First Republic Executive and Family Members Cash In

The founder of troubled First Republic Bank earned top compensation and paid a son and a brother-in-law a combined $5.7 million for executive and consulting roles.

Jim Herbert, executive chairman of the San Francisco-based mortgage and commercial real estate lender, paid his son $3.5 million in 2021 to oversee a lending unit at the bank and his brother-in-law $2.3 million for advisory work, the San Francisco Business Journal reported, citing a Wall Street Journal report.

Herbert’s son James is a senior vice president at the bank who oversees a lending unit. James Herbert, who earned an MBA at Stanford, co-founded the San Francisco-based real estate investment startup LendingHome, which rebranded as Kiavi in 2021. 

Since 2010, the bank has paid Herbert’s brother-in-law, James Healy, for consulting services through his company, Capra Ibex Advisors. 

In 2021, First Republic paid the New York-based consulting firm $2.3 million for advisory work related to its “investment portfolio, risk management, interest rate and economic outlook and other financial matters,” the bank said in an annual proxy filing in spring 2022. 

The two family members were paid similar amounts in 2020, according to the Journal.

The senior Herbert wasn’t involved in pay negotiations for either relative, according to the Journal. A spokesperson for First Republic said the bank has a policy for transactions with family members and fully discloses such transactions each year.

Jim Herbert founded First Republic Bank in 1985 and served as CEO for 37 years, growing it to one of the nation’s 15 largest banks by the end of last year, when he was appointed executive chairman.

The bank paid him $17.8 million in 2021, the bank’s disclosures for that year showed. The compensation was more than CEOs at most similar-sized banks, according to the Journal.

The deals with Herbert’s family members stand out among similar-sized banks. While numerous other midsize and large banks employ top executives’ family members, they are typically paid less, often under $250,000, disclosures show. 

Herbert and other executives have sold more than $11 million in stock so far this year, the Journal previously reported, bringing attention to executive compensation at the bank.

Since the March 10 failure of Silicon Valley Bank in Santa Clara, First Republic has been hit hard by the fallout, with its shares losing nearly 90 percent of their value since the start of the month.

A $30 billion rescue package from 11 of the nation’s biggest lenders has failed to stop its share price from its roller-coaster plunge and upswing pattern, or its credit rating, which has fallen to junk status. Shares in FRC rose $2 on Monday past $14, more than $80 less than before the SVB failure.

Since the collapse of Silicon Valley Bank, First Republic has been seen as the next Bay Area bank at risk of failure because of its reliance on wealthy customers, meaning those with deposits above the FDIC insured rate of $250,000. 

— Dana Bartholomew