First Republic's management team will forgo bonuses in 2023

Lauren Justice/Bloomberg

The highest-paid executives at First Republic Bank, where the stock price has plunged 89% this year, said they would give up their 2023 bonuses.

Chief Executive Officer Michael J. Roffler, Executive Chairman James H. Herbert II and the other six members of the bank's management team have agreed to forfeit their annual bonuses and performance-based incentives for 2023, according to a regulatory filing by the bank on Wednesday.

First Republic said the move is designed to "foster closer alignment with the shareholder experience and signal commitment to the bank and all of its stakeholders."

The announcement comes as industry leaders work to find a way to ensure the $213 billion-asset bank survives after the collapse of Silicon Valley Bank and Signature Bank put pressure on the deposit bases of other regional banks.

In a March 16 statement, First Republic said that it was focused on reducing its borrowings and evaluating the size and composition of its balance sheet, and that it would suspend its common stock dividend. It also said that daily deposit outflows had slowed considerably.

Still, a $30 billion infusion from 11 large banks last week wasn't enough to shore up depositor confidence. Now, government officials and industry leaders working on a potential deal say it might require the backing of the federal government, Bloomberg News reported.

"Trust and confidence are so key in banking, and First Republic, if they haven't lost it, they certainly had it very much shaken both from investors and depositors, and that could be very hard for them to get back any time soon," said David Smith, an analyst at Autonomous Research.

In its filing Wednesday, First Republic said that Herbert also agreed to waive his salary for this year. In 2021, his salary was $900,000.

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Bonuses for top executives in 2021, the most recent year for which data is available, ranged from $2.175 million for Roffler to $9.2 million for Herbert, the bank's founder and executive chairman. At the time, Roffler was the bank's chief financial officer, and Herbert was its CEO. Roffler was named CEO in 2022.

Executives at First Republic sold $12 million of stock in the two months leading up to this month's banking crisis, according to a report from The Wall Street Journal. Herbert alone sold $4.5 million of his stake in the company. Roffler, Chief Credit Officer David B. Lichtman and Robert L. Thornton, the head of private wealth management at the bank, together sold $7 million of stock. 

Compensation for bank executives has come back into the crosshairs of legislators after the high-profile bank failures this month. Legislation proposed by Democratic members of Congress last week would allow the Treasury Department to recoup bank executives' bonuses and profits from certain stock deals.

Shares in First Republic continued to decline after the filing. They closed at $13.27, down 15.9% on the day.