Top executives dumped shares in First Republic bank this year, shortly before its near collapse and rescue. These sales were not part of pre-announced plans.
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From The Wall Street Journal:
Top executives of First Republic Bank sold millions of dollars of company stock in the two months before the bank’s shares plummeted during the panic over the health of regional lenders.
Executives had been selling for months, the documents show. Executive Chairman James Herbert II has sold $4.5 million worth of shares 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 below $130 a share. The bank’s chief credit officer, its president of private wealth management and chief executive together sold $7 million worth of stock.
None of the filings for the executives’ sales indicate that they were executed under 10b5-1 plans, which are pre-scheduled sales designed to insulate insiders from accusations of trading on nonpublic information.
Their timing was great! The stock is down 72% this year, with most losses coming in the last week.
If authorities can find evidence that they knew the bank was teetering and didn’t warn investors, these men belong in prison.
Today, some of the country’s largest banks are working on a rescue for First Republic. From Bloomberg:
The nation’s biggest banks are close to agreeing upon a plan to deposit as much as $30 billion with First Republic Bank in an effort supported by the US government to stabilize the battered California lender, according to people with knowledge of the matter.
Customers have been pulling billions from First Republic since the failure of Silicon Valley Bank. This appears to have put First Republic on the brink of being unable to redeem deposits.
First Republic does not appear to be insolvent. But no bank can redeem a huge portion of its deposits at once.
And given these large, well-timed insider sales, the bank seems to have considerable internal dysfunction.
I’ve said it before, and I’ll say it again: diversify your deposits.
You can split 50/50 or into even smaller chunks. But be sure to include one or more of the Big 4 banks (JPM, Citi, BoA, Wells).
They can be a pain in the neck to deal with. But they’re the most Too Big to Fail-y banks out there.
What do you think an investigation of First Republic will find?
Leave a comment and let me know!
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Photo: First Republic CEO Michael J. Roffler
Tremendous 
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