Announcement • Jun 13
Hagens Berman Files Securities Fraud Class Action Against First Republic Bank Hagens Berman filed securities fraud class action against First Republic Bank. The litigation focuses on First Republic Bank’s repeated assurances that its capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks. According to the complaint, Defendants (1) misrepresented the strength of First Republic’s balance sheet and liquidity position, while understating the significant pressure that rising interest rates posed to the bank’s business model, and (2) misrepresented the strength of the bank’s ability to deliver consistent results across different interest rate environments, the diversity of the bank’s deposit base, and its ability to generate net interest income growth and maintain stable net interest margins. Investors began to learn the truth on Oct. 14, 2022, when First Republic announced disappointing Third Quarter 2022 financial results and revealed that its net interest income growth slowed and its net interest margin severely contracted. Defendants continued to maintain that First Republic’s deposit base “is strong and well diversified” and its “liquidity position remains very strong.” Despite these assurances, on Mar. 12, 2023First Republic announced it shored up its finances with additional funding from the Federal Reserve and JPMorgan Chase. Then, on Mar. 15, 2023, the Financial Times reported that S&P Global Ratings downgraded First Republic’s credit four tiers to junk (BB+), largely because the rating agency concluded that about 68% of the bank’s total deposits (the portion above the FDIC’s insurance limit of $250k) is the most susceptible to withdrawal. Fitch Ratings also reportedly downgraded First Republic to BB- from A-, and put the bank on negative rating watch, and cited deposit concerns. These events sent the price of First Republic shares sharply lower. 
