UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-Q
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the Quarterly Period Ended:
September 30,
2008
|
Commission
File Number:
000-17007
|
Republic First
Bancorp, Inc.
|
(Exact
name of business issuer as specified in its
charter)
|
Pennsylvania
|
23-2486815
|
(State
or other jurisdiction of
|
IRS
Employer Identification
|
incorporation
or organization)
|
Number
|
50 South
16th Street
,
Philadelphia
,
Pennsylvania
|
19102
|
(Address
of principal executive offices)
|
(Zip
code)
|
(Registrant's
telephone number, including area
code)
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90
days.
|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “large accelerated filer”,
“accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
|
Large
accelerated filer ____
|
Accelerated
Filer
X
|
|
|
Non-Accelerated
filer ____
|
Smaller
reporting company ___
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act):
|
APPLICABLE
ONLY TO CORPORATE ISSUERS:
|
Indicate
the number of shares outstanding of each of the Issuer's classes of common
stock, as of the latestpracticable date.
11,031,253
shares
of Issuer's
Common Stock, par value
|
$0.01 per share
, issued
and outstanding as of November 5,
2008
|
Exhibit
index appears on page 39
TABLE OF
CONTENTS
|
|
|
|
Part
I: Financial Information
|
Page
|
|
|
Item
1: Financial Statements (unaudited)
|
|
|
|
Item
2: Management’s Discussion and Analysis of Financial Condition
and
|
|
Results
of Operations
|
|
|
|
Item
3: Quantitative and Qualitative Information about Market
Risk
|
|
|
|
Item
4: Controls and Procedures
|
|
|
|
Part
II: Other Information
|
|
|
|
Item
1: Legal Proceedings
|
|
|
|
Item
1A: Risk Factors
|
|
|
|
Item
2: Unregistered Sales of Equity and Use of Proceeds
|
|
|
|
Item
3: Defaults Upon Senior Securities
|
|
|
|
Item
4: Submission of Matters to a Vote of Security Holders
|
|
|
|
Item
5: Other Information
|
|
|
|
Item
6: Exhibits
|
|
ITEM
1: FINANCIAL STATEMENTS
|
Page
|
|
|
|
|
Consolidated
Balance Sheets as of September 30, 2008 (unaudited) and December 31,
2007
|
|
|
|
Consolidated
Statements of Income for the three and nine months ended
|
|
September
30, 2008 and 2007 (unaudited)
|
|
|
|
Consolidated
Statements of Changes in Shareholders’ Equity for the nine months
ended
|
|
September
30, 2008 and 2007 (unaudited)
|
|
|
|
Consolidated
Statements of Cash Flows for the nine months ended
|
|
September
30, 2008 and 2007 (unaudited)
|
|
|
|
Notes
to Consolidated Financial Statements (unaudited)
|
|
|
|
Republic
First Bancorp, Inc. and Subsidiary
As
of September 30, 2008 and December 31, 2007
Dollars
in thousands, except share data
ASSETS:
|
|
September
30, 2008
|
|
|
|
December
31, 2007
|
|
|
|
|
|
(unaudited)
|
|
|
|
Cash
and due from banks
|
|
$
|
19,013
|
|
|
|
$
|
10,996
|
|
Interest
bearing deposits with banks
|
|
|
341
|
|
|
|
|
320
|
|
Federal
funds sold
|
|
|
38,382
|
|
|
|
|
61,909
|
|
Total
cash and cash equivalents
|
|
|
57,736
|
|
|
|
|
73,225
|
|
|
|
|
|
|
|
|
|
|
|
Investment
securities available for sale, at fair value
|
|
|
86,345
|
|
|
|
|
83,659
|
|
Investment
securities held to maturity, at amortized cost
|
|
|
|
|
|
|
|
|
|
(Fair
value of $216 and $285, respectively)
|
|
|
203
|
|
|
|
|
282
|
|
Restricted
stock, at cost
|
|
|
6,401
|
|
|
|
|
6,358
|
|
Loans
receivable (net of allowance for loan losses of
|
|
|
|
|
|
|
|
|
|
$6,807
and $8,508, respectively)
|
|
|
764,245
|
|
|
|
|
813,041
|
|
Premises
and equipment, net
|
|
|
14,411
|
|
|
|
|
11,288
|
|
Other
real estate owned, net
|
|
|
8,580
|
|
|
|
|
3,681
|
|
Accrued
interest receivable
|
|
|
4,209
|
|
|
|
|
5,058
|
|
Bank
owned life insurance
|
|
|
12,029
|
|
|
|
|
11,718
|
|
Other
assets
|
|
|
10,573
|
|
|
|
|
7,998
|
|
Total
Assets
|
|
$
|
964,732
|
|
|
|
$
|
1,016,308
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY:
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
Demand
– non-interest-bearing
|
|
$
|
77,728
|
|
|
|
$
|
99,040
|
|
Demand
– interest-bearing
|
|
|
32,432
|
|
|
|
|
35,235
|
|
Money
market and savings
|
|
|
240,055
|
|
|
|
|
223,645
|
|
Time
less than $100,000
|
|
|
181,367
|
|
|
|
|
179,043
|
|
Time
over $100,000
|
|
|
197,905
|
|
|
|
|
243,892
|
|
Total
Deposits
|
|
|
729,487
|
|
|
|
|
780,855
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
100,682
|
|
|
|
|
133,433
|
|
Other
borrowings
|
|
|
25,000
|
|
|
|
|
-
|
|
Accrued
interest payable
|
|
|
2,820
|
|
|
|
|
3,719
|
|
Other
liabilities
|
|
|
5,010
|
|
|
|
|
6,493
|
|
Subordinated
debt
|
|
|
22,476
|
|
|
|
|
11,341
|
|
Total
Liabilities
|
|
|
885,475
|
|
|
|
|
935,841
|
|
Shareholders’
Equity
:
|
|
|
|
|
|
|
|
|
|
Preferred
stock, par value $0.01 per share: 10,000,000 shares
authorized;
|
|
|
|
|
|
|
|
|
|
no
shares issued as of September 30, 2008 and December 31,
2007
|
|
|
-
|
|
|
|
|
-
|
|
Common
stock par value $0.01 per share, 20,000,000 shares
authorized;
|
|
|
|
|
|
|
|
|
|
shares
issued 11,031,253 as of September 30, 2008
|
|
|
|
|
|
|
|
|
|
and
10,737,211 as of December 31, 2007
|
|
|
110
|
|
|
|
|
107
|
|
Additional
paid in capital
|
|
|
76,297
|
|
|
|
|
75,321
|
|
Retained
earnings
|
|
|
8,871
|
|
|
|
|
8,927
|
|
Treasury
stock at cost (416,303 shares)
|
|
|
(2,993
|
)
|
|
|
|
(2,993
|
)
|
Stock
held by deferred compensation plan
|
|
|
(1,165
|
)
|
|
|
|
(1,165
|
)
|
Accumulated
other comprehensive income (loss)
|
|
|
(1,863
|
)
|
|
|
|
270
|
|
Total
Shareholders’ Equity
|
|
|
79,257
|
|
|
|
|
80,467
|
|
Total
Liabilities and Shareholders’ Equity
|
|
$
|
964,732
|
|
|
|
$
|
1,016,308
|
|
(See
notes to unaudited consolidated financial statements)
Republic
First Bancorp, Inc. and Subsidiary
For
the Three and Nine Months Ended September 30, 2008 and 2007
(Dollars
in thousands, except per share data)
(unaudited)
|
|
Three months
ended
|
|
|
Nine months
ended
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and fees on loans
|
|
$
|
12,208
|
|
|
$
|
16,209
|
|
|
$
|
37,821
|
|
|
$
|
47,166
|
|
Interest
and dividends on taxable investment securities
|
|
|
1,173
|
|
|
|
1,198
|
|
|
|
3,315
|
|
|
|
3,852
|
|
Interest
and dividends on tax-exempt investment securities
|
|
|
106
|
|
|
|
131
|
|
|
|
326
|
|
|
|
380
|
|
Interest
on federal funds sold and other interest-earning assets
|
|
|
45
|
|
|
|
139
|
|
|
|
199
|
|
|
|
543
|
|
Total
interest income
|
|
|
13,532
|
|
|
|
17,677
|
|
|
|
41,661
|
|
|
|
51,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
interest-bearing
|
|
|
68
|
|
|
|
109
|
|
|
|
283
|
|
|
|
327
|
|
Money
market and savings
|
|
|
1,625
|
|
|
|
2,816
|
|
|
|
4,663
|
|
|
|
9,370
|
|
Time
less than $100,000
|
|
|
1,671
|
|
|
|
1,829
|
|
|
|
5,900
|
|
|
|
5,510
|
|
Time
over $100,000
|
|
|
1,545
|
|
|
|
2,921
|
|
|
|
5,925
|
|
|
|
8,161
|
|
Other
borrowings
|
|
|
1,005
|
|
|
|
2,198
|
|
|
|
3,046
|
|
|
|
5,694
|
|
|
|
|
5,914
|
|
|
|
9,873
|
|
|
|
19,817
|
|
|
|
29,062
|
|
Net
interest income
|
|
|
7,618
|
|
|
|
7,804
|
|
|
|
21,844
|
|
|
|
22,879
|
|
Provision
for loan losses
|
|
|
43
|
|
|
|
1,282
|
|
|
|
5,898
|
|
|
|
1,425
|
|
Net
interest income after provision for loan losses
|
|
|
7,575
|
|
|
|
6,522
|
|
|
|
15,946
|
|
|
|
21,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan
advisory and servicing fees
|
|
|
120
|
|
|
|
156
|
|
|
|
270
|
|
|
|
715
|
|
Service
fees on deposit accounts
|
|
|
300
|
|
|
|
289
|
|
|
|
884
|
|
|
|
871
|
|
Mastercard
transaction
|
|
|
-
|
|
|
|
-
|
|
|
|
309
|
|
|
|
-
|
|
Legal
settlement
|
|
|
-
|
|
|
|
-
|
|
|
|
100
|
|
|
|
-
|
|
Gains
on sales and calls of investment securities
|
|
|
-
|
|
|
|
-
|
|
|
|
5
|
|
|
|
-
|
|
Gain
on sale of other real estate owned
|
|
|
-
|
|
|
|
183
|
|
|
|
-
|
|
|
|
185
|
|
Bank
owned life insurance income
|
|
|
98
|
|
|
|
106
|
|
|
|
311
|
|
|
|
309
|
|
Other
income
|
|
|
154
|
|
|
|
26
|
|
|
|
294
|
|
|
|
75
|
|
|
|
|
672
|
|
|
|
760
|
|
|
|
2,173
|
|
|
|
2,155
|
|
Non-interest
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employee benefits
|
|
|
2,319
|
|
|
|
2,713
|
|
|
|
7,752
|
|
|
|
7,874
|
|
Occupancy
|
|
|
611
|
|
|
|
688
|
|
|
|
1,809
|
|
|
|
1,829
|
|
Depreciation
and amortization
|
|
|
342
|
|
|
|
347
|
|
|
|
1,007
|
|
|
|
1,036
|
|
Legal
|
|
|
249
|
|
|
|
166
|
|
|
|
720
|
|
|
|
438
|
|
Writedown/
loss on sale of other real estate owned
|
|
|
559
|
|
|
|
-
|
|
|
|
1,615
|
|
|
|
-
|
|
Other
real estate
|
|
|
163
|
|
|
|
3
|
|
|
|
505
|
|
|
|
23
|
|
Advertising
|
|
|
75
|
|
|
|
141
|
|
|
|
353
|
|
|
|
385
|
|
Data
processing
|
|
|
214
|
|
|
|
172
|
|
|
|
620
|
|
|
|
486
|
|
Insurance
|
|
|
149
|
|
|
|
106
|
|
|
|
401
|
|
|
|
293
|
|
Professional
fees
|
|
|
315
|
|
|
|
129
|
|
|
|
558
|
|
|
|
379
|
|
Regulatory
assessments and costs
|
|
|
151
|
|
|
|
45
|
|
|
|
381
|
|
|
|
132
|
|
Taxes,
other
|
|
|
207
|
|
|
|
204
|
|
|
|
719
|
|
|
|
618
|
|
Other
expenses
|
|
|
654
|
|
|
|
774
|
|
|
|
2,077
|
|
|
|
2,273
|
|
|
|
|
6,008
|
|
|
|
5,488
|
|
|
|
18,517
|
|
|
|
15,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before provision for income tax (benefit) expense
|
|
|
2,239
|
|
|
|
1,794
|
|
|
|
(398
|
)
|
|
|
7,843
|
|
Provision
(benefit) for income taxes
|
|
|
706
|
|
|
|
558
|
|
|
|
(342
|
)
|
|
|
2,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
1,533
|
|
|
$
|
1,236
|
|
|
$
|
(56
|
)
|
|
$
|
5,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.14
|
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.51
|
|
Diluted
|
|
$
|
0.14
|
|
|
$
|
0.12
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(See
notes to unaudited consolidated financial statements)
Republic
First Bancorp, Inc. and Subsidiary
For the Nine Months Ended September 30,
2008 and 2007
(
Dollars in thousands, except share
data)
(unaudited)
|
Comprehensive
Loss
|
|
Common
Stock
|
|
Additional
Paid
in
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
Stock
Held by
Deferred
Compensation
Plan
|
Accumulated
Other
Comprehensive
Income/(Loss)
|
|
Total
Shareholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 1, 2008
|
|
|
$
107
|
|
$
75,321
|
|
$ 8,927
|
|
$ (2,993)
|
$ (1,165)
|
$ 270
|
|
$ 80,467
|
|
Total
other comprehensive loss, net of taxes of $(1,099)
|
$
(2,133)
|
|
–
|
|
–
|
|
–
|
|
–
|
–
|
(2,133)
|
|
(2,133)
|
|
Net
loss
|
(56)
|
|
–
|
|
–
|
|
(56)
|
|
–
|
–
|
–
|
|
(56)
|
|
Total
comprehensive loss
|
$
(2,189
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
based compensation
|
|
|
–
|
|
94
|
|
–
|
|
–
|
–
|
–
|
|
94
|
|
Options
exercised
(294,042
shares)
|
|
|
3
|
|
882
|
|
–
|
|
–
|
–
|
–
|
|
885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
September 30, 2008
|
|
|
$
110
|
|
$
76,297
|
|
$ 8,871
|
|
$ (2,993)
|
$ (1,165)
|
$ (1,863)
|
|
$ 79,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Income
|
|
Common
Stock
|
|
Additional
Paid
in
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
Stock
Held by
Deferred
Compensation
Plan
|
Accumulated
Other
Comprehensive
Income/(Loss)
|
|
Total
Shareholders’
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
January 1, 2007
|
|
|
$ 97
|
|
$ 63,342
|
|
$ 13,511
|
|
$ (1,688)
|
$ (810)
|
$ 282
|
|
$ 74,734
|
|
Total
other comprehensive loss, net of taxes of $(254)
|
$ (494)
|
|
–
|
|
–
|
|
–
|
|
–
|
–
|
(494)
|
|
(494)
|
|
Net
income
|
5,308
|
|
–
|
|
–
|
|
5,308
|
|
–
|
–
|
–
|
|
5,308
|
|
Total
comprehensive income
|
$
4,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
based compensation
|
|
|
–
|
|
|
|
–
|
|
–
|
–
|
–
|
|
|
|
|
|
|
Stock
based compensation
|
|
|
–
|
|
92
|
|
–
|
|
–
|
–
|
–
|
–
|
92
|
|
Stock
dividend
(974,441
shares)
|
|
|
10
|
|
11,459
|
|
(11,469)
|
|
–
|
–
|
–
|
|
–
|
|
Options
exercised
(15,067
shares)
|
|
|
–
|
|
37
|
|
–
|
|
–
|
–
|
–
|
|
37
|
|
Purchase
of treasury shares
(140,700
shares)
|
|
|
–
|
|
–
|
|
–
|
|
(1,305)
|
–
|
–
|
|
(1,305)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
September 30, 2007
|
|
|
$ 107
|
|
$ 74,930
|
|
$ 7,350
|
|
$ (2,993)
|
$ (810)
|
$ (212)
|
|
$ 78,372
|
|
(See
notes to unaudited consolidated financial statements)
|
|
|
|
|
|
|
Republic
First Bancorp, Inc. and Subsidiary
|
|
|
|
For
the Nine Months Ended September 30, 2008 and 2007
|
|
Dollars
in thousands
|
|
(unaudited)
|
|
|
|
Nine
months ended
|
|
|
|
September
30,
|
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(56
|
)
|
|
$
|
5,308
|
|
Adjustments
to reconcile net income (loss) to net
|
|
|
|
|
|
|
|
|
cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Provision
for loan losses
|
|
|
5,898
|
|
|
|
1,425
|
|
Writedown/
loss (gain) on sale of other real estate owned
|
|
|
1,615
|
|
|
|
(185
|
)
|
Depreciation and
amortization
|
|
|
1,007
|
|
|
|
1,036
|
|
Stock
based compensation
|
|
|
94
|
|
|
|
92
|
|
Gains
on sales and calls of investment securities
|
|
|
(5
|
)
|
|
|
-
|
|
Amortization
of discounts on investment securities
|
|
|
(168
|
)
|
|
|
(127
|
)
|
Increase
in value of bank owned life insurance
|
|
|
(311
|
)
|
|
|
(309
|
)
|
Increase
in accrued interest receivable and other assets
|
|
|
(627
|
)
|
|
|
(1,061
|
)
|
Decrease
in accrued interest payable and other liabilities
|
|
|
(2,382
|
)
|
|
|
(1,326
|
)
|
Net
cash provided by operating activities
|
|
|
5,065
|
|
|
|
4,853
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of securities:
|
|
|
|
|
|
|
|
|
Available
for sale
|
|
|
(16,366
|
)
|
|
|
(4,644
|
)
|
Proceeds
from maturities and calls of securities:
|
|
|
|
|
|
|
|
|
Held
to maturity
|
|
|
79
|
|
|
|
52
|
|
Available
for sale
|
|
|
10,621
|
|
|
|
25,523
|
|
Purchase
of FHLB stock
|
|
|
(43
|
)
|
|
|
(3,667
|
)
|
Net
decrease (increase) in loans
|
|
|
21,514
|
|
|
|
(50,406
|
)
|
Net
proceeds from sale of other real estate owned
|
|
|
14,870
|
|
|
|
715
|
|
Premises
and equipment expenditures
|
|
|
(4,130
|
)
|
|
|
(6,334
|
)
|
Net
cash provided by (used in) investing activities
|
|
|
26,545
|
|
|
|
(38,761
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
proceeds from exercise of stock options
|
|
|
885
|
|
|
|
37
|
|
Purchase
of treasury shares
|
|
|
-
|
|
|
|
(1,305
|
)
|
Net
decrease in demand, money market and savings deposits
|
|
|
(7,705
|
)
|
|
|
(26,640
|
)
|
Net
(decrease) increase in short term borrowings
|
|
|
(32,751
|
)
|
|
|
8,712
|
|
Increase
in other borrowings
|
|
|
25,000
|
|
|
|
-
|
|
Issuance
of subordinated debt
|
|
|
11,135
|
|
|
|
5,155
|
|
Net
increase (decrease) in time deposits
|
|
|
(43,663
|
)
|
|
|
41,756
|
|
Net
cash (used in) provided by financing activities
|
|
|
(47,099
|
)
|
|
|
27,715
|
|
Decrease
in cash and cash equivalents
|
|
|
(15,489
|
)
|
|
|
(6,193
|
)
|
Cash
and cash equivalents, beginning of period
|
|
|
73,225
|
|
|
|
83,127
|
|
Cash
and cash equivalents, end of period
|
|
$
|
57,736
|
|
|
$
|
76,934
|
|
Supplemental
disclosure:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
20,716
|
|
|
$
|
29,984
|
|
Taxes
paid
|
|
$
|
400
|
|
|
$
|
2,625
|
|
Non-monetary
transfers from loans to other real estate owned
|
|
$
|
21,384
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
(See
notes to unaudited consolidated financial statements)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note
1: Organization
Republic
First Bancorp, Inc. (“the Company”) is a one-bank holding company organized and
incorporated under the laws of the Commonwealth of Pennsylvania. It is comprised
of one wholly owned subsidiary, Republic First Bank (“Republic”), a Pennsylvania
state chartered bank. Republic offers a variety of banking services to
individuals and businesses throughout the Greater Philadelphia and South Jersey
area through its offices and branches in Philadelphia, Montgomery, Delaware, and
Camden counties.
In third
quarter 2008, BSC Services Corp. (“BSC”), a subsidiary of First Bank of
Delaware, which was formerly a subsidiary of the Company, discontinued its
operations. BSC had provided data processing, accounting, human
resources and compliance staffing to Republic. Staff members
previously employed through BSC are now employed directly by
Republic.
The
Company and Republic encounter vigorous competition for market share in the
geographic areas they serve from bank holding companies, other community banks,
thrift institutions and other non-bank financial organizations, such as mutual
fund companies, insurance companies and brokerage companies.
The
Company and Republic are subject to regulations of certain state and federal
agencies. These regulatory agencies periodically examine the Company and its
subsidiary for adherence to laws and regulations. As a consequence of such
regulations and periodic examinations, the cost of doing business may be
affected.
Note
2: Summary of Significant Accounting Policies:
Basis
of Presentation:
The
consolidated financial statements include the accounts of the Company and
Republic. The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim
financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been
included. Operating results for the three and nine month periods
ended September 30, 2008 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2008. All significant inter-company
accounts and transactions have been eliminated in the consolidated financial
statements.
Risks
and Uncertainties and Certain Significant Estimates:
The
earnings of the Company depend on the earnings of Republic. Earnings are
dependent primarily upon the level of net interest income, which is the
difference between interest earned on its interest-earning assets, such as loans
and investments, and the interest paid on its interest-bearing liabilities, such
as deposits and borrowings. Accordingly, the results of operations are subject
to risks and uncertainties surrounding their exposure to change in the interest
rate environment.
Prepayments
on residential real estate mortgage and other fixed rate loans and
mortgage-backed securities vary significantly and may cause significant
fluctuations in interest margins.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
significant estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at the date
of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
Significant
estimates are made by management in determining the allowance for loan losses,
carrying values of other real estate owned, other than temporary impairment of
investment securities and the realization of deferred tax assets. Consideration
is given to a variety of factors in establishing these estimates. In estimating
the allowance for loan losses, management considers current economic conditions,
diversification of the loan portfolio, delinquency statistics, results of
internal loan reviews, borrowers’ perceived financial and managerial strengths,
the adequacy of underlying collateral, if collateral dependent, or present value
of future cash flows and other relevant factors. Because these estimates are
dependent, to a great extent, on the general economy and other conditions that
may be beyond Republic’s control, these estimates could differ materially in the
near term. In estimating the carrying values of other real estate
owned, valuations are periodically performed by management and the assets are
carried at the lower of carrying amount or fair value, less the cost to
sell. In estimating other than temporary impairment of investment
securities, securities are evaluated on at least a quarterly basis, and more
frequently when market conditions warrant such an evaluation, to determine
whether a decline in their value is other-than-temporary. To
determine whether a loss in value is other-than-temporary, management utilizes
criteria such as the reasons underlying the decline, the magnitude and duration
of the decline and the intent and ability of the Company to retain its
investment in the security for a period of time sufficient to allow for an
anticipated recovery in the fair value. The term
“other-than-temporary” is not intended to indicate that the decline is
permanent, but indicates that the prospects for a near-term recovery of value is
not necessarily favorable, or that there is a lack of evidence to support a
realizable value equal to or greater than the carrying value of
investment. Once a decline in value is determined to be
other-than-temporary, the value of the security is reduced and a corresponding
charge to earnings is recognized. In evaluating our ability to
recover deferred tax assets, management considers all available positive and
negative evidence, including our past operating results and our forecast of
future taxable income. In determining future taxable income,
management makes assumptions for the amount of taxable income, the reversal of
temporary differences and the implementation of feasible and prudent tax
planning strategies. These assumptions require us to make judgments
about our future taxable income and are consistent with the plans and estimates
we use to manage our business. Any reduction in estimated future
taxable income may require us to record a valuation allowance against our
deferred tax assets. An increase in the valuation allowance would
result in additional income tax expense in the period and could have a
significant impact on our future earnings.
The
Company and Republic are subject to federal and state regulations governing
virtually all aspects of their activities, including but not limited to, lines
of business, liquidity, investments, the payment of dividends, and
others. Such regulations and the cost of adherence to such
regulations can have a significant impact on earnings and financial
condition.
Share-Based
Compensation:
At
September 30, 2008, the Company maintains a Stock Option Plan and Restricted
Stock Plan (the “Plan”) under which the Company grants options to its employees
and directors. No restricted stock awards have been
made. Under terms of the Plan, 1.5 million shares of common stock,
plus an annual increase equal to the number of shares needed to restore the
maximum number of shares that may be available for grant under the Plan to 1.5
million shares, are reserved for awards. The Plan provides that the
exercise price of each option granted equals the market price of the Company’s
stock on the date of grant. Any options granted vest within one to
five years and have a maximum term of 10 years. The Black-Sholes
option pricing model is utilized to determine the fair market value of stock
options. In
2008 the
following assumptions were utilized; a dividend yield of 0%; expected volatility
of 24.98% to 34.52%; a risk-free interest rate of 3.08% to 3.69% and an expected
life of 7.0 years. In 2007 the following assumptions were utilized; a
dividend yield of 0%; expected volatility of 25.24%; a risk-free interest rate
of 4.70% and an expected life of 7.0 years. A dividend yield of 0% is
utilized, because cash dividends have never been paid. The expected
life reflects a 3 to 4 year “all or nothing” vesting period, the maximum ten
year term and review of historical behavior. The volatility was based
on Bloomberg’s seven year volatility calculation for “FRBK”
stock. The risk-free interest rate is based on the seven year
Treasury bond. 12,000 shares vested in the first nine months of
2008. Expense is recognized ratably over the period required to
vest. There were 105,050 unvested options at January 1, 2008 with a
fair value of $486,885 with $346,012 of that amount remaining to be recognized
as expense. At September 30, 2008, there were 170,550 unvested
options with a fair value of $594,137 with $383,590 of that amount remaining to
be recognized as expense. At that date, the intrinsic value of the 435,472
options outstanding was $670,680, while the intrinsic value of the 264,922
exercisable (vested) was $488,327. During the first nine months of 2008, 27,500
nonvested options were forfeited, with a weighted average grant fair value of
$126,750.
A summary
of the status of the Company’s stock options under the Plan as of September 30,
2008 and 2007 and changes during the nine months ended September 30, 2008 and
2007 are presented below:
|
|
For
the Nine Months Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding,
beginning of year
|
|
|
737,841
|
|
|
$
|
6.39
|
|
|
|
661,449
|
|
|
$
|
5.55
|
|
Granted
|
|
|
105,000
|
|
|
|
6.62
|
|
|
|
99,000
|
|
|
|
11.77
|
|
Exercised
|
|
|
(294,042
|
)
|
|
|
(3.01
|
)
|
|
|
(15,067
|
)
|
|
|
(2.42
|
)
|
Forfeited
|
|
|
(113,327
|
)
|
|
|
(8.90
|
)
|
|
|
(6,050
|
)
|
|
|
(12.14
|
)
|
Outstanding,
end of period
|
|
|
435,472
|
|
|
|
8.07
|
|
|
|
739,332
|
|
|
|
6.39
|
|
Options
exercisable at period-end
|
|
|
264,922
|
|
|
|
7.47
|
|
|
|
634,282
|
|
|
|
5.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average fair value of options granted during the period
|
|
|
|
|
|
$
|
2.47
|
|
|
|
|
|
|
$
|
4.61
|
|
|
|
For
the Nine Months Ended
September
30,
|
|
|
|
2008
|
|
|
2007
|
|
Number
of options exercised
|
|
|
294,042
|
|
|
|
15,067
|
|
Cash
received
|
|
$
|
884,615
|
|
|
$
|
36,413
|
|
Intrinsic
value
|
|
|
862,833
|
|
|
|
115,589
|
|
Tax
benefit
|
|
|
301,992
|
|
|
|
40,456
|
|
The
following table summarizes information about options outstanding under the Plan
as of September 30, 2008.
|
|
|
|
|
|
|
|
Options
outstanding
|
|
|
Options
exercisable
|
|
Range
of Exercise Prices
|
|
|
Shares
|
|
|
Weighted
Average
remaining
contractual
life
(years)
|
|
|
Weighted
Average
exercise
price
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
$
1.81
|
|
|
|
23,851
|
|
|
|
2.3
|
|
|
$
|
1.81
|
|
|
|
23,851
|
|
|
$
|
1.81
|
|
$
2.77
to $3.96
|
|
|
|
12,813
|
|
|
|
1.9
|
|
|
|
3.48
|
|
|
|
12,813
|
|
|
|
3.48
|
|
$
5.94 to
$8.30
|
|
|
|
200,313
|
|
|
|
7.2
|
|
|
|
6.40
|
|
|
|
110,313
|
|
|
|
6.25
|
|
$
9.94
to $12.14
|
|
|
|
198,495
|
|
|
|
7.3
|
|
|
|
10.81
|
|
|
|
117,945
|
|
|
|
10.41
|
|
|
|
|
|
|
435,472
|
|
|
|
|
|
|
$
|
8.07
|
|
|
|
264,922
|
|
|
$
|
7.47
|
|
|
|
For
the Nine Months Ended,
|
|
|
|
September
30, 2008
|
|
|
|
Number of
shares
|
|
|
Weighted
average grant date fair value
|
|
Nonvested
at beginning of year
|
|
|
105,050
|
|
|
$
|
4.64
|
|
Granted
|
|
|
105,000
|
|
|
|
2.47
|
|
Vested
|
|
|
(12,000
|
)
|
|
|
(2.04
|
)
|
Forfeited
|
|
|
(27,500
|
)
|
|
|
(4.61
|
)
|
Nonvested
at end of period
|
|
|
170,550
|
|
|
$
|
3.48
|
|
|
|
|
|
|
|
|
|
|
During
the three months ended September 30, 2008, $19,000 was recognized in
compensation expense, with a 35% assumed tax benefit, for the
Plan. During the nine months ended September 30, 2008, $94,000 was
recognized in compensation expense, with a 35% assumed tax benefit, for the
Plan. During the three months ended September 30, 2007, $33,000 was recognized
in compensation expense, with a 35% assumed tax benefit, for the
Plan. During the nine months ended September 30, 2007, $92,000 was
recognized in compensation expense, with a 35% assumed tax benefit, for the
Plan.
Note
3
:
Reclassifications
None
Note
4: Recent Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141 (R), Business
Combinations. This statement establishes principles and requirements
for how the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree. The statement also provides
guidance for recognizing and measuring the goodwill acquired in the business
combination and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination. The guidance will become effective as of the
beginning of a company’s fiscal year beginning after December 15,
2008. The new pronouncement will impact the Company’s accounting for
business combinations completed beginning January 1, 2009.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements- an amendment of ARB No. 51. This
statement establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary. The guidance will become effective as of the
beginning of a company’s fiscal year
beginning
after December 15, 2008. The company is currently evaluating the
potential impact the new pronouncement will have on its consolidated financial
statements.
In
December 2007, the SEC issued SAB No. 110 which amends and replaces Question 6
of Section D.2 of Topic 14, Share-Based Payment, of the Staff Accounting
Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the
views of the staff regarding the use of the “simplified” method in developing an
estimate of expected term of “plain vanilla” share options and allows usage of
the “simplified” method for share option grants prior to December 31,
2007. SAB 110 allows public companies which do not have historically
sufficient experience to provide a reasonable estimate to continue use of the
“simplified” method for estimating the expected term of “plain vanilla” share
option grants after December 31, 2007. SAB 110 is effective January
1, 2008. The adoption did not have any effect on the Company’s
financial position or results of operations.
In May
2008, the FASB issued FASB Staff Position (FSP) APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)" which clarifies the accounting for
convertible debt instruments that may be settled in cash (including partial cash
settlement) upon conversion. The FSP requires issuers to account
separately for the liability and equity components of certain convertible debt
instruments in a manner that reflects the issuer's nonconvertible debt borrowing
rate when interest cost is recognized. The FSP requires bifurcation
of a component of the debt, classification of that component in equity and the
accretion of the resulting discount on the debt to be recognized as part of
interest expense. The FSP requires retrospective application to the
terms of instruments as they existed for all periods presented. The
FSP is effective for fiscal years beginning after December 15, 2008, and interim
periods within those years. Early adoption is not
permitted. The Company is currently evaluating the potential impact
the new pronouncement will have on its consolidated financial
statements.
In June
2008, the FASB issued FASB Staff Position (FSP) EITF 03-6-1, “Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.” This FSP clarifies that all outstanding
unvested share-based payment awards that contain rights to nonforfeitable
dividends participate in undistributed earnings with common
shareholders. Awards of this nature are considered participating
securities and the two-class method of computing basic and diluted earnings per
share must be applied. This FSP is effective for fiscal years
beginning after December 15, 2008. The Company is currently
evaluating the potential impact the new pronouncement will have on its
consolidated financial statements.
In
October 2008, the FASB issued FSP SFAS No. 157-3,
“
Determining the Fair Value
of a Financial Asset When The Market for That Asset Is Not
Active” (FSP 157-3), to clarify the application of the
provisions of SFAS 157 in an inactive market and how an entity would
determine fair value in an inactive market. FSP 157-3 is
effective immediately and applies to our September 30, 2008 financial
statements. The application of the provisions of FSP 157-3 did
not materially affect our results of operations or financial condition as of and
for the periods ended September 30, 2008.
In
September 2008, the FASB issued FSP 133-1 and FIN 45-4, “Disclosures about
Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No.
133 and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161” (FSP 133-1 and FIN 45-4). FSP 133-1 and FIN
45-4 amends and enhances disclosure requirements for sellers of credit
derivatives and financial guarantees. It also clarifies that the
disclosure requirements of SFAS No. 161 are effective for quarterly periods
beginning after November 15, 2008, and fiscal years that include those
periods. FSP 133-1 and FIN 45-4 is effective for reporting periods
(annual or interim) ending after November 15, 2008. The
implementation of this standard will not have a material impact on our
consolidated financial position and results of operations.
