First Republic Bank (FRC) Made False and Misleading Statements Regarding its Ability to Deliver Consistent Growth and Performance Through Diversification
A shareholder filed a class action on behalf of all persons and entities that purchased or otherwise acquired First Republic Bank (NYSE: FRC) securities between January 14, 2021 and March 14, 2023. First Republic is a California state-chartered bank and trust company that provides private banking, private business banking, and private wealth management.
According to the complaint, during the class period defendants failed to disclose material adverse facts about the Company’s business and operations. Specifically, defendants misrepresented the strength of the Company’s balance sheet and liquidity position, while also understating the significant pressure rising interest rates posed to First Republic’s business model. Defendants also misrepresented the strength of the Company’s ability to deliver consistent results across different interest rate environments, the diversity of the Company’s deposit funding base, and the Company’s ability to generate net interest income growth and maintain a stable net interest margin.
On October 14, 2022, after announcing disappointing third quarter 2022 financial results, the price of First Republic stock fell $22.14 per share, or more than 16%, to close at $112.59 per share.
Then, on March 10, 2023, SVB Financial Group, the parent company of Silicon Valley Bank and a peer bank of First Republic, collapsed, causing investors to question First Republic’s ability to withstand the interest rate environment and remain insolvent. On this news, the price of First Republic common stock declined by $83.79 per share, or more than 72% over three trading sessions, to close at $31.21 per share on March 13, 2023.
Despite statements from First Republic and its executives confirming the stability of the Company’s business model, investors learned more about First Republic’s vulnerability on March 15, 2023, when S&P Global Ratings downgraded its long-term issuer credit rating and preferred stock issue rating for First Republic due to the risks of deposit outflows leading to increased funding costs. That same day, Fitch Ratings announced that it had also downgraded First Republic’s credit rating, observing that “FRC’s funding and liquidity profile has changed and represents a ‘weakest link.’” On this news, the price of First Republic common stock declined by $8.47 per share, or more than 21%, from a closing price of $39.63 per share on March 14, 2023, to a closing price $31.16 per share on March 15, 2023.
What Now: Similarly situated shareholders may be eligible to participate in the class action against First Republic. Shareholders who want to act as lead plaintiff for the class must file their papers by June 23, 2023. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. You do not have to participate in the case to be eligible for a recovery.
All representation is on a contingency fee basis. Shareholders pay no fees or expenses.