Jim Herbert, founder of First Republic

Two months in the past, any record of most admired US bankers would have included Jim Herbert. A shrewd and pushed businessman, Herbert grew First Republic, his California-based lender, from simply 9 workers to America’s 14th largest financial institution by providing prosperous city professionals low-cost mortgages and personalised service.

Now virtually every part Herbert, 78, labored for has turned to mud. Early on Monday morning, earlier than US markets opened, regulators closed the financial institution and bought off all $93.5bn of its deposits and most of its property to JPMorgan.

The March 10 collapse of Silicon Valley Financial institution had sparked a $100bn deposit run at First Republic the place he was govt chair. It additionally drew consideration to the enterprise mannequin’s profound vulnerability to rising rates of interest. Shares plummeted 95 per cent, class-action legal professionals had been circling and commentators had been overtly speculating about whether or not the financial institution can be taken over by the Federal Deposit Insurance coverage Company.

In First Republic’s on-line “heritage e book”, Herbert warned workers to “keep forward and keep alert”, but that’s apparently what the financial institution and its management did not do. “The issue is that this enterprise mannequin was designed for a low rate of interest world,” stated brief vendor Barry Norris, who has made a number of million {dollars} betting in opposition to First Republic. “If you wish to be a profitable banker it’s important to do extra.”

Traders, pals and different beneficiaries of Herbert’s enthusiasm at the moment are asking themselves how a enterprise run by a person so lauded for his widespread sense and dedication may have gone so profoundly off-track. Linda Shelton, govt director of New York’s Joyce Theatre, stated Herbert went the additional mile for her and others within the dance world. “He was a really inspiring particular person . . . all the time curious about supporting artists earlier than anyone knew who they had been,” she stated. “It’s very laborious to see this.”

Born in Ohio to a group banker and a homemaker, Herbert had solely left the Midwest a handful of instances earlier than he went to school in Boston. As a trainee at Chase Manhattan financial institution, he obtained a wake-up name that remained an inspiration. “James”, his boss stated, handing again a closely edited report, “in the event you can’t do higher than this, it is best to work someplace else.”

“My requirements shot up, and I by no means seemed again,” Herbert recalled for the financial institution’s historian.

He met and married Cecilia Healy, one in all Harvard’s early feminine MBAs. A detour into the soda-bottling enterprise took him to San Francisco the place he ultimately based First Republic in 1985. From the primary, he centered on entrepreneurs and strivers, beginning with extra-large mortgages earlier than rising right into a full-service non-public financial institution. First Republic expanded into eight states, and the Herberts started a bicoastal life, supporting civic and charitable causes on each. “His curiosity and curiosity concerning the arts was uncommon for a businessman,” stated Helgi Tomasson, the retired creative director of the San Francisco Ballet, the place Herbert served as chair.

Herbert additionally proved he may play dealmaker with Wall Road’s finest. In 2007, he bought First Republic to Merrill Lynch for a 40 per cent premium. However Merrill was crunched into Financial institution of America within the 2008 monetary disaster, so Herbert purchased his child again with the assistance of personal fairness group Normal Atlantic. Inside months, that they had relisted it on the inventory trade for 70 per cent greater than that they had paid. “Jim is without doubt one of the finest and most entrepreneurial bankers of his technology,” Invoice Ford, Normal Atlantic’s chief govt, stated after the deal.

For the subsequent decade or so, it appeared Herbert may do no mistaken. First Republic guess laborious on wealth administration with a high-profile acquisition, and cruised previous $50bn in property. When American Banker journal named him banker of the 12 months in 2014, it pointed to the financial institution’s speedy progress and pristine credit score high quality to argue that “At 70, Herbert is on the high of his recreation.”

Round then, he pressed Ian Bremmer, Eurasia Group president, to pitch a public affairs present to New York’s public tv station, and First Republic turned its founding sponsor. “He was so supportive of creating certain we didn’t simply have institution voices. He doesn’t care who you’re going to vote for. He cares that you’re speaking to all sides,” Bremmer stated.

However Herbert’s efforts to cut back his involvement with First Republic proved problematic. In the course of the pandemic, he moved to Wyoming to be close to his grandchildren, and started promoting down his stake from about 1mn shares on the finish of 2019, to about 700,000 this March. His remaining shares, which had been value $85mn at first of March, had been valued at simply over $4mn final Friday earlier than the financial institution was taken over.

His chosen successor, Hafize Gaye Erkan, lasted simply six months as co-chief govt and her shock departure in early 2022 coincided with a severe cardiac sickness that compelled Herbert to step away from lively management. By the point he returned, the Fed had begun quickly elevating rates of interest, a course of that destabilised SVB and sowed the seeds for First Republic’s collapse.

After years of fawning analyst and press protection, Herbert appeared stung by the immediately harsh assessments of First Republic’s prospects. He was conspicuously absent from a disastrous earnings name final week that despatched the shares into a brand new tailspin.

“Jim in his prime would have been in a position to flip this round,” stated a senior govt who is aware of Herbert effectively, and banks at First Republic. “He was an revolutionary banker and a beautiful particular person. This can be a tragedy.”


This text has been up to date since preliminary publication after the takeover of First Republic by regulators on Monday

Back To Top