Note
5: Legal Proceedings
The
Company and Republic are from time to time parties (plaintiff or defendant) to
lawsuits in the normal course of business. While any litigation involves an
element of uncertainty, management, after reviewing pending actions with legal
counsel, is of the opinion that the liabilities of the Company and Republic, if
any, resulting from such actions will not have a material effect on the
financial condition or results of operations of the Company.
Note
6: Segment Reporting
The
Company has one reportable segment: community banking. The community bank
segment primarily encompasses the commercial and consumer loan and deposit
activities of Republic, primarily in the area surrounding its
branches.
Note
7: Earnings Per Share:
Earnings
per share (“EPS”) consists of two separate components: basic EPS and diluted
EPS. Basic EPS is computed by dividing net income by the weighted average number
of common shares outstanding for each period presented. Diluted EPS is
calculated by dividing net income by the weighted average number of common
shares outstanding plus dilutive common stock equivalents (“CSEs”). CSEs consist
of dilutive stock options granted through the Company’s stock option plan and
convertible securities related to the trust preferred securities issuance in
June 2008. In the diluted EPS computation, the after tax interest
expense on that trust preferred securities issuance is added back to net
income. That amounted to $150,000 in third quarter
2008. Those securities were not outstanding in 2007. The following
table is a reconciliation of the numerator and denominator used in calculating
basic and diluted EPS. CSEs which are anti-dilutive are not included in the
following calculation. At September 30, 2008, there were 198,495
stock options to purchase common stock, which were excluded from the computation
of earnings per share because the option price was greater than the average
market price. At September 30, 2007, there were 264,842 stock options to
purchase common stock, which were excluded from the computation of earnings per
share because the option price was greater than the average market
price. The following tables are a comparison of EPS for the three
months ended September 30, 2008 and 2007. EPS has been restated for a
stock dividend paid on April 17, 2007.
Three
months ended September 30,
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$1,533,000
|
|
|
|
|
|
$1,236,000
|
|
|
|
|
|
|
|
|
|
Per
|
|
|
|
|
|
Per
|
|
Weighted
average shares
|
|
Shares
|
|
|
Share
|
|
|
Shares
|
|
|
Share
|
|
for
period
|
|
|
10,581,435
|
|
|
|
|
|
|
10,344,662
|
|
|
|
|
Basic
EPS
|
|
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
$
|
0.12
|
|
Add
common stock equivalents
representing
dilutive stock options
|
|
|
1,728,926
|
|
|
|
|
|
|
|
253,557
|
|
|
|
|
|
Effect
on basic EPS of dilutive CSE
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
-
|
|
Equals
total weighted average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
and CSE (diluted)
|
|
|
12,310,361
|
|
|
|
|
|
|
|
10,598,219
|
|
|
|
|
|
Diluted
EPS
|
|
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
$
|
0.12
|
|
The
following tables are a comparison of EPS for the nine months ended September 30,
2008 and 2007. EPS has been restated for a stock dividend paid on
April 17, 2007.
Nine
months ended September 30,
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
(56,000)
|
|
|
|
|
|
$
5,308,000
|
|
|
|
|
|
|
|
|
|
Per
|
|
|
|
|
|
|
Per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
period
|
|
|
10,463,331
|
|
|
|
|
|
|
10,413,044
|
|
|
|
|
Basic
EPS
|
|
|
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
$
|
0.51
|
|
Add
common stock equivalents
representing
dilutive stock options
|
|
|
766,725
|
|
|
|
|
|
|
|
284,577
|
|
|
|
|
|
Effect
on basic EPS of dilutive CSE
|
|
|
|
|
|
$
|
-
|
|
|
|
|
|
|
$
|
(0.01
|
)
|
Equals
total weighted average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
and CSE (diluted)
|
|
|
11,230,056
|
|
|
|
|
|
|
|
10,697,621
|
|
|
|
|
|
Diluted
EPS
|
|
|
|
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
$
|
0.50
|
|
Note
8: Fair Value of Financial Instruments:
SFAS
No.157 establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or
liabilities (level 1 measurements) and the lowest priority to unobservable
inputs (level 3 measurements). The three levels of the fair value hierarchy
under SFAS No.157 are described below:
Basis of Fair Value
Measurement:
Level
1 – Unadjusted quoted prices in active markets that are accessible at the
measurement date for identical, unrestricted assets or
liabilities;
Level
2 – Quoted prices in markets that are not active, or inputs that are observable,
either directly or indirectly, for substantially the full term of the asset or
liability;
Level
3 – Prices or valuation techniques that require inputs that are both significant
to the fair value measurement and observable (i.e., supported by little or no
market activity).
A
financial instrument’s level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value
measurement.
The
Company’s cash instruments are generally classified within level 1 or level 2 of
the fair value hierarchy because they are valued using quoted market prices,
broker or dealer quotations, or alternative pricing sources with reasonable
levels of price transparency.
The
types of instruments valued based on quoted market prices in active markets
include all of the Company’s U.S. government and agency securities, municipal
obligations and corporate bonds and trust preferred securities. Such instruments
are generally classified within level 1 or level 2 of the fair value hierarchy.
As required by SFAS No. 157, the Bank does not adjust the quoted price for such
instruments.
The
types of instruments valued based on quoted prices in markets that are not
active, broker or dealer quotations, or alternative pricing sources with
reasonable levels of transparency for securities which the bank owns may include
investment- grade corporate bonds, municipal obligations, and trust preferred
securities. Such instruments are generally classified within level 2 of the fair
value hierarchy.
Level
3 is for positions that are not traded in active markets or are subject to
transfer restrictions, and may be adjusted to reflect illiquidity and/or
non-transferability, with such adjustment generally based on available market
evidence. In the absence of such evidence, management’s best estimate is used.
Subsequent to inception, management only changes level 3 inputs and assumptions
when corroborated by evidence such as transactions in similar instruments,
completed or pending third-party transactions in
the
underlying investment or comparable entities, subsequent rounds of financing,
recapitalizations and other transactions across the capital structure, offerings
in the equity or debt markets, and changes in financial ratios or cash
flows.
The Company’s investment securities
classified as available for sale were accounted for at fair values as of
September 30, 2008 by level within the fair value hierarchy as follows: Quoted
Prices in Active Markets for Identical Assets (Level 1) $75.6 million;
Significant Other Observable Inputs (Level 2) $3.9 million; Significant
Unobservable Inputs (Level 3) $6.8 million. The Level 3
investment securities classified as available for sale are comprised of various
issues of bank pooled trust preferred securities with a fair value of $6.8
million at September 30, 2008. These were classified as Level 2
investment securities available for sale at June 30, 2008. Bank
pooled trust preferred consists of the debt instruments of various banks,
diversified by the number of participants in the security as well as
geographically. The securities are performing according to terms,
however the secondary market for such securities has become inactive, and such
securities are therefore classified as Level 3 securities. The
resulting fair value analysis was based on a cash flow analysis of comparably
rated securities. At June 30, 2008, the fair value of these
securities was $7.9 million. The Company’s other real estate owned
was accounted for at fair values as of September 30, 2008 as
follows: Significant Unobservable Inputs (Level 3) $8.6
million. As required by SFAS No. 157, financial assets are classified
in their entirety based on the lowest level of input that is significant to the
fair value measurement.
The
following table is an analysis of the change in Other Real Estate Owned for the
nine months ended September 30, 2008.
Dollars
in millions
|
|
2008
|
|
Balance
at January 1,
|
|
$
|
3.7
|
|
Additions,
net
|
|
|
21.4
|
|
Sales
|
|
|
(14.9
|
)
|
Writedowns/losses
on sales
|
|
|
(1.6
|
)
|
Balance
at September 30,
|
|
$
|
8.6
|
|
Note
9: Convertible Trust Preferred Securities
The Company caused the issuance of
$10.8 million of convertible trust preferred securities in June 2008 as part of
the Company’s strategic capital plan. The securities were purchased
by various investors, including Vernon W. Hill, II ($7.8 million) and Harry D.
Madonna ($3.0 million), Chairman, President and Chief Executive Officer of the
Company.
The trust preferred securities and
related subordinated debentures pay interest at an annual rate of 8.0%, have a
conversion price of $6.50, and are convertible into 1.7 million shares of common
stock. The trust preferred securities have a term of 30 years and
will be callable after the fifth year. The securities will be
convertible into common shares anytime after June 30, 2009 at the option of the
purchaser and under certain conditions prior to June 30, 2009. The
issuer will also retain certain option conversion triggers after the fifth
year.
Republic First Capital Trust IV
(“RFCT”), which issued the securities, holds, as its sole asset, the
subordinated debentures issued by the Company in June 2008. The
common securities of RFCT are held by the Company. The Company does
not consolidate the RFCTs. The non-consolidation results in the
investment in the common securities of the RFCT to be included in other assets
with a corresponding increase in outstanding debt of $335,000 at September 30,
2008, which represents the subordinated debentures supporting the common
securities.
The
following is management’s discussion and analysis of significant changes in the
Company’s results of operations, financial condition and capital resources
presented in the accompanying consolidated financial statements. This
discussion should be read in conjunction with the accompanying notes to the
consolidated financial statements.
Certain
statements in this document may be considered to be “forward-looking statements”
as that term is defined in the U.S. Private Securities Litigation Reform Act of
1995, such as statements that include the words “may,” “believes,” “expect,”
“estimate,” “project,” “anticipate,” “should,” “intend,” “probability,” “risk,”
“target,” “objective” and similar expressions or variations on such
expressions. The forward-looking statements contained herein are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected in the forward-looking
statements. For example, risks and uncertainties can arise with
changes in: general economic conditions, including their impact on
capital expenditures; new service and product offerings by competitors and price
pressures; and similar items. Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect management’s
analysis only as of the date hereof. The Company undertakes no
obligation to publicly revise or update these forward-looking statements to
reflect events or circumstances that arise after the date hereof, except as may
be required by applicable laws and regulations. Readers should
carefully review the risk factors described in other documents the Company files
from time to time with the Securities and Exchange Commission, including the
Company’s Annual Report on Form 10-K for the year ended December 31, 2007, as
well as other filings.
Financial
Condition:
September
30, 2008 Compared to December 31, 2007
Assets
decreased $51.6 million to $964.7 million at September 30, 2008, versus $1.0
billion at December 31, 2007. This decrease reflected a $48.8 million decrease
in loans receivable and a $15.5 million decrease in cash and cash
equivalents.
Loans:
The loan
portfolio represents the Company’s largest asset category and is its most
significant source of interest income. The Company’s lending strategy focuses on
small and medium size businesses and professionals that seek highly personalized
banking services. Gross loans decreased $50.5 million, to $771.1 million at
September 30, 2008, versus $821.5 million at December 31, 2007, as the Company
adopted a defensive balance sheet strategy as a result of the economic
downturn. Substantially all of the decrease resulted from commercial
and construction loans. The loan portfolio consists of secured and unsecured
commercial loans including commercial real estate, construction loans,
residential mortgages, automobile loans, home improvement loans, home equity
loans and lines of credit, overdraft lines of credit and others. Commercial
loans typically range between $250,000 and $5,000,000 but customers may borrow
significantly larger amounts up to the legal lending limit of approximately
$15.0 million at September 30, 2008. Individual customers may have several loans
that are secured by different collateral, which in total are subject to that
lending limit.
Investment
Securities:
Investment
securities available-for-sale are investments which may be sold in response to
changing market and interest rate conditions and for liquidity and other
purposes. The Company’s investment securities available-for-sale consist
primarily of U.S. Government debt securities, U.S. Government agency issued
mortgage-backed securities, municipal securities, and debt securities which
include corporate bonds and trust preferred securities. Available-for-sale
securities totaled $86.3 million at September 30, 2008, compared to $83.7
million at year-end 2007. The increase reflected purchases of mortgage backed
securities partially offset by sales of selected municipal securities. At
September 30, 2008 and December 31, 2007, the portfolio had net unrealized
losses of $2.8 million and net realized gains of $409,000,
respectively.
Investment
securities held-to-maturity are investments for which there is the intent and
ability to hold the investment to maturity. These investments are carried at
amortized cost. The held-to-maturity portfolio consists primarily of debt
securities and stocks. At September 30, 2008, securities held to maturity
totaled $203,000, compared to $282,000 at year-end 2007.
Restricted
Stock:
Republic
is required to maintain FHLB stock in proportion to its outstanding debt to
FHLB. When the debt is repaid, the purchase price of the stock is
refunded. At September 30, 2008, FHLB stock totaled $6.3 million, an
increase of $43,000 from $6.2 million at December 31, 2007.
Republic
is also required to maintain ACBB stock as a condition of a rarely used
contingency line of credit. At September 30, 2008 and December 31,
2007, ACBB stock totaled $143,000.
Cash
and Cash Equivalents:
Cash and
due from banks, interest bearing deposits and federal funds sold comprise this
category which consists of the Company’s most liquid assets. The aggregate
amount in these three categories decreased by $15.5 million, to $57.7 million at
September 30, 2008, from $73.2 million at December 31, 2007, primarily
reflecting a decrease in federal funds sold.
Fixed
Assets:
The
balance in premises and equipment, net of accumulated depreciation, was $14.4
million at September 30, 2008, compared to $11.3 million at December 31, 2007,
reflecting primarily branch expansion.
Other
Real Estate Owned:
Other
real estate owned amounted to $8.6 million at September 30, 2008 compared to
$3.7 million at December 31, 2007, primarily reflecting transfers from loans of
$21.4 million, partially offset by net proceeds from sales of $14.9 million and
$1.6 million in property writedowns and losses on sales.
Bank
Owned Life Insurance:
The
balance of bank owned life insurance amounted to $12.0 million at September 30,
2008 and $11.7 million at December 31, 2007. The income earned on these policies
is reflected in non-interest income.
Other
Assets:
Other
assets increased by $2.6 million to $10.6 million at September 30, 2008, from
$8.0 million at December 31, 2007, principally resulting from an increase of
$1.1 million in deferred tax assets related to net unrealized losses on
investment securities, $704,000 in short term receivables collected in the
fourth quarter of 2008, and $737,000 in prepaid expenses.
Deposits:
Deposits,
which include non-interest and interest-bearing demand deposits, money market,
savings and time deposits including some brokered deposits, are Republic’s major
source of funding. Deposits are generally solicited from the Company’s market
area through the offering of a variety of products to attract and retain
customers, with a primary focus on multi-product relationships. Total
deposits decreased by $51.4 million to $729.5 million at September 30, 2008 from
$780.9 million at December 31, 2007. Average transaction account
balances decreased 5.9% or $21.5 million less than the prior year period to
$343.6 million in the third quarter of 2008. Period end time deposits decreased
$43.7 million, or 10.3% to $379.3 million at September 30, 2008, versus $422.9
million at the prior year-end. The decrease reflected intentional
reductions of higher cost deposits.
FHLB
Borrowings and Overnight Advances:
FHLB
borrowings and overnight advances are used to supplement deposit
generation. Republic had $25.0 million in term borrowings at
September 30, 2008 versus $0 at December 31, 2007. The term
borrowings have maturities of less than two years. Republic had total
short-term borrowings (overnight) of $100.7 million at September 30, 2008 versus
$133.4 million at the prior year-end, which consisted primarily of FHLB
overnight borrowings.
Subordinated
Debt:
Subordinated
debt amounted to $22.5 million at September 30, 2008, compared to $11.3 million
at December 31, 2007, as a result of an $11.1 million issuance of convertible
trust preferred securities in June 2008 at a rate of 8% and the issuance of
subordinated debentures to support the trust securities. The
securities have a conversion price of $6.50 and are convertible into 1.7 million
shares of common stock. The trust preferred securities have a term of
30 years and will be callable after the fifth year. The securities
will be convertible into common shares anytime after June 30, 2009 at the option
of the purchaser and under certain conditions prior to June 30,
2009. The issuer will also retain certain optional conversion
triggers after the fifth year.
Shareholders’
Equity:
Total
shareholders’ equity decreased $1.2 million to $79.3 million at September 30,
2008, versus $80.5 million at December 31, 2007. This decrease
was primarily the result of fluctuations in the estimated market value of
securities of $2.1 million, partially offset by net proceeds from exercise of
stock options of $885,000.
Three Months Ended September
30, 2008 compared to September 30, 2007
Results
of Operations:
Overview
The
Company's net income increased to $1.5 million or $0.14 per diluted share for
the three months ended September 30, 2008, compared to $1.2 million, or $0.12
per diluted share for the comparable prior year period. There was a
$4.1 million, or 23.4%, decrease in total interest income, reflecting a 142
basis point decrease in the yield on average loans outstanding as well as a 7.4%
decrease in average loans outstanding while interest expense decreased $4.0
million, reflecting a 175 basis point decrease in the rate on average
interest-bearing deposits outstanding and a 211 basis point decrease in the rate
on average borrowings outstanding. Accordingly, net interest
income decreased $186,000 between the periods. The provision for loan
losses in the third quarter of 2008 decreased to $43,000, compared to $1.3
million in the third quarter of 2007 reflecting an increase in non accrual loans
in third quarter 2007. Non-interest income decreased $88,000 to
$672,000 in third quarter 2008 compared to $760,000 in third quarter 2007.
Non-interest expenses increased $520,000 to $6.0 million compared to $5.5
million in the third quarter of 2007, primarily due to a $719,000 increase in
other real estate owned expenses. Return on average assets and average equity of
0.65% and 7.76% respectively, in the third quarter of 2008 compared to 0.50% and
6.29% respectively for the same period in 2007.
Analysis
of Net Interest Income
Historically,
the Company's earnings have depended significantly upon net interest income,
which is the difference between interest earned on interest-earning assets and
interest paid on interest-bearing liabilities. Net interest income is impacted
by changes in the mix of the volume and rates of interest-earning assets and
interest-bearing liabilities. Yields are adjusted for tax
equivalency.
|
|
For
the three months ended
|
|
|
For
the three months ended
|
|
|
|
September
30, 2008
|
|
|
September
30, 2007
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
(Dollars
in thousands)
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
Federal
funds sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
other interest-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earning
assets
|
|
$
|
8,568
|
|
|
$
|
45
|
|
|
|
2.09
|
%
|
|
$
|
10,817
|
|
|
$
|
139
|
|
|
|
5.10
|
%
|
Securities
(2)
|
|
|
92,525
|
|
|
|
1,334
|
|
|
|
5.77
|
%
|
|
|
89,042
|
|
|
|
1,399
|
|
|
|
6.28
|
%
|
Loans
receivable
|
|
|
775,642
|
|
|
|
12,208
|
|
|
|
6.26
|
%
|
|
|
837,417
|
|
|
|
16,209
|
|
|
|
7.68
|
%
|
Total
interest-earning assets
|
|
|
876,735
|
|
|
|
13,587
|
|
|
|
6.17
|
%
|
|
|
937,276
|
|
|
|
17,747
|
|
|
|
7.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
57,371
|
|
|
|
|
|
|
|
|
|
|
|
40,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
934,106
|
|
|
|
|
|
|
|
|
|
|
$
|
977,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand-non
interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
bearing
|
|
$
|
71,990
|
|
|
|
|
|
|
|
|
|
|
$
|
80,646
|
|
|
|
|
|
|
|
|
|
Demand
interest-bearing
|
|
|
31,090
|
|
|
$
|
68
|
|
|
|
0.87
|
%
|
|
|
35,009
|
|
|
$
|
109
|
|
|
|
1.24
|
%
|
Money
market & savings
|
|
|
240,554
|
|
|
|
1,625
|
|
|
|
2.69
|
%
|
|
|
249,450
|
|
|
|
2,816
|
|
|
|
4.48
|
%
|
Time
deposits
|
|
|
381,820
|
|
|
|
3,216
|
|
|
|
3.35
|
%
|
|
|
358,192
|
|
|
|
4,750
|
|
|
|
5.26
|
%
|
Total
deposits
|
|
|
725,454
|
|
|
|
4,909
|
|
|
|
2.69
|
%
|
|
|
723,297
|
|
|
|
7,675
|
|
|
|
4.21
|
%
|
Total
interest-bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deposits
|
|
|
653,464
|
|
|
|
4,909
|
|
|
|
2.99
|
%
|
|
|
642,651
|
|
|
|
7,675
|
|
|
|
4.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
borrowings (1)
|
|
|
122,709
|
|
|
|
1,005
|
|
|
|
3.26
|
%
|
|
|
162,268
|
|
|
|
2,198
|
|
|
|
5.37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
liabilities
|
|
$
|
776,173
|
|
|
$
|
5,914
|
|
|
|
3.03
|
%
|
|
$
|
804,919
|
|
|
$
|
9,873
|
|
|
|
4.87
|
%
|
Total
deposits and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
borrowings
|
|
|
848,163
|
|
|
|
5,914
|
|
|
|
2.77
|
%
|
|
|
885,565
|
|
|
|
9,873
|
|
|
|
4.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
interest-bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
liabilites
|
|
|
7,393
|
|
|
|
|
|
|
|
|
|
|
|
14,266
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
78,550
|
|
|
|
|
|
|
|
|
|
|
|
77,958
|
|
|
|
|
|
|
|
|
|
Total
liabilities and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders'
equity
|
|
$
|
934,106
|
|
|
|
|
|
|
|
|
|
|
$
|
977,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
|
$
|
7,673
|
|
|
|
|
|
|
|
|
|
|
$
|
7,874
|
|
|
|
|
|
Net
interest spread
|
|
|
|
|
|
|
|
|
|
|
3.14
|
%
|
|
|
|
|
|
|
|
|
|
|
2.64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest margin
|
|
|
|
|
|
|
|
|
|
|
3.48
|
%
|
|
|
|
|
|
|
|
|
|
|
3.33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes term borrowings and subordinated debentures supporting trust
preferred securities
|
|
|
|
|
(2)
On a tax equivalent basis. FTE income adjustment: 2008 $161; 2007
$201
|
|
|
|
|
|
|
The rate
volume table below presents an analysis of the impact on interest income and
expense resulting from changes in average volumes and rates during the period.
For purposes of this table, changes in interest income and expense are allocated
to volume and rate categories based upon the respective changes in average
balances and average rates.
Rate/Volume
Table
|
|
Three
months ended September 30, 2008
|
|
|
|
versus
September 30, 2007
|
|
|
|
(dollars
in thousands)
|
|
|
|
Due
to change in:
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
Interest
earned on:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
funds sold
|
|
$
|
(12
|
)
|
|
$
|
(82
|
)
|
|
$
|
(94
|
)
|
Securities
(tax equivalent basis)
|
|
|
51
|
|
|
|
(116
|
)
|
|
|
(65
|
)
|
Loans
|
|
|
(975
|
)
|
|
|
(3,026
|
)
|
|
|
(4,001
|
)
|
Total
interest-earning assets
|
|
|
(936
|
)
|
|
|
(3,224
|
)
|
|
|
(4,160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense of deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
demand deposits
|
|
|
9
|
|
|
|
32
|
|
|
|
41
|
|
Money
market and savings
|
|
|
60
|
|
|
|
1,131
|
|
|
|
1,191
|
|
Time
deposits
|
|
|
(200
|
)
|
|
|
1,734
|
|
|
|
1,534
|
|
Total
deposit interest expense
|
|
|
(131
|
)
|
|
|
2,897
|
|
|
|
2,766
|
|
Other
borrowings
|
|
|
325
|
|
|
|
868
|
|
|
|
1,193
|
|
Total
interest expense
|
|
|
194
|
|
|
|
3,765
|
|
|
|
3,959
|
|
Net
interest income
|
|
$
|
(742
|
)
|
|
$
|
541
|
|
|
$
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company’s tax equivalent net interest margin increased 15 basis points to 3.48%
for the three months ended September 30, 2008, versus 3.33% in the prior year
comparable period. The increased net interest margin reflected reduced
funding costs which had been abnormally high in relation to historical spreads
to the prime rate and the impact of maturing higher rate certificates of
deposit.
While
yields on interest-bearing assets decreased 134 basis points to 6.17% in third
quarter 2008 from 7.51% in third quarter 2007, the yield on total deposits and
other borrowings decreased 165 basis points to 2.77% from 4.42% between those
respective periods. The decrease in yields on assets and rates on deposits and
borrowings was primarily due to the repricing of assets and liabilities as a
result of actions taken by the Federal Reserve since September
2007.
The
Company's tax equivalent net interest income decreased $201,000, or 2.6%, to
$7.7 million for the three months ended September 30, 2008, from $7.9 million
for the prior year comparable period. As shown in the Rate Volume table above,
the decrease in net interest income reflected a decrease in average interest
earning assets as well as a larger concentration of higher rate time deposits
that offset a decrease in average money market and savings deposits. Average
interest-earning assets amounted to $876.7 million for third quarter 2008 and
$937.3 million for third quarter 2007. The $60.5 million decrease
resulted primarily from a reduction in loans as the Company adopted a defensive
balance sheet strategy as a result of the economic downturn.
The
Company’s total tax equivalent interest income decreased $4.2 million, or 23.4%,
to $13.6 million for the three months ended September 30, 2008, from $17.7
million for the prior year comparable period. Interest and fees on
loans decreased $4.0 million, or 24.7%, to $12.2 million for the three months
ended September 30, 2008, from $16.2 million for the prior year comparable
period. The decrease was due primarily to the 142 basis point decline
in the yield on loans resulting from the repricing of the variable rate loan
portfolio as a result of actions taken by the Federal Reserve as well as a $61.8
million, or 7.4%, decrease in average loans outstanding to $775.6 million from
$837.4 million. Interest and dividends on investment securities
decreased $65,000, or 4.6%, to $1.3 million for the three months ended September
30, 2008, from $1.4 million for the prior year comparable
period. This decrease was due primarily to the 51 basis point decline
in the yield on securities which was partially offset by an increase in average
securities outstanding of $3.5 million, or 3.9%, to $92.5 million from $89.0
million for the prior year comparable period. Interest on federal
funds sold and other interest-earning assets decreased $94,000, or 67.6%,
primarily reflecting decreases in short-term interest rates.
The
Company's total interest expense decreased $4.0 million, or 40.1%, to $5.9
million for the three months ended September 30, 2008, from $9.9 million for the
prior year comparable period. Interest-bearing liabilities averaged $776.2
million for the three months ended September 30, 2008, versus $804.9 million for
the prior year comparable period, or a decrease of $28.7 million. The decrease
primarily reflected reduced funding requirements due to a decrease in average
interest earning assets. Average deposit balances increased $2.2 million while
there was a $39.6 million decrease in average other borrowings. The average rate
paid on interest-bearing liabilities decreased 184 basis points to 3.03% for the
three months ended September 30, 2008. Interest expense on time deposit balances
decreased $1.5 million to $3.2 million in third quarter 2008, from $4.8 million
in the comparable prior year period, reflecting lower rates which more than
offset the impact of higher average balances. Money market and
savings interest expense decreased $1.2 million to $1.6 million in third quarter
2008, from $2.8 million in the comparable prior year period. The decrease in
interest expense on deposits primarily reflected the impact of the lower
short-term interest rate environment. Accordingly, rates on total
interest-bearing deposits decreased 175 basis points in third quarter 2008
compared to third quarter 2007.
Interest
expense on other borrowings decreased $1.2 million to $1.0 million in third
quarter 2008, from $2.2 million in the comparable prior year period, also as a
result of the lower short-term interest rate environment. In addition, average
other borrowings, primarily overnight FHLB borrowings, decreased $39.6 million,
or 24.4%, between those respective periods. Rates on overnight borrowings
reflected the lower short-term interest rate environment as the rate of other
borrowings decreased to 3.26% in third quarter 2008, from 5.37% in the
comparable prior year period. Interest expense on other borrowings also includes
the interest on average balances of $25.0 million of FHLB term borrowings and
$22.5 million of subordinated debentures supporting trust preferred
securities.
Provision
for Loan Losses
The
provision for loan losses is charged to operations in an amount necessary to
bring the total allowance for loan losses to a level that reflects the known and
estimated inherent losses in the portfolio. The provision for loan losses
amounted to $43,000 in third quarter 2008 compared to $1.3 million in third
quarter 2007. The decrease from third quarter 2007 reflected the
increase in non accrual loans in 2007. In addition, the provision in
both periods reflected amounts required to increase the allowance for loan
growth in accordance with the Company’s methodology.
Non-Interest
Income
Total
non-interest income decreased $88,000 to $672,000 for third quarter 2008
compared to $760,000 for the three months ended September 30, 2007, primarily
due to the impact of a $183,000 gain on the sale of other real estate owned
property in third quarter 2007 which was partially offset by a $128,000 increase
in other income in 2008. In addition, loan advisory and servicing
fees decreased
$36,000,
or 23.1%, to $120,000 in third quarter 2008, compared to third quarter 2007 due
to lower prepayment fee income. Service fees on deposit accounts
increased $11,000, or 3.8%, to $300,000 in third quarter 2008, versus $289,000
for the comparable prior year period.
Non-Interest
Expenses
Total
non-interest expenses increased $520,000 or 9.5% to $6.0 million for the three
months ended September 30, 2008, from $5.5 million for the prior year comparable
period. Salaries and employee benefits decreased $394,000 or 14.5%, to $2.3
million for the three months ended September 30, 2008, from $2.7 million for the
prior year comparable period. That decrease reflected reduced staff levels in
third quarter 2008 due to attrition. New staff is being
added.
Occupancy
expense decreased $77,000, or 11.2%, to $611,000 in third quarter 2008, compared
to $688,000 in third quarter 2007, resulting from headquarters and branch
relocations in 2007.
Depreciation
expense decreased $5,000 or 1.4% to $342,000 for the three months ended
September 30, 2008, versus $347,000 for the prior year comparable
period.
Legal
fees increased $83,000, or 50.0%, to $249,000 in third quarter 2008, compared to
$166,000 in third quarter 2007, resulting from increased fees on a number of
different matters.
Other
real estate expenses increased $719,000 to $722,000 for the three months ended
September 30, 2008 compared to $3,000 for the third quarter 2007 due to $559,000
in losses on property sales and $163,000 in third quarter 2008 property
maintenance expenses.
Advertising
expense decreased $66,000, or 46.8%, to $75,000 in third quarter 2008, compared
to $141,000 in third quarter 2007, due to decreases in print
advertising.
Data
processing expense increased $42,000, or 24.4%, to $214,000 in third quarter
2008, compared to $172,000 in third quarter 2007, primarily due to system
enhancements.
Insurance
expense increased $43,000, or 40.6%, to $149,000 in third quarter 2008, compared
to $106,000 in third quarter 2007, resulting primarily from higher
rates.
Professional
fees increased $186,000, or 144.2%, to $315,000 in third quarter 2008, compared
to $129,000 in third quarter 2007, resulting primarily from increased consulting
fees.
Regulatory
assessments and costs increased $106,000 or 235.6% to $151,000 in third quarter
2008, compared to $45,000 in third quarter 2007, resulting primarily from
increases in statutory FDIC insurance rates.
Taxes,
other increased $3,000, or 1.5%, to $207,000 for the three months ended
September 30, 2008, versus $204,000 for the comparable prior year
period. The increase reflected an increase in Pennsylvania shares tax
which is assessed at an amount of 1.25% on a 6 year moving average of regulatory
capital. The full amount of the increase resulted from increased
capital. This increase was offset by a reduction in Pennsylvania sales taxes
recorded in third quarter 2008.
Other
expenses decreased $120,000, or 15.5% to $654,000 for the three months ended
September 30, 2008, from $774,000 for the prior year comparable
period.
Provision
for Income Taxes
The
provision for income taxes increased $148,000 to $706,000 for the three months
ended September 30, 2008, from $558,000 for the prior year comparable period.
That reduction was primarily the result of the decrease in pre-tax
income. The effective tax rates in those periods were 32% and 31%
respectively.
Nine Months Ended September
30, 2008 compared to September 30, 2007
Results
of Operations:
Overview
The
Company's net income decreased to a $56,000 loss or $(0.01) per diluted share
for the nine months ended September 30, 2008, compared to $5.3 million, or $0.50
per diluted share for the comparable prior year period. There was a
$10.3 million, or 19.8%, decrease in total interest income, reflecting a 136
basis point decrease in the yield on average loans outstanding as well as a 4.0%
decrease in average interest earning assets. Interest expense
decreased $9.2 million, reflecting a 131 basis point decrease in the rate on
average interest-bearing deposits outstanding and a 222 basis point decrease in
the rate on average borrowings outstanding. Accordingly net interest
income decreased $1.0 million between the periods. The provision for
loan losses in the first nine months of 2008 increased $4.5 million to $5.9
million, compared to $1.4 million in the first nine months of 2007, reflecting
additional reserves on certain loans. Non-interest income increased
$18,000 to $2.2 million in first nine months of 2008 compared to $2.2 million in
first nine months of 2007. Non-interest expenses increased $2.8
million to $18.5 million in first nine months of 2008 compared to $15.8 million
in the first nine months of 2007, primarily due to $1.6 million in writedowns of
other real estate owned, an increase of $482,000 in other real estate expenses
related to property maintenance, an increase of $282,000 in legal expenses, and
an increase of $249,000 in regulatory assessments and costs. Return on average
assets and average equity of (0.01)% and (0.09)% respectively, in the first nine
months of 2008 compared to 0.73% and 9.21% respectively for the same period in
2007.
