'Banker of the Year' at First Republic Bank keeps credit losses low with clawbacks – San Francisco Business Times – The Business Journals

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First Republic Bank Chairman and CEO Jim Herbert was named 2014 “Banker of the Year” by American Banker for achieving dramatic growth at the San Francisco-based bank while keeping credit losses low.
American Banker was quick to say that First Republic (NYSE: FRC) doesn’t fit the size and high profile of an institution typically recognized as its Banker of the Year. Wells Fargo CEO John Stumpf was the trade newspaper’s Banker of the Year in 2013.
Herbert founded First Republic in 1985 and has built it into a $47 billion bank by focusing on delivering a high level of customer service to a client roster that includes Quincy Jones, Larry King, former Clorox CEO Craig Sullivan and San Francisco real estate investor Russ Flynn.
Herbert shared with American Banker one strategy to keep troubled loans to a minimum: At First Republic, the banker who made the loan takes the first hit if the mortgage goes bad in the first few years.
“If you made X on that loan, we will claw back between four and six times that” amount, Herbert said in the American Banker profile. The policy has an added benefit, he said: Bankers who don’t like those terms will seek employment elsewhere.
“If they see there’s a clawback, they may not come in for that next interview,” Herbert said.
Herbert also shared another insight into the bank’s success in speaking with the San Francisco Business Times for a profile in 2009, when he was recognized as a Most Admired CEO.
In that profile, Herbert was asked about the bank’s decision to pioneer ATM-fee rebates on checking accounts so customers could use any ATM around the world for free. It’s a practice that many other financial institutions with limited ATM networks have since adopted.
The rebates were prompted by a First Republic employee working on the front lines asking how the bank could better compete against big banks and their ubiquitous ATMs.
“A junior employee may not have answers, but they know the right question to ask,” Herbert said.
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