When Charlotte’s NewDominion Bank approached John Hipp four years ago to turn the lender around as it faltered after the real estate bubble burst, Hipp’s first reaction was “not interested.”
“Even my friends said, ‘There’s no way. You can’t save it. It’s impossible,’ ” Hipp said.
Now Hipp, who eventually accepted the CEO job for the community lender based in Charlotte’s midtown area, says the bank is on strong financial footing as he prepares to step down this week.
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“Our guys have done pretty much what everybody said was impossible,” said Hipp, 63, who announced his retirement from the bank and its board earlier this year. “Everything is coming together like we had planned.”
His retirement, which is official Friday, marks a change in leadership at one of the handful of remaining community banks headquartered in Charlotte.
Here and elsewhere, community banks