Analysis
of Net Interest Income
Historically,
the Company's earnings have depended significantly upon net interest income,
which is the difference between interest earned on interest-earning assets and
interest paid on interest-bearing liabilities. Net interest income is impacted
by changes in the mix of the volume and rates of interest-earning assets and
interest-bearing liabilities. Yields are adjusted for tax equivalency
for tax exempt municipal securities income in the first nine months of 2008 and
2007.
|
|
For
the nine months ended
|
|
|
For
the nine months ended
|
|
|
|
September
30, 2008
|
|
|
September
30, 2007
|
|
Interest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
(Dollars
in thousands)
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
Average
|
|
|
Income/
|
|
|
Yield/
|
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
|
Balance
|
|
|
Expense
|
|
|
Rate
|
|
Federal
funds sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
other interest-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earning
assets
|
|
$
|
10,478
|
|
|
$
|
199
|
|
|
|
2.54
|
%
|
|
$
|
14,424
|
|
|
$
|
543
|
|
|
|
5.03
|
%
|
Securities
(2)
|
|
|
87,506
|
|
|
|
3,814
|
|
|
|
5.81
|
%
|
|
|
98,571
|
|
|
|
4,436
|
|
|
|
6.00
|
%
|
Loans
receivable
|
|
|
796,782
|
|
|
|
37,821
|
|
|
|
6.34
|
%
|
|
|
819,243
|
|
|
|
47,166
|
|
|
|
7.70
|
%
|
Total
interest-earning assets
|
|
|
894,766
|
|
|
|
41,834
|
|
|
|
6.25
|
%
|
|
|
932,238
|
|
|
|
52,145
|
|
|
|
7.48
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
51,915
|
|
|
|
|
|
|
|
|
|
|
|
39,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
946,681
|
|
|
|
|
|
|
|
|
|
|
$
|
971,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand-non
interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
bearing
|
|
$
|
76,487
|
|
|
|
|
|
|
|
|
|
|
$
|
78,502
|
|
|
|
|
|
|
|
|
|
Demand
interest-bearing
|
|
|
34,760
|
|
|
$
|
283
|
|
|
|
1.09
|
%
|
|
|
39,766
|
|
|
$
|
327
|
|
|
|
1.10
|
%
|
Money
market & savings
|
|
|
219,877
|
|
|
|
4,663
|
|
|
|
2.83
|
%
|
|
|
275,249
|
|
|
|
9,370
|
|
|
|
4.55
|
%
|
Time
deposits
|
|
|
402,235
|
|
|
|
11,825
|
|
|
|
3.93
|
%
|
|
|
347,292
|
|
|
|
13,671
|
|
|
|
5.26
|
%
|
Total
deposits
|
|
|
733,359
|
|
|
|
16,771
|
|
|
|
3.05
|
%
|
|
|
740,809
|
|
|
|
23,368
|
|
|
|
4.22
|
%
|
Total
interest-bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deposits
|
|
|
656,872
|
|
|
|
16,771
|
|
|
|
3.41
|
%
|
|
|
662,307
|
|
|
|
23,368
|
|
|
|
4.72
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
borrowings (1)
|
|
|
125,140
|
|
|
|
3,046
|
|
|
|
3.25
|
%
|
|
|
139,188
|
|
|
|
5,694
|
|
|
|
5.47
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
interest-bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
liabilities
|
|
$
|
782,012
|
|
|
$
|
19,817
|
|
|
|
3.38
|
%
|
|
$
|
801,495
|
|
|
$
|
29,062
|
|
|
|
4.85
|
%
|
Total
deposits and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
borrowings
|
|
|
858,499
|
|
|
|
19,817
|
|
|
|
3.08
|
%
|
|
|
879,997
|
|
|
|
29,062
|
|
|
|
4.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
interest-bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
liabilites
|
|
|
8,955
|
|
|
|
|
|
|
|
|
|
|
|
14,184
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
79,227
|
|
|
|
|
|
|
|
|
|
|
|
77,086
|
|
|
|
|
|
|
|
|
|
Total
liabilities and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shareholders'
equity
|
|
$
|
946,681
|
|
|
|
|
|
|
|
|
|
|
$
|
971,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
|
|
|
|
|
$
|
22,017
|
|
|
|
|
|
|
|
|
|
|
$
|
23,083
|
|
|
|
|
|
Net
interest spread
|
|
|
|
|
|
|
|
|
|
|
2.87
|
%
|
|
|
|
|
|
|
|
|
|
|
2.63
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest margin
|
|
|
|
|
|
|
|
|
|
|
3.29
|
%
|
|
|
|
|
|
|
|
|
|
|
3.31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes term borrowings and subordinated debentures supporting trust
preferred securities
|
|
|
|
|
(2)
On a tax equivalent basis. FTE adjustment: 2008 $499; 2007
$584
|
|
|
|
|
|
|
|
|
The rate
volume table below presents an analysis of the impact on interest income and
expense resulting from changes in average volumes and rates during the period.
For purposes of this table, changes in interest income and expense are allocated
to volume and rate categories based upon the respective changes in average
balances and average rates.
Rate/Volume
Table
|
|
Nine
months ended September 30, 2008
|
|
|
|
versus
September 30, 2007
|
|
|
|
(dollars
in thousands)
|
|
|
|
Due
to change in:
|
|
|
|
Volume
|
|
|
Rate
|
|
|
Total
|
|
Interest
earned on:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
funds sold
|
|
$
|
(75
|
)
|
|
$
|
(269
|
)
|
|
$
|
(344
|
)
|
Securities
(tax equivalent basis)
|
|
|
(483
|
)
|
|
|
(139
|
)
|
|
|
(622
|
)
|
Loans
|
|
|
(1,069
|
)
|
|
|
(8,276
|
)
|
|
|
(9,345
|
)
|
Total
interest-earning assets
|
|
|
(1,627
|
)
|
|
|
(8,684
|
)
|
|
|
(10,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense of deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
demand deposits
|
|
|
41
|
|
|
|
3
|
|
|
|
44
|
|
Money
market and savings
|
|
|
1,178
|
|
|
|
3,529
|
|
|
|
4,707
|
|
Time
deposits
|
|
|
(1,620
|
)
|
|
|
3,466
|
|
|
|
1,846
|
|
Total
deposit interest expense
|
|
|
(401
|
)
|
|
|
6,998
|
|
|
|
6,597
|
|
Other
borrowings
|
|
|
343
|
|
|
|
2,305
|
|
|
|
2,648
|
|
Total
interest expense
|
|
|
(58
|
)
|
|
|
9,303
|
|
|
|
9,245
|
|
Net
interest income
|
|
$
|
(1,685
|
)
|
|
$
|
619
|
|
|
$
|
(1,066
|
)
|
The
Company’s tax equivalent net interest margin decreased 2 basis points to 3.29%
for the nine months ended September 30, 2008, versus 3.31% in the prior year
comparable period.
While
yields on interest-bearing assets decreased 123 basis points to 6.25% in the
first nine months of 2008 from 7.48% in the prior year comparable period, the
rate on total deposits and other borrowings decreased 134 basis points to 3.08%
from 4.42% between those respective periods. The decrease in yields on assets
and rates on deposits and borrowings was due primarily to the repricing of
assets and liabilities as a result of actions taken by the Federal Reserve since
September 2007.
The
Company's tax equivalent net interest income decreased $1.1 million, or 4.6%, to
$22.0 million for the nine months ended September 30, 2008, from $23.1 million
for the prior year comparable period. As shown in the Rate Volume table above,
the decrease in net interest income was due primarily to a decrease in average
interest earning assets as well as a larger concentration of higher rate time
deposits that offset a decrease in average money market and savings
deposits. Average interest earning assets amounted to $894.8 million
for the first nine months of 2008 and $932.2 million for the comparable prior
year period. The $37.5 million decrease resulted from reductions in
loans, securities, and federal funds sold.
The
Company’s total tax equivalent interest income decreased $10.3 million, or
19.8%, to $41.8 million for the nine months ended September 30, 2008, from $52.1
million for the prior year comparable period. Interest and fees on
loans decreased $9.3 million, or 19.8%, to $37.8 million for the nine months
ended September 30, 2008, from $47.2 million for the prior year comparable
period. The decrease was due primarily to the 136 basis point decline
in the yield on loans resulting primarily from the repricing of the variable
rate loan portfolio as a result of actions taken by the Federal Reserve as well
as a $22.5 million, or 2.7%, decrease in average loans outstanding to $796.8
million from $819.2 million. Interest and dividends on investment
securities decreased $622,000, or 14.0%, to $3.8 million for the first nine
months ended September 30, 2008, from $4.4 million for the prior year comparable
period. This decrease reflected a decrease in average securities
outstanding of $11.1 million, or 11.2%, to $87.5 million from $98.6 million for
the prior year comparable period. Interest on federal funds sold and
other interest-earning assets decreased $344,000, or 63.4%, reflecting decreases
in short- term interest rates
and a
$3.9 million decrease in average balances to $10.5 million for the first nine
months of 2008 from $14.4 million for the comparable prior year
period.
The
Company’s total interest expense decreased $9.2 million, or 31.8%, to $19.8
million for the nine months ended September 30, 2008, from $29.1 million for the
prior year comparable period. Interest- bearing liabilities averaged
$782.0 million for the nine months ended September 30, 2008, versus $801.5
million for the prior year comparable period, or a decrease of $19.5
million. The decrease primarily reflected reduced funding
requirements due to a decrease in average interest earning
assets. Average deposit balances decreased $7.5 million while there
was a $14.0 million decrease in average other borrowings. The average
rate paid on interest- bearing liabilities decreased 147 basis points to 3.38%
for the nine months ended September 30, 2008. Interest expense on
time deposit balances decreased $1.8 million to $11.8 million in the first nine
months of 2008 from $13.7 million in the comparable prior year period,
reflecting lower rates which more than offset the impact of higher average
balances. Money market and savings interest expense decreased $4.7
million to $4.7 million in the first nine months of 2008, from $9.4 million in
the comparable prior year period. The decrease in interest expense on
deposits reflected the impact of the lower short- term interest rate environment
as well as lower average balances. Accordingly, rates on total
interest- bearing deposits decreased 131 basis points in the first nine months
of 2008 compared to the comparable prior year period.
Interest
expense on other borrowings decreased $2.6 million to $3.0 million in the first
nine months of 2008, reflecting the lower short- term interest rate environment
and lower average balances. Average other borrowings, primarily
overnight FHLB borrowings, decreased $14.0 million, or 10.1%, between the
respective periods. Rates on overnight borrowings reflected the lower
short- term interest rate environment as the rate of other borrowings decreased
to 3.25% in the first nine months of 2008, from 5.47% in the comparable prior
year period. Interest expense on other borrowings also includes the
interest on average balances of $15.9 million of subordinated debentures
supporting trust preferred securities and $10.7 million of FHLB term
borrowings.
Provision
for Loan Losses
The
provision for loan losses is charged to operations in an amount necessary to
bring the total allowance for loan losses to a level that reflects the known and
estimated inherent losses in the portfolio. The provision for loan losses
amounted to $5.9 million in the first nine months of 2008 compared to $1.4
million for the comparable prior year period. The provision for the
first nine months of 2008 reflected $5.7 million of charges to increase reserves
on specific loans primarily comprised of the following. A $1.3 million charge
was taken on a New Jersey residential development shore property,
notwithstanding higher appraisals, and reflected the most up to date potential
buyer indications. A $600,000 charge was taken on a residential
development property in New Jersey, also proximate to the shore, based upon the
same factors. A $1.7 million charge was taken for a borrower with
loans secured by multiple commercial properties which, notwithstanding higher
appraisals, was based on the most current efforts to market the
properties. A $1.3 million charge was taken on a suburban
Philadelphia residential development property, notwithstanding higher
appraisals, based on the most recent potential buyer indications. A
$450,000 charge was taken on a Philadelphia city residential development, based
on the most recent realtor indications. In each case the charges were
based on a more rapid disposition than initially planned.
The
comparable 2007 provision reflected $952,000 for loan transferred to non accrual
status in third quarter 2007 and $546,000 for increases in reserves on certain
loans due to a downturn in the housing market which was partially offset by
$256,000 for recoveries on tax refund loans. The remaining provision
in 2007 also reflected amounts required to increase the allowance for loan
growth in accordance with the Company’s methodology.
Non-Interest
Income
Total
non-interest income increased $18,000 to $2.2 million for the first nine months
of 2008 compared to $2.2 million for the comparable prior year period, primarily
due to a one- time Mastercard transaction of $309,000, $219,000 in other
miscellaneous items, and a $100,000 legal settlement partially offset by a
decrease of $445,000 in the first nine months of 2008 related to loan advisory
and servicing fees and $185,000 in gains on the sale of OREO properties in
2007. The decrease in loan advisory and servicing fees resulted from
lower advisory and prepayment fee income, primarily due to volume.
Non-Interest
Expenses
Total
non-interest expenses increased $2.8 million or 17.4% to $18.5 million for the
nine months ended September 30, 2008, from $15.8 million for the prior year
comparable period. Salaries and employee benefits decreased $122,000 or 1.5%, to
$7.8 million for the nine months ended September 30, 2008, from $7.9 million for
the prior year comparable period. That decrease reflected a reduction in salary
expense of $641,000 as staff levels declined in 2008 due to
attrition. New staff is being added. The decrease was
partially offset by a decrease in salary deferrals of $426,000 based on lower
loan originations.
Occupancy
expense decreased $20,000, or 1.1%, to $1.8 million in the first nine months of
2008, compared to $1.8 million for the comparable prior year
period.
Depreciation
expense decreased $29,000 or 2.8% to $1.0 million for the nine months ended
September 30, 2008, versus $1.0 million for the prior year comparable
period.
Legal
fees increased $282,000, or 64.4%, to $720,000 in the first nine months of 2008,
compared to $438,000 for the comparable prior year period, resulting from
increased fees on a number of different matters.
Other
real estate increased $2.1 million for the nine months ended September 30, 2008
compared to $23,000 for the comparable prior year period due to $1.6 million in
property writedowns and losses on sales and $505,000 in property maintenance
expenses.
Advertising
expense decreased $32,000, or 8.3%, to $353,000 in the first nine months of
2008, compared to $385,000 for the comparable prior year period.
Data
processing expense increased $134,000, or 27.6%, to $620,000 in the first nine
months of 2008, compared to $486,000 for the comparable prior year period,
primarily due to system enhancements.
Insurance
expense increased $108,000, or 36.9%, to $401,000 in the first nine months of
2008, compared to $293,000 for the comparable prior year period, resulting
primarily from higher rates.
Professional
fees increased $179,000, or 47.2%, to $558,000 in the first nine months of 2008,
compared to $379,000 for the comparable prior year period, resulting primarily
from increased consulting fees.
Regulatory
assessments and costs increased $249,000, or 188.6%, to $381,000 for the nine
months ended September 30, 2008, from $132,000 for the comparable prior year
period, resulting primarily from increases in statutory FDIC insurance
rates.
Taxes,
other increased $101,000, or 16.3%, to $719,000 for the nine months ended
September 30, 2008, versus $618,000 for the comparable prior year
period. The increase reflected an increase in Pennsylvania shares
tax, which is assessed at an annual rate of 1.25% on a 6 year moving average of
regulatory capital. The full amount of the increase resulted from
increased capital.
Other
expenses decreased $196,000, or 8.6% to $2.1 million for the nine months ended
September 30, 2008, from $2.3 million for the prior year comparable
period.
Provision
for Income Taxes
The
provision for income taxes decreased $2.9 million, to a $342,000 benefit for the
nine months ended September 30, 2008, from $2.5 million for the prior year
comparable period. That decrease was primarily the result of the decrease in
pre-tax income. The effective tax rates in those periods were an 86%
benefit and 32% respectively.
Commitments,
Contingencies and Concentrations
Financial
instruments whose contract amounts represent potential credit risk are
commitments to extend credit of approximately $100.8 million and $160.2 million
and standby letters of credit of approximately $5.5 million and $4.6 million at
September 30, 2008, and December 31, 2007, respectively.
Commitments
to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and many require the
payment of a fee. Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily represent
future cash requirements. Republic evaluates each customer’s creditworthiness on
a case-by-case basis. The amount of collateral obtained upon extension of credit
is based on management’s credit evaluation of the customer. Collateral held
varies but may include real estate, marketable securities, pledged deposits,
equipment and accounts receivable.
Standby
letters of credit are conditional commitments that guarantee the performance of
a customer to a third party. The credit risk and collateral policy involved in
issuing letters of credit is essentially the same as that involved in extending
loan commitments. The amount of collateral obtained is based on management’s
credit evaluation of the customer. Collateral held varies but may include real
estate, marketable securities, pledged deposits, equipment and accounts
receivable. Management believes that the proceeds obtained through a liquidation
of such collateral would be sufficient to cover the maximum potential amount of
future payments required under the corresponding guarantees.
Regulatory
Matters
The
following table presents the Company’s and Republic’s capital regulatory ratios
at September 30
,
2008,
and December 31, 2007:
|
|
Actual
|
|
|
For
Capital
|
|
|
To
be well
|
|
|
|
|
|
|
|
|
|
Adequacy
purposes
|
|
|
capitalized
under FRB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
capital
guidelines
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
September 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
risk based capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic
|
|
$
|
97,877
|
|
|
|
11.71
|
%
|
|
$
|
66,871
|
|
|
|
8.00
|
%
|
|
$
|
83,588
|
|
|
|
10.00
|
%
|
Company
|
|
|
109,726
|
|
|
|
13.09
|
%
|
|
|
67,040
|
|
|
|
8.00
|
%
|
|
|
-
|
|
|
|
N/A
|
|
Tier
one risk based capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic
|
|
|
91,070
|
|
|
|
10.90
|
%
|
|
|
33,435
|
|
|
|
4.00
|
%
|
|
|
50,153
|
|
|
|
6.00
|
%
|
Company
|
|
|
102,919
|
|
|
|
12.28
|
%
|
|
|
33,520
|
|
|
|
4.00
|
%
|
|
|
-
|
|
|
|
N/A
|
|
Tier
one leveraged capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic
|
|
|
91,070
|
|
|
|
9.75
|
%
|
|
|
46,698
|
|
|
|
5.00
|
%
|
|
|
46,698
|
|
|
|
5.00
|
%
|
Company
|
|
|
102,919
|
|
|
|
11.02
|
%
|
|
|
46,705
|
|
|
|
5.00
|
%
|
|
|
-
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
For
Capital
|
|
|
To
be well
|
|
|
|
|
|
|
|
|
|
Adequacy
purposes
|
|
|
capitalized
under FRB
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
capital
guidelines
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
At
December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
risk based capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic
|
|
$
|
99,634
|
|
|
|
11.02
|
%
|
|
$
|
72,534
|
|
|
|
8.00
|
%
|
|
$
|
90,667
|
|
|
|
10.00
|
%
|
Company
|
|
|
99,704
|
|
|
|
11.01
|
%
|
|
|
72,638
|
|
|
|
8.00
|
%
|
|
|
-
|
|
|
|
N/A
|
|
Tier
one risk based capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic
|
|
|
91,126
|
|
|
|
10.08
|
%
|
|
|
36,267
|
|
|
|
4.00
|
%
|
|
|
54,400
|
|
|
|
6.00
|
%
|
Company
|
|
|
91,196
|
|
|
|
10.07
|
%
|
|
|
36,319
|
|
|
|
4.00
|
%
|
|
|
-
|
|
|
|
N/A
|
|
Tier
one leveraged capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Republic
|
|
|
91,126
|
|
|
|
9.45
|
%
|
|
|
48,225
|
|
|
|
5.00
|
%
|
|
|
48,225
|
|
|
|
5.00
|
%
|
Company
|
|
|
91,196
|
|
|
|
9.44
|
%
|
|
|
48,294
|
|
|
|
5.00
|
%
|
|
|
-
|
|
|
|
N/A
|
|
Dividend Policy
The
Company has not paid any cash dividends on its common stock, but may consider
dividend payments in the future.
Liquidity
Financial
institutions must maintain liquidity to meet day-to-day requirements of
depositors and borrowers, time investment purchases to market conditions and
provide a cushion against unforeseen needs. Liquidity needs can be met by either
reducing assets or increasing liabilities. The most liquid assets
consist of cash, amounts due from banks and federal funds sold.
Regulatory
authorities require the Company to maintain certain liquidity ratios such that
Republic maintains available funds, or can obtain available funds at reasonable
rates, in order to satisfy commitments to borrowers and the demands of
depositors. In response to these requirements, the Company has formed
an Asset/Liability Committee (“ALCO”), comprised of selected members of the
board of directors and senior management, which monitors such
ratios. The purpose of the Committee is in part, to monitor
Republic’s liquidity and adherence to the ratios in addition to managing
relative interest rate risk. The ALCO meets at least
quarterly.
Republic’s
most liquid assets, consisting of cash due from banks, deposits with banks and
federal funds sold, totaled $57.7 million at September 30, 2008, compared to
$73.2 million at December 31, 2007, due primarily to a decrease in federal
funds sold. Loan maturities and repayments, if not reinvested in loans, also are
immediately available for liquidity. At September 30, 2008, Republic estimated
that in excess of $50.0 million of loans would mature or be repaid in the six
month period that will end March 31, 2009. Additionally, the majority of its
securities are available to satisfy liquidity requirements through pledges to
the FHLB to access Republic’s line of credit with that institution.
Funding
requirements have historically been satisfied primarily by generating
transaction accounts and certificates of deposit with competitive rates, and
utilizing the facilities of the FHLB. At September 30, 2008 Republic had
$103.9 million in unused lines of credit readily available under
arrangements with the FHLB and correspondent banks compared to $113.1 million at
December 31, 2007. These lines of credit enable Republic to purchase funds
for short or long-term needs at rates often lower than other sources and require
pledging of securities or loan collateral. The amount of available credit has
been decreasing with the prepayment of mortgage backed loans and
securities.
At
September 30, 2008, Republic had aggregate outstanding commitments (including
unused lines of credit and letters of credit) of $106.3 million. Certificates of
deposit scheduled to mature in one year totaled $354.7 million at September 30,
2008. There were FHLB advances outstanding of $25.0 million at September 30,
2008 and short-term borrowings of $100.7 million consisted of overnight FHLB
borrowings of $80.7 million and uncollateralized overnight advances from PNC
Bank of $20.0 million. The Company anticipates that it will have sufficient
funds available to meet its current commitments.
Republic’s
target and actual liquidity levels are determined by comparisons of the
estimated repayment and marketability of its interest-earning assets and
projected future outflows of deposits and other liabilities. Republic has
established a line of credit with a correspondent bank to assist in managing
Republic’s liquidity position. That line of credit totaled $15.0
million and was unused at September 30, 2008. Republic has
established a line of credit with the Federal Home Loan Bank of Pittsburgh with
a maximum borrowing capacity of approximately $194.6 million. As
of September 30, 2008, Republic had borrowed $105.7 million under that line of
credit. Securities also represent a primary source of liquidity. Accordingly,
investment decisions generally reflect liquidity over other
considerations. Additionally, Republic has uncollateralized overnight
advances from PNC bank. As of September 30, 2008, there were $20.0
million of such overnight advances outstanding.
Republic’s
primary short-term funding sources are certificates of deposit and its
securities portfolio. The circumstances that are reasonably likely to affect
those sources are as follows. Republic has historically been able to generate
certificates of deposit by matching Philadelphia market rates or paying a
premium rate of 25 to 50 basis points over those market rates. It is anticipated
that this source of liquidity will continue to be available; however, its
incremental cost may vary depending on market conditions. Republic’s securities
portfolio is also available for liquidity, usually as collateral for FHLB
advances. Because of the FHLB’s AAA rating, it is unlikely those advances would
not be available. But even if they are not, numerous investment companies would
likely provide repurchase agreements up to the amount of the market value of the
securities.
Republic’s
ALCO is responsible for managing its liquidity position and interest
sensitivity. That committee’s primary objective is to maximize net interest
income while configuring interest-sensitive assets and liabilities to manage
interest rate risk and provide adequate liquidity.
Investment
Securities Portfolio
At
September 30, 2008, the Company had identified certain investment securities
that are being held for indefinite periods of time, including securities that
will be used as part of the Company’s asset/liability management strategy and
that may be sold in response to changes in interest rates, prepayments and
similar factors. These securities are classified as available for
sale and are intended to increase the flexibility of the Company’s
asset/liability management. Available for sale securities consisted
of U.S. Government Agency securities and other investments. The market values of
investment
securities available for sale were $86.3 million and $83.7 million as of
September 30, 2008 and December 31, 2007, respectively. At September
30, 2008 and December 31, 2007, the portfolio had net unrealized losses of $2.8
million and gains of $409,000, respectively.
Securities
are evaluated on at least a quarterly basis, and more frequently when market
conditions warrant such an evaluation, to determine whether a decline in their
value is other-than-temporary. To determine whether a loss in value
is other-than-temporary, management utilizes criteria such as the reasons
underlying the decline, the magnitude and duration of the decline and the intent
and ability of the Company to retain its investment in the security for a period
of time sufficient to allow for an anticipated recovery in the fair
value. The term “other-than-temporary” is not intended to indicate
that the decline is permanent, but indicates that the prospects for a near-term
recovery of value is not necessarily favorable, or that there is a lack of
evidence to support a realizable value equal to or greater than the carrying
value of the investment. Once a decline in value is determined to be
other-than-temporary, the value of the security is reduced and a corresponding
charge to earnings is recognized. No impairment charge was recognized
during the nine months ended September 30, 2008 and 2007.
Loan
Portfolio
The
Company’s loan portfolio consists of secured and unsecured commercial loans
including commercial real estate loans, loans secured by one-to-four family
residential property, commercial construction and residential construction loans
as well as residential mortgages, home equity loans, short-term consumer and
other consumer loans. Commercial loans are primarily term loans made to small to
medium-sized businesses and professionals for working capital, asset acquisition
and other purposes. Commercial loans are originated as either fixed or variable
rate loans with typical terms of 1 to 5 years. Republic’s commercial loans
typically range between $250,000 and $5.0 million but customers may borrow
significantly larger amounts up to Republic’s legal lending limit of
approximately $15.0 million at September 30, 2008. Individual customers may have
several loans often secured by different collateral.
Gross
loans decreased $50.5 million, to $771.1 million at September 30, 2008, from
$821.5 million at December 31, 2007.
The
following table sets forth the Company's gross loans by major categories for the
periods indicated:
(Dollars
in thousands)
|
|
As
of September 30, 2008
|
|
|
As
of December 31, 2007
|
|
|
|
Balance
|
|
|
%
of Total
|
|
|
Balance
|
|
|
%
of Total
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
estate secured
|
|
$
|
457,440
|
|
|
|
59.3
|
%
|
|
$
|
476,873
|
|
|
|
58.1
|
%
|
Construction
and land development
|
|
|
218,018
|
|
|
|
28.3
|
|
|
|
228,616
|
|
|
|
27.8
|
|
Non
real estate secured
|
|
|
64,262
|
|
|
|
8.3
|
|
|
|
77,347
|
|
|
|
9.4
|
|
Non
real estate unsecured
|
|
|
4,591
|
|
|
|
0.6
|
|
|
|
8,451
|
|
|
|
1.0
|
|
|
|
|
744,311
|
|
|
|
96.5
|
|
|
|
791,287
|
|
|
|
96.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
real estate
|
|
|
5,722
|
|
|
|
0.8
|
|
|
|
5,960
|
|
|
|
0.7
|
|
Consumer
& other
|
|
|
21,019
|
|
|
|
2.7
|
|
|
|
24,302
|
|
|
|
3.0
|
|
Total
loans, net of unearned income
|
|
|
771,052
|
|
|
|
100.0
|
%
|
|
|
821,549
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
allowance for loan losses
|
|
|
(6,807
|
)
|
|
|
|
|
|
|
(8,508
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loans
|
|
$
|
764,245
|
|
|
|
|
|
|
$
|
813,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Quality
Republic’s
written lending policies require specified underwriting, loan documentation and
credit analysis standards to be met prior to funding, with independent credit
department approval for the majority of new loan balances. A committee of the
Board of Directors oversees the loan approval process to monitor that proper
standards are maintained and approves the majority of commercial
loans.
Loans,
including impaired loans, are generally classified as non-accrual if they are
past due as to maturity or payment of interest or principal for a period of more
than 90 days, unless such loans are well-secured and in the process of
collection. Loans that are on a current payment status or past due less than 90
days may also be classified as non-accrual if repayment in full of principal
and/or interest is in doubt.
Loans may
be returned to accrual status when all principal and interest amounts
contractually due are reasonably assured of repayment within an acceptable
period of time, and there is a sustained period of repayment performance by the
borrower, in accordance with the contractual terms.
While a
loan is classified as non-accrual or as an impaired loan and the future
collectibility of the recorded loan balance is doubtful, collections of interest
and principal are generally applied as a reduction to principal outstanding.
When the future collectibility of the recorded loan balance is expected,
interest income may be recognized on a cash basis. In the case where a
non-accrual loan had been partially charged off, recognition of interest on a
cash basis is limited to that which would have been recognized on the recorded
loan balance at the contractual interest rate. Cash interest receipts in excess
of that amount are recorded as recoveries to the allowance for loan losses until
prior charge-offs have been fully recovered.
The
following summary shows information concerning loan delinquency and other
non-performing assets at the dates indicated.
|
|
September
30,
2008
|
|
|
December
31,
2007
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
Loans
accruing, but past due 90 days or more
|
|
$
|
-
|
|
|
$
|
-
|
|
Non-accrual
loans
|
|
|
7,287
|
|
|
|
22,280
|
|
Total
non-performing loans (1)
|
|
|
7,287
|
|
|
|
22,280
|
|
Other
real estate owned
|
|
|
8,580
|
|
|
|
3,681
|
|
|
|
|
|
|
|
|
|
|
Total
non-performing assets (2)
|
|
$
|
15,867
|
|
|
$
|
25,961
|
|
|
|
|
|
|
|
|
|
|
Non-performing
loans as a percentage
of
total loans net of unearned
|
|
|
|
|
|
|
|
|
income
|
|
|
0.95
|
%
|
|
|
2.71
|
%
|
Non-performing
assets as a percentage
of
total assets
|
|
|
1.64
|
%
|
|
|
2.55
|
%
|
(1)
|
Non-performing
loans are comprised of (i) loans that are on a nonaccrual basis;
(ii) accruing loans that are 90 days or more past due and
(iii) restructured loans.
|
(2)
|
Non-performing
assets are composed of non-performing loans and other real estate owned
(assets acquired in foreclosure).
|
As
discussed under “Provision for Loan Losses” Republic is pursuing more rapid
disposition of non performing loans. Accordingly Republic has taken title or
control of the majority of such loans which has resulted in their transfer to
other real estate owned as follows.
Non accrual-loans decreased $15.0
million, to $7.3 million at September 30, 2008, from $22.3 million at December
31, 2007.
An analysis of
2008
activity is as fo
llows.
T
he
$15.0 million
decrease reflected $15.8 million of
transfers of loans to two customers to other real estate owned after related
2008 charge-offs of $4.2 million and payoffs of $
1.3
million. The
resulting
decrease was partially offset by
the
transition of
nine
loans totaling $
6.4
million to non-accrual
status
.
Problem loans consist of loans that are
included in performing loans, but for which potential credit problems of the
borrowers have caused management to have serious doubts as to the ability of
such borrowers to continue to comply with present repayment terms. At September
30, 2008, all identified problem loans are included in the preceding table or
are internally classified, with a specific reserve allocation in the allowance
for loan losses (see “Allowance For Loan Losses”). Management believes that the
appraisals and other estimates of the value of the collateral pledged against
the non-accrual loans generally exceed the amount of its outstanding
balances
.
Non-accrual
loans totaled $7.3 million at September 30, 2008, and $22.3 million at December
31, 2007, and the amount of related valuation allowances were $932,000 and $1.6
million, respectively at those dates. The primary reason for the
decrease in non-accrual loans was the aforementioned transfers of loans to other
real estate owned and charge-offs. There were no commitments to extend credit to
any borrowers with impaired loans as of the end of the periods presented
herein.
At
September 30, 2008, compared to December 31, 2007, internally classified
accruing loans had decreased to $521,000 from $702,000.
Republic
had delinquent loans as follows: (i) 30 to 59 days past due, in the aggregate
principal amount of $0 at September 30, 2008 and $3.6 million at December 31,
2007; and (ii) 60 to 89 days past due, at September 30, 2008 and December 31,
2007, in the aggregate principal amount of $3.2 million and $1.6 million,
respectively. The decrease in the loans delinquent 30 to 59 days reflects $3.6
million in loans that remain at full accrual status. The increase in
the loans delinquent 60 to 89 days reflects $3.0 million in loans that remain at
full accrual status partially offset by a $1.3 million loan transferred to non
accrual status in 2008.
Other
Real Estate Owned:
The
balance of other real estate owned increased to $8.6 million at September 30,
2008 from $3.7 million at December 31, 2007 due to additions from three
customers totaling $21.4 million, sales of $14.9 million
and writedowns on properties of $1.6 million.
At
September 30, 2008, the Company had no credit exposure to "highly leveraged
transactions" as defined by the Federal Reserve Bank.
Allowance
for Loan Losses
An
analysis of the allowance for loan losses for the nine months ended September
30, 2008, and 2007, and the twelve months ended December 31, 2007 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
For
the nine months
ended
|
|
|
For
the twelve months
ended
|
|
|
For
the nine months
ended
|
|
(dollars
in thousands)
|
|
September
30, 2008
|
|
|
December
31, 2007
|
|
|
September
30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of period…….…..
|
|
$
|
8,508
|
|
|
$
|
8,058
|
|
|
$
|
8,058
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and construction………….
|
|
|
7,778
|
|
|
|
1,503
|
|
|
|
1,028
|
|
Tax
refund loans……………………….
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Consumer
……………………….…….
|
|
|
19
|
|
|
|
3
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
charge-offs
|
|
|
7,797
|
|
|
|
1,506
|
|
|
|
1,030
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
and construction………….
|
|
|
119
|
|
|
|
81
|
|
|
|
81
|
|
Tax
refund loans……………………….
|
|
|
77
|
|
|
|
283
|
|
|
|
256
|
|
Consumer……………………………
|
|
|
2
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
recoveries…………………...
|
|
|
198
|
|
|
|
366
|
|
|
|
338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
charge-offs……………………….….
|
|
|
7,599
|
|
|
|
1,140
|
|
|
|
692
|
|
Provision
for loan losses………………..
|
|
|
5,898
|
|
|
|
1,590
|
|
|
|
1,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of
period……………..
|
|
$
|
6,807
|
|
|
$
|
8,508
|
|
|
$
|
8,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans outstanding
(1)……. …
|
|
$
|
796,782
|
|
|
$
|
820,380
|
|
|
$
|
819,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
a percent of average loans (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs
(annualized)……………
|
|
|
1.27
|
%
|
|
|
0.14
|
%
|
|
|
0.11
|
%
|
Provision for loan losses
(annualized)……………..
|
|
|
0.99
|
%
|
|
|
0.19
|
%
|
|
|
0.23
|
%
|
Allowance for loan
losses……….…...
|
|
|
0.85
|
%
|
|
|
1.04
|
%
|
|
|
1.07
|
%
|
Allowance
for loan losses to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned
income at period
end…………………………
|
|
|
0.88
|
%
|
|
|
1.04
|
%
|
|
|
1.04
|
%
|
Total non-performing loans at
period
end……………………………….
|
|
|
93.41
|
%
|
|
|
38.19
|
%
|
|
|
34.56
|
%
|
(1)
Includes nonaccruing loans.
