The First Republic’s stock took another major blow in the Tuesday premarket after Bloomberg reported that the bank and its auditor had been sued by a public pension fund that holds a stake in the company. The stock fell more than 23% in premarket trading after dropping over 20% on Monday after-hours.

First Republic and its Auditor Repeatedly Issued Misstatements, the Lawsuit States

Shares of First Republic Bank are down 25% in premarket trading Tuesday after shareholders filed a lawsuit against the bank and its auditor KPMG, accusing them of issuing misstatements ahead of the banking turmoil last month. According to Bloomberg, the suit primarily targets the bank after its fallout in early March due to unprecedented outflows.

The lawsuit, filed in San Francisco court on Monday by a Florida-based public pension fund, alleges that First Republic, its executives, and KPMG have repeatedly overstated the safety of the bank’s business model. The misstatements were issued even though rising interest rates weighed on the value of the bank’s loan and securities portfolio, the fund stated in the lawsuit.

Apart from the lawsuit, the steep drop in the bank’s stock is likely attributable to its Q1 earnings report published on Monday, which showed that deposits fell over 40% to $104.5 billion at the end of the quarter, from $176.4 billion on Dec. 31. Shares dropped more than 20% in after-hours trading on the report.

KPMG Issued Similar Audit Statements for the Collapsed Signature Bank

While most affected banks largely recovered from the banking crisis triggered by the Silicon Valley Bank (SVB) collapse last month, issues at First Republic continue to mount.

The latest lawsuit appears to be focused on the bank’s 2020 annual report, which allegedly downplayed and hid the risks related to potential interest rate increases and changes in its deposit mix and the consequent outflows. The 2020 report also included an audit signed by KPMG, which is likely why the auditor is also named in the lawsuit.

Similarly, KPMG issued clean audit statements for clients of Signature Bank, a crypto-friendly bank that recently got shut down by the US regulators due to “systemic risk.” The suit against First Republic includes the bank’s former CEO James H. Herbert and current CEO and president Michael Roffler, who previously spent 16 years at KPMG.

This article originally appeared on The Tokenist

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