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First Republic founder Jim Herbert

Two months ago, the list of the most admired American bankers would have included Jim Herbert. A shrewd and aspiring businessman, Herbert helped his California-based lender, First His Republic, by providing affordable mortgages and personalized services to wealthy urban professionals. From just his nine employees he has grown into the 14th largest bank in America.

Now almost everything the 78-year-old Herbert worked for has shattered.Early Monday morning before US markets opened, regulators closed and sold the bank Transfer all $93.5 billion of deposits and most of the assets to JP Morgan.

The failure of Silicon Valley Bank on March 10 triggered a $100 billion rundown of First Republic, where he was chairman. It also drew attention to the serious vulnerability of business models to rising interest rates. Stock prices he plummeted 95%, class-action lawyers were on the move, and commentators were openly speculating about whether the bank would be bought by the Federal Deposit Insurance Corporation.

In First Republic’s online “Heritage book,” Herbert warned employees to “always stay ahead and stay vigilant,” but the bank and its management clearly failed to do so. “The problem is that this business model was designed for a world with low interest rates,” said Barry Norris, who made millions betting on First Republic. “If you want to be a successful banker, you have to do more.”

Investors, friends, and other beneficiaries of Herbert’s aspirations are asking themselves how a business run by a man admired for his common sense and dedication could go so far off track. Linda Shelton, director of Joyce Her Theater in New York, said Herbert went the extra mile for her and others in the dance world. “He was such an inspiring person…always interested in supporting artists before anyone knew who they were,” she said. is very difficult to see.”

Born in Ohio to a community banker and homemaker, Herbert only left the Midwest a few times before attending college in Boston. As an intern at Chase’s Manhattan Bank, he received his call in the morning. “James,” said his superior, handing back a heavily redacted report.

“My standards skyrocketed and never looked back,” Herbert recalled for Banking Historians.

He met and married Cecilia Healy, one of Harvard’s earliest female MBA’s. After a detour into the soda bottling business, he went to San Francisco and founded First His Republic in 1985. From the beginning, he focused on entrepreneurs and hard workers, starting with an oversized mortgage and growing into a full-service private his bank. The First Republic expanded to his eight states, and Mr. and Mrs. Herbert began living on both sides of the shore, supporting civic and charitable causes in both. “His interest in and curiosity about art was unusual for a businessman,” said Helgi Thomasson, retired artistic director of the San Francisco Ballet, of which Herbert was chair.

Herbert has also proven he can play the best dealmaker on Wall Street. In 2007, he sold First Republic to Merrill Lynch for a 40% premium. But Merrill was crushed by Bank of America in his 2008 financial crisis, so Herbert bought the baby back with the help of private equity his group General Atlantic. Within months, he was relisted on the stock exchange at a price 70% higher than what they paid. “Jim is one of the brightest and most entrepreneurial bankers of his generation,” General Atlantic CEO Bill Ford said after the transaction.

For the next decade or so, Herbert seemed to be able to do no wrong, with First Republic betting on wealth management with a high-profile acquisition that has over $50 billion in assets. American He said when Banker magazine named him Banker of the Year in 2014, it noted the bank’s rapid growth and pristine credit quality, saying, “A 70-year-old Herbert is at the top of his game. ‘ claimed.

Around that time, he pressured Ian Bremmer, president of the Eurasia Group, to pitch a publicity program to New York’s public television station, of which the First Republic became its founding sponsor. “He was very supportive of us not having just the voices of the ruling class. He doesn’t care who you vote for. I care about what you’re talking about,” Bremmer said.

However, Herbert’s efforts to curtail his involvement in the First Republic proved problematic. During the pandemic, he moved to Wyoming to be near his grandchildren and began selling about 1 million shares at the end of 2019 to about 700,000 shares in his March of this year. His remaining shares, which were valued at $85 million in early March, were just over $4 million last Friday before the bank was acquired.

His chosen successor, Hafize Gaye Erkan, lasted only six months as co-CEO. Her sudden departure in early 2022 It coincided with a serious heart condition that forced Herbert to step away from active leadership. By the time he returned home, the Fed had begun raising interest rates rapidly. This was the process that destabilized his SVB and sowed the seeds for the fall of the First Republic.

After years of indulging analyst and media reports, Herbert appeared to be stung by a sudden harsh assessment of the First Republic’s prospects. was apparently absent from the disastrous earnings report of the company.

“Jim in his prime could have turned this around,” said a senior executive familiar with Herbert and a First Republic bank. “He was an innovative banker and a lovely person. This is a tragedy.”

brooke.masters@ft.com

This article has been updated since it was first published after the regulator took over First Republic on Monday.