Management
makes at least a quarterly determination as to an appropriate provision from
earnings to maintain an allowance for loan losses that is management’s best
estimate of known and inherent losses. The Company’s Board of Directors
periodically reviews the status of all non-accrual and impaired loans and loans
classified by the Republic’s regulators or internal loan review officer, who
reviews both the loan portfolio and overall adequacy of the allowance for loan
losses. The Board of Directors also considers specific loans, pools of similar
loans, historical charge-off activity, economic conditions and
other
relevant factors in reviewing the adequacy of the loan loss reserve. Any
additions deemed necessary to the allowance for loan losses are charged to
operating expenses.
The
Company has an existing loan review program, which monitors the loan portfolio
on an ongoing basis. Loan review is conducted by a loan review officer who
reports quarterly, directly to the Board of Directors.
Estimating
the appropriate level of the allowance for loan losses at any given date is
difficult, particularly in a continually changing economy. In management’s
opinion, the allowance for loan losses is appropriate at September 30, 2008.
However, there can be no assurance that, if asset quality deteriorates in future
periods, additions to the allowance for loan losses will not be
required.
Republic’s
management is unable to determine in which loan category future charge-offs and
recoveries may occur. The entire allowance for loan losses is available to
absorb loan losses in any loan category. The majority of the
Company's loan portfolio represents loans made for commercial purposes, while
significant amounts of residential property may serve as collateral for such
loans. The Company attempts to evaluate larger loans individually, on the basis
of its loan review process, which scrutinizes loans on a selective basis and
other available information. Even if all commercial purpose
loans
could be reviewed, there is no assurance that information on potential problems
would be available. The Company's portfolios of loans made for purposes of
financing residential mortgages and consumer loans are evaluated in groups. At
September 30, 2008, loans made for commercial and construction, residential
mortgage and consumer purposes, respectively, amounted to $744.3 million, $5.7
million and $21.0 million.
Effects
of Inflation
The
majority of assets and liabilities of a financial institution are monetary in
nature. Therefore, a financial institution differs greatly from most commercial
and industrial companies that have significant investments in fixed assets or
inventories. Management believes that the most significant impact of
inflation on financial results is the Company’s need and ability to react to
changes in interest rates. As discussed previously, management attempts to
maintain an essentially balanced position between rate sensitive assets and
liabilities over a one year time horizon in order to protect net interest income
from being affected by wide interest rate fluctuations.
There has
been no material change in the Company’s assessment of its sensitivity to market
risk since its presentation in the 2007 Annual Report on Form 10-K filed with
the SEC.
(
a) Evaluation of
disclosure controls and procedures.
Our
Chief Executive Officer and Chief Financial Officer, with the assistance of
management, evaluated the effectiveness of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the
period covered by this report (the “Evaluation Date”). Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that, as of the Evaluation Date, our disclosure controls and procedures were
effective to ensure that information required to be disclosed in our reports
under the Exchange Act, is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and
forms, and that such information is accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosures.
(b)
Changes in internal controls.
There has not been any change in our internal control over financial reporting
during our quarter ended September 30, 2008 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II
OTHER
INFORMATION
None
No material changes from risk factors
as previously disclosed in the Company’s Form 10-K in response to
Item 1A in Part 1 of Form 10-K.
None
None
None
None
The
following Exhibits are filed as part of this report. (Exhibit numbers
correspond to the exhibits required by Item 601 of Regulation S-K for an annual
report on Form 10-K)
Exhibit
No.
10.1
Amended and Restated
Supplemental Retirement Plan Agreements
10.3
Registration Rights
Agreement
10.4
Consulting
Agreement
31.1
Certification of the
Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act
31.2
Certification of the
Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act
32.1
Certification of the
Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act
32.2
Certification of the
Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Issuer has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
|
Republic
First Bancorp, Inc.
|
|
|
|
|
|
|
|
/s/Harry D.
Madonna
|
|
Chairman,
President and Chief Executive Officer
|
|
|
|
|
|
|
|
/s/Paul
Frenkiel
|
|
Executive
Vice President and Chief Financial Officer
|
|
|
Dated:
November 7, 2008
40
AMENDED
AND RESTATED
SUPPLEMENTAL RETIREMENT PLAN
AGREEMENT
THIS AGREEMENT
is entered into
this ___ day of May, 2001 by
FIRST REPUBLIC BANK
, having
its principal offices at 1608 Walnut Street, Suite 1000, Philadelphia,
Pennsylvania 19103 (the "BANK") and
NEIL I. RODIN
, (the
"DIRECTOR").
RECITALS
WHEREAS
, DIRECTOR and BANK
entered into a Supplemental Retirement Plan Agreement dated August 4, 1992 (the
"PLAN") and the parties hereto desire to amend and restate the PLAN as provided
herein; and
WHEREAS
, the DIRECTOR has been
on the Board of Directors of the BANK since 1988, and;
WHEREAS
, its Board of
Directors, recognizing the past services of the DIRECTOR, the DIRECTOR'S
contribution to the BANK and the experience and knowledge of the DIRECTOR,
desires to modify and amend the rewards the DIRECTOR receives under the Plan for
his continued valuable service and counsel.
NOW THEREFORE
, in
consideration of services performed in the past and to be performed in the
future as well as of the mutual promises and covenants herein contained, the
parties agree that the Plan is hereby amended and restated in its entirety as
follows:
ARTICLE
I
CONDITIONS
1.1 The
DIRECTOR agrees to continue to devote such time and attention to the business
and affairs of the BANK as shall be required, and to use his best efforts to
furnish faithful and satisfactory service to the Board during his
tenure.
1.2 The
payment of benefits is conditioned upon the DIRECTOR not acting in any similar
capacity for any business enterprise which competes to a substantial degree with
the BANK, nor engaging in any activity involving substantial competition with
the BANK, without written consent from the Board of Directors. This provision
shall be limited to that time while the DIRECTOR continues to serve on the Board
of Directors of the Bank (the "BOARD").
ARTICLE
II
BENEFITS
2.1
Effective Date.
The
benefits provided to the DIRECTOR hereunder shall be fully vested as of the date
of this Agreement and shall be payable as provided hereinafter.
2.2
Death
Before Retirement.
If the
DIRECTOR dies while actively serving on the Board prior to the commencement of
his retirement benefits payable hereunder, the BANK shall pay to such
beneficiary(ies) as the DIRECTOR shall designate in writing the sum of $25,000
per year for ten years. Said payments shall be paid in annual installments
commencing when the DIRECTOR would have reached sixty-five (65) years of age. If
the DIRECTOR fails to properly designate a beneficiary, the payments shall be
made to the DIRECTOR'S surviving spouse or if the spouse is deceased, to the
personal
representative of the DIRECTOR'S estate.
2.3
Retirement Benefits.
At the later to occur of DIRECTOR ceasing to serve as a DIRECTOR of the BANK or
the DIRECTOR attaining the age sixty-five, the BANK shall pay the DIRECTOR
$25,000 per year for ten years. Such benefit payments shall be made in annual
installments beginning not later than the fifteenth (15t11) day of the month
following the fulfillment of the requirements in this Section 2.3.
Notwithstanding the above, in the event
their is a Fundamental Change as defend in Section 7.2 hereof, of the BANK or
its parent company, the DIRECTOR shall have the right, upon sixty (60) days
written notice to BANK, to require the BANK to assign all insurance policies
applicable to the DIRECTOR in lieu of receipt of payments by the BANK under this
Agreement, or, at the sole discretion of DIRECTOR, require the BANK to commence
payment of the $25,000 per annum for ten (10) years provided for under Section
2.3 hereof
ARTICLE
III
OTHER TERMINATIONS OF
SERVICE
3.1 If
the DIRECTOR'S service on the Board is terminated due to disability, such
termination of service shall be treated as any other termination of service.
There shall be no acceleration of benefits and the DIRECTOR shall only be
entitled to the benefit he would have otherwise been due under this
Agreement.
3.2 If
the services of the DIRECTOR is terminated, as a result of any violation of
criminal laws relating to banking, this Agreement shall terminate upon the date
of such termination of service and no benefits or payments of any kind shall be
made hereunder.
2
ARTICLE
IV
FIDUCIARY
4.1 The
BANK is hereby designated the Named Fiduciary of the Plan and for purposes of
the claims procedure under this Agreement. The BANK shall have authority to
control and manage the operation and administration of this Agreement, and it
shall be responsible for establishing and carrying any funding policy or methods
consistent with this Agreement.
4.2 The
BANK shall have the right to change the Named Fiduciary of the Plan created
under this Agreement. The BANK shall give the DIRECTOR written notice of a
change of the Named Fiduciary, or any change in the address or telephone number
of the Named Fiduciary.
ARTICLE
V
CLAIMS
PROCEDURE
5.1 Benefits
shall be paid in accordance with the provisions of this Agreement. Except in the
death, the DIRECTOR or a designated recipient or any other person claiming
through the DIRECTOR shall make a written request for benefits under this
Agreement. This written claim shall be mailed or delivered to the Named
Fiduciary. Such claim shall be reviewed by the Named Fiduciary. In the event of
DIRECTOR'S death, while receiving payments hereunder, benefits shall continue to
be timely paid to the DIRECTOR'S designated beneficiary, or if none has been
named, to his estate.
5.2 The
BANK shall only deny benefits in the event DIRECTOR shall violate the provisions
of Section 1.2 or 3.2.
ARTICLE
VI
NO CONTRACT OF
EMPLOYMENT
This
Agreement shall not be deemed to constitute a contract of employment between the
parties hereto, nor shall any provisions hereof restrict the removal of the
DIRECTOR, or restrict the right of the DIRECTOR to terminate his
service.
ARTICLE
VII
REORGANIZATION OR
FUNDAMENTAL CHANGE
7.1 The
BANK shall not merge or consolidate into or with another bank, or reorganize, or
sell substantially all of its assets to another bank, firm or person unless and
until such succeeding or continuing bank, firm, or person agrees to assume and
timely discharge the obligations of the BANK under this Agreement.
3
7.2 A
Fundamental Change shall mean:
|
a.
|
individuals
who, as of the date hereof constitute the Board of the BANK'S parent
company (the "COMPANY") or Board of the BANK (in either case hereinafter
referred to as the "INCUMBENT BOARD") cease for any reason to constitute
at least fifty percent (50%) of the Board of the Company or the BANK;
provided,
however,
that any individual becoming a director subsequent to the
date hereof whose nomination for election by Company or BANK's
shareholders was approved by a vote of at least a majority of the
directors then comprising the INCUMBENT BOARD shall be considered as
though such individual were a member of the INCUMBENT BOARD, but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person
other than one nominated by the Board;
|
|
|
|
|
b.
|
the
Company or the BANK shall enter into an agreement or agreements providing
for (a) the reorganization, merger, or the sale or consolidation of the
Company's or BANK's assets with or into another entity, (b) the exchange
of all or substantially all of the stock of the Company or the BANK for
the stock of another entity or for cash, (c) the liquidation or
dissolution of the Company or the BANK, or (d) the sale or the disposition
of all or substantially all of the assets of the Company or of the
BANK.
|
ARTICLE
VIII
FUNDING
8.1 The
BANK'S obligation under this Agreement shall be funded in a manner to assure
DIRECTOR'S benefits shall be paid when due.
8.2 Should
the BANK determine to fund this Agreement, in whole or in part, through the
medium of life insurance, the BANK reserves the absolute right, at its sole
discretion, to terminate such life insurance, as well as any other funding at
any time, either in whole or in part. Except as provided in Section 2.3 hereof,
at no time shall the DIRECTOR be deemed to have any right, title, or interest in
or to any specified asset or assets of the BANK, including, but not by way of
restriction, any insurance contracts or the proceeds therefrom. Except as
provided in Section 2.3 hereof, any such life insurance purchased by the BANK
shall not in any way be considered to be security for the performance of the
obligations of this Agreement. It shall be, and remain, a general, unpledged,
unrestricted asset of the BANK.
4
ARTICLE
IX
INDEPENDENCE OF
BENEFITS
The
benefits payable under this Agreement shall be independent of, and in addition
to, any other benefits or compensation, whether by salary, or bonus or otherwise
payable under any other employment agreements that now exist or may hereafter
exist from time to time between the DIRECTOR and the BANK. This Agreement does
not involve a reduction in salary or the foregoing or deferring of an increase
in future salary by the DIRECTOR. Nor does the Agreement in any way affect or
reduce the existing and future compensation and other benefits of the
DIRECTOR.
ARTICLE
X
ASSIGNABILITY,
ALIENABILITY
Except in
so far as prohibited by applicable law, no sale, transfer, alienation,
assignment, pledge, collateralization, or attachment of any benefits under this
Agreement shall be valid or recognized by the BANK. Neither the DIRECTOR, his
spouse, or designated beneficiary shall have any power to hypothecate, mortgage,
commute, modify or otherwise encumber in advance of any of the benefits payable
hereunder, nor shall any of said benefits be subject to seizure for the payment
of any debts, judgments, alimony, or separate maintenance, owed by the DIRECTOR
or his beneficiary, or be transferable by operation of law in the event of
bankruptcy, insolvency, or otherwise.
ARTICLE
XI
ADMINISTRATIVE
CLAUSE
Any
payment required to be made pursuant to this Agreement to a person who is under
a legal disability at the time such payment is due may be made by the BANK to or
for the benefit of such person in such of the following ways as the BANK shall
determine: (a) directly to the person entitled to the payment; (b) to the legal
representative of such person; (c) to some near relative of such person to be
used for the latter's benefit; (d) directly in payment of expenses of support,
maintenance or education of such person. Any such payment by the BANK shall, to
the extent thereof be a complete discharge of any liability under this Agreement
with respect to such payment. The BANK shall not be required to see to the
application by any third party of any payments made pursuant to this
paragraph.
ARTICLE
XII
MARITAL, DEDUCTION
PROVISION
If the
DIRECTOR designates his spouse to receive payments to be made after his death,
she shall have the right to direct the BANK as to the distribution of the sums,
if any,
5
payable
after her death. The DIRECTOR'S spouse has the right to direct any such payments
which may be payable after her death be paid to such person(s) or to her own
estate as she appoints and directs by a written direction fled with the BANK
during her lifetime or by her last will and testament specifically referring to
this power of appointment and to the extent the DIRECTOR'S spouse does not
effectively exercise the power of appointment, such sums shall upon her death be
distributed to her estate.
ARTICLE
XIII
PAYMENTS
UNSECURED
The
DIRECTOR, his beneficiary and any other person or persons having or claiming a
right to payments hereunder or to any interest in this Agreement shall rely
solely on the unsecured promises of the BANK set forth herein, and nothing in
this Agreement shall be construed to give the DIRECTOR, his beneficiary or any
other persons any right, title, interest or claim in or to any specific asset,
fund, reserve, account or property of any kind whatsoever owned by the BANK or
in which it may have any right, title or interest now or in the future, but
DIRECTOR, his beneficiary or any other person or persons having any right to
payments hereunder shall have the right to enforce his claim against the BANK in
the same manner as any unsecured creditor.
ARTICLE
XIV
AMENDMENT
During
the lifetime of the DIRECTOR, this Agreement may be amended or revoked at any
time, in whole or in part, by mutual agreement of the Parties.
ARTICLE
XV
NOTICES
Any
notice, consent or demand required or permitted to be given under the provisions
of this Agreement shall be in writing, and shall be signed by the party giving
or making the same. If such notice, consent or demand is mailed to a party
hereto, it shall be sent by United States certified mail, postage prepaid,
addressed to such party's last known address as shown on the records of the
BANK. The date of such mailing shall be deemed the date of notice, consent or
demand.
ARTICLE
XVI
LAW
GOVERNING
This
Agreement shall be governed by the laws of the Commonwealth of Pennsylvania.
This Agreement shall be binding upon the designated recipients, beneficiaries,
heirs,
6
executors
and administrators of the DIRECTOR and upon the successors and assigns of the
BANK.
ARTICLE
XVII
PRIOR
AGREEMENTS
This
Agreement shall amend and restate in its entirety that certain agreement between
the BANK and the DIRECTOR dated August 4, 1992.
ARTICLE
XVIII
MISCELLANEOUS
18.1 No
modification of this Agreement shall be binding or enforceable in any court
unless in writing and signed by the parties.
18.2 If
any provision of this Agreement shall be or shall become illegal or
unenforceable in whole or in part, for any reason whatsoever, the remaining
provisions shall nevertheless be deemed valid, binding, and
subsisting.
18.3 The
waiver by either party of a breach or violation of any provision of this
Agreement shall not operate as or be construed to be a waiver of any subsequent
breach or violation thereof.
18.4 In
the event any dispute shall arise between the BANK or its successor and the
DIRECTOR as to the terms or interpretations of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action taken
by the DIRECTOR to enforce the terms of this Agreement or in defending against
any action taken by the BANK or its successor, the BANK shall reimburse DIRECTOR
for all costs and expenses, including reasonable attorneys' fees and costs,
arising from such dispute, proceedings, or actions, notwithstanding the ultimate
outcome thereof. Such reimbursement shall be paid within ten (10) days of
DIRECTOR furnishing to the BANK written evidence, which may be in the form,
among other things, of a canceled check or receipt, of any costs or expenses
incurred by DIRECTOR. Any such request for reimbursement by DIRECTOR shall be
made no more frequently than at thirty (30) day intervals.
|
|
FIRST
REPUBLIC BANK
|
|
|
|
|
|
By:
/s/ Robert
Davis
|
Asst.
Secretary
|
|
President
|
|
|
|
|
|
/s/ Neil I. Rodin
|
Witness
|
|
DIRECTOR
|
7
AMENDED
AND RESTATED
SUPPLEMENTAL
RETIREMENT PLAN AGREEMENT
THIS AGREEMENT
is entered into
this day of
May , 2001 by
FIRST REPUBLIC BANK
, having its principal
offices at 1608 Walnut Street, Suite 1000,
Philadelphia
,
Pennsylvania
19103
(the "BANK") and
WILLIAM W. BATOFF
, (the
"DIRECTOR").
RECITALS
WHEREAS,
DIRECTOR and BANK entered into a
Supplemental Retirement Plan Agreement dated August 4, 1992 (the "PLAN") and the
parties hereto desire to amend and restate the PLAN as provided herein;
and
WHEREAS,
the DIRECTOR has been on the Board of
Directors of the BANK since 1988, and;
WHEREAS,
its Board of Directors, recognizing
the past services of the
DIRECTOR, the DIRECTOR'S contribution
to the BANK and the experience and knowledge of the DIRECTOR, desires to modify
and amend the rewards the DIRECTOR
receives under the Plan for his
continued valuable service and counsel.
NOW THEREFORE,
in consideration of services
performed in the past and to be performed in the future as well as of the mutual
promises and covenants herein contained, the parties agree that the Plan is
hereby amended and restated in its entirety as follows:
ARTICLE
I
CONDITIONS
1.1 The
DIRECTOR agrees to continue to devote such time and attention to the business
and affairs of the BANK as shall be required, and to use his best efforts to
furnish faithful and satisfactory service to the Board during his
tenure.
1.2
The payment of benefits is conditioned
upon the DIRECTOR not acting in any
similar capacity for any business
enterprise which competes to a substantial degree with
the BANK, nor
engaging in any activity involving substantial competition with the
BANK, without written consent from the
Board of Directors. This provision shall be limited to that time while the
DIRECTOR continues to serve on the Board of Directors of
the Bank (the
"BOARD").
ARTICLE
II
BENEFITS
2.1
Effective Date.
The
benefits provided to the DIRECTOR hereunder shall be fully vested as of the date
of this Agreement and shall be payable as provided hereinafter.
2.2
Death Before
Retirement.
If the DIRECTOR dies while actively serving on the
Board prior to the commencement of his
retirement benefits payable hereunder, the BANK shall pay to such
beneficiary(ies) as the DIRECTOR shall designate in writing the
sum of
$25,000 per year for ten years. Said payments shall be paid in annual
installments commencing when the DIRECTOR would have reached sixty-five (65)
years of age. If the DIRECTOR fails to properly designate a beneficiary, the
payments shall be made to the DIRECTOR'S surviving spouse or if the spouse is
deceased, to the personal representative of the DIRECTOR'S estate.
2.3
Retirement Benefits.
At the later to' occur of DIRECTOR ceasing to serve as a DIRECTOR of the BANK or
the DIRECTOR attaining the age sixty-five, the BANK
shall pay the DIRECTOR $25,000 per year
for ten years. Such benefit payments shall be
made in annual installments
beginning not later than the fifteenth (15th) day of the month following the
fulfillment of the requirements in this Section 2.3.
Notwithstanding
the above, in the event their is a Fundamental Change as defined in Section 7.2
hereof, of the BANK or its parent company, the DIRECTOR shall have the right,
upon sixty (60) days written notice to BANK, to require the BANK to assign all
insurance policies applicable to the DIRECTOR in lieu of receipt of payments by
the BANK under this Agreement, or, at the sole discretion of DIRECTOR, require
the BANK to commence payment of the $25,000 per annum for ten (10) years
provided for under Section 2.3 hereof.
ARTICLE
III
OTHER
TERMINATIONS OF SERVICE
3.1
If the DIRECTOR'S service on the Board
is terminated due to disability, such
termination of service shall be
treated as any other termination of service. There shall be no acceleration of
benefits and the DIRECTOR shall only be entitled to the benefit he would have
otherwise been due under this Agreement.
3.2
If the services of the DIRECTOR is
terminated, as a result of any violation of
criminal laws relating to
banking, this Agreement shall terminate upon the date of such termination of
service and no benefits or payments of any kind shall be made
hereunder.
2
ARTICLE
IV
FIDUCIARY
4.1 The
BANK is hereby designated the Named Fiduciary of the Plan and for purposes of
the claims procedure under this Agreement. The BANK shall have authority to
control and manage the operation and administration of this Agreement, and it
shall be
responsible for
establishing and carrying any funding policy or methods consistent with
this Agreement.
4.2
The BANK shall have the right to change
the Named Fiduciary of the Plan
created under this Agreement. The BANK
shall give the DIRECTOR written notice of a change of the Named Fiduciary, or
any change in the address or telephone number of the Named
Fiduciary.
ARTICLE
V
CLAIMS
PROCEDURE
5.1 Benefits
shall be paid in accordance with the provisions of this Agreement. Except in the
death, the DIRECTOR or a designated recipient or any other person claiming
through the DIRECTOR shall make a written request for benefits under this
Agreement. This written claim shall be mailed or delivered to the Named
Fiduciary. Such claim shall be reviewed by the Named Fiduciary. In the event of
DIRECTOR'S death, while receiving payments hereunder, benefits shall continue to
be timely paid to the DIRECTOR'S designated beneficiary, or if none has been
named, to his estate.
5.2 The
BANK shall only deny benefits in the event DIRECTOR shall violate the provisions
of Section 1.2 or 3.2.
ARTICLE
VI
NO
CONTRACT OF EMPLOYMENT
This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provisions hereof restrict the removal of the DIRECTOR, or
restrict the
right of the DIRECTOR to terminate his service.
ARTICLE
VII
REORGANIZATION
OR FUNDAMENTAL CHANGE
7.1
The BANK shall not merge or consolidate
into or with another bank, or
reorganize, or sell substantially all
of its assets to another bank, firm or person unless and
until such
succeeding or continuing bank, firm, or person agrees to assume and timely
discharge the obligations of the BANK under this Agreement.
3
7.2 A
Fundamental Change shall mean:
a.
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individuals
who, as of the date hereof constitute the Board of the
BANK'S parent company (the
"COMPANY") or Board of the BANK (in
either case hereinafter
referred to as the "INCUMBENT BOARD") cease for any reason to constitute
at least fifty percent (50%) of the Board of the Company or the BANK;
provided,
however,
that any individual becoming
a director subsequent to the date
hereof whose nomination for election by Company or BANK's shareholders was
approved by a vote of at least a majority of the directors then comprising
the INCUMBENT BOARD shall
be considered as though such individual
were a member of the INCUMBENT BOARD, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result of
an actual or threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a person other than one nominated by the
Board;
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b.
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the.
Company or the BANK shall enter into an agreement or agreements providing
for (a) the reorganization, merger, or the sale or consolidation of the
Company's or BANK's assets with or into another entity, (b) the exchange
of all or substantially all of the stock of the Company or the BANK for
the stock of another entity or for cash, (c) the liquidation or
dissolution of the Company or the BANK, or (d) the sale or the disposition
of all or substantially all of the assets of the Company or of the
BANK.
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ARTICLE
VIII
FUNDING
8.1 The
BANK'S obligation under this Agreement, shall be funded in a manner to assure
DIRECTOR'S benefits shall be paid when due.
8.2
Should the BANK determine to fund this
Agreement, in whole or in part, through
the medium of life insurance, the BANK
reserves the absolute right, at its sole discretion, to terminate such life
insurance, as well as any other funding at any time, either in whole or in part.
Except as provided in Section 2.3 hereof, at no time shall the DIRECTOR be
deemed to have any right, title, or interest in or to any specified asset
or assets of the BANK, including, but not by way of restriction, any insurance
contracts or the proceeds
therefrom. Except as provided in
Section 2.3 hereof, any such life insurance purchased by the BANK shall not in
any way be considered to be security for the performance of the obligations of
this Agreement. It shall be, and remain, a general, unpledged,
unrestricted asset of the BANK.
4
ARTICLE
IX
INDEPENDENCE
OF
BENEFITS
The benefits payable under this
Agreement shall be independent of, and in addition to,
any other benefits
or compensation, whether by salary, or bonus or otherwise payable under any
other employment agreements that now exist or may hereafter exist from time to
time between the DIRECTOR and the BANK. This Agreement does not involve a
reduction in salary or the foregoing or
deferring of an increase in future salary by the
DIRECTOR. Nor does the
Agreement in any way affect or reduce the existing and future compensation and
other benefits of the DIRECTOR.
ARTICLE
X
ASSIGNABILITY,
ALIENABILITY
Except in
so far as prohibited by applicable law, no sale, transfer, alienation,
assignment, pledge, collateralization, or attachment of any benefits under this
Agreement shall be valid or recognized by the BANK. Neither the DIRECTOR, his
spouse, or designated beneficiary shall have any power to hypothecate, mortgage,
commute, modify or otherwise encumber in advance of any of the benefits payable
hereunder, nor shall any of said benefits be subject to seizure for the payment
of any debts, judgments, alimony, or separate maintenance, owed by the DIRECTOR
or his beneficiary, or be transferable by operation of law in the event of
bankruptcy, .insolvency, or otherwise.
ARTICLE
XI
ADMINISTRATIVE
CLAUSE
Any
payment required to be made pursuant to this Agreement to a person who is under
a legal disability at the time such payment is due may be made by the BANK to or
for the benefit of such person in such of the following ways as the BANK shall
determine: (a) directly to the person entitled to the payment; (b) to the legal
representative of such person; (c) to some near relative of such person to be
used for the latter's benefit; (d) directly in payment of expenses of support,
maintenance or education of such person. Any such payment by the BANK shall, to
the extent thereof be a complete discharge of
any liability under this Agreement with
respect to such payment. The BANK shall not be
required to see to the
application by any third party of any payments made pursuant to this
paragraph.
ARTICLE
XII
MARITAL,
DEDUCTION PROVISION
If the
DIRECTOR designates his spouse to receive payments to be made after his death,
she shall have the right to direct the BANK as to the distribution of the sums,
if any,
5
payable
after her death. The DIRECTOR'S spouse has the right to direct any such payments
which may be payable after her death be paid to such person(s) or to her own
estate as she appoints and
directs by a written direction fled with the BANK during her
lifetime or
by her last will and testament specifically referring to this power of
appointment and to the extent the
DIRECTOR'S spouse does not effectively exercise the
power of appointment,
such sums shall upon her death be distributed to her estate.
ARTICLE
XIII
PAYMENTS
UNSECURED
The
DIRECTOR, his beneficiary and any other person or persons having or claiming a
right to payments hereunder or to any interest in this Agreement shall rely
solely on the unsecured promises of the BANK set forth herein, and nothing in
this Agreement shall be construed to give the DIRECTOR, his beneficiary or any
other persons any right, title, interest or claim in or to any specific asset,
fund, reserve, account or property
of
an
y
kind whatsoever
owned by the BANK or in which it may have any right, title or interest now or in
the future, but DIRECTOR, his beneficiary or any other person or persons having
any right to payments hereunder shall have the right to enforce his claim
against the BANK in the same manner as any unsecured creditor.
ARTICLE
XIV
AMENDMENT
During
the lifetime of the DIRECTOR, this Agreement may be amended or revoked at any
time, in whole or in part, by mutual agreement of the Parties.
ARTICLE
XV
NOTICES
Any
notice, consent or demand required or permitted to be given under the provisions
of this Agreement shall be in writing, and shall be signed by the party giving
or making the
same. If such
notice, consent or demand is mailed to a party hereto, it shall be sent by
United States certified mail, postage prepaid, addressed to such party's
last known address as shown on the records of the BANK. The date of such mailing
shall be deemed
the date
of notice, consent or demand.
ARTICLE
XVI
LAW
GOVERNING
This
Agreement shall be governed by the laws of the Commonwealth of Pennsylvania.
This Agreement shall be binding upon the designated recipients, beneficiaries,
heirs,
6
executors
and administrators of the DIRECTOR and upon the successors and assigns of the
BANK.
ARTICLE
XVII
PRIOR
AGREEMENTS
This
Agreement shall amend and restate in its entirety that certain agreement between
the BANK and the DIRECTOR dated August 4, 1992.
ARTICLE
XVIII
MISCELLANEOUS
18.1 No
modification of this Agreement shall be binding or enforceable in any court
unless in writing and signed by the parties.
18.2 If
any provision of this Agreement shall be or shall become illegal or
unenforceable in whole or in .part, for any reason whatsoever, the remaining
provisions shall nevertheless be deemed valid, binding, and
subsisting.
18.3 The
waiver by either party of a breach or violation of any provision of this
Agreement shall not operate as or be construed to be a waiver of any subsequent
breach or violation thereof.
18.4
In the event any dispute shall arise
between the BANK or its successor and the
DIRECTOR as to the terms or
interpretations of this Agreement, whether instituted by formal legal
proceedings or otherwise, including any action taken by the DIRECTOR to enforce
the terms of this Agreement or in defending against any action taken by the BANK
or its successor, the BANK shall reimburse DIRECTOR for all costs and expenses,
including reasonable attorneys' fees and costs, arising from such dispute,
proceedings, or actions, notwithstanding the ultimate outcome thereof. Such
reimbursement shall be paid within ten (10) days of DIRECTOR furnishing to the
BANK written evidence, which may be in the form, among other things, of a
canceled check or receipt, of any costs or expenses incurred by DIRECTOR. Any
such request for reimbursement by DIRECTOR shall be made no more frequently than
at thirty (30) day
intervals.
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FIRST
REPUBLIC BANK
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By:
/s/ Robert
Davis
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Asst.
Secretary
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President
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/s/
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/s/
William W. Batoff
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Witness
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DIRECTOR
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Addendum
to Amended and Restated Supplemental Retirement Plan Agreement For William W.
Batoff, dated May, 2001
Notwithstanding
anything to the contrary in the amended and restated supplemental retirement
plan agreement for William W. Batoff, dated May, 2001, the benefits distribution
schedule will be as follows. Effective January 1, 2007 Mr. Batoff will be
entitled to a distribution of 6 years of benefits at $25,000 per year, to total
$150,000. Such payment will be made upon request of Mr. Batoff, which request
may be made no earlier than that date.
Republic
First Bank
/s/ Robert
Davis
By:
President
Dated:
August 9, 2006
/s/ William W.
Batoff
William
W. Batoff
AMENDED
AND RESTATED
SUPPLEMENTAL
RETIREMENT PLAN AGREEMENT
THIS
AGREEMENT
is entered into this 22
nd
day of May, 2001 by
FIRST
REPUBLIC BANK
, having its principal offices at
1608 Walnut Street, Suite 1000,
Philadelphia
,
Pennsylvania
19103
(the "BANK") and
HARRIS D. MADONNA
, (the
"DIRECTOR").
RECITALS
WHEREAS
, DIRECTOR and BANK entered into a
Supplemental Retirement Plan Agreement dated August 4, 1992 (the "PLAN") and the
parties hereto desire to amend and restate the PLAN as provided herein;
and
WHEREAS
, the DIRECTOR has been on the Board of
Directors of the BANK
since 1988, and;
WHEREAS
, its Board of Directors, recognizing
the past services of the DIRECTOR, the DIRECTOR'S contribution to the BANK and
the experience and knowledge of the DIRECTOR, desires to modify and amend the
rewards the DIRECTOR receives under the Plan for his continued valuable service
and counsel.
NOW THEREFORE
, in consideration of services
performed in the past and to be performed in the future as well as of the mutual
promises and covenants herein contained, the parties agree that the Plan is
hereby amended and restated in its entirety as follows:
ARTICLE
I
CONDITIONS
1.1 The
DIRECTOR agrees to continue to devote such time and attention to the business
and affairs of the BANK as shall be required, and to use his best efforts to
furnish faithful and satisfactory service to the Board during his
tenure.
1.2
The payment of benefits is conditioned
upon the DIRECTOR not acting in any
similar capacity for any business
enterprise which competes to a substantial degree with the BANK, nor engaging in
any activity involving substantial competition with the BANK, without written
consent from the Board of Directors. This provision shall be limited to that
time while the DIRECTOR continues to serve on the Board of Directors of
the Bank (the "BOARD").
ARTICLE
II
BENEFITS
2.1
Effective Date.
The
benefits provided to the DIRECTOR hereunder shall be fully vested as of the date
of this Agreement and shall be payable as provided hereinafter.
2.2
Death Before
Retirement.
