Case Background:
This is a federal securities fraud class action lawsuit on behalf of all persons and entities that purchased or otherwise acquired First Republic Bank (“FRB” or the “Bank”) securities between October 21, 2020 and April 28, 2023, inclusive (the “Class Period”). This action arises out of misrepresentations and omissions made by former executives of FRB and FRB’s auditor, KPMG LLP, about significant risks faced by FRB that led to its dramatic collapse in May 2023, the second largest bank collapse in U.S. history.
The complaint alleges that Defendants failed to disclose material risks associated with the Bank’s deposit base and with respect to Defendants’ management of liquidity and interest rate risk. In contrast to Defendants’ representations regarding the safety and stability of FRB, the complaint alleges that Defendants relied on undisclosed sales practices to inflate the Bank’s deposit and loan growth, including, for example, by offering abnormally low interest rates on long-duration, fixed-rate mortgages in exchange for clients making checking deposits. And contrary to Defendants’ representations that they actively and responsibly managed the Bank’s interest rate risk, the complaint details how Defendants continually violated the Bank’s interest rate risk management policies by concentrating the Bank’s assets in long-duration, fixed rate mortgages. In 2022, when the Federal Reserve began rapidly raising interest rates, the Bank’s low-interest, long-duration loans began to decline in value, creating a mismatch between the Bank’s assets and liabilities. Internally, FRB’s interest rate models showed severe breaches of the Bank’s risk limits in higher rate scenarios, and Defendants discussed potential corrective actions at risk management meetings. However, Defendants took no corrective action, continued to mislead investors about the Bank’s interest rate risk, and only amplified the Bank’s risk profile by deepening the Bank’s concentration in long-duration loans.
Current Status of Case:
On June 9, 2025 the Court entered the Order granting Defendants’ Motion to Dismiss for lack of subject matter jurisdiction. On July 9, 2025, Plaintiffs filed a Notice of Appeal. The Appeal is ongoing.
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