https://www.wsj.com/articles/first-republic-suspends-dividends-on-preferred-stock-63e6d388
First Republic Bank, beset by concerns over loan values and deposit flight, said in a regulatory filing Friday that it will suspend payments of quarterly cash dividends on its preferred stock.
The bank said that it was suspending the payments “as a measure of prudent oversight.”
First Republic’s shares have fallen by nearly 90% since the beginning of March, hit by the failures of Silicon Valley Bank and Signature Bank. The bank suspended its dividend on common stock in mid-March after the collapse of Silicon Valley Bank caused First Republic’s customers to pull their deposits over fears about the San Francisco bank’s financial strength.
Like Silicon Valley Bank and Signature, many of First Republic’s wealthy clients had accounts over the federal deposit-insurance limit. When they started to panic about the bank’s health, they pulled $70 billion in deposits, The Wall Street Journal has reported. The bank is also facing a hole in its loan book caused by unrealized losses related to rising interest rates.
The bank is trying to find a way out of its predicament. Some peers are trying to help. In mid-March, a group of the country’s biggest banks tried to assist First Republic by providing it with $30 billion in deposits, meant to address liquidity needs due to deposit outflows. JPMorgan Chase & Co. CEO Jamie Dimon personally led efforts to try to try to find another fix.
The latest suspension of dividends relates to seven series of preferred stock. The bank said that the right of holders to receive dividends is “noncumulative,” meaning dividends don’t accrue to be paid at a later date should the bank resume payments.
First Republic disclosed the suspension of payments as it also announced that it plans to report its first-quarter results on April 24. By suspending dividend payments on the preferred stock, the bank will conserve capital.
The bank had $3.6 billion in preferred stock outstanding as of Dec. 31, 2022, according to its latest annual filing. In 2022, it paid $158 million in dividends on preferred stock, the filing shows.