If the DIRECTOR dies while actively serving on the Board
prior to the commencement of his retirement benefits payable hereunder, the BANK
shall pay to such beneficiary(ies) as the DIRECTOR shall designate in writing
the sum of $25,000 per year for ten years. Said payments shall be paid in annual
installments commencing when the DIRECTOR would have reached sixty-five (65)
years of age. If the DIRECTOR fails to properly designate a beneficiary, the
payments shall be made to the DIRECTOR'S surviving spouse or if the spouse is
deceased, to the personal representative of the DIRECTOR'S estate.
2.3 Retirement
Benefits, At the later to occur of DIRECTOR ceasing to serve as a
DIRECTOR of the BANK or the DIRECTOR
attaining the age sixty-five, the BANK
shall pay the DIRECTOR $25,000 per
year for ten years. Such benefit payments shall be made in annual installments
beginning not later than the fifteenth (15`) day of the month following the
fulfillment of the requirements in this Section 2.3.
Notwithstanding
the above, in the event their is a Fundamental Change as defined in Section 7.2
hereof, of the BANK or its parent company, the DIRECTOR shall have the right,
upon sixty (60) days written notice to BANK, to require the BANK to assign all
insurance policies applicable to the DIRECTOR in lieu of receipt of payments by
the BANK under this Agreement, or, at the sole discretion of DIRECTOR, require
the BANK to commence payment of the $25,000 per annum for ten (10) years
provided for under Section 2.3 hereof
ARTICLE
III
OTHER
TERMINATIONS OF SERVICE
3.1 If
the DIRECTOR'S service on the Board is terminated due to disability, such
termination of service shall be treated as any other termination of service.
There shall be no acceleration of benefits and the DIRECTOR shall only be
entitled to the benefit he would have otherwise been due under this
Agreement.
3.2 If
the services of the DIRECTOR is terminated, as a result of any violation of
criminal laws relating to banking, this Agreement shall terminate upon the date
of such termination of service and no benefits or payments of any kind shall be
made hereunder.
2
ARTICLE
IV
FIDUCIARY
4.1 The
BANK is hereby designated the Named Fiduciary of the Plan and for purposes of
the claims procedure under this Agreement. The BANK shall have authority to
control and manage the operation and administration of this Agreement, and it
shall be responsible for establishing and carrying any funding policy or methods
consistent with this Agreement.
4.2 The
BANK shall have the right to change the Named Fiduciary of the Plan created
under this Agreement. The BANK shall give the DIRECTOR written notice of a
change of the Named Fiduciary, or any change in the address or telephone number
of the Named Fiduciary.
ARTICLE
V
CLAIMS
PROCEDURE
5.1 Benefits
shall be paid in accordance with the provisions of this Agreement. Except in the
death, the DIRECTOR or a designated recipient or any other person claiming
through the DIRECTOR shall make a written request for benefits under this
Agreement. This written claim shall be mailed or delivered to the Named
Fiduciary. Such claim shall be reviewed by the Named Fiduciary. In the event of
DIRECTOR'S death, while receiving payments hereunder, benefits shall continue to
be timely paid to the DIRECTOR'S designated beneficiary, or if none has been
named, to his estate.
5.2 The
BANK shall only deny benefits in the event DIRECTOR shall violate the provisions
of Section 1.2 or 3.2.
ARTICLE
VI
NO
CONTRACT OF EMPLOYMENT
This
Agreement shall not be deemed to constitute a contract of employment between the
parties hereto, nor shall any provisions hereof restrict the removal of the
DIRECTOR, or restrict the right of the DIRECTOR to terminate his
service.
ARTICLE
VII
REORGANIZATION
OR FUNDAMENTAL CHANGE
7.1 The
BANK shall not merge or consolidate into or with another bank, or reorganize, or
sell substantially all of its assets to another bank, firm or person unless and
until such succeeding or continuing bank, firm, or person agrees to assume and
timely discharge the obligations of the BANK under this Agreement.
3
7.2 A
Fundamental Change shall mean:
a.
|
individuals
who, as of the date hereof constitute the Board of the
BANK'S parent company (the
"COMPANY") or Board of the BANK (in
either case hereinafter
referred to as the "INCUMBENT BOARD") cease for any reason to constitute
at least fifty percent (50%) of the Board of the Company or the BANK;
provided,
however
that any individual becoming a director subsequent to the
date hereof whose nomination for election by Company or BANK's
shareholders was approved by a vote of at least a majority of the
directors then comprising the INCUMBENT BOARD shall be considered as
though such individual were a member of the INCUMBENT BOARD, but
excluding, for this purpose, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a person
other than one nominated by the
Board;
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b.
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the
Company or the BANK shall enter into an agreement or agreements providing
for (a) the reorganization, merger, or the sale or consolidation of the
Company's or BANK's assets with or into another entity, (b) the exchange
of all or substantially all of the stock of the Company or the BANK for
the stock of another entity or for cash, (c) the liquidation or
dissolution of the Company or the BANK, or (d) the sale or the disposition
of all or substantially all of the assets of the Company or of the
BANK.
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ARTICLE
VIII
FUNDING
8.1 The
BANK'S obligation under this Agreement shall be funded in a manner to assure
DIRECTOR'S benefits shall be paid when due.
8.2 Should
the BANK determine to fund this Agreement, in whole or in part, through the
medium of life insurance, the BANK reserves the absolute right, at its sole
discretion, to terminate such life insurance, as well as any other funding at
any time, either in whole or in part. Except as provided in Section 2.3 hereof,
at no time shall the DIRECTOR be deemed to have any right, title, or interest in
or to any specified asset or assets of the BANK, including, but not by way of
restriction, any insurance contracts or the proceeds therefrom. Except as
provided in Section 2.3 hereof, any such life insurance purchased by the BANK
shall not in any way be considered to be security for the performance of the
obligations of this Agreement. It shall be, and remain, a general, unpledged,
unrestricted asset of the BANK.
4
ARTICLE
IX
INDEPENDENCE
OF
BENEFITS
The
benefits payable under this Agreement shall be independent of, and in addition
to, any other benefits or compensation, whether by salary, or bonus or otherwise
payable under any other employment agreements that now exist or may hereafter
exist from time to time between the DIRECTOR and the BANK. This Agreement does
not involve a reduction in salary or the foregoing or deferring of an increase
in future salary by the DIRECTOR. Nor does the Agreement in any way affect or
reduce the existing and future compensation and other benefits of the
DIRECTOR.
ARTICLE
X
ASSIGNABILITY,
ALIENABILITY
Except in
so far as prohibited by applicable law, no sale, transfer, alienation,
assignment, pledge, collateralization, or attachment of any benefits under this
Agreement shall be valid or recognized by the BANK. Neither the DIRECTOR, his
spouse, or designated beneficiary shall have any power to hypothecate, mortgage,
commute, modify or otherwise encumber in advance of any of the benefits payable
hereunder, nor shall any of said benefits be subject to seizure for the payment
of any debts, judgments, alimony, or separate maintenance, owed by the DIRECTOR
or his beneficiary, or be transferable by operation of law in the event of
bankruptcy, insolvency, or otherwise.
ARTICLE
XI
ADMINISTRATIVE
CLAUSE
Any
payment required to be made pursuant to this Agreement to a person who is under
a legal disability at the time such payment is due may be made by the BANK to or
for the benefit of such person in such of the following ways as the BANK shall
determine: (a) directly to the person entitled to the payment; (b) to the legal
representative of such person; (c) to some near relative of such person to be
used for the latter's benefit; (d) directly in payment of expenses of support,
maintenance or education of such person. Any such payment by the BANK shall, to
the extent thereof be a complete discharge of any liability under this Agreement
with respect to such payment. The BANK shall not be required to see to the
application by any third party of any payments made pursuant to this
paragraph.
ARTICLE
XII
MARITAL
DEDUCTION PROVISION
If the
DIRECTOR designates his spouse to receive payments to be made after his death,
she shall have the right to direct the BANK as to the distribution of the sums,
if any,
5
payable
after her death. The DIRECTOR'S spouse has the right to direct any such payments
which may be payable after her death be paid to such person(s) or to her own
estate as she appoints and directs by a written direction fled with the BANK
during her lifetime or by her last will and testament specifically referring to
this power of appointment and to the extent the DIRECTOR'S spouse does not
effectively exercise the power of appointment, such sums shall upon her death be
distributed to her estate.
ARTICLE
XIII
PAYMENTS
UNSECURED
The
DIRECTOR, his beneficiary and any other person or persons having or claiming a
right to payments hereunder or to any interest in this Agreement shall rely
solely on the unsecured promises of the BANK set forth herein, and nothing in
this Agreement shall be construed to give the DIRECTOR, his beneficiary or any
other persons any right, title, interest or claim in or to any specific asset,
fund, reserve, account or property of any kind whatsoever owned by the BANK or
in which it may have any right, title or interest now or in the future, but
DIRECTOR, his beneficiary or any other person or persons having any right to
payments hereunder shall have the right to enforce his claim against the BANK in
the same manner as any unsecured creditor.
ARTICLE
XIV
AMENDMENT
During
the lifetime of the DIRECTOR, this Agreement may be amended or revoked at any
time, in whole or in part, by mutual agreement of the Parties.
ARTICLE
XV
NOTICES
Any
notice, consent or demand required or permitted to be given under the provisions
of this Agreement shall be in writing, and shall be signed by the party giving
or making the same. If such notice, consent or demand is mailed to a party
hereto, it shall be sent by United States certified mail, postage prepaid,
addressed to such party's last known address as shown on the records of the
BANK. The date of such mailing shall be deemed the date of notice, consent or
demand.
ARTICLE
XVI
LAW
GOVERNING
This
Agreement shall be governed by the laws of the Commonwealth of Pennsylvania.
This Agreement shall be binding upon the designated recipients, beneficiaries,
heirs,
6
executors
and administrators of the DIRECTOR and upon the successors and assigns of the
BANK.
ARTICLE
XVII
PRIOR
AGREEMENTS
This Agreement shall amend and restate
in its entirety that certain agreement between the
BANK and the DIRECTOR
dated August 4, 1992.
ARTICLE
XVIII
MISCELLANEOUS
18.1 No
modification of this Agreement shall be binding or enforceable in any court
unless in writing and signed by the parties.
18.2 If
any provision of this Agreement shall be or shall become illegal or
unenforceable in whole or in part, for any reason whatsoever, the remaining
provisions shall nevertheless be deemed valid, binding, and
subsisting.
18.3 The
waiver by either party of a breach or violation of any provision of this
Agreement shall not operate as or be construed to be a waiver of any subsequent
breach or violation thereof.
18.4 In
the event any dispute shall arise between the BANK or its successor and the
DIRECTOR as to the terms or interpretations of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action taken
by the DIRECTOR to enforce the terms of this Agreement or in defending against
any action taken by the BANK or its successor, the BANK shall reimburse DIRECTOR
for all costs and expenses, including reasonable attorneys' fees and costs,
arising from such dispute, proceedings, or actions, notwithstanding the ultimate
outcome thereof. Such reimbursement shall be paid within ten (10) days of
DIRECTOR furnishing to the BANK written evidence, which may be in the form,
among other things, of a canceled check or receipt, of any costs or expenses
incurred by DIRECTOR. Any such request for reimbursement by DIRECTOR shall be
made no more frequently than at thirty (30) day intervals.
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FIRST
REPUBLIC BANK
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By:
/s/ Robert
Davis
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Asst.
Secretary
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President
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/s/
Harris D. Madonna
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Witness
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DIRECTOR
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7
AMENDED
AND RESTATED
SUPPLEMENTAL
RETIREMENT PLAN AGREEMENT
THIS AGREEMENT
is entered into this ___ day of
May , 2001 by
FIRST
REPUBLIC BANK
, having its principal offices at
1608 Walnut Street, Suite
1000
,
Philadelphia,
Pennsylvania 19103 (the "BANK") and
HARRIS
WILDSTEIN
, (the "DIRECTOR").
RECITALS
WHEREAS
, DIRECTOR and BANK entered into a
Supplemental Retirement Plan Agreement dated August 4, 1992 (the "PLAN") and the
parties hereto desire to amend and restate the PLAN as provided herein;
and
WHEREAS
, the DIRECTOR has been on the Board of
Directors of the BANK since 1988, and;
WHEREAS
, its Board of Directors, recognizing
the past services of the DIRECTOR, the DIRECTOR'S contribution to the BANK and
the experience and knowledge of the DIRECTOR, desires to modify and amend the
rewards the DIRECTOR receives under the Plan for his continued valuable service
and counsel.
NOW THEREFORE
, in consideration of services
performed in the past and to be performed in the future as well as of the mutual
promises and covenants herein contained, the parties agree that the Plan is
hereby amended and restated in its entirety as follows:
ARTICLE
I
CONDITIONS
1.1 The
DIRECTOR agrees to continue to devote such time and attention to the business
and affairs of the BANK as shall be required, and to use his best efforts to
furnish faithful and satisfactory service to the Board during his
tenure.
1.2 The
payment of benefits is conditioned upon the DIRECTOR not acting in any similar
capacity for any business enterprise which competes to a substantial degree with
the BANK, nor engaging in any activity involving substantial competition with
the BANK, without written consent from the Board of Directors. This provision
shall be limited to that time while the DIRECTOR continues to serve on the Board
of Directors of the Bank (the "BOARD").
ARTICLE
II
BENEFITS
2.1
Effective Date.
The
benefits provided to the DIRECTOR hereunder shall be fully vested as of the date
of this Agreement and shall be payable as provided hereinafter.
2.2
Death Before
Retirement.
If the DIRECTOR dies while actively serving on the Board
prior to the commencement of his retirement benefits payable hereunder, the BANK
shall pay to such beneficiary(ies) as the DIRECTOR shall designate in writing
the sum of $25,000 per year for ten years. Said payments shall be paid in annual
installments commencing when the DIRECTOR would have reached sixty-five (65)
years of age. If the DIRECTOR fails to properly designate a beneficiary, the
payments shall be made to the DIRECTOR'S surviving spouse or if the spouse is
deceased, to the personal representative of the DIRECTOR'S estate.
2.3
Retirement Benefits.
At the later to occur of DIRECTOR ceasing to serve as a DIRECTOR of the BANK or
the DIRECTOR attaining the age sixty-five, the BANK shall pay the DIRECTOR
$25,000 per year for ten years. Such benefit payments shall be made in annual
installments beginning not later than the fifteenth (15th) day of the month
following the fulfillment of the requirements in this Section 2.3.
Notwithstanding
the above, in the event their is a Fundamental Change as defined in Section 7.2
hereof, of the BANK or its parent company, the DIRECTOR shall have the right,
upon sixty (60) days written notice to BANK, to require the BANK to assign all
insurance policies applicable to the DIRECTOR in lieu of receipt of payments by
the BANK under this Agreement, or, at the sole discretion of DIRECTOR, require
the BANK to commence payment of the $25,000 per annum for ten (10) years
provided for under Section 2.3 hereof
ARTICLE
III
OTHER
TERMINATIONS OF SERVICE
3.1 If
the DIRECTOR'S service on the Board is terminated due to disability, such
termination of service shall be treated as any other termination of service.
There shall be no acceleration of benefits and the DIRECTOR shall only be
entitled to the benefit he would have otherwise been due under this
Agreement.
3.2 If
the services of the DIRECTOR is terminated, as a result of any violation of
criminal laws relating to banking, this Agreement shall terminate upon the date
of such termination of service and no benefits or payments of any kind shall be
made hereunder.
2
ARTICLE
IV
FIDUCIARY
4.1 The
BANK is hereby designated the Named Fiduciary of the Plan and for purposes of
the claims procedure under this Agreement. The BANK shall have authority to
control and manage the operation and administration of this Agreement, and it
shall be responsible for establishing and carrying any funding policy or methods
consistent with this Agreement.
4.2
The BANK shall have the right to change
the Named Fiduciary of the Plan
created under this Agreement. The BANK
shall give the DIRECTOR written notice of a change of the Named Fiduciary, or
any change in the address or telephone number of the
Named
Fiduciary.
ARTICLE
V
CLAIMS
PROCEDURE
5.1 Benefits
shall be paid in accordance with the provisions of this Agreement. Except in the
death, the DIRECTOR or a designated recipient or any other person claiming
through the DIRECTOR shall make a written request for benefits under this
Agreement. This written claim shall be mailed or delivered to the Named
Fiduciary. Such claim shall be reviewed by the Named Fiduciary. In the event of
DIRECTOR'S death, while receiving payments hereunder, benefits shall continue to
be timely paid to the DIRECTOR'S designated beneficiary, or if none has been
named, to his estate.
5.2 The
BANK shall only deny benefits in the event DIRECTOR shall violate
the
provisions
of Section 1.2 or 3.2.
ARTICLE
VI
NO
CONTRACT OF EMPLOYMENT
This
Agreement shall not be deemed to constitute a contract of employment between the
parties hereto, nor shall any provisions hereof restrict the removal of the
DIRECTOR, or restrict the right of the DIRECTOR to terminate his
service.
ARTICLE
VII
REORGANIZATION
OR FUNDAMENTAL CHANGE
7.1 The
BANK shall not merge or consolidate into or with another bank, or reorganize, or
sell substantially all of its assets to another bank, firm or person unless and
until such succeeding or continuing bank, firm, or person agrees to assume and
timely discharge the obligations of the BANK under this Agreement.
3
7.2 A
Fundamental Change shall mean:
a.
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individuals
who, as of the date hereof constitute the Board of the BANK'S parent
company (the "COMPANY") or Board of the BANK (in either case hereinafter
referred to as the "INCUMBENT BOARD") cease for any reason to constitute
at least fifty percent (50%) of the Board of the Company or the BANK;
provided,
however,
that any individual becoming a director subsequent to the
date hereof whose nomination for election by Company or BANK's
shareholders was approved by a vote of at least a
majority of the directors then
comprising the INCUMBENT BOARD shall be considered as though such
individual were a member of the INCUMBENT BOARD, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as
a result of an actual
or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
one nominated by the Board;
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b.
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the
Company or the BANK shall enter into an agreement or agreements providing
for (a) the reorganization, merger, or the sale or consolidation of the
Company's or BANK's assets with or into another entity, (b) the exchange
of all or substantially all of the stock of the Company or the BANK for
the stock of another entity or for cash, (c) the liquidation or
dissolution of the Company or the BANK, or (d) the sale or the disposition
of all or substantially all of the assets of the Company or of the
BANK.
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ARTICLE
VIII
FUNDING
8.1 The
BANK'S obligation under this Agreement shall be funded in a manner to assure
DIRECTOR'S benefits shall be paid when due.
8.2 Should
the BANK determine to fund this Agreement, in whole or in part, through the
medium of life insurance, the BANK reserves the absolute right, at its sole
discretion, to terminate such life insurance, as well as any other funding at
any time, either in whole or in part. Except as provided in Section 2.3 hereof,
at no time shall the DIRECTOR be deemed to have any right, title, or interest in
or to any specified asset or assets of the BANK, including, but not by way of
restriction, any insurance contracts or the proceeds therefrom. Except as
provided in Section 2.3 hereof, any such life insurance purchased by the BANK
shall not in any way be considered to be security for the performance of the
obligations of this Agreement. It shall be, and remain, a general, unpledged,
unrestricted asset of the BANK.
4
ARTICLE
IX
INDEPENDENCE
OF
BENEFITS
The benefits payable under this
Agreement shall be independent of, and in addition to, any other benefits or
compensation, whether by salary, or bonus or otherwise payable under any other
employment agreements that now exist or may hereafter exist from time to time
between the DIRECTOR and the BANK. This Agreement does not involve a reduction
in salary or the foregoing or deferring of an increase in future salary by the
DIRECTOR. Nor does the Agreement in any way affect or reduce the existing and
future
compensation and other benefits of the DIRECTOR.
ARTICLE
X
ASSIGNABILITY,
ALIENABILITY
Except in
so far as prohibited by applicable law, no sale, transfer, alienation,
assignment, pledge, collateralization, or attachment of any benefits under this
Agreement shall be valid or recognized by the BANK. Neither the DIRECTOR, his
spouse, or designated beneficiary shall have any power to hypothecate, mortgage,
commute, modify or otherwise encumber in advance of any of the benefits payable
hereunder, nor shall any of said benefits be subject to seizure for the payment
of any debts, judgments, alimony, or separate maintenance, owed by the DIRECTOR
or his beneficiary, or be transferable by operation of law in the event of
bankruptcy, insolvency, or otherwise.
ARTICLE
XI
ADMINISTRATIVE
CLAUSE
Any
payment required to be made pursuant to this Agreement to a person who is under
a legal disability at the time such payment is due may be made by the BANK to or
for the benefit of such person in such of the following ways as the BANK shall
determine: (a) directly to the person entitled to the payment; (b) to the legal
representative of such person; (c) to some near relative of such person to be
used for the latter's benefit; (d) directly in payment of expenses of support,
maintenance or education of such person. Any such payment by the BANK shall, to
the extent thereof be a complete discharge of any liability under this Agreement
with respect to such payment. The BANK shall not be required to see to the
application by any third party of any payments made pursuant to this
paragraph.
ARTICLE
XII
MARITAL,
DEDUCTION PROVISION
If the
DIRECTOR designates his spouse to receive payments to be made after his death,
she shall have the right to direct the BANK as to the distribution of the sums,
if any,
5
payable
after her death. The DIRECTOR'S spouse has the right to direct any such
payments which may be payable after her
death be paid to such person(s) or to her own
estate as she appoints and
directs by a written direction fled with the BANK during her lifetime or by her
last will and testament specifically referring to this power of
appointment and to the extent the
DIRECTOR'S spouse does not effectively exercise the
power of appointment,
such sums shall upon her death be distributed to her estate.
ARTICLE
XIII
PAYMENTS
UNSECURED
The
DIRECTOR, his beneficiary and any other person or persons having or claiming a
right to payments hereunder or to any interest in this Agreement shall rely
solely on the unsecured promises of the BANK set forth herein, and nothing in
this Agreement shall be construed to give the DIRECTOR, his beneficiary or any
other persons any right, title, interest or claim in or to any specific asset,
fund, reserve, account or property of any kind whatsoever owned by the BANK or
in which it may have any right, title or interest now or in the future, but
DIRECTOR, his beneficiary or any other person or persons having any right to
payments hereunder shall have the right to enforce his claim against the BANK in
the same manner as any unsecured creditor.
ARTICLE
XIV
AMENDMENT
During
the lifetime of the DIRECTOR, this Agreement may be amended or revoked at any
time, in whole or in part, by mutual agreement of the Parties.
ARTICLE
XV
NOTICES
Any notice, consent or demand required
or permitted to be given under the provisions of
this Agreement shall be
in writing, and shall be signed by the party giving or making the same. If such
notice, consent or demand is mailed to a party hereto, it shall be sent by
United States certified mail, postage prepaid, addressed to such party's last
known address as shown on the records of the BANK. The date of such mailing
shall be deemed the date of notice, consent or demand.
ARTICLE
XVI
LAW
GOVERNING
This
Agreement shall be governed by the laws of the Commonwealth of Pennsylvania.
This Agreement shall be binding upon the designated recipients, beneficiaries,
heirs,
6
executors
and administrators of the DIRECTOR and upon the successors and assigns of
the BANK.
ARTICLE
XVII
PRIOR
AGREEMENTS
This
Agreement shall amend and restate in its entirety that certain agreement between
the BANK and the DIRECTOR dated August 4, 1992.
ARTICLE
XVIII
MISCELLANEOUS
18.1 No
modification of this Agreement shall be binding or enforceable in any court
unless in writing and signed by the parties.
18.2 If
any provision of this Agreement shall be or shall become illegal or
unenforceable in whole or in part, for any reason whatsoever, the remaining
provisions shall nevertheless be deemed valid, binding, and
subsisting.
18.3
The waiver by either party of a breach
or violation of any provision of this
Agreement shall not operate as or be
construed to be a waiver of any subsequent breach
or violation
thereof.
18.4 In
the event any dispute shall arise between the BANK or its successor and the
DIRECTOR as to the terms or interpretations of this Agreement, whether
instituted by formal legal proceedings or otherwise, including any action taken
by the DIRECTOR to enforce the terms of this Agreement or in defending against
any action taken by the BANK or its successor, the BANK shall reimburse DIRECTOR
for all costs and expenses, including reasonable attorneys' fees and costs,
arising from such dispute, proceedings, or actions, notwithstanding the ultimate
outcome thereof. Such reimbursement shall be paid within ten (10) days of
DIRECTOR furnishing to the BANK written evidence, which may be in the form,
among other things, of a canceled check or receipt, of any costs or expenses
incurred by DIRECTOR. Any such request for reimbursement by DIRECTOR shall be
made no more frequently than at thirty (30) day intervals.
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FIRST
REPUBLIC BANK
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|
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By:
/s/ Robert
Davis
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Asst.
Secretary
|
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President
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/s/
Harris Wildstein
|
Witness
|
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DIRECTOR
|
7
PURCHASE
AGREEMENT
among
REPUBLIC
FIRST BANCORP, INC.,
REPUBLIC
FIRST BANCORP CAPITAL TRUST IV
and
VERNON
W. HILL, II,
THE
HARRY D. MADONNA FAMILY TRUST,
STEVEN
M. LEWIS,
JOHN P.
SILVESTRI, and
THEODORE
J. FLOCCO, JR.,
AS
PURCHASERS
________________
Dated as
of June 10, 2008
________________
PURCHASE
AGREEMENT
$10,800,000
Convertible
Trust
Preferred Securities
THIS
PURCHASE AGREEMENT (the “Agreement”), dated as of June 10, 2008 (the “Closing
Date”), is entered into among, Republic First Bancorp, Inc., a Pennsylvania
corporation (the “Company”), Republic First Bancorp Capital Trust IV, a
statutory trust organized under the Delaware Statutory Trust Act (the “Delaware
Act”), 12 Del. C. § 3801
et
seq.
(the “Trust,”
and, together with the Company, the “Offerors”), and the Purchasers as set forth
in Schedule A (each, a “Purchaser” and together, the “Purchasers”).
WITNESSETH:
WHEREAS,
the Offerors propose that the Trust issue and sell an aggregate of 10,800
Convertible Capital Securities of the Trust (with a stated liquidation amount of
$1,000 per capital security) having the terms described in the Declaration
(defined below) (“Capital Securities”) to the Purchasers;
WHEREAS
the Capital Securities will be convertible into common stock of the Company, par
value $0.01 per share (“Common Stock”), by the Purchasers (i) at any time on or
after the occurrence of the following events: (1) if, as of the last day of any
calendar quarter beginning with the quarter June 30, 2008, the closing sale
price of the Common Stock for at least 20 trading days in a period of 30
consecutive trading days ending on the last trading day of such calendar quarter
is more than 110% of the conversion price in effect on the last day of such
calendar; (2) upon the occurrence of the following corporate events: (a) a
“change in control” of the Company, which will be deemed to have occurred at
such time as a report is filed on Schedule 13D or TO disclosing that any person
has become the beneficial owner of 50% or more of the voting power of the Common
Stock then outstanding, (b) any compulsory share exchange, (c) any consolidation
of the Company with, or merger of the Company into any other person, any merger
of another person into the Company (other than a merger which does not result in
a reclassification, conversion, exchange or cancellation of outstanding shares
of Common Stock), or (d) any sale, transfer or lease of all or substantially all
of the assets of the Company; (ii) at any time after June 30, 2009; and (iii) on
the business day immediately preceding the date of repayment of such Capital
Securities, whether at stated maturity or upon redemption;
WHEREAS
the Company may redeem the Capital Securities, subject to conditions set forth
in the Indenture, prior to maturity, in whole or in part, on one or more
occasions (i) at any time on or after June 30, 2013 if the Closing Price (as
defined in the Indenture, which is defined below) of Common Stock for 20 Trading
Days (as defined in the Indenture) in a period of 30 consecutive Trading Days
ending on the Trading Day prior to the mailing of the notice of redemption
exceeds 120% of the then prevailing Conversion Price (as defined in the
Indenture); and (ii) at any time on or after June 30, 2018;
WHEREAS,
the entire proceeds from the sale by the Trust of the Capital Securities will be
combined with the entire proceeds from the sale by the Trust to the Company of
335 common securities (the “Common Securities”); and
WHEREAS,
the Capital Securities will be guaranteed by the Company to the extent provided
in the Guarantee Agreement, dated as of the Closing Date (the “Guarantee
Agreement”), between the Company, as guarantor, and Wilmington Trust Company, as
guarantee trustee (the “Guarantee Trustee”), with respect to distributions and
payments upon liquidation, redemption and otherwise; and
WHEREAS,
the entire proceeds from the sale of the Capital Securities will be combined
with the entire proceeds from the sale by the Trust to the Company of its common
securities (the “Common Securities”), and will be used by the Trust to purchase
$11,135,000 aggregate principal amount of Convertible Junior Subordinated Debt
Securities due 2038 (the “Subordinated Debt Securities”) issued by the
Company. The Capital Securities and the Common Securities will be
issued pursuant to the Amended and Restated Declaration of Trust, to be dated as
of the Closing Date (the “Declaration”), among the Company, as sponsor, the
Administrators named therein (the “Administrators”), Wilmington Trust Company,
as institutional trustee (the “Institutional Trustee”), Wilmington Trust
Company, as Delaware trustee (the “Delaware Trustee”), and the holders, from
time to time, of undivided beneficial interests in the assets of the
Trust. The Subordinated Debt Securities will be issued pursuant to
the Indenture, to be dated as of the Closing Date (the “Indenture”), between the
Company and Wilmington Trust Company, as indenture trustee (the “Indenture
Trustee”). The Indenture, the Guarantee Agreement, the Declaration,
and this Agreement are hereinafter referred to collectively as the “Operative
Documents.”
NOW,
THEREFORE, in consideration of the foregoing and the mutual agreements and
subject to the terms and conditions herein set forth, the parties hereto agree
as follows:
SECTION
1.
Representations and
Warranties of the Offerors
.
(a)
The Trust
and the Company, jointly and severally, represent and warrant to each Purchaser
of Capital Securities as of the date hereof and as of the Closing Date, and
agree with each Purchaser, as follows:
(i)
Similar
Offerings
. Within a period of six months before or after the
date hereof, the Offerors have not, directly or indirectly, solicited any offer
to buy or offered to sell, and will not, directly or indirectly, solicit any
offer to buy or offer to sell, in the United States or to any United States
citizen or resident, any security which is or would be integrated with the sale
of the Capital Securities (including any securities of the same or a similar
class as the Capital Securities) in a manner that would require the Capital
Securities to be registered under the Securities Act of 1933, as amended (the
“1933 Act”).
(ii)
Incorporated
Documents
. The documents of the Company filed with the
Securities and Exchange Commission (the “Commission”) in accordance with the
Securities Exchange Act of 1934, as amended (the “1934 Act”), from and including
the commencement of the fiscal year covered by the Company’s most recent Annual
Report on Form 10-K, at the time they were or hereafter are filed by the Company
with the Commission (collectively, the “1934 Act Reports”), complied and will
comply in all material respects with the requirements of the 1934 Act and the
rules and regulations of the Commission thereunder (the
“1934 Act
Regulations”), and, at the date of this Agreement and on the Closing Date, do
not and will not include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and other than such instruments, agreements, contracts and
other documents as are filed as exhibits to the Company’s Annual Report on Form
10-K, Quarterly Reports on Form 10-Q or Current Reports on Form 8-K, there are
no instruments, agreements, contracts or documents of a character described in
Item 601 of Regulation S-K promulgated by the Commission to which the Company or
any of its subsidiaries is a party.
(iii)
Independent
Accountants
. The accountants of the Company who certified the
financial statements included in the 1934 Act Reports (the “Independent
Accountants”) are independent public accountants of the Company and its
subsidiaries within the meaning of the 1933 Act and the rules and regulations of
the Commission thereunder (the “1933 Act Regulations”).
(iv)
Financial Statements and
Information
. The consolidated historical financial statements
of the Company, together with the related schedules and notes, included in the
1934 Act Reports present fairly, in all material respects, the respective
consolidated financial positions of the Company and its consolidated
subsidiaries at the respective dates indicated, and the consolidated statements
of income, changes in stockholders’ equity and cash flows of the Company and its
consolidated subsidiaries for the respective periods specified; said financial
statements have been prepared in conformity with generally accepted accounting
principles in the United States applied on a consistent basis throughout the
periods involved, except as disclosed in the notes to such financial statements;
the supporting schedules, if any, included in the 1934 Act Reports present
fairly, in all material respects, the information required to be stated therein;
and any pro forma financial statements and the related notes thereto included in
the 1934 Act Reports present fairly, in all material respects, the information
shown therein, have been prepared in accordance with the Commission’s rules and
guidelines with respect to pro forma financial statements and have been properly
compiled on the bases described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred to
therein.
(v)
No Material Adverse
Change
. Since March 31, 2008, there have not been (A) any
events, changes, or circumstances that have occurred or are occurring that,
singularly or in the aggregate, has had or would reasonably be expected to
result in a material adverse change in the condition, financial, regulatory or
otherwise, or in the business affairs, management, stockholders’ equity, results
of operations, or business prospects of the Trust or of the Company and its
subsidiaries, each of which is listed in Schedule B, considered as one
enterprise, whether or not arising in the ordinary course of business (a
“Material Adverse Effect”) or (B) any dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock other
than regular quarterly dividends on the Company’s common stock declared and paid
consistent with past practice.
