process in a normal fashion,” Republic First said in a February statement. “We suspect the group would agree to participate in our process – rather disrupt it from the outside – if it actually believed its proposal was competitive and viable.”

The Norcross-Braca Group immediately shot back, calling out the bank and its board, claiming they were attempting to shift responsibility for its failure.

“The claims made in today’s Republic First statement are clearly another attempt to deflect attention from its own failures because the record is clear: we have repeatedly offered serious, substantive proposals to make a major investment and inject badly needed capital into the company, but all we have been met with is silence and legal gamesmanship,” said Greg Braca last month. “Meanwhile, the company continues to flounder.”

The Norcross-Braca Group did not immediately respond to a request for comment about Friday’s news of the capital raise.