Commerce Bancorp Inc. founder Vernon W. Hill II and three associates have invested $7.8 million in Republic First Bancorp Inc., Philadelphia, to finance an expansion of the company's First Republic Bank. Republic chairman Harry D. Madonna pumped in $3 million more.
Republic will use the money to add branches and attract retail deposits, Madonna said. The bank lost money in the first quarter, but Madonna said it did not have to raise new capital.
Hill will receive a four-year consulting contract and the right to name a Republic director.
In an interview yesterday at Madonna's office at Two Liberty Place, Hill said he hoped that $1-billion-asset Republic would replace Commerce as a major locally based bank. In March, the Toronto-Dominion Bank bought Commerce for $8 billion after Hill was forced out as chief executive officer last year. Commerce has $48 billion in assets.
"Philadelphia needs a major headquarters bank, and Republic has a chance to be that bank," Hill said.
"We started out as a business bank. We want to be a full-service bank, and we're adding branches" in South Jersey, Northeast Philadelphia, and other residential markets, Madonna said.
Republic shares rose $1.48 yesterday to close at $5.85 in Nasdaq trading. Monday's close at $4.37 had marked a five-year low.
Republic will "become the next great Philadelphia-based success story," Hill said in the statement.
The investments, trust-preferred securities, yield 8 percent, and may be converted into stock at $6.50 a share. Sandler O'Neill & Partners L.P., a Wall Street investment bank specializing in midsize commercial banks, advised Republic in the deal.
Republic lost $2.8 million in the first quarter as loan charge-offs zoomed to $4.2 million (from $1.1 million in the last quarter of 2007) and the bank reported it had taken over business borrowers' real estate worth $16.4 million (up from $3.7 million).
Hill ran Commerce Bancorp, Cherry Hill, for 35 years before regulators and his board forced him into early retirement last year over the long-running controversy about payments to his wife's design company.
Hill is now active in the Saladworks Inc. chain, among other enterprises.