(vi)
Internal Accounting
Controls
. The Company and its subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with the management’s general or
specific
authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with the management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(vii)
Disclosure
Controls
. The Company has established and maintains disclosure
controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e)
under the 1934 Act); such disclosure controls and procedures (i) are designed to
ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to the Company’s Chief Executive
Officer and its Chief Financial Officer by others within those entities,
particularly during the periods in which the 1934 Act Reports are being
prepared, (ii) have been evaluated for effectiveness as of the end of the annual
or quarterly period reported to the Commission and (iii) are effective to
perform the functions for which they were established; the Company’s auditors
and the Audit Committee of the Board of Directors have been advised of: (A) any
significant deficiencies in the design or operation of internal controls which
could adversely affect the Company’s ability to record, process, summarize, and
report financial data and (B) any fraud, whether or not material, that involves
management or other employees who have a role in the Company’s internal
controls; any material weaknesses in internal controls have been identified for
the Company’s auditors; and since the date of the most recent evaluation of such
disclosure controls and procedures, there have been no significant changes in
internal controls or in other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
(viii)
Regulatory
Matters
. (a) Neither the Company nor any of its subsidiaries
is subject or is party to, or has received any written notice that any of them
may become subject or party to any investigation with respect to, any
corrective, suspension or cease-and-desist order, agreement, consent agreement,
memorandum of understanding or other regulatory enforcement action, proceeding
or order with or by, or is a party to any commitment letter or similar
undertaking to, or is subject to any directive by, or has been a recipient of
any supervisory letter from, or has adopted any board resolutions at the request
of, any Regulatory Agency (as defined below) that currently (i) restricts in any
material respect the conduct of their business, (ii) relates to their capital
adequacy or (iii) in any material manner relates to their management or business
(each, a “Regulatory Agreement”), nor has the Company or any of its subsidiaries
been advised in writing by any Regulatory Agency that it is considering issuing
or requesting any such Regulatory Agreement; there is no unresolved violation,
criticism or exception by any Regulatory Agency with respect to any report or
statement relating to any examinations of the Company or any of its subsidiaries
which would reasonably be expected to have a Material Adverse
Effect. As used herein, the term “Regulatory Agency” means any
federal or state agency charged with the supervision or regulation of depositary
institutions or holding companies of depositary institutions, or engaged in the
insurance of depositary institution deposits, or any court, administrative
agency or commission or other governmental agency, authority or instrumentality
having supervisory or regulatory authority with respect to the Company or any of
its subsidiaries.
(b) Since
January 1, 2005, the Company and its Significant Subsidiary has timely filed all
reports, registration statements, proxy statements and other materials, together
with any amendments required to be made with respect thereto, that were required
to be filed with (i) the Office of Thrift Supervision, (ii) the Office of the
Comptroller of the Currency, (iv) the Federal Reserve Board, (iii) the Federal
Deposit Insurance Corporation (the “FDIC”) and (iv) any other federal, state or
foreign Governmental Entity (all such reports and statements are collectively
referred to herein as the “Reports”), and have paid all fees and assessments due
and payable in connection therewith. As of their respective dates, the Reports
complied in all material respects with all of the statutes and published rules
and regulations enforced or promulgated by the regulatory authority with which
they were filed and with respect to all other Reports, were complete and
accurate in all material respects as of their respective dates. There
are no facts existing as of the date hereof peculiar to the Company or its
Significant Subsidiary that the Company has not disclosed in the Reports or to
the Purchasers in writing that, individually or in the aggregate, have had or
would reasonably be expected to have a Material Adverse Effect.
(ix)
No Undisclosed
Liabilities
. Neither the Company nor any of its subsidiaries
has any material liability, whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due, including
any liability for taxes (and there is no past or present fact, situation,
circumstance, condition or other basis for any present or future action, suit,
proceeding, hearing, charge, complaint, claim or demand against the Company or
its subsidiaries giving rise to any such liability), except (i) for liabilities
set forth in the financial statements referred to in Section 1(a)(iv) above and
(ii) normal fluctuations in the amount of the liabilities referred to in clause
(i) above occurring in the ordinary course of business of the Company and all of
its subsidiaries since the date of the most recent balance sheet included in
such financial statements.
(x)
Good Standing of the
Company
. The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the Commonwealth of
Pennsylvania and has full power and authority under such laws to own, lease and
operate its properties and to conduct its business, to enter into and perform
its obligations under each of the Operative Documents to which it is a party,
and to issue the Subordinated Debt Securities; and the Company is duly
registered as a bank holding company under the Bank Holding Company Act of 1956,
as amended.
(xi)
Good Standing of the
Subsidiaries
. The “significant subsidiary” (as defined in Rule
1-02 of Regulation S-X) of the Company (the “Significant Subsidiary”) has been
duly organized and is validly existing as an entity in good standing under the
laws of the jurisdiction in which it is chartered and has full power and
authority under such laws to own, lease and operate its properties and to
conduct its current and contemplated business; and the deposit accounts of
Republic First Bank (the “Bank”) are insured up to the applicable limits by the
Deposit Insurance Fund of the FDIC to the fullest extent permitted by law and
the rules and regulations of the FDIC, and no proceeding for the revocation or
termination of such insurance is pending or, to the knowledge of the Company,
threatened. The Company’s only Significant Subsidiary is the
Bank.
(xii)
Foreign
Qualifications
. Each of the Company and its Significant
Subsidiary is duly qualified as a foreign entity to transact business, and each
is in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to be so qualified would not
reasonably be expected to have, singularly or in the aggregate, a Material
Adverse Effect.
(xiii)
Capital Stock Duly
Authorized and Validly Issued
. All of the issued and
outstanding capital stock of the Company has been duly authorized and validly
issued and is fully paid and nonassessable; all of the issued and outstanding
capital stock of the Significant Subsidiary of the Company has been duly
authorized and validly issued, is fully paid and nonassessable and is owned by
the Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equitable right; and
none of the issued and outstanding capital stock of the Company or its
Significant Subsidiary was issued in violation of any preemptive or similar
rights arising by operation of law, under the charter, by-laws or code of
regulations of the Company or its Significant Subsidiary or under any agreement
to which the Company or its Significant Subsidiary is a party.
(xiv)
Capitalization
. (a)
The authorized capital stock of the Company consists of (A) 20,000,000 shares of
Common Stock, of which as of the date of this Agreement, 10,811,747 shares were
issued and outstanding and (B) 10,000,000 shares of preferred stock, of which as
of the date of this Agreement, no shares were issued and
outstanding. As of March 31, 2008, the Company held 416,303 shares of
Common Stock in its treasury. As of March 31, 2008, there were
663,044 shares of Common Stock reserved for issuance in connection with employee
benefit, stock option and dividend reinvestment and stock purchase plans. All of
the issued and outstanding shares of the Company’s capital stock have been duly
and validly authorized and issued and are fully paid and nonassessable, and are
not subject to preemptive rights. No bonds, debentures, notes or
other indebtedness having the right to vote on any matters on which the
stockholders of the Company may vote (“Voting Debt”) are issued and
outstanding. Other than as set forth herein or pursuant to this
Agreement, (A) no equity securities or Voting Debt of the Company are or may be
required to be issued by reason of any options, warrants, rights to subscribe
to, calls or commitments of any character whatsoever, (B) there are outstanding
no securities or rights convertible into or exchangeable for any equity
securities or Voting Debt of the Company and (C) there are no contracts,
commitments, understandings or arrangements by which the Company is bound to
issue additional equity securities or Voting Debt or options, warrants or rights
to purchase or acquire any additional equity securities or Voting
Debt.
(b) Except
for any director qualifying shares, all of the issued and outstanding shares of
capital stock or other equity ownership interests of each Subsidiary of the
Company are owned by the Company, directly or indirectly, free and clear of any
material liens, pledges, charges and security interests and similar
encumbrances, and all of such shares or equity ownership interests have been
duly and validly authorized and issued and are fully paid and nonassessable, and
are not subject to preemptive rights. No Subsidiary of the Company has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other
equity
security of such Subsidiary or any securities representing the right to purchase
or otherwise receive any shares of capital stock or any other equity security of
such Subsidiary.
(xv)
Good Standing of the
Trust
. The Trust has been duly created and is validly existing
in good standing as a statutory trust under the Delaware Act with the power and
authority to own property and to conduct its business as provided in the
Declaration, to enter into and perform its obligations under the Operative
Documents to which it is a party, and to issue the Capital Securities and the
Common Securities; the Trust is not a party to or otherwise bound by any
agreement other than the Operative Documents to which it is a party; and the
Trust is, and will be, under current law, classified for United States federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation.
(xvi)
Authorization of Common
Securities
. On the Closing Date, the Common Securities will
have been duly authorized for issuance by the Trust pursuant to the Declaration
and, when duly issued and executed in accordance with the Declaration and
delivered by the Trust to the Company against payment therefor in accordance
with the subscription agreement therefor, will be validly issued and fully paid
and nonassessable undivided common beneficial ownership interests in the assets
of the Trust; the issuance of the Common Securities is not subject to preemptive
or other similar rights; and on the Closing Date, all of the issued and
outstanding Common Securities of the Trust will be owned directly by the
Company, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equitable right.
(xvii)
Authorization of Capital
Securities
. On the Closing Date, the Capital Securities will
have been duly authorized for issuance by the Trust pursuant to the Declaration
and, when duly issued, executed and authenticated in accordance with the
Declaration and delivered by the Trust against payment therefor as provided
herein and will be validly issued and fully paid and nonassessable undivided
preferred beneficial ownership interests in the assets of the Trust; the
issuance of the Capital Securities will not be subject to preemptive or other
similar rights; and the Capital Securities will be in the form contemplated by,
and entitled to the benefits of, the Declaration.
(xviii)
Authorization of Common
Stock
. On the Closing Date, the Common Stock into which the
Capital Securities or Debt Securities are convertible pursuant to the
Declaration and the Indenture will have been duly authorized for issuance by the
Company and, upon conversion, all such stock will be validly issued and fully
paid and nonassessable and will have the same relative rights as, and will be
identical in all respects with, every other share of Common Stock.
(xix)
Authorization of this
Agreement
. This Agreement has been duly authorized, executed
and delivered by each of the Offerors and assuming due authorization, execution
and delivery by the Purchasers, will constitute a valid, legal and binding
agreement of each of the Offerors, enforceable against each of the Offerors in
accordance with its terms, except to the extent that enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors’ rights generally and (b) general principles of equity (regardless of
whether
enforceability is considered in a proceeding at law or in equity) (collectively,
the “Enforceability Exceptions”).
(xx)
Authorization of
Declaration
. The Declaration has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company and the Administrators, and assuming due authorization, execution
and delivery of the Declaration by the Institutional Trustee and the Delaware
Trustee, the Declaration will constitute a valid, legal and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except to the extent that enforceability may be limited by the Enforceability
Exceptions.
(xxi)
Authorization of Guarantee
Agreement
. The Guarantee Agreement has been duly authorized by
the Company and, on the Closing Date, will have been duly executed and delivered
by the Company, and assuming due authorization, execution and delivery of the
Guarantee Agreement by the Guarantee Trustee, the Guarantee Agreement will
constitute a valid, legal and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
enforceability may be limited by the Enforceability Exceptions.
(xxii)
Authorization of
Indenture
. The Indenture has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company, and assuming due authorization, execution and delivery of the
Indenture by the Indenture Trustee, the Indenture will constitute a valid, legal
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforceability may be
limited by the Enforceability Exceptions.
(xxiii)
Authorization of
Subordinated Debt Securities
. The Subordinated Debt Securities
have been duly authorized by the Company; on the Closing Date, the Subordinated
Debt Securities will have been duly executed by the Company and, when
authenticated in the manner provided for in the Indenture and delivered by the
Company to the Trust against payment therefor as contemplated in the
subscription agreement therefor, will constitute valid, legal and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, except to the extent that enforceability may be limited by the
Enforceability Exceptions; the Subordinated Debt Securities will be in the form
contemplated by, and entitled to the benefits of, the Indenture; the
Subordinated Debt Securities constitute indebtedness of the Company for United
States federal income tax purposes and the Company has no present intention to
exercise its option to defer payments of interest on the Subordinated Debt
Securities as provided in the Indenture.
(xxiv)
Authorization of
Administrators
. Each of the Administrators of the Trust is an
officer or employee of the Company or one of its subsidiaries and has been duly
authorized by the Company to execute and deliver the Declaration.
(xxv)
Not an Investment
Company
. Neither the Trust nor the Company is, and immediately
following consummation of the transactions contemplated hereby and the
application of the net proceeds therefrom neither the Trust nor the Company will
be, an “investment company” or an entity “controlled” by an “investment
company”, in each case
within
the meaning of Section 3(a) of the Investment Company Act of 1940, as amended
(the “1940 Act”), without regard to Section 3(c) of the 1940 Act.
(xxvi)
Absence of Defaults and
Conflicts
. The Trust is not in violation of the trust
certificate of the Trust filed with the State of Delaware (the “Trust
Certificate”) or the Declaration, and neither the Company nor its Significant
Subsidiary is in violation of its charter, by-laws or code of regulations; none
of the Trust, the Company or any subsidiary of the Company is in default in the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which it is a party
or by which it or any of them may be bound or to which any of its properties or
assets is subject (collectively, “Agreements and Instruments”), except for such
defaults under Agreements and Instruments that would not reasonably be expected
to have a Material Adverse Effect; and the execution, delivery and performance
of the Operative Documents by the Trust or the Company, as the case may be, the
issuance, sale and delivery of the Capital Securities and the Subordinated Debt
Securities, the consummation of the transactions contemplated by the Operative
Documents, and compliance by the Trust and the Company with the terms of the
Operative Documents to which they are a party have been duly authorized by all
necessary corporate action on the part of the Company and, on the Closing Date,
will have been duly authorized by all necessary action on the part of the Trust
and do not and will not, whether with or without the giving of notice or passage
of time or both, violate, conflict with or constitute a breach of, or default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any, security interest, mortgage, pledge, lien, charge,
encumbrance, claim or equitable right upon any properties or assets of the Trust
or the Company or its Significant Subsidiary pursuant to any of the Agreements
and Instruments, nor will such action result in any violation of the provisions
of the charter, by-laws or code of regulations of the Company or its Significant
Subsidiary or the Declaration or the Trust Certificate, or violation by the
Company or any of its Significant Subsidiaries or bank subsidiaries of any
applicable law, statute, rule, regulation, judgment, order, writ or decree of
any government, government authority, agency (including, without limitation,
each applicable Regulatory Agency) or instrumentality or court, domestic or
foreign, having jurisdiction over the Trust or the Company or any of its
Significant Subsidiaries or bank subsidiaries or their respective properties or
assets (collectively, “Governmental Entities”). As used herein, a
“Repayment Event” means any event or condition which gives the holder of any
note, debenture or other evidence of indebtedness (or any person acting on such
holder’s behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Trust or the Company or its
Significant Subsidiary prior to its scheduled maturity.
(xxvii)
ERISA
. (a)
All “employee benefit plans”, as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“
ERISA
”), that are subject
to Title I of ERISA and are currently maintained or maintained since January 1,
2003, by either the Company or any companies which, with the Company, would be
deemed to be a single employer under Section 414(b), (c), (m) or (o) of the Code
(collectively, the “
Company
Group
”) for the benefit of the Company Group employees, are collectively,
for purposes of this Agreement, referred to herein as the “
Company
Plans.
” All Company Plans that constitute employee “pension
plans” as defined in Section 3(2) of ERISA that are subject to Title IV of ERISA
are referred to herein as the “
Company Pension
Plans.
” Except as would not reasonably be expected to have,
singularly or in the aggregate, a Material Adverse Effect, to the knowledge
of the
Company, no non-exempt “prohibited transaction” (as such term is used in Section
406 of ERISA or Section 4975 of the Code), has heretofore occurred with respect
to any Company Plan or any Company Pension Plan and, to the knowledge of the
Company, no such non-exempt prohibited transaction with respect to any Company
Plan or Company Pension Plan shall occur as a result of the execution and
delivery of this Agreement and the consummation of the transactions contemplated
herein.
(b) Except
as would not reasonably be expected to have, singularly or in the aggregate, a
Material Adverse Effect, the consummation of the transactions contemplated
hereby will not result in an increase in the amount of, or acceleration in the
timing of payment of vesting of, any compensation payable or awarded by the
Company or its Significant Subsidiary to any of its or their employees under any
employment agreements, plans or programs of the Company or its Significant
Subsidiary.
(xxviii)
Intellectual
Property
. (a) the Company and its Significant Subsidiary owns,
or is licensed to use (in each case, free and clear of any claims, liens or
encumbrances), all Intellectual Property (as defined below) used in or necessary
for the conduct of its business as currently conducted; (b) the use of any
Intellectual Property by the Company and its Significant Subsidiary does not, to
the knowledge of the Company, infringe on or otherwise violate the rights of any
person and is in accordance with any applicable license pursuant to which the
Company or its Significant Subsidiary acquired the right to use any Intellectual
Property; (c) no person is challenging, infringing on or otherwise violating any
right of the Company or any of its Significant Subsidiary with respect to any
material Intellectual Property owned by or licensed to the Company or its
Significant Subsidiary; (d) to the knowledge of the Company, neither the Company
nor its Significant Subsidiary has received any notice of any pending claim with
respect to any Intellectual Property used by the Company or its Significant
Subsidiary; and (e) to the knowledge of the Company, no Intellectual Property
owned or licensed by the Company or its Significant Subsidiary is being used or
enforced in a manner that would be expected to result in the abandonment,
cancellation or unenforceability of such Intellectual Property. In
this Section 1(xxviii), “Intellectual Property” shall mean trademarks, service
marks, brand names, certification marks, trade dress and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including divisions, continuations, continuations in part and renewal
applications), and any renewals, extensions or reissues thereof, in any
jurisdiction; nonpublic information, trade secrets and confidential information
and rights in any jurisdiction to limit the use or disclosure thereof by any
person; writings and other works, whether copyrightable or not, in any
jurisdiction; and registrations or applications for registration of copyrights
in any jurisdiction, and any renewals or extensions thereof; and any similar
intellectual property or proprietary rights.
(xxix)
Environmental
Liability
. Except as has not had and would not reasonably be
expected to have, singularly or in the aggregate, a Material Adverse
Effect: (a) there are no legal, administrative, arbitral or other
proceedings, claims, actions, causes of action or notices with respect to any
environmental, health or safety matters or any private or governmental
environmental, health or safety investigations or remediation activities of
any
nature
seeking to impose, or that are reasonably likely to result in, any liability or
obligation of the Company or its Significant Subsidiary arising under common law
or under any local, state or federal environmental, health or safety statute,
regulation or ordinance, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, pending or threatened
against the Company or its Significant Subsidiary; (b) to the knowledge of the
Company, there is no reasonable basis for, or circumstances that are reasonably
likely to give rise to, any such proceeding, claim, action, investigation or
remediation by any Governmental Entity or any third party that would give rise
to any liability or obligation on the part of the Company or its Significant
Subsidiary; and (d) neither the Company nor its Significant Subsidiary is
subject to any agreement, order, judgment, decree, letter or memorandum by or
with any Governmental Entity or third party imposing any liability or obligation
with respect to any of the foregoing.
(xxx)
Taxes and Tax
Returns
. Except as has not had and would not reasonably be
expected to have, singularly or in the aggregate, a Material Adverse Effect: (a)
each of the Company and its subsidiaries has duly and timely filed (including
all applicable extensions) all reports, returns or other information (including
any amendments) required to be supplied to a governmental entity with respect to
taxes including, where permitted or required, combined or consolidated returns
for any group of entities that includes the Company or its subsidiaries (“Tax
Returns”) required to be filed by it on or prior to the date hereof (all such
returns being accurate and complete in all respects), has paid all taxes shown
thereon as arising and has duly paid or made provision for the payment of all
taxes that have been incurred or are due or claimed to be due from it by
federal, state, foreign or local taxing authorities other than taxes that are
not yet delinquent or are being contested in good faith, have not been finally
determined and have been adequately reserved against; (b) the federal, state and
local income Tax Returns of the Company and its subsidiaries have been examined
by the Internal Revenue Service (the “
IRS
”) and any
applicable state and local tax authorities for all years to and including 2002
and any liability with respect thereto has been satisfied or any liability with
respect to deficiencies asserted as a result of such examination is covered by
reserves that are adequate under GAAP; (c) there are no disputes pending, or
claims asserted, for taxes or assessments upon the Company or its subsidiaries
for which the Company does not have reserves that are adequate under GAAP; (d)
neither the Company nor its subsidiaries are (A) a party to or is bound by any
tax sharing, allocation or indemnification agreement or arrangement (other than
such an agreement or arrangement exclusively between or among the Company and
its subsidiaries) or (B) has any liability for the taxes of any Person (other
than the Company or any of its subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law); (e) within
the past two years, neither the Company nor its subsidiaries have been a
“distributing corporation” or a “controlled corporation” in a distribution
intended to qualify under Section 355(a) of the Code; (f) neither the Company
nor its subsidiaries are required to include in income any adjustment pursuant
to Section 481(a) of the Code, no such adjustment has been proposed by the IRS
and no pending request for permission to change any accounting method has been
submitted by the Company or its subsidiaries; and (g) neither the Company nor
its subsidiaries has participated in a “transaction” within the meaning of
Treasury Regulation section 1.601 1-4(b).
(xxxi)
Absence of Labor
Dispute
. No labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the knowledge of the executive officers of
the
Company, is imminent, which would reasonably be expected to result in a Material
Adverse Effect.
(xxxii)
Absence of
Proceedings
. There is no action, suit, proceeding, inquiry or
investigation before or brought by any Governmental Entity, now pending, or, to
the knowledge of the Trust or the Company, threatened, against or affecting the
Trust or the Company or any of its subsidiaries, which would reasonably be
expected to have a Material Adverse Effect or materially and adversely affect
the consummation of the transactions contemplated by the Operative Documents or
the performance by the Trust or the Company of its obligations hereunder or
thereunder; and the aggregate of all pending legal or governmental proceedings
to which the Trust or the Company or any of its subsidiaries is a party or of
which any of their respective properties or assets is the subject, including
ordinary routine litigation incidental to the business, would not reasonably be
expected to have a Material Adverse Effect.
(xxxiii)
Absence of Further
Requirements
. No filing with, or authorization, approval,
consent, license, order, registration, qualification or decree of, any
Governmental Entity, other than those that have been made or obtained, is
necessary or required for the authorization, execution, delivery or performance
by the Trust or the Company of their respective obligations under the Operative
Documents, the Subordinated Debt Securities or the Capital Securities, as
applicable, or the consummation by the Trust or the Company of the transactions
contemplated by the Operative Documents.
(xxxiv)
Possession of Licenses and
Permits
. Each of the Trust, the Company and the subsidiaries
of the Company possesses such permits, orders, certificates, licenses,
approvals, consents and other authorizations (collectively, “Governmental
Licenses”) issued by the appropriate Governmental Entities necessary to conduct
the business now operated by it that is material to the Trust or the Company and
its subsidiaries considered as one enterprise; each of the Trust, the Company
and the subsidiaries of the Company is in compliance with the terms and
conditions of all of its Governmental Licenses, except where the failure so to
comply, would not reasonably be expected to have, singularly or in the
aggregate, a Material Adverse Effect; all of the Governmental Licenses are valid
and in full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force and
effect, would not reasonably be expected to have a Material Adverse Effect; and
none of the Trust, the Company or any subsidiary of the Company has received
notice of any proceeding, and to the knowledge of the Trust, the Company or any
subsidiary of the Company, there has been no threatened proceeding, relating to
the revocation, termination, suspension or modification of any such Governmental
Licenses which would reasonably be expected to have, singularly or in the
aggregate, a Material Adverse Effect.
(xxxv)
Title to
Property
. Each of the Trust, the Company and the subsidiaries
of the Company has good and marketable title to all of its respective real and
personal properties, in each case free and clear of all liens, encumbrances and
defects, except such as, in the reasonable judgment of the Trust or the Company,
singularly or in the aggregate, are not expected to result in a Material Adverse
Effect; and all of the leases and subleases under which the Trust, the Company
or any subsidiary of the Company holds properties are in full force and effect,
except when the failure of such leases and subleases to be in full force and
effect, would not reasonably be expected to have, singularly or in the
aggregate, a Material
Adverse
Effect, and none of the Trust, the Company or any subsidiary of the Company has
any notice of any claim of any sort that has been asserted by anyone adverse to
the rights of the Trust, the Company or any subsidiary of the Company under any
of the leases or subleases under which the Trust, the Company or any subsidiary
of the Company holds properties, or affecting or questioning the rights of such
entity to the continued possession of the leased or subleased premises under any
such lease or sublease, except when such claim would not reasonably be expected
to have, singularly or in the aggregate, a Material Adverse Effect.
(xxxvi)
Stabilization
. The
Company has not taken and will not take, directly or indirectly, any action
designed to, or that might be reasonably expected to, cause or result in
stabilization or manipulation of the price of the Capital
Securities.
(xxxvii)
No General
Solicitation
. Neither the Trust or the Company nor any of
their Affiliates (as defined in Rule 501(b) under the 1933 Act) or any person
acting on its or any of their behalf has engaged or will engage, in connection
with the offering of the Capital Securities, in any form of general solicitation
or general advertising within the meaning of Rule 502(c) under the 1933
Act.
(xxxviii)
No
Registration
. (a) Subject to compliance by the Purchasers with
the relevant provisions of Section 6 hereof, it is not necessary in connection
with the offer, sale and delivery of the Capital Securities by the Trust in the
manner contemplated by this Agreement to register the Capital Securities, the
guarantee as described in the Guarantee Agreement or the Subordinated Debt
Securities under the 1933 Act or to qualify the Declaration, the Guarantee
Agreement or the Indenture under the Trust Indenture Act of 1939, as
amended.
(b)
Any
certificate signed by any Trustee of the Trust or any duly authorized officer of
the Company or any of its subsidiaries and delivered to the Purchasers or to
counsel for the Purchasers shall be deemed a representation and warranty by the
Trust or the Company, as the case may be, to the Purchasers as to the matters
covered thereby.
SECTION
2.
Representations and
Warranties of the Purchasers
(a)
Each
Purchaser understands and acknowledges that (i) none of the Capital Securities,
the Debentures, the Guarantee or the Common Stock (the “Offeror Securities”)
have been or will be registered under the Securities Act, or any other
applicable securities laws, (ii) the Offeror Securities are being offered for
sale by the Offerors in transactions not requiring registration under the
Securities Act, and (iii) the Offeror Securities may not be offered, sold,
pledged or otherwise transferred by the Purchasers except in compliance with the
registration requirements of the Securities Act, or any other applicable
securities laws, pursuant to an exemption therefrom or in a transaction not
subject thereto.
(b)
Each
Purchaser represents and warrants that it is an “accredited investor” as such
term is defined in Regulation D promulgated under the 1933 Act, has the ability
to bear the risks of an investment in the Company for an indefinite period and
is suitable to be an investor in a private offering.
(c)
Each
Purchaser represents and warrants that it is purchasing the Capital Securities
and, if converted, Common Stock for its own account, for investment and not with
a
view to,
or for offer or sale in connection with, any distribution thereof in violation
of the Securities Act or other applicable securities laws, subject to any
requirement of law that the disposition of its property be at all times within
its control and subject to its ability to resell such Capital Securities and,
upon conversion, Common Stock pursuant to an effective registration statement
under the Securities Act or pursuant to an exemption therefrom or in a
transaction not subject thereto, and the Purchasers agree, severally and not
jointly, to the legends and transfer restrictions applicable to the Capital
Securities and Common Stock contained in the Declaration.
(d)
Each
Purchaser has had the opportunity to ask questions of, and receive answers and
request additional information from, the Offerors and is aware that it may be
required to bear the economic risk of an investment in the Capital Securities
and, if converted, Common Stock.
(e)
Each
Purchaser has full power and legal capacity to execute, deliver and perform this
Agreement, to make the representations and warranties specified herein, and to
consummate the transactions contemplated herein and it has full right and power
to purchase the Capital Securities.
(f)
No filing
with, or authorization, approval, consent, license, order, registration,
qualification or decree of, any governmental body, agency or court having
jurisdiction over any Purchaser, other than those that have been made or
obtained, is necessary or required for the performance by each Purchaser of its
obligations under this Agreement or to consummate the transactions contemplated
herein.
(g)
Each
Purchaser represents and warrants that the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not (i) violate any law or order by which such Purchaser is bound or (ii)
result in a violation or breach of, or constitute a default under any agreement,
instrument or contract to which such Purchaser is a party.
(h)
This
Agreement has been duly executed and delivered by each Purchaser.
(i)
Each
Purchaser represents and warrants that it is not a beneficial owner (within the
meaning of Section 13(d) of the 1934 Act) of any Common Stock.
(j)
Each
Purchaser understands and acknowledges that the Offerors will rely upon the
truth and accuracy of the foregoing acknowledgments, representations, warranties
and agreements and agrees that if any of the foregoing acknowledgments,
representations, warranties or agreements cease to be accurate, it shall
promptly notify the Offerors.
(k)
Each
Purchaser agrees that it will keep confidential and will not disclose or divulge
any confidential, proprietary or secret information that it may obtain from
financial statements or other material submitted by the Company to such
Purchaser pursuant to this Agreement. Notwithstanding the foregoing,
a Purchaser may disclose such information (i) as has become generally available
to the public, (ii) as may be required in any report, statement or testimony
submitted to any municipal, state or federal regulatory body having jurisdiction
over such Purchaser, (iii) as may be required in response to any summons or
subpoena or in connection with any litigation (provided such Purchaser makes
reasonable efforts to enable the
Company
to seek a protective order), (iv) in order to comply with any law, order,
regulation or ruling applicable to such Purchaser or (v) on a confidential basis
to its attorneys, accountants, consultants and other professionals to the extent
necessary to obtain their services in connection with its investment in the
Company.
(l)
Each
Purchaser understands that no public market exists for any of the Capital
Securities, and that it is unlikely that a public market will ever exist for the
Capital Securities.
SECTION
3.
Sale and Delivery to
Purchasers; Closing
.
(a)
Subject
to all of the terms and conditions of this Agreement, and in reliance upon the
representations and warranties set forth herein, at the Closing provided for in
Section 3(b) hereof, the Trust hereby agrees to issue and sell the Capital
Securities to each of the Purchasers and, subject to the terms and conditions
specified in this Agreement, each of the Purchasers agrees, severally and not
jointly,
to
purchase from the Trust, in consideration of the aggregate purchase price, the
number of Capital Securities set forth opposite the name of such Purchaser in
Schedule A hereto.
(b)
The
Capital Securities shall be issued in definitive form and registered in the
name(s) and denomination(s) specified by the Purchasers. Subject to
all of the terms and conditions of this Agreement, delivery of the certificates
representing the Capital Securities shall be made by the Trust to or on behalf
of the Purchasers at the offices of Thacher Proffitt & Wood llp in The City
of New York (the "Closing"), and payment of the purchase price for the Capital
Securities shall be made by the Purchasers to the Trust by wire transfer of
immediately available funds to a bank designated by the Company contemporaneous
with closing on the Closing Date.
(c)
At the
Closing: (A) the Company will deliver to each Purchaser certificates for the
Capital Securities registered in the name of such Purchaser; (B) each Purchaser,
in full payment for the Capital Securities, will deliver to the Company
immediately available funds, by wire transfer to such account as the Company
shall specify, in the amount of the purchase price to be paid hereunder pursuant
to subsection (a) above; and (iii) each party shall take or cause to happen such
other actions, and shall execute and deliver such other instruments or
documents, as shall be required under Section 6.
SECTION
4.
Notice of Material
Events
. The Offerors covenant with the Purchasers,
severally and not jointly, that, prior to the Closing Date, the Offerors will
immediately notify the Purchasers, and confirm such notice in writing, of any
event or development that would reasonably be expected to have a Material
Adverse Effect.
SECTION
5.
Payment of
Expenses
. Whether or not this Agreement is terminated or the
sale of the Capital Securities is consummated, the Company, as borrower under
the Subordinated Debt Securities, will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) expenses
related to the preparation, issuance and delivery of the certificates for the
Capital Securities and Subordinated Debt Securities, (ii) the fees and
disbursements of the Company’s counsel, accountants and other advisors, (iii)
the fees and disbursements of the Purchasers’ counsel, (iv) the fees and
disbursements of the Guarantee
Trustee’s,
Institutional Trustee’s and Delaware Trustee’s counsel and (v) the fees and
disbursements of any registrar for the Capital Securities.
SECTION
6.
Conditions of Purchasers’
Obligations
. The obligations of the Purchasers on the Closing
Date are subject to the accuracy of the representations and warranties of the
Offerors contained in Section 1 hereof or in certificates of any Administrator
of the Trust or any officer of the Company or any of its subsidiaries delivered
pursuant to the provisions hereof, to the performance by the Offerors of their
obligations hereunder, and to the following further conditions:
(a)
Opinion of Counsel for the
Offerors
. On the Closing Date, the Purchasers shall have
received the favorable opinion, dated as of the Closing Date, of Thacher
Proffitt & Wood llp, special counsel for the Offerors, in substantially the
form set out in Annex A hereto, in form and substance reasonably satisfactory to
counsel for the Purchasers. Such counsel may state that, insofar as
such opinion involves factual matters, they have relied, to the extent they deem
proper, upon the opinion of Stevens & Lee P.C., certificates of
Administrators of the Trust, officers of the Company or any of its subsidiaries
and public officials.
(b)
Opinion of Special Delaware Counsel
for the Trust
. On the Closing Date, the Purchasers shall have
received the favorable opinion, dated as of the Closing Date, of Stevens &
Lee P.C., special Delaware counsel for the Trust, in substantially the form set
out in Annex B hereto, in form and substance reasonably satisfactory to counsel
for the Purchasers.
(c)
Opinion of Special Tax Counsel for
the Offerors
. On the Closing Date, the Purchasers shall have
received an opinion, dated as of the Closing Date, of Thacher Proffitt &
Wood llp, special tax counsel for the Offerors, that (i) the Trust will be
classified for United States federal income tax purposes as a grantor trust and
not as an association taxable as a corporation and (ii) the Subordinated Debt
Securities will constitute indebtedness of the Company for United States federal
income tax purposes, in substantially the form set out in Annex C
hereto. Such opinion may be conditioned on, among other things, the
initial and continuing accuracy of the facts, financial and other information,
covenants and representations set forth in certificates of officers of the
Company and other documents deemed necessary for such opinion.
(d)
Opinion of Counsel to the Guarantee
Trustee, the Institutional Trustee, the Delaware Trustee and the Indenture
Trustee
. On the Closing Date, the Purchasers shall have
received the favorable opinion, dated as of the Closing Date, of Stevens &
Lee P.C., counsel for the Guarantee Trustee, the Institutional Trustee, the
Delaware Trustee and the Indenture Trustee, in substantially the form set out in
Annex D hereto, in form and substance reasonably satisfactory to counsel for the
Purchasers.
