First Republic Bank executives sold $12 million in stock in the months before the crash

Top executives at First Republic Bank sold millions of dollars of company stock in the two months before the bank’s stock plummeted during the health scare at regional lenders.

The bank’s chief risk officer sold on March 6, according to government documents. Two days later, Silicon Valley Bank rocked the market and sent other banks into freefall. The First Republic was among the worst hit.

SAN FRANCISCO, CALIFORNIA – MARCH 16: A sign is posted on the exterior of a First Republic Bank office on March 16, 2023 in San Francisco, California. A week after Silicon Valley Bank and Signature Bank failed, First Republic Bank is considering an SA (Photo by Justin Sullivan/Getty Images/Getty Images)

Executives had been selling for months, the documents show. Executive Chairman James Herbert II has sold $4.5 million worth of stock since the start of the year. In all, insiders have sold $11.8 million worth of stock so far this year at prices averaging just under $130 a share. The bank’s chief credit officer, president of private wealth management and CEO sold $7 million worth of stock together.

First Republic stock has fallen further this week, down 21% on Wednesday and an additional 22% since midday Thursday, to $24.13. Credit rating agency S&P Global Ratings downgraded the bank’s credit four notches to speculative or “junk.”


The executives’ dealings went largely unnoticed. Unlike insider sales at most companies, First Republic’s are not required to be reported to the Securities and Exchange Commission. SEC filings on insider sales are scrutinized by investors for clues about a company’s prospects.

Instead, the transactions were reported to the Federal Deposit Insurance Corporation. Currently, few banks submit these forms to the FDIC, which posts them on a website where the documents can be accessed one at a time. First Republic also publishes the disclosures individually on its website.

FDIC office sign on door

An FDIC sign is posted in a window at a Silicon Valley Bank branch in Wellesley, Mass., Saturday, March 11, 2023. (AP Photo/Peter Morgan/AP Newsroom)

As of Wednesday, First Republic is the only S&P 500 company not to file insider trading with the SEC, according to a Wall Street Journal analysis. Signature Bank was similarly excluded, but its shares were replaced in the index on Wednesday after the close on Sunday.

The quirk in the reporting rules dates back to the Securities Act of 1933, which exempted banks from registering their securities with the SEC.

The selloff in First Republic came before a disastrous stretch that saw Silicon Valley Bank, Signature and Silvergate Bank collapse in five days and share prices crater for several others, including First Republic. The Justice Department is investigating insider sales made by Silicon Valley Bank executives in the week before the bank failed, the newspaper said.


A spokesman for First Republic said the bank and its executives declined to comment on the sales. A spokesman for Mr Herbert, 78, said his sales were in line with his annual plan and philanthropy, with more than a fifth of the proceeds being donated to charity.

The failures of SVB and Signature Bank came as fears grew about unrealized losses being carried over to banks’ balance sheets. Investors decided that First Republic was similarly vulnerable. The fair value of the bank’s asset portfolio was $26.9 billion less than its book value, and the difference was well above its equity of $17.4 billion. More than two-thirds of the bank’s deposits were uninsured, leaving it vulnerable to default if customers are concerned about its ability to fund their withdrawals.

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Major U.S. banks, including JPMorgan Chase & Co., are discussing a joint bailout of First Republic that could involve a large enough infusion of capital to shore up the beleaguered lender, people familiar with the matter said. A deal could be revealed as early as today. Any bailout would likely be at a share price well below the levels where executives sold shares.

Sehwa Kim, a professor of accounting at Columbia Business School, has studied the impact of FDIC filings and found that the market does not react to them as it does to more readily available disclosures filed with the SEC.

“Filings for insider trading on the FDIC’s website had little reaction at first compared to those at the SEC,” Mr. Kim said of his research, which also found that insiders at banks that did not file with the SEC was more likely. engage in selling before negative news.


Mr. Herbert, First Republic’s executive chairman, sold $4.5 million worth of stock in January and February, in two sales worth 7 percent and 5 percent of his holdings at the time, respectively, the filings show.

Robert Thornton, chairman of the bank’s private wealth management, made the largest single sale by value and stake ratio in recent months, the filings show. On January 18, Mr. Thornton sold 73% of his shares in First Republic for $3.5 million. It was his first trade since 2021.

First Republic Bank in New York

A branch of First Republic Bank in New York, U.S., Friday, March 10, 2023. Shares of First Republic Bank were halted after falling as much as 53 percent on Friday, the biggest intraday record, as the bank’s shares were hit by the fallout from the SVB Financial Group (Photo: Jeenah Moon/Bloomberg via Getty Images / Getty Images)

Other executives made significant sales that were smaller proportions of their total holdings. All executives received new shares during the period.

First Republic CEO Michael Roffler sold nearly $1 million in January, according to the filings. The sale and $1.3 million worth of other shares he sold in November was his first since July 2021 and the largest in proportion to his holdings since 2017.

The bank’s chief credit officer, David Lichtman, sold $2.5 million worth of stock in three sales in 2023, the filings show. The latest came on March 6, two days before Silvergate Bank closed and Silicon Valley Bank disclosed a $1.8 billion loss that caused its banking operations. Mr. Lichtman and his wife had already sold $2.5 million in November and December. Their seven transactions in five months were the most sales they made in such a period of time, according to the filings.


None of the executive sales filings show they were executed under 10b5-1 plans, which are pre-planned sales designed to insulate insiders from charges for trading in non-public information.

These plans have recently come under scrutiny, and the SEC recently changed the rules for the program to implement a 90-day waiting period between filing or amending a 10b5-1 plan and executing a trade.

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