Executive officers at First Republic Bank have elected not to receive millions in potential bonuses this year amid uncertainty about the bank’s future and a nearly 90% plunge in its shares over the past two weeks.
The company said in a Wednesday filing with the Securities and Exchange Commission that the move comes “[i]n light of the recent volatility in the banking system and its subsequent impact on First Republic Bank … and in order to foster closer alignment with the shareholder experience, and signal commitment to the Bank and all of its stakeholders, including very importantly, its clients, colleagues and communities.”
Executive Chairman James Herbert and Chief Executive Michael Roffler were specifically called out as having elected to cut their bonuses to zero this year, along with all other executive officers at the bank.
Additionally, the executive officers have forfeited vesting of performance-based incentives in 2023. Herbert “further elected to waive his salary as Executive Chairman effective March 12, 2023,” the filing noted.
CEO Roffler earned $900,000 in base salary and a maximum annual incentive bonus opportunity of $2.95 million for 2022, according to First Republic’s proxy statement filed on May 22.
On May 4, 2022, the bank’s compensation committee approved Roffler’s long-term incentive award for 2022 with a grant date fair value equal to $5.65 million, to be paid in the form of performance-stock units.
Roffler took over as CEO on March 13, 2022.
Herbert’s annual incentive bonus as executive chair was subject to a maximum of $7 million for 2022, the company said. Up to 50% of Herbert’s earned bonus amount was to be paid in the form of time-vested restricted stock units with a three-year annual vesting period.
In connection with Herbert’s transition to his new role as executive chairman last year, his annual salary was reduced to 64% of his 2021 base salary of $900,000.
Last year, Herbert’s annual incentive bonus opportunity was reduced to 0.32% from 0.5% of the bank’s pretax profit, and his annual long-term incentive grant was reduced to 64% of the equity award granted in 2021.
His total compensation in 2021 was $13.3 million, including $8.7 million in stock awards, $3.4 million in incentive plan compensation, and other compensation of about $320,000.
First Republic shares have gotten pummeled in the past couple weeks as the collapse of Silicon Valley Bank has sparked concerns about outflows at other regional banks.
The company has a client focus similar to that of Silicon Valley Bank, with an emphasis on higher-end clients in Silicon Valley and on the East Coast, and it has also had heavy exposure to long-dated securities.
A group of 11 big banks agreed to deposit $30 billion at First Republic earlier this month to help prop up the bank.
See more: First Republic’s stock is getting battered. Here’s how the bank’s tailspin started and why it hasn’t stopped.
After closing at $115 on March 8, before Silicon Valley Bank’s troubles blew open, First Republic shares have fallen to $13.33, down 88% in that span. The stock was up about 2% in premarket trading Thursday.
The company continues to see its debt downgraded by ratings agencies, with Fitch lowering its issuer default rating again late Wednesday.
Steve Gelsi contributed to this report.