(e)
Certificates
. On
the Closing Date, there shall not have been, since the date hereof or since the
respective dates as of which information is given in the 1934 Act Reports, any
Material Adverse Effect, and the Purchasers shall have received a certificate of
the Chairman, the Chief Executive Officer, the President, any Executive Vice
President or any Vice President of the Company and of the Chief Financial
Officer or Chief Accounting Officer of the Company and a certificate of an
Administrator of the Trust, dated as of the Closing Date, to the effect that
(i) there
has been no such Material Adverse Effect, (ii) the representations and
warranties in Section 1 hereof were true and correct when made and are true and
correct with the same force and effect as though expressly made on and as of the
Closing Date, and (iii) the Offerors have complied with all agreements and
satisfied all conditions on their part to be performed or satisfied on or prior
to the Closing Date.
(f)
Maintenance of
Ratings
. From the date of this Agreement through the Closing
Date, there shall not have occurred a downgrading in or withdrawal of the rating
assigned to any debt securities or preferred stock of the Company or its
Significant Subsidiary by any “nationally recognized statistical rating
organization,” as that term is defined by the Commission for the purposes of
Rule 436(g)(2) under the 1933 Act, and no such organization shall have publicly
announced that it has under surveillance or review its rating of any debt
securities or preferred stock of the Company or its Significant
Subsidiary.
(g)
Additional
Documents
. On the Closing Date, the Purchasers shall have been
furnished such documents and opinions as they may reasonably request in
connection with the issue and sale of the Capital Securities; and all
proceedings taken by the Offerors in connection with the issuance, and sale of
the Capital Securities shall be satisfactory in form and substance to the
Purchaser.
(h)
Termination of
Agreement
. If any condition specified in this Section shall
not have been fulfilled when and as required to be fulfilled, this Agreement may
be terminated by the Purchasers by notice to the Offerors at any time on or
prior to the Closing Date. In addition, such termination shall be
subject to Section 5 hereof.
SECTION
7.
Offers and Sales of the
Capital Securities
.
(a)
Offer and Sale
Procedures
. The Purchasers and the Offerors hereby establish
and agree to observe the following provisions with respect to the offer, issue
and sale of the Capital Securities:
(i)
Offers and Sales only to the
Purchasers
. Offers and sales of the Capital Securities will be
made only to the Purchasers in a transaction not requiring registration under
the 1933 Act.
(ii)
No General
Solicitation
. No general solicitation or general advertising
(within the meaning of Rule 502(c) under the 1933 Act) has been or will be used
in connection with the offering of the Capital Securities.
(iii)
Purchaser
Notification
. The Purchasers acknowledge that the Capital
Securities (A) have not been and will not be registered under the 1933 Act, (B)
are being sold without registration under the 1933 Act in accordance with an
exemption from the registration requirements of the 1933 Act and (C) may not be
offered, sold or otherwise transferred except in accordance with the legend set
forth in Annex E hereto.
(b)
Covenants of the
Offerors
. Each of the Offerors, jointly and severally,
covenant with the Purchasers as follows:
(i)
Due
Diligence
. In connection with the sale of the Capital
Securities, the Offerors agree that the Purchasers shall have the right to make
reasonable inquiries into the business of the Trust, the Company and the
subsidiaries of the Company. The Offerors also agree to provide
answers to each Purchaser, if requested, concerning the Trust, the Company and
the subsidiaries of the Company (to the extent that such information is
available or can be acquired and made available without unreasonable effort or
expense and to the extent the provision thereof is not prohibited by applicable
law) and the terms and conditions of the offering of the Capital Securities and
the Subordinated Debt Securities.
(ii)
Integration
. The
Offerors agree that they will not, and will cause their Affiliates not to, make
any offer or sale of securities of the Offerors of any class if, as a result of
the doctrine of “integration” referred to in Rule 502 under the 1933 Act, such
offer or sale would render invalid the exemption from the registration
requirements of the 1933 Act provided by Section 4(2) thereof or by Rule 144A or
otherwise.
(iii)
Nasdaq
Listing
. The Company will use its commercially reasonable
efforts to obtain approval for listing of the shares of the Common Stock
underlying the Capital Securities on the NASDAQ Stock Market or such other
exchange within three months following the Closing Date and will use its
commercially reasonable efforts to maintain such listing.
(iv)
Financial
Statements
. For so long as the Purchasers beneficially own
Capital Securities convertible into shares of Common Stock, or shares of Common
Stock issued upon the conversion of the Capital Securities, or any combination
of the foregoing, in any case representing at least 4.9 percent of the Common
Stock then outstanding, the Offerors shall deliver the reports required to be
delivered to Securityholders (as defined in the Indenture) pursuant to the terms
of, and in the manner described in, Section 4.03 of the Indenture.
SECTION
8.
Representations, Warranties
and Agreements to Survive Delivery
. All representations,
warranties and agreements contained in this Agreement or in certificates of
officers of the Company or Trustees of the Trust submitted pursuant hereto shall
remain operative and in full force and effect, and shall survive delivery of the
Capital Securities by the Trust.
SECTION
9.
Termination of
Agreement
.
(a)
Termination;
General
. The Purchasers may terminate this Agreement, by
notice to the Offerors, at any time on or prior to the Closing Date if, since
the time of execution of this Agreement or, in the case of (i), since the
respective dates as of which information is given in the 1934 Act Reports, (i)
there has occurred any Material Adverse Effect, or (ii) there has occurred any
material adverse change in the financial markets in the United States, any
outbreak of hostilities or escalation thereof or any other calamity or crisis,
or any change or development involving political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Purchasers, impracticable to purchase the Capital Securities, or
(iii) trading in any securities of the Company has been suspended or limited by
the Commission or any national stock exchange or market on or in which such
securities are traded or quoted, or if trading generally on the American Stock
Exchange, the New York Stock
Exchange
or the Nasdaq National Market has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers or any other
governmental authority, or (iv) a banking moratorium has been declared by United
States federal, Delaware or New York authorities.
(b)
Liabilities
. If
this Agreement is terminated pursuant to this Section, such termination shall be
without liability of any party to any other party except as provided in Section
4 and Section 5 hereof, and provided further that Sections 1, 7 and 8 hereof
shall survive such termination and remain in full force and effect.
SECTION
10.
Notices
. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Offerors shall be directed to
Republic First Bancorp, Inc., 50 South 16th Street, Philadelphia, Pennsylvania
19102, Attention: Paul Frenkiel, with a copy to Thacher Proffitt & Wood llp,
Two World Financial Center, New York, New York 10281, Attention: Robert C.
Azarow, Esq. Notices to the Purchasers shall be directed to Vernon W.
Hill, II, 17000 Horizon Way, Suite 100, Mount Laurel, NJ 08054 with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Sq., New York, New York
10036, Attention: David C. Ingles, The Harry D. Madonna Family Trust, 1320 N.
Avignon Dr., Gladwyne, PA 19035, Steven M. Lewis 1780 Swede Road, Blue Bell, PA
19422, John P. Silvestri, 17000 Horizon Way, Suite 100, Mount Laurel, NJ
08054, and Theodore J. Flocco, Jr., 11 Brookwood Road, Mount Laurel, NJ
08054.
SECTION
11.
Parties
. This
Agreement shall inure to the benefit of and be binding upon each of the
Purchasers and the Offerors and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Purchasers and the
Offerors, and their respective successors and the controlling persons and other
persons referred to in Sections 1, 7 and 8 hereof and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Purchasers and the Offerors and their
respective successors, and said controlling persons and other persons and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation.
SECTION
12.
GOVERNING
LAW
. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES OF SAID STATE OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW.
EACH OF
THE TRUST AND THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW
YORK IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING RELATED TO THIS AGREEMENT
OR ANY OF THE MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF
LACK OF
PERSONAL JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT. EACH OF THE TRUST AND THE COMPANY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
SECTION
13.
Disclosure of Tax Treatment
and Tax Structure
. Notwithstanding anything herein to the
contrary, any party to this Agreement (and each employee, representative or
other agent of any party to this Agreement) may disclose to any and all persons,
without limitation of any kind, the tax treatment and tax structure of the offer
and sale and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure. However, such information relating to the tax treatment or
tax structure is required to be kept confidential to the extent necessary to
comply with any applicable federal or state securities laws. For this
purpose, “tax structure” means any facts relevant to the federal income tax
treatment of the offer and sale contemplated by this Agreement but does not
include information relating to the identity of the Offeror.
SECTION
14.
Effect of
Headings
. The Section headings herein are for convenience only
and shall not affect the construction hereof.
If the
foregoing is in accordance with your understanding of our agreement, please sign
and return to the Company a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the Purchasers and
the Offerors in accordance with its terms.
|
Very
truly yours,
|
|
|
|
|
REPUBLIC
FIRST BANCORP, INC.
|
|
|
|
|
|
By:
|
|
|
|
|
Name:
Harry D. Madonna
|
|
|
|
Title:
Chairman, President and Chief Executive Officer
|
|
|
|
|
|
|
REPUBLIC
FIRST BANCORP CAPITAL TRUST IV
|
|
|
|
|
By:
|
|
|
|
Name:
Harry D. Madonna
|
|
|
Title:
Administrator
|
VERNON W.
HILL, II
|
|
|
|
|
|
Vernon
W. Hill, II
|
|
|
THE
HARRY D. MADONNA FAMILY TRUST
|
By:
|
|
|
Name:
|
|
Title:
|
|
|
STEVEN
M. LEWIS
|
|
|
|
Steven
M. Lewis
|
JOHN P.
SILVESTRI
|
|
|
|
John
P. Silvestri
|
|
|
THEODORE
J. FLOCCO, JR.
|
|
|
|
Theodore
J. Flocco, Jr
|
Schedule
A
Name
|
Amount
|
Vernon
W. Hill, II
|
$6,000,000
|
The
Harry D. Madonna Family Trust
|
$3,000,000
|
Steven
M. Lewis
|
$780,000
|
John P.
Silvestri
|
$780,000
|
Theodore
J. Flocco, Jr.
|
$240,000
|
Schedule
B
Significant
Subsidiary
|
Banking
Subsidiary
|
Republic
First Bank
|
Republic
First Bank
|
ANNEX
A
Pursuant
to Section 5(a) of the Purchase Agreement, special counsel for the Offerors
shall deliver an opinion in substantially the following form:
1. The
Company is incorporated and is validly existing as a corporation in good
standing under the laws of the Commonwealth of Pennsylvania.
2. The
Company has corporate power and authority to (i) execute and deliver, and to
perform its obligations under, the Operative Documents to which it is a party
and (ii) issue and perform its obligations under the Subordinated Debt
Securities.
3. The
Company is registered as a bank holding company under the Bank Holding Company
Act of 1956, as amended.
4. (i)
The Significant Subsidiary is validly existing under the laws of the
jurisdiction of its organization; and (ii) to the best of our knowledge, all of
the issued and outstanding shares of capital stock of the Significant Subsidiary
is owned of record by the Company, directly or through other
subsidiaries.
5. The
deposit accounts of the Bank are insured by the Federal Deposit Insurance
Corporation up to the maximum amount allowable under applicable
law.
6. No
consent, approval, authorization or order of or filing, registration or
qualification with any Governmental Entity is required in connection with the
execution and delivery by the Company of the Operative Documents or the
Subordinated Debt Securities and the consummation of the transactions
contemplated thereby except as have already been obtained or made.
7. The
Purchase Agreement has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and delivery by
the Purchasers, respectively, constitutes a valid and binding
instrument of the Company, enforceable against the Company in accordance with
its terms, except as rights to indemnity and contribution thereunder may be
limited under applicable law or public policy, and subject to the qualifications
that (i) enforcement thereof may be limited by bankruptcy, insolvency,
receivership, reorganization, liquidation, voidable preference, moratorium or
other laws (including the laws of fraudulent conveyance and transfer) or
judicial decisions affecting the enforcement of creditors’ rights generally or
the reorganization of financial institutions and (ii) the enforceability of the
obligations of the Company thereunder is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and to the effect of certain laws and judicial decisions upon
the availability and enforceability of certain remedies, including the remedies
of specific performance and self-help.
8. The
Declaration has been duly authorized, executed and delivered by the Company and
the Administrators.
9. Each
of the Guarantee Agreement and the Indenture has been duly authorized, executed,
and delivered by the Company and, assuming due authorization, execution
and
delivery by the Guarantee Trustee and the Indenture Trustee, respectively,
constitutes a valid and binding instrument of the Company, enforceable against
the Company in accordance with its terms, except as rights to indemnity and
contribution thereunder may be limited under applicable law or public policy,
and subject to the qualifications that (i) enforcement thereof may be limited by
bankruptcy, insolvency, receivership, reorganization, liquidation, voidable
preference, moratorium or other laws (including the laws of fraudulent
conveyance and transfer) or judicial decisions affecting the enforcement of
creditors’ rights generally or the reorganization of financial institutions and
(ii) the enforceability of the Company’s obligations thereunder is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and to the effect of certain
laws and judicial decisions upon the availability and enforceability of certain
remedies, including the remedies of specific performance and
self-help.
10. The
Subordinated Debt Securities have been duly authorized for issuance by the
Company pursuant to the Indenture and, when executed, authenticated and
delivered in the manner provided for in the Indenture and paid for in accordance
with the subscription agreement therefor, will constitute valid and binding
obligations of the Company and will entitle the holders thereof to the benefits
of the Indenture, enforceable against the Company in accordance with their
terms, except as rights to indemnity and contribution thereunder may be limited
under applicable law or public policy, and subject to the qualifications that
(i) enforcement thereof may be limited by bankruptcy, insolvency, receivership,
reorganization, liquidation, voidable preference, moratorium or other laws
(including the laws of fraudulent conveyance and transfer) or judicial decisions
affecting the enforcement of creditors’ rights generally or the reorganization
of financial institutions and (ii) the enforceability of the Company’s
obligations thereunder is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and to the effect of certain laws and judicial decisions upon the availability
and enforceability of certain remedies, including the remedies of specific
performance and self-help.
11. The
execution, delivery and performance of the Operative Documents, Registration
Rights Agreement, the Subordinated Debt Securities and the Capital Securities,
as applicable, by the Company and the Trust and the consummation by the Company
and the Trust of the transactions contemplated by the Operative Documents, as
applicable, will not result in any violation of (i) the charter or bylaws of the
Company, (ii) the charter or bylaws of the Significant
Subsidiary, (iii) the Amended Declaration or the Certificate of Trust
of the Trust, (iv) the certificate of trust, trust agreement and other
agreements or instruments related to the formation of, and issuance of
securities by, First Republic Bancorp Capital Trust II, (v) the
certificate of trust, trust agreement and other agreements or instruments
related to the formation of, and issuance of securities by, First Republic
Bancorp Capital Trust III and (vi) the terms of any agreement, instrument,
contract or other document to which the Company or any of its subsidiaries is a
party or by which any of them or any of their respective properties may be
bound, which agreement, instrument, contract or other document has been filed
with the Securities and Exchange Commission as an exhibit to filings required
under the 1934 Act during the period from and including January 1, 2007 to and
including the date hereof or incorporated by reference to such
filings.
12. Assuming
(i) the accuracy of the representations and warranties, and compliance with the
agreements, contained in the Purchase Agreement and (ii) that the Capital
Securities are sold in the manner contemplated by, and in accordance with, the
Purchase Agreement and the Declaration, it is not necessary in connection with
the offer, sale and delivery of the Capital Securities by the Trust to the
Purchasers to register the Capital Securities, the Guarantee Agreement or the
Subordinated Debt Securities under the 1933 Act or to qualify an indenture under
the Trust Indenture Act of 1939, as amended.
13. Neither
the Company nor the Trust is, and, following the issuance of the Capital
Securities and the consummation of the transactions contemplated by the
Operative Documents and the application of the proceeds therefrom, neither the
Company nor the Trust will be, an “investment company” required to be registered
under the Investment Company Act of 1940 Act, as amended.
In
rendering such opinions, such counsel may (A) state that its opinion is limited
to the laws of New York and the Federal laws of the United States and (B) rely
as to matters involving the application of laws of any jurisdiction other than
New York or the United States, to the extent deemed proper and specified in such
opinion, upon the opinion of other counsel of good standing believed to be
reliable and who are satisfactory to you and as to matters of fact, to the
extent deemed proper, on certificates of responsible officers of the Company and
public officials.
ANNEX
B
Pursuant
to Section 5(b) of the Purchase Agreement, special Delaware counsel for the
Trust shall deliver an opinion in substantially the following form:
1. The
Trust has been duly formed and is validly existing in good standing as a
statutory trust under the Delaware Act.
2. The
Declaration constitutes a valid and binding obligation of the Sponsor and
Trustees party thereto, enforceable against such Sponsor and Trustees in
accordance with its terms.
3. Under
the Delaware Act and the Declaration, the Trust has the requisite trust power
and authority (i) to own its properties and conduct its business, all as
described in the Declaration, (ii) to execute and deliver, and perform its
obligations under, the Operative Documents to which it is a party, (iii) to
authorize, issue, sell and perform its obligations under its Capital Securities
and Common Securities, and (iv) to purchase and hold the Subordinated Debt
Securities.
4. The
Capital Securities have been duly authorized for issuance by the Trust and, when
issued, executed and authenticated in accordance with the Declaration and
delivered against payment therefor in accordance with the Declaration and the
Purchase Agreement, will be validly issued and, subject to the qualifications
set forth in paragraph 5 below, fully paid and nonassessable undivided
beneficial interests in the assets of the Trust and the holders of the Capital
Securities will be entitled to the benefits provided by the
Declaration.
5. Each
holder of Capital Securities, in such capacity, will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. We note, however, that the holders of the Capital Securities may be
required to make payment or provide indemnity or security as set forth in the
Declaration.
6. Under
the Declaration and the Delaware Act, the issuance of the Capital Securities and
Common Securities is not subject to preemptive rights.
7. The
Common Securities have been duly authorized for issuance by the Trust and, when
issued and executed in accordance with the Declaration and delivered against
payment therefor in accordance with the Declaration and the subscription
agreement therefor, will be validly issued undivided beneficial interests in the
assets of the Trust and the holders of the Common Securities will be entitled to
the benefits provided by the Declaration.
8. Under
the Declaration and the Delaware Act, the execution and delivery by the Trust of
the Operative Documents to which it is a party, and the performance by the Trust
of its obligations thereunder, have been duly authorized by the requisite trust
action on the part of the Trust.
9. The
issuance and sale by the Trust of its Capital Securities and Common Securities,
the execution, delivery and performance by the Trust of the Operative Documents
to
which it
is a party, the consummation by the Trust of the transactions contemplated by
the Operative Documents to which it is party, and the compliance by the Trust
with its obligations thereunder are not prohibited by (i) the Declaration or the
Trust Certificate, or (ii) any law or administrative regulation of the State of
Delaware applicable to the Trust.
10. No
authorization, approval, consent or order of any Delaware court or Delaware
governmental authority or Delaware agency is required to be obtained by the
Trust solely in connection with the issuance and sale by the Trust of its
Capital Securities and Common Securities, the due authorization, execution and
delivery by the Trust of the Operative Documents to which it is a party or the
performance by the Trust of its obligations under the Operative Documents to
which it is a party.
11. The
holders of the Capital Securities (other than those holders who reside or are
domiciled in the State of Delaware) will have no liability for income taxes
imposed by the State of Delaware solely as a result of their participation in
the Trust, and the Trust will not be liable for any income tax imposed by the
State of Delaware.
ANNEX
C
Pursuant
to Section 5(c) of the Purchase Agreement, special tax counsel for the Offerors
shall deliver an opinion in substantially the following form:
It is our
opinion that, under current law and assuming the performance of the Operative
Documents in accordance with the terms described therein, the Subordinated Debt
Securities will be treated for United States federal income tax purposes as
indebtedness of the Company.
It is our
opinion that the Trust will be classified for United States federal income tax
purposes as a grantor trust and not as an association taxable as a
corporation.
ANNEX
D
Pursuant
to Section 5(d) of the Purchase Agreement, counsel to the Guarantee Trustee, the
Institutional Trustee, the Delaware Trustee and the Indenture Trustee shall
deliver an opinion in substantially the following form:
1. Wilmington
Trust Company (“WTC”) is a Delaware banking corporation with trust powers, duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with requisite corporate power and authority to execute and
deliver, and to perform its obligations under, the Declaration, the Guarantee
Agreement and the Indenture (collectively, the “Transaction
Documents”).
2. The
execution, delivery, and performance by WTC of the Transaction Documents have
been duly authorized by all necessary corporate action on the part of WTC, and
the Transaction Documents have been duly executed and delivered by
WTC.
3. The
execution, delivery and performance of the Transaction Documents by WTC and the
consummation of any of the transactions by WTC contemplated thereby are not
prohibited by (i) the charter or bylaws of WTC, (ii) any law or administrative
regulation of the State of Delaware or the United States of America governing
the banking and trust powers of WTC, or (iii) to our knowledge (based and
relying solely on the Officer Certificates), any agreements or instruments to
which WTC is a party or by which WTC is bound or any judgments or order
applicable to WTC.
4. The
Subordinated Debt Securities delivered on the date hereof have been
authenticated by due execution thereof and delivered by WTC, as Indenture
Trustee, in accordance with the Indenture. The Capital Securities delivered on
the date hereof have been authenticated by due execution thereof and delivered
by WTC, as Institutional Trustee, in accordance with the
Declaration.
5. None
of the execution, delivery and performance by WTC of the Transaction Documents
and the consummation of any of the transactions by WTC contemplated thereby
requires the consent, authorization, order or approval of, the withholding of
objection on the part of, the giving of notice to, the registration with or the
taking of any other action in respect of, any governmental authority or agency,
under any law or administrative regulation of the State of Delaware or the
United States of America governing the banking and trust powers of WTC, except
for the filing of the Trust Certificate with the Office of the Secretary of
State of the State of Delaware pursuant to the Delaware Act (which filing has
been duly made).
ANNEX
E
THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY OR
ANY INTEREST OR PARTICIPATION HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF, AS
THE CASE MAY BE, AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY OR
ANY INTEREST OR PARTICIPATION HEREIN ONLY (A) TO THE DEBENTURE ISSUER OR THE
TRUST, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A
PERSON THE HOLDER REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER,” AS
DEFINED IN RULE 144A, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR”
WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT OR TO ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS COME
WITHIN SUCH SUBPARAGRAPHS THAT IS ACQUIRING THIS SECURITY OR SUCH INTEREST OR
PARTICIPATION FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE
IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D)
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE DEBENTURE ISSUER AND THE
TRUST PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) OR (D)
ABOVE TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE AMENDED
AND RESTATED DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE
DEBENTURE ISSUER OR THE TRUST. THE HOLDER OF THIS SECURITY OR ANY
INTEREST OR PARTICIPATION HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF, AS THE
CASE MAY BE, AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.
THE
HOLDER OF THIS SECURITY OR ANY INTEREST OR PARTICIPATION HEREIN, BY ITS
ACCEPTANCE HEREOF OR THEREOF, AS THE CASE MAY BE, ALSO AGREES, REPRESENTS AND
WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR
OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH A “PLAN”), OR AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS”
BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING “PLAN ASSETS” OF
ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST OR PARTICIPATION
HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF
AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION
96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS
PURCHASE AND HOLDING OF THIS SECURITY OR SUCH INTEREST OR PARTICIPATION IS NOT
PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO
SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THIS SECURITY OR
ANY INTEREST OR PARTICIPATION HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING HEREOF OR THEREOF, AS THE CASE MAY BE, THAT EITHER (i) IT
IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR
A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER
PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON
OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH
PURCHASE, OR (ii) SUCH PURCHASE AND HOLDING WILL NOT RESULT IN A PROHIBITED
TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH
THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
IN
CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE
REQUIRED BY THE AMENDED AND RESTATED DECLARATION OF TRUST TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS
SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A
LIQUIDATION AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS
THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A
LIQUIDATION AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO
LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE
THE HOLDER OF THIS SECURITY OR ANY INTEREST OR PARTICIPATION HEREIN FOR ANY
PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS
SECURITY OR SUCH INTEREST OR PARTICIPATION, AND SUCH PURPORTED TRANSFEREE SHALL
BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY OR ANY INTEREST OR
PARTICIPATION HEREIN.
REGISTRATION
RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT (this “
Agreement
”)
is made and entered into as of June 10, 2008 by and among Republic First
Bancorp, Inc., a Pennsylvania corporation (the “
Company
”)
and Vernon W. Hill, II (“
Hill
”),
The Harry D. Madonna Family Trust (“
Madonna
”),
John Silvestri (“
Silvestri
”), Steve Lewis
(“
Lewis
”) and
T.J. Flocco Jr. (“
Flocco
”) and their Assignees
(as defined below) (collectively, the “
Holders
”
and each a “
Holder
”).
RECITALS
WHEREAS,
pursuant to other agreements being entered into on the date hereof by the
parties hereto and others, (i) the Holders will acquire shares of the Company’s
common stock, par value $0.01 per share (“
Common
Stock
”), upon conversion of trust preferred securities held by each of
them (the “Trust Preferred Securities”); and
WHEREAS,
the Company and the Holders desire to enter this Agreement for the purpose of
granting to the Holders certain rights in connection with the disposition and
sale of shares of Common Stock which are owned or may be owned by
them;
NOW,
THEREFORE, in consideration of and in reliance on, the recitals and the terms,
conditions and agreements and mutual obligations herein set forth, the parties
hereto agree as follows:
1.
Definitions
. As
used in this Agreement, the following terms shall have the following
meanings:
Affiliate
: as
defined in SEC Rule 144.
Assignee
: as
defined in Section 14 hereof.
Exchange
Act
: the Securities Exchange Act of 1934, as
amended.
Initiating
Holders
: as defined in Section 2(a) hereof.
Person
: any
individual, corporation, partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof, or any other entity
of any type whatsoever.
Registrable
Securities
: at any time, Common Stock held by a Holder upon
conversion of the Trust Preferred Securities though such securities will cease
to be Registrable Securities when they have been distributed to the public
through a broker, dealer or market purchaser in compliance with Rule 144 under
the Securities Act (or any similar rule then in force) or sold pursuant to an
effective registration statement under the Securities Act.
The terms
“
register
,”
“
registered
”
and “
registration
”
refer to a registration effected by preparing and filing with the SEC a
registration statement in compliance with the Securities Act, and the
declaration or ordering of the effectiveness of such registration
statement.
“Registration
Expenses”
shall mean all expenses except as otherwise stated below,
incurred by the Company in complying with Sections 2 and 3 hereof, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company) and the reasonable
fees and disbursements of one counsel for all Holders. Registration
Expenses shall not include Selling Expenses.
SEC
: the
Securities and Exchange Commission.
Securities
Act
: the Securities Act of 1933, as amended.
Selling
Expenses
: all underwriting discounts, selling commissions and
stock transfer taxes applicable to the securities registered by the Holders
except as set forth under “Registration Expenses.”
Trust Preferred
Purchaser
: a Person that purchased the convertible trust
preferred securities from the Company pursuant to the Trust Preferred Securities
Purchase Agreement (as defined below).
Trust Preferred
Securities Purchase Agreement
: the Trust Preferred Securities
Purchase Agreement, dated as of June 10, 2008, by and among the Company, Hill
and Madonna, Silvestri, Lewis and Flocco.
Violation
: as
defined in Section 10(a) hereof.
2.
Request for
Registration
.
(a)
If the
Company shall receive a written request from the Holders holding beneficial
interest of not less than forty percent (40%) of the Registrable Securities (the
“
Initiating
Holders
”) that the Company file a registration statement under the
Securities Act covering Registrable Securities (1) at any time that is at least
twelve (12) months after the effective date of the Trust Preferred Securities
Purchase Agreement, (2) once per twelve (12) month period following the twelve
(12) month anniversary of the effective date of the Trust Preferred Securities
Purchase Agreement and (3) any time after the Company’s market capitalization
exceeds $500 million, then the Company shall:
(i)
within
fifteen (15) days of the receipt thereof, give written notice of such request to
all Holders of Registrable Securities; and
(ii)
use
commercially reasonable efforts to effect, as soon as practicable after receipt
of such request, registration under the Securities Act of all Registrable
Securities that the Initiating Holders and other Holders request to be
registered (and, in the case of a request pursuant to Section 2(a)(3) above,
file a “shelf” registration pursuant to Rule 415 under the Securities Act)
subject to the limitations of Section 2(b), within thirty (30) days of the
mailing of such notice by the Company in accordance with this
Section 2(a);
(b)
If the
Initiating Holders intend to distribute the Registrable Securities covered by
their request by means of an underwriting, they shall so advise the Company as a
part of their request made pursuant to Section 2(a) and the Company shall
include such information in the written notice referred to in Section
2(a). The underwriter will be jointly selected by the Initiating
Holders and the Company. In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder’s participation in such underwriting and the inclusion of such
Holder’s Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company as
provided in Section 4(e)) enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such
underwriting. If any Holder disapproves of the terms of the
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the managing underwriter(s). Notwithstanding any
other provision of this Section 2, if the underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
Holders of Registrable Securities that would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder on a fully-diluted
basis;
provided
, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c)
Notwithstanding
the foregoing, if the Company shall furnish a notice to the Holders requesting a
registration statement pursuant to this Section 2, a certificate signed by
the Chairman, Chief Executive Officer and President of the Company stating that
in the good faith judgment of the Board of Directors, it would be seriously
detrimental to the Company and its stockholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than one hundred twenty
(120) days after receipt of the request of the Initiating Holders;
provided
, however,
that the Company may not utilize this right more than once in any twelve-month
period, and
provided
further,
that the Company shall not register any shares for its own account during such
one hundred twenty (120) day period.
(d)
In
addition, the Company shall not be obligated to effect, or to take any action to
effect, any registration pursuant to this Section 2 during the period starting
with the date sixty (60) days prior to the Company's good faith estimate of the
date of filing of, and ending on a date one hundred twenty (120) days after the
effective date of, a registration subject to Section 3 hereof;
provided
, however,
that the Company is actively employing in good faith all commercially reasonable
efforts to cause such registration statement to become effective.
3.
Company
Registration
.
(a)
If (but
without any obligation to do so) the Company proposes to register any of its
stock or other securities under the Securities Act in connection with the public
offering of such securities solely for cash (other than a registration statement
on Form S-4 or S-8 (or their
successor
forms) or filed in connection with an exchange offer or an offering of
securities solely to the Company’s existing stockholders, and other than as set
forth in Section 3(b) below), the Company shall, at such time, promptly give
each Holder written notice of such registration. Upon the written
request of each Holder given within thirty (30) days after mailing of such
notice by the Company in accordance with this Section 3(a), the Company
shall, subject to the provisions of Section 8, cause to be registered under the
Securities Act all of the Registrable Securities that each such Holder has
requested to be registered;
provided
, however,
that any Holder so requesting shall agree, upon or prior to effectiveness of
such registration, to convert the Trust Preferred Securities to Common Stock to
the extent necessary for such Holder to acquire the number of Registrable
Securities for which such Holder has requested registration. If the
Company decides to register any securities pursuant to this Section 3 by means
of an underwritten offering, then the Company shall have the sole right to
select the underwriters for such offering.
(b)
Notwithstanding
anything to the contrary contained in this Agreement, the Company shall not be
required to include Registrable Securities in any registration statement if the
proposed registration is (i) a registration of a stock option or other employee
incentive compensation or employee benefit plan or of securities issued or
issuable pursuant to any such plan, or a registration statement relating to
warrants, options or shares of capital stock granted or to be granted or sold
primarily as incentive compensation to employees and officers of the Company,
(ii) a registration of securities issued or issuable pursuant to a stockholder
reinvestment plan or other similar plan, (iii) a registration of securities
issued in exchange for any securities or any assets of, or in connection with a
merger or consolidation with, an unaffiliated company, (iv) a registration of
securities pursuant to a “rights” or other similar plan designed to protect the
Company’s stockholders from a coercive or other attempt to cause a change in
control of the Company or (v) a registration of securities filed pursuant to
Rule 145 under the Securities Act or any successor rule.
4.
Obligations of the
Company
. Whenever required under this Agreement to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a)
Prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use its commercially reasonable efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to one hundred twenty (120)
days or until the distribution contemplated in the registration statement has
been completed;
provided
, however,
that (i) such one hundred twenty (120) day period shall be extended for a period
of time equal to the period the Holder refrains from selling any securities
included in such registration at the request of an underwriter of Common Stock
(or other securities) of the Company; and (ii) in the case of any
registration of Registrable Securities on Form S-3 that are intended to be
offered on a continuous or delayed basis, such one hundred twenty (120) day
period shall be extended, if necessary, to keep the registration statement
effective until all such Registrable Securities are sold,
provided
that Rule
415, or any successor rule under the Securities Act, permits an offering on a
continuous or delayed basis, and
provided
further that
applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
that
(A) includes any prospectus required by Section 10(a)(3) of the
Securities Act or (B) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (A) and
(B) above to be contained in periodic reports filed pursuant to Section 13
or 15(d) of the Exchange Act in the registration statement.
(b)
Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement.
(c)
Furnish
to the Holders such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.
(d)
Use its
commercially reasonable efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Holders;
provided
, however,
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act.
(e)
In the
event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement.
(f)
In the
event of the issuance of any stop order suspending the effectiveness of a
Registration Statement, or of any order suspending or preventing the use of any
related prospectus or ceasing trading of any securities included in such
Registration Statement for sale in any jurisdiction, use its commercially
reasonable efforts promptly to obtain the withdrawal of such order.
(g)
Notify
each Holder of Registrable Securities covered by such registration statement at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(h)
Cause all
such Registrable Securities registered pursuant hereunder to be listed on a
national securities exchange and each exchange on which similar securities
issued by the Company are then listed.
(i)
Use its
commercially reasonable efforts to cause all Registrable Securities covered by
such Registration Statement to be registered with or approved by such other
governmental agencies, authorities or self-regulatory bodies as may be necessary
or reasonably advisable in light of the business and operations of the Company
to enable the Holder or Holders thereof to consummate the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition thereof.
(j)
Notify
each Holder of any Registrable Securities being sold and covered by such
Registration Statement (i) when the prospectus or any prospectus supplement or
post-effective amendment has been filed and, with respect to such Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC for amendments or supplements to such
registration statement or to amend or to supplement such prospectus or for
additional information and (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of such registration statement or the initiation of
any proceedings for any of such purposes.
