First Republic Bank and its auditor KPMG were sued by shareholders over alleged misstatements ahead of last month’s regional-banking crisis, Bloomberg News reported. The lawsuit, filed Monday in San Francisco federal court by a Florida-based public pension fund, appears to be first targeting the bank since it was crushed in early March by unprecedented outflows. First Republic, its executives and its auditor are accused of repeatedly overstating the safety of its business model even as rising interest rates undermined the value of the bank’s loan and securities portfolios. First Republic is slashing its workforce, shrinking its balance sheet and pursuing strategic options after deposits plummeted even more than analysts expected amid the crisis. The bank has been drawn into the turmoil escalated by the collapse of SVB Financial Group’s Silicon Valley Bank, which fell into government receivership in early March after asset sales spooked depositors in the venture capital community. The city of Hollywood, Fla.’s police officers’ retirement system seeks in its proposed class action to represent investors who purchased First Republic securities from January 14, 2021, to March 14, 2023. The pension fund points to the bank’s 2020 annual report, which the complaint says downplayed and concealed the risks of potential increases to interest rates, changes in its mix of deposits, and resulting deposit outflows.