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Two months ago, the list of the most admired American bankers would have included Jim Herbert. A shrewd and aspiring businessman, Herbert helped his California-based lender, First His Republic, by providing affordable mortgages and personalized services to wealthy urban professionals. From just his nine employees he has grown into the 14th largest bank in America.Now almost everything the 78-year-old Herbert worked for has shattered.Early Monday morning before US markets opened, regulators closed and sold the bank Transfer all $93.5 billion of deposits and most of the assets to JP Morgan.The failure of Silicon Valley Bank on March 10 triggered a $100 billion rundown of First Republic, where he was chairman. It also drew attention to the serious vulnerability of business models to rising interest rates. Stock prices he plummeted 95%, class-action lawyers were on the move, and commentators were openly speculating about whether the bank would be bought by the Federal Deposit Insurance Corporation.In First Republic’s online “Heritage book,” Herbert warned employees to “always stay ahead and stay vigilant,” but the bank and its management clearly failed to do so. “The problem is that this business model was designed for a world with low interest rates,” said Barry Norris, who made millions betting on First Republic. “If you want to be a successful banker, you have to do more.”Investors, friends, and other beneficiaries of Herbert’s aspirations are asking themselves how a business run by a man admired for his common sense and dedication could go so far off track. Linda Shelton, director of Joyce Her Theater in New York, said Herbert went the extra mile for her and others in the dance world. “He was such an inspiring person…always interested in supporting artists before anyone knew who they were,” she said. is very difficult to see.”Born in Ohio to a community banker and homemaker, Herbert only left the Midwest a few times before attending college in Boston. As an intern at Chase’s Manhattan Bank, he received his call in the morning. “James,” said his superior, handing back a heavily redacted report.”My standards skyrocketed and never looked back,” Herbert recalled for Banking Historians.He met and married Cecilia Healy, one of Harvard’s earliest female MBA’s. After a detour into the soda bottling business, he went to San Francisco and founded First His Republic in 1985. From the beginning, he focused on entrepreneurs and hard workers, starting with an oversized mortgage and growing into a full-service private his bank. The First Republic expanded to his eight states, and Mr. and Mrs. Herbert began living on both sides of the shore, supporting civic and charitable causes in both. “His interest in and curiosity about art was unusual for a businessman,” said Helgi Thomasson, retired artistic director of the San Francisco Ballet, of which Herbert was chair. Herbert has also proven he can play the best dealmaker on Wall Street. In 2007, he sold First Republic to Merrill Lynch for a 40% premium. But Merrill was crushed by Bank of America in his 2008 financial crisis, so Herbert bought the baby back with the help of private equity his group General Atlantic. Within months, he was relisted on the stock exchange at a price 70% higher than what they paid. “Jim is one of the brightest and most entrepreneurial bankers of his generation,” General Atlantic CEO Bill Ford said after the transaction.For the next decade or so, Herbert seemed to be able to do no wrong, with First Republic betting on wealth management with a high-profile acquisition that has over $50 billion in assets. American He said when Banker magazine named him Banker of the Year in 2014, it noted the bank’s rapid growth and pristine credit quality, saying, “A 70-year-old Herbert is at the top of his game. ‘ claimed.Around that time, he pressured Ian Bremmer, president of the Eurasia Group, to pitch a publicity program to New York’s public television station, of which the First Republic became its founding sponsor. “He was very supportive of us not having just the voices of the ruling class. He doesn’t care who you vote for. I care about what you’re talking about,” Bremmer said.However, Herbert’s efforts to curtail his involvement in the First Republic proved problematic. During the pandemic, he moved to Wyoming to be near his grandchildren and began selling about 1 million shares at the end of 2019 to about 700,000 shares in his March of this year. His remaining shares, which were valued at $85 million in early March, were just over $4 million last Friday before the bank was acquired.His chosen successor, Hafize Gaye Erkan, lasted only six months as co-CEO. Her sudden departure in early 2022 It coincided with a serious heart condition that forced Herbert to step away from active leadership. By the time he returned home, the Fed had begun raising interest rates rapidly. This was the process that destabilized his SVB and sowed the seeds for the fall of the First Republic. After years of indulging analyst and media reports, Herbert appeared to be stung by a sudden harsh assessment of the First Republic’s prospects. was apparently absent from the disastrous earnings report of the company. “Jim in his prime could have turned this around,” said a senior executive familiar with Herbert and a First Republic bank. “He was an innovative banker and a lovely person. This is a tragedy.”brooke.masters@ft.comThis article has been updated since it was first published after the regulator took over First Republic on Monday.
https://www.ft.com/content/a4426630-11ed-445a-af94-d60debd77270 First Republic founder Jim Herbert

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