(k)
Make
available for inspection by any Holder of the Registrable Securities being sold,
any underwriter participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by any such
Holder or underwriter, all financial and other records, pertinent corporate
documents and documents relating to the business of the Company, and cause the
Company's officers, directors, employees and independent accountants to supply
all information reasonably requested by any such Holder, underwriter, attorney,
accountant or agent in connection with such Registration Statement; provided,
that each Holder will, and will use its commercially reasonable efforts to cause
each such underwriter, accountant or other agent to enter into a customary
confidentiality agreement in form and substance reasonably satisfactory to the
Company; provided further, that such confidentiality agreement will not contain
terms that would prohibit any such Person from complying with its obligations
under applicable law or the rules of the NASDAQ Stock Market.
(l)
Otherwise
use its commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months beginning with the first day of the Company's first full calendar
quarter after the effective date of the Registration Statement, which earnings
statement will satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder.
(m)
If such
registration includes an underwritten public offering, obtain one or more
comfort letters, addressed to the Holders of the Registrable Securities being
sold and the underwriters of such offering, signed by the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by comfort letters.
(n)
Provide
legal opinions of the Company's outside counsel, addressed to the Holders of the
Registrable Securities being sold (and, if such registration includes an
underwritten public offering, to the underwriters of such offering), with
respect to the Registration Statement and prospectus in customary form and
covering such matters of the type customarily covered by legal opinions of such
nature.
(o)
Provide a
transfer agent and registrar for all Registrable Securities registered pursuant
hereunder and a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration.
(p)
Use its
commercially reasonable efforts to take or cause to be taken all other actions,
and do and cause to be done all other things, necessary or reasonably advisable
to effect the registration of such Registrable Securities contemplated
hereby.
5.
Furnish
Information
. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be reasonably required to effect the registration of such Holder’s
Registrable Securities.
6.
Expenses of Demand
Registration
. Registration Expenses incurred in connection
with any registration, filing or qualification of Registrable Securities with
respect to the registrations pursuant to Section 2 for each Holder shall be
borne by the Company and all Selling Expenses relating to Registrable Securities
shall be borne and paid on a pro rata basis by each participating Holder and, if
it participates, the Company;
provided
, however,
that the Company shall not be required to pay for any Registration Expenses or
Selling Expenses in connection with a registration proceeding begun pursuant to
Section 2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 2, or unless such
withdrawal results from the Holders learning of material adverse information
about the Company not known or publicly available to the Holders at the time of
their request. The Holders and the Company (if the Company
participates in the registration) shall bear and pay all Selling Expenses
incurred in connection with the registrations pursuant to Section 2 on a pro
rata basis.
7.
Expenses of Company
Registration
. The Company shall bear and pay all Registration
Expenses (other than Selling Expenses relating to Registrable Securities)
incurred in connection with any registration, filing or qualification of
Registrable Securities with respect to the registrations pursuant to
Section 3 for each Holder (which right may be assigned as provided in
Section 13). The Holders and the Company (if the Company
participates in the registration) shall bear and pay all Selling Expenses
incurred in connection with the registrations pursuant to Section 3 on a pro
rata basis.
8.
Underwriting
Requirements
. In connection with any offering involving an
underwriting of shares of the Company’s capital stock, the Company shall not be
required under Section 3 to include any of the Holders’ securities in such
underwriting unless they accept the customary terms of the underwriting as
agreed upon between the Company and the underwriters selected by it and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company pursuant to the
guidelines set out below. If the total amount of securities,
including Registrable Securities, requested by stockholders to be included in
such offering, when added to the securities to be offered by the
Company,
exceeds the maximum amount of securities that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters determine in
their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the Holders according to
the total amount of securities entitled to be included therein owned by each
Holder or in such other proportions as shall mutually be agreed to by such
Holders). For purposes of the preceding parenthetical concerning
apportionment, for any Holder that is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single Holder,
and any pro-rata reduction with respect to such Holder shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such Holder. If any Registrable
Securities are excluded from any registration pursuant to this Section 8, no
other securities (except securities offered by the Company) shall be included in
such registration.
9.
Delay of
Registration
. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any such registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Agreement.
10.
Indemnification
. In
the event any Registrable Securities are included in a registration statement
under this Agreement:
(a)
The
Company will indemnify and hold harmless each Holder, any underwriter (as
defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Exchange Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the Exchange
Act or other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a “
Violation
”):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto
or any issuer freewriting prospectus (as defined in Securities Act Rule 433),
(ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, the Financial Industry Regulatory
Authority (“
FINRA
”)
rules, any state securities law or any rule or regulation promulgated under such
Acts or any state securities law; and the Company will pay to each such Holder,
underwriter or controlling person any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action as such expenses are incurred;
provided
, however,
that the indemnity agreement contained in this Section 10(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company,
which consent shall not be unreasonably withheld, nor shall the Company be
liable in any case for any loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with information
furnished
in writing (including electronic transmissions) expressly for use in connection
with such registration by any such Holder, underwriter or controlling
person.
(b)
To the
extent permitted by law, each selling Holder will severally and not jointly
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the Exchange Act, the
FINRA rules or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with information
furnished in writing (including electronic transmissions) by such Holder
expressly for use in connection with such registration; and each such Holder
will pay severally and not jointly any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this Section
10(b), in connection with investigating or defending any such loss, claim,
damage, liability, or action;
provided
, however,
that the indemnity agreement contained in this Section 10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder, which consent
shall not be unreasonably withheld; and
provided
further that
in no event shall (i) any Holder have any indemnity under this Section 10(b) for
any amount that exceeds the net proceeds from the offering received by such
Holder and (ii) any person or entity found guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) be entitled to
contribution hereunder.
(c)
Promptly
after receipt by an indemnified party under this Section 10 of notice of the
commencement of any action (including any governmental action), such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 10, deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties;
provided
, however,
that an indemnified party (together with all other indemnified parties that may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of liability to the indemnified
party under this Section 10 to the extent of such prejudice, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 10.
(d)
If the
indemnification provided for in this Section 10 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss,
liability,
claim, damage, or expense referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party hereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as any
other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties’
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. In no event shall any Holder be
liable under Sections 10(c) and 10(b) taken together for amounts that exceed the
net proceeds from the offering received by such Holder.
(e)
Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
(f)
The
obligations of the Company and Holders under this Section 10 shall survive the
completion of any offering of Registrable Securities in a registration statement
under this Agreement, and otherwise.
11.
Reports Under the Exchange
Act
. With a view to making available to the Holders the
benefits of Rule 144 promulgated under the Securities Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a)
make and
keep public information available, as those terms are understood and defined in
SEC Rule 144, at all times after the effective date of the first registration
statement filed by the Company for the offering of its securities to the general
public;
(b)
take such
action, including the voluntary registration of its Common Stock under
Section 12 of the Exchange Act, as is necessary to enable the Holders to
utilize Form S-3 for the sale of their Registrable Securities, such action to be
taken as soon as practicable after the end of the fiscal year in which the first
registration statement filed by the Company for the offering of its securities
to the general public is declared effective;
(c)
file with
the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(d)
furnish
to any Holder forthwith upon request (i) a written statement by the Company
that it has complied with the reporting requirements of SEC Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual
or
quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration or pursuant to such
form.
12.
Market Stand-Off
Agreement
. Each Holder hereby agrees that, during the period
of duration specified by the Company and an underwriter of common stock or other
securities of the Company, following the effective date of a registration
statement of the Company filed under the Securities Act, it shall not (except
for bona fide charitable gifts or dispositions to any trust for the direct or
indirect benefit of the undersigned and/or an immediate family member of the
undersigned), to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period except
common stock included in such registration;
provided
, however,
that:
(a)
such
agreement shall be applicable only to the first such registration statement of
the Company that covers common stock (or other securities) to be sold on its
behalf to the public in an underwritten offering;
(b)
such
market stand-off time period shall not exceed one hundred eighty (180) days;
and
(c)
all
officers, directors and holders of 5% or more of the outstanding Common Stock of
the Company enter into similar agreements.
In order
to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period. Notwithstanding the foregoing, the
obligations described in this Section 12 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future.
13.
Limitations on Subsequent
Registration Rights
. From and after the date these
registration rights are granted, the Company shall not, without the prior
written consent of the Holders of not less than fifty percent (50%) of the
Registrable Securities then held by Holders, voting together as a class, enter
into any agreement with any holder or prospective holder of any securities of
the Company that would allow such holder or prospective holder to include such
securities in any registration filed under Section 2 or 3 hereof other than
rights subordinate to the rights of any Holder hereunder.
14.
Assignment of Registration
Rights
. The Registrable Securities, the rights to cause the
Company to register Registrable Securities pursuant to this Agreement and the
Trust Preferred Securities may be assigned (but only with all related
obligations and, in the case of the Trust Preferred Securities, in accordance
with the terms and limitations provided in the Trust Preferred Securities
Purchase Agreement, Amended and Restated Declaration of Trust, dated as
of June
10, 2008, by and among the Company, Wilmington Trust Company, as
Institutional Trustee, Wilmington Trust Company, as Delaware Trustee, the
Administrators named therein and the Indenture, dated as of June 10, 2008,
between the Company and Wilmington Trust Company, as Trustee) by a Holder to one
or more transferees or assignees of such securities (each an “
Assignee
”),
provided that: (a) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such Assignee
and the securities with respect to which such registration rights are being
assigned; (b) such Assignee agrees in writing to be bound by and subject to
the terms and conditions of this Agreement; (c) such assignment shall be
effective only if immediately following such transfer the further disposition of
such securities by the Assignee is restricted under the Securities Act; and (d)
immediately following such assignment, the shares acquired by the Assignee would
continue to constitute “Registrable Securities” as defined herein.
15.
Termination of Registration
Rights
. No Holder shall be entitled to exercise any right
provided for in this Agreement after three (3) years following the conversion of
all of the Trust Preferred Securities to Common Stock.
16.
Notices
. All
written communications provided for hereunder shall be shall be sent by
overnight courier or delivery service (with charges prepaid) or by facsimile
with confirmation sent by first class mail and
(a)
if to a
Holder, addressed to such Holder at his address on the books of the Company
relative to his Registrable Securities, or at such other address as such Holder
shall have specified to the Company in writing, and
(b)
if to the
Company, addressed as follows:
Republic
First Bancorp, Inc.
50 South
16
th
Street
Suite
2400
Philadelphia,
PA
Attn: Harry
D. Madonna
Facsimile
No. (215) 735-0955
Thacher
Proffitt & Wood, llp
Two World
Financial Center
New York,
NY 10281
Attn:
Robert C. Azarow
Fax:
212-912-7751
Such
communications shall be deemed delivered on (i) the date on which delivered,
with receipt acknowledged, (ii) the date on which sent by facsimile and
confirmed by answerback, and (iii) the next business day if delivered by
overnight courier or delivery service, as the case may be.
17.
Jurisdiction; Service of
Process
. Each party hereto hereby irrevocably and
unconditionally agrees that any suit, action or proceeding with respect to this
Agreement, or any
proceeding
to execute or otherwise enforce any judgment in respect of any breach thereof,
may be brought against such party in the courts of the State of New York sitting
in New York County, or in the U.S. District Court for the Southern District of
New York, as the party bringing such suit may in its sole discretion elect, and
by the execution and delivery of this Agreement, each party hereto irrevocably
submits to the jurisdiction of each such court, and agrees that process served
either personally or by registered mail shall constitute, to the extent
permitted by law, adequate service of process in any such suit. In
addition, each party hereto hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue in any suit, action or proceeding arising out of or relating to this
Agreement, brought in the said courts, and hereby irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall in any way be deemed to
limit the ability of any party hereto to serve any such writs, process or
summonses, in any manner permitted by applicable law or to obtain jurisdiction
over any other party in such other jurisdiction, and in such manner, as may be
permitted by applicable law.
18.
WAIVER OF TRIAL BY
JURY
. EACH PARTY HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO A TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR RELATING TO ANY OF THE
MATTERS CONTAINED IN THIS AGREEMENT.
19.
Modification; Waiver in
Writing
. No modification, amendment, extension, discharge,
termination or waiver of any provision of this Agreement shall be effective
unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given.
20.
Governing Law
. This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of New York without giving effect to any choice or conflict of
law provision or rule that would cause the application of the laws of any
jurisdiction other than the State of New York.
21.
Severability
. The
provisions of this Agreement are severable, and if any clause or provision shall
be held invalid or unenforceable in whole or in part in any jurisdiction, then
such invalidity or unenforceability shall affect only such clause or provision,
or part thereof, in such jurisdiction and shall not in any manner affect the
validity of such clause or provision in any other jurisdiction, or any other
clause or provision of this Agreement in such jurisdiction.
22.
Benefit.
This
Agreement shall be binding upon and, except as otherwise provided herein, inure
to the benefit of each Holder and the legal representatives, successors and
permitted assigns of such Holder. This Agreement shall be binding
upon and inure to the benefit of the Company and its successors and assigns,
including without limitation any Person which may acquire all or substantially
all of the assets of the Company or into which the Company may be consolidated
or merged.
23.
Headings
. Section
headings throughout this Agreement are for the convenience of the parties and
shall not be considered in the construction or interpretation of this
Agreement.
Personal
pronouns shall be deemed masculine, feminine or neuter, singular or plural, as
the context requires.
IN
WITNESS WHEREOF, as of the day and year first above written, the Company has
caused this Agreement to be executed on its behalf by its duly authorized
officer, and each Holder has executed this Agreement or caused this Agreement to
be executed on its behalf by its duly authorized representative.
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COMPANY:
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REPUBLIC
FIRST BANCORP, INC.
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By
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Name
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Title
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HOLDERS:
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Vernon
W. Hill, II
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The
Harry D. Madonna Family Trust
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By
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Name
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Title
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John
Silvestri
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Steve
Lewis
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T.J.
Flocco, Jr.
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CONSULTING
AGREEMENT
This
CONSULTING AGREEMENT (“
Consulting
Agreement
”) is entered into, as of June 10, 2008 (the "
Effective Date
"), by
and between Republic First Bancorp, Inc. (the “
Company
”) and Vernon
W. Hill, II (“
Consultant
”).
WITNESSETH
WHEREAS,
the Company and Consultant wish to enter into a consulting relationship on the
terms and conditions exclusively set forth in this Consulting
Agreement.
NOW
THEREFORE, in consideration of the mutual covenants and promises set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Consultant hereby
agree as follows:
1.
Term;
Termination
.
(a)
The
initial term of this Consulting Agreement shall commence on the Effective Date
and shall continue until the fourth anniversary of the Effective
Date, unless terminated sooner pursuant to Section 1(b) below (the "
Initial
Term
"). This Consulting Agreement shall continue in effect for
successive one-year periods thereafter, unless terminated sooner pursuant to
Section 1(b) below or unless notice is given in writing by either party to the
other party – at least 60 days prior to the fourth anniversary of the
Effective Date or prior to any anniversary of the Effective Date thereafter – of
the Company's or Consultant's desire to modify, amend or terminate this
Consulting Agreement (collectively, including the Initial Term, the "
Term
").
(b)
Consultant
may terminate this Consulting Agreement and the Term at any time upon 10 days
advance written notice to the Company. The Company may
terminate this Consulting Agreement and the Term upon written notice to
Consultant only if (i) Consultant engages in willful misconduct or is
grossly negligent in the performance of the "Consulting Services" (as defined
below); (ii) Consultant materially fails or refuses to perform the
Consulting Services after reasonable advance request by the Company; (iii)
Consultant is convicted of, or enters a plea of guilty or
nolo contendere
to, a felony;
(iv) Consultant engages in any willful or intentional act that is materially
injurious to the reputation, business or business relationships of the Company
or its subsidiaries; (v) Consultant is unable, with reasonable accommodation, to
perform the Consulting Services because of physical or mental impairment; or
(vi) Consultant breaches in any material respect any of his obligations under
Section 4 below. The Term shall also end without any action by the Company upon
the death of the Consultant.
(c)
Upon any
termination of Consultant's engagement as a consultant hereunder, the Company
shall pay Consultant all fees and reimburse Consultant for all reasonable
expenses incurred hereunder prior to the date of termination.
2.
Consulting
Services
. From time to time during the Term, Consultant shall
provide advisory and consulting services with respect to strategic matters and
opportunities regarding the Company and its business and operations, for a
minimum of 24 hours per month (the "
Consulting
Services
").
3.
Consulting
Fees
. As compensation for the Consulting Services, the Company
will pay to Consultant a monthly fee based on a per annum rate of Two Hundred
Fifty Thousand Dollars ($250,000), payable via bank wire transfer on the last
day of each month. In addition, the Company shall reimburse
Consultant for all reasonable out-of-pocket expenses incurred by Consultant in
connection with the performance of the Consulting Services. The
Company shall reimburse all expenses due to Consultant within a reasonable
period after Consultant submits such expenses to the Company for reimbursement
provided that the expenses are incurred during the Term, are submitted to the
Company within (30) days after they are incurred, and otherwise are
substantiated in accordance with the reimbursement policy of the
Company. If any reimbursement is taxable to the Consultant, the
following provisions shall apply: The amount of expenses that are eligible for
reimbursement during the taxable year of the Consultant may not affect the
expenses eligible for reimbursement in any other taxable year. The
reimbursement must be paid to the Consultant within thirty (30) days after the
Consultant submits the related expense reports and receipts. The
right to reimbursement is not subject to liquidation or exchange for another
benefit. A taxable reimbursement otherwise will be made in a manner
intended to avoid the imposition of tax under Section 409A of the Internal
Revenue Code of 1986.
4.
Restrictive
Covenants
.
(a)
Non-Competition
.
Consultant hereby covenants and agrees that during the Term, Consultant shall
not, without the written consent of the Company, become an officer, employee,
consultant, director or trustee of any savings bank, savings and loan
association, savings and loan holding company, bank or bank holding
company or credit union, or any direct or indirect subsidiary of any such
entity, which is headquartered in the states of New York, New Jersey or
Pennsylvania or the owner of 10% or greater of the voting equity of any such
entity;
provided,
however
, that this shall not prohibit or restrict any investment in any
such entity by Hill Townsend Capital or any other investment company or
fund with which Consultant is affiliated and the fund manager or advisor for
which is registered with the U.S. Securities and Exchange
Commission.
(b)
Conf
identiality
. Consultant
hereby covenants and agrees that during the Term and for the period ending two
years after the latter of (i) the effective date of termination of this
Consulting Agreement and (ii) the date upon which the Designee ceases to serve
as a director of the Company and the Bank he shall not directly or indirectly
use or disclose, except as required by law or judicial or regulatory proceedings
or as authorized by the Company, any “Company Information” (as defined below)
that Consultant may have or acquire (whether or not developed or compiled by
Consultant) during the Term. The term “Company Information” as used
in this Consulting Agreement shall mean confidential or proprietary information
including
strategic
plans specific to the Company and its business operations, technical and
financial information and customer or client lists, relating to the Company or
its programs or procedures, including without limitation, information received
by the Company from third parties under confidential
conditions. Notwithstanding the foregoing, the term “Company
Information” shall also include, without limitation, the Company’s computer
database, forms and form letters, form contracts, information regarding specific
transactions, financial information and estimates and long-term planning and
goals specific to the Company and its business operations. The term
“Company Information” shall not include information that has become generally
available to the public other than as a result of disclosure by Consultant in
violation of this Consulting Agreement. Consultant also agrees to
comply with the terms of the Company’s securities trading policy during the
Term. Notwithstanding anything to the contrary set forth herein, the
Company acknowledges that Consultant has been retained due to, among other
things, provide his experience and expertise in the management of the
operations, growth and strategic development of retail and commercial banking
businesses, and the restrictions on disclosure and use of Company Information
set forth in this Section 4(b) shall not be deemed to prohibit Consultant from
utilizing that experience and expertise following termination of the non-compete
covenant set forth in Section 4(a) above in connection with his acting in any
capacity or taking any action that might otherwise be prohibited during the
period of effectiveness of such non-compete covenant.
(c)
Non-Solicitation
. Consultant
hereby covenants and agrees that during the Term and, if
this Consulting Agreement is terminated prior to the expiration of the
Initial Term, for a period of six (6) months after the effective date of
such termination, Consultant shall not without the written consent of the
Company: (i) solicit, offer employment to, or take any other action
intended to cause any officer or employee of the Company or any of its
subsidiaries to terminate his or her employment and accept employment or become
affiliated with, or provide services for compensation in any capacity whatsoever
to, any savings bank, savings and loan association, bank, bank holding company,
savings and loan holding company, or other financial institution;
(ii) provide any information, advice or recommendation to any officer or
employee of the Company or any of its subsidiaries with respect to any savings
bank, savings and loan association, bank, bank holding company, savings and loan
holding company, or other financial institution, that is intended to
cause such officer or employee of the Company or any of its affiliates or
subsidiaries to terminate his or her employment and accept employment or become
affiliated with, or provide services for compensation in any capacity whatsoever
to, any savings bank, savings and loan association, bank, bank holding company,
savings and loan holding company, or other financial institution; or (iii)
solicit, provide any information, advice or recommendation or take any other
action intended to cause any customer (other than Consultant or any customer
affiliated with or related to Consultant as of the date of this Consulting
Agreement) of the Company or any of its subsidiaries to terminate an existing
business or commercial relationship with the Company or its
subsidiaries.
5.
Independent
Contractor Relationship
. The manner, means, details or methods
by which Consultant performs the Consulting Services under this Consulting
Agreement shall be solely within Consultant's discretion. The Company
shall
not have
the authority to, nor shall it, supervise, direct or control the manner, means,
details or methods by which Consultant performs the Consulting Services under
this Consulting Agreement and nothing in this Consulting Agreement shall be
construed to grant the Company any such authority. Consultant shall
not become, by virtue of the consulting relationship described herein, an
employee of the Company. Consultant and the Company acknowledge and
agree that Consultant's relationship with the Company shall be that of an
independent contractor. Nothing in this Consulting Agreement is
intended, or should be construed, to create a partnership, agency or joint
venture between Consultant and the Company.
6.
Board
Representation
.
Subject to the
director qualification standards of each of the Company and Republic First Bank
(the “Bank”), within 30 calendar days of the date of this Consulting Agreement,
the Company shall, and shall cause the Bank to, appoint Consultant’s designee
(the “Designee”) to the Board of Directors of the Company and the Board of
Directors of the Bank, respectively, as a Class III member to serve in
accordance with the articles of incorporation and bylaws of the Company and the
articles of incorporation and bylaws of the Bank. During the Term,
(i) with respect to each meeting of the Company's stockholders at which the
Designee's then-current term expires, the Company's board of directors shall
nominate the Designee and the Company shall recommend to its stockholders the
election of the Designee to the Company's board of directors, and the Company
shall solicit proxies for election of the Designee to the same extent as it
solicits proxies for its other nominees for the board of directors, and (ii)
with respect to each meeting of the Bank's stockholder (or any action by written
consent in lieu of such meeting) at which the Designee's then-current term
expires, the Company shall elect the Designee to serve on the Bank's board of
directors, in each case subject to the director qualification standards of the
Company and the Bank, respectively. During the Term, in the event
that the Designee is unable to continue serving as a director of the Company and
the Bank as a result of illness, incapacity, death, retirement, resignation or
any other reason, Consultant shall designate an individual to replace the
Designee as a director of the Company and the Bank, subject to the director
qualification standards of the Company and the Bank, respectively, and the
Company shall promptly take all action necessary to cause such individual to be
elected to the boards of directors of the Company and the Bank (and such
individual shall constitute the "Designee" for all purposes
hereunder). The Designee shall be entitled to the same compensation,
expense reimbursement and indemnification in connection with his or her service
as a director as are enjoyed by the other members of the board of directors of
the Company and the Bank. Upon termination of this Consulting Agreement pursuant
to Section 1(b) by the Company or by the Consultant, or, if later, on such date
as Consultant, together with (i) his affiliates, (ii) the persons listed on the
attached Exhibit A and (iii) any other person who may be deemed, with
Consultant, to constitute a “group,” (within the meaning of Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder), is not the
record or beneficial owner of at least 4.9% of the outstanding Common Stock of
the Company, Consultant shall use his reasonable best efforts to cause the
Designee to resign from service as a director of the Company and the
Bank.
7.
Other
Agreements of the Consultant
.
In consideration
of the provisions of this Consulting Agreement, during the Term and, if this
Consulting Agreement is terminated prior to the expiration of the Initial Term,
during the period ending on and including the date on which the Designee ceases
to serve as a director of the Company and the Bank, Consultant agrees as
follows:
(a)
Obligation Regarding
Voting
. To the extent permitted by law, Consultant shall vote or cause to
be voted Company stock beneficially owned by Consultant in favor of Company
proposals regarding ratification of the Company’s auditors and election of
Company nominees to its Board of Directors.
(b)
Negative Covenants
.
Unless required by law or court order, Consultant shall not, directly or
indirectly:
i.
seek or
accept representation of more than one member of the Board of Directors of the
Company or the Bank;
ii.
seek to
have any representative serve as the Chairman of the Board of directors, or
chairman of an executive or similar committee of the Company or the Bank’s Board
of Directors or as President or Chief Executive Officer of the Company or
the Bank;
iii.
propose a
director in opposition to nominees proposed by the management of the Company or
the Bank for the Board of Directors of the Company or the Bank,
respectively;
iv.
support,
initiate or participate in any proxy contest against the Company or the
Bank;
v.
cause,
cooperate or otherwise aid in the preparation of any press release or other
publicity (other than filings required by securities laws) concerning the
Company or the Bank or its operations without prior approval of the Company
unless required by law, in which case notice of such requirement shall be given
to the Company or otherwise make any public statement in opposition to, or that
would reflect negatively against, the Company or the Bank, the Board of
Directors of the Company or the Bank, or any of the officers of the Company or
the Bank;
vi.
directly
or indirectly participate or act in concert with any affiliate, group or other
person to participate, by encouragement or otherwise, in any litigation seeking
to effect or facilitate (i) a change in control, consolidation, merger or sale,
conveyance, transfer or other disposition of all or substantially all of the
property and assets of the Company or the Bank, (ii) termination or removal of
any of the Company’s officers or directors or (iii) a proposal regarding any
action described in clauses (i) or (ii) above;
vii.
seek to
amend, or otherwise take action to change, the articles of incorporation,
charter, or bylaws of the Company or the Bank;
viii.
acquire
beneficial ownership of 10.0% or more of the outstanding common stock of the
Company; or
ix.
assist,
aid or abet any of its affiliates or associates that are not parties to this
Consulting Agreement or act in concert with any person or company to do any of
the foregoing.
8.
Specific
Performance
. The parties acknowledge that the covenants set
forth in Sections 4, 6 and 7 are under all of the circumstances reasonable and
necessary for the protection of the Company and its respective business and the
Consultant, as applicable. In the event that Company or the
Consultant, as applicable, shall breach any of the provisions of Sections 4, 6
or 7, or in the event that any such breach is threatened by such party, in
addition to and without limiting or waiving any other remedies available to the
non-breaching party, at law or in equity, the Company or the Consultant, as
applicable, shall be entitled to immediate injunctive relief in any court,
domestic or foreign, having the capacity to grant such relief, without the
necessity of posting a bond, to restrain any such breach or threatened breach
and to enforce the provisions of Sections 4, 6 and 7 while such provisions are
in effect. The Company and the Consultant acknowledge and agree that
there is no adequate remedy at law for any such breach or threatened breach and,
in the event that any action or proceeding is brought seeking injunctive relief,
the breaching party shall not use as a defense thereto that there is an adequate
remedy at law. Nothing in this Section 8 shall affect or restrict or
limit any other provisions of this Consulting Agreement, including Company’s or
the Consultant’s right to terminate this Consulting Agreement pursuant to
Section 1 hereof.
9.
Assignment
.
The obligations under this Consulting Agreement are personal to Consultant and
may not be assigned by Consultant. This Consulting Agreement is
binding on, and will inure to the benefit of, the Company and its successors and
assigns.
10.
Counterparts
. This
Consulting Agreement may be executed in several counterparts, each of which is
an original. It shall not be necessary in making proof of this
Consulting Agreement or any counterpart hereof to produce or account for any of
the other counterparts.
11.
Governing
Law
. This Consulting Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, without regard
to its choice-of-law rules.
12.
Entire
Agreement; No Oral Modifications
. This Consulting Agreement
sets forth the entire agreement between Consultant and the Company with respect
to the subject matter contained therein and supersedes any and all other prior
agreements, promises, covenants, arrangements, negotiations, communications,
representations or warranties. No waiver or modification in whole or
in part of this Consulting Agreement, or any term or condition hereof, shall be
effective against any party unless in writing and duly signed by the party
sought to be bound.
13.
Notice
. For
the purposes of this Consulting Agreement, notices, demands and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when delivered or (unless otherwise specified) mailed by
United States certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Consultant:
Vernon W.
Hill, II
Hill
& Co.
17000
Horizon Way
Mt.
Laurel, NJ 08054
If to Company:
Republic
First Bancorp, Inc.
50 South
16th Street
Philadelphia,
PA 19102
Attention:
Harry D. Madonna
Chairman,
President and Chief Executive Officer
or to
such other address as any party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
14.
Validity
. The
invalidity or unenforceability of any provision or provisions of this Consulting
Agreement shall not affect the validity or enforceability of any other provision
of this Consulting Agreement, which shall remain in full force and
effect.
15.
Representations
of Consultant
. The Consultant hereby represents to the Company as
follows: (i) except for the Amended and Restated Employment Agreement between
Consultant and Commerce Bancorp, Inc., dated January 1, 2006, he is not bound by
the terms of any agreement with any previous employer or other party to refrain
from using or disclosing any trade secret or confidential or proprietary
information in the course of his employment with the Company or to refrain from
competing, directly or indirectly, with the business of such previous employer
or other party, or by any other agreement that could restrict the Consultant’s
ability to perform the Consulting Services contemplated hereby; (ii) his
performance of Consulting Services as an independent contractor of the Company
does not and will not breach any agreement to keep in confidence proprietary
information, knowledge or data acquired by him in confidence or in trust prior
to his engagement of providing consulting services as an independent contractor
to the Company; (iii) to his knowledge, the Consultant is not prevented from
performing the Consulting Services by any applicable statute, rule, or
regulation or regulatory authority; (iv) he has carefully read this Consulting
Agreement, understands the contents herein, and freely and voluntarily assents
to all of the terms and conditions of this Consulting Agreement; and (v) he has
had an opportunity to fully discuss and review the terms of this Consulting
Agreement with an attorney.
16.
Survival
. The
provisions of Sections 4(b), 4(c) and 7 shall survive the termination of this
Consulting Agreement and shall terminate only at the conclusion of the
respective periods stated therein;
provided
,
however
, that if the Company
terminates this Consulting Agreement, the provisions of Section 7 shall not
survive. Except as set forth above, the provisions of this Consulting
Agreement shall not survive termination of this Consulting
Agreement.
IN
WITNESS WHEREOF, Consultant and a duly authorized representative of the Company
have executed this Consulting Agreement as of the Effective Date.
VERNON
W. HILL, II
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REPUBLIC
FIRST BANCORP, INC.
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By:
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Vernon
W. Hill, II
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Harry
D. Madonna
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Chairman,
President and Chief
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Executive
Officer
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Exhibit
A
John
Silvestri
Steve
Lewis
T.J.
Flocco Jr.
10
Exhibit
31.1
REPUBLIC
FIRST BANCORP, INC.
CERTIFICATIONS
PURSUANT TO
SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002
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I,
Harry D. Madonna, certify that:
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1.
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I
have reviewed this Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008 of Republic First Bancorp, Inc. (the
"Company");
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2.
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Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
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3.
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Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company
as of, and for, the periods presented in this
report;
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4.
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The
Company's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a–15(f) and 15d-15(f)) for the Company and
have:
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(a)
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Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
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(b)
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Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
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(c)
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Evaluated
the effectiveness of the Company's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation;
and
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(d) Disclosed
in this report any change in the Company’s internal control over financial
reporting that occurred during the Company’s most recent fiscal quarter
(the Company’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting;
and
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5.
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The
Company's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the Company's auditors and the audit committee of the Company's board of
directors (or persons performing the equivalent
functions):
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(a)
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All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company's ability to record,
process, summarize and report financial information;
and
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(b)
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Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal control
over financial reporting.
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Date: November
7, 2008
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/s/
Harry D. Madonna
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Chairman,
President and Chief Executive Officer
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Exhibit
31.2
REPUBLIC
FIRST BANCORP, INC.
CERTIFICATIONS
PURSUANT TO
SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul Frenkiel, certify
that:
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1.
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I
have reviewed this Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008 of Republic First Bancorp, Inc. (the
"Company");
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2.
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Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
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3.
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Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company
as of, and for, the periods presented in this
report;
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4.
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The
Company's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a–15(f) and 15d-15(f)) for the Company and
have:
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(a)
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Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
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(b)
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Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
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(c)
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Evaluated
the effectiveness of the Company's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation;
and
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(d)
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Disclosed
in this report any change in the Company’s internal control over financial
reporting that occurred during the Company’s most recent fiscal quarter
(the Company’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting;
and
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5.
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The
Company's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the Company's auditors and the audit committee of the Company's board of
directors (or persons performing the equivalent
functions):
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(a)
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All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company's ability to record,
process, summarize and report financial information;
and
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(b)
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Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal control
over financial reporting.
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Date: November
7, 2008
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/s/
Paul Frenkiel
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Executive
Vice President and Chief Financial Officer
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Exhibit
32.1
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008, as filed with the Securities and Exchange Commission by
Republic First Bancorp, Inc. (the "Company") on the date hereof (the "Report"),
I, Harry D. Madonna, Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
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(1)The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
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(2)The
information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the
Company.
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Date:
November
7, 2008
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By
:
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/s/
Harry D. Madonna
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Harry
D. Madonna
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Chairman,
President and
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Chief
Executive Officer
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Exhibit
32.2
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008, as filed with the Securities and Exchange Commission by
Republic First Bancorp, Inc. (the "Company") on the date hereof (the "Report"),
I, Paul Frenkiel, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
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(1)The
Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
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(2)The
information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the
Company.
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Date:
November 7, 2008
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By
:
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/s/
Paul Frenkiel
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Paul
Frenkiel,
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Executive
Vice President and
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Chief
Financial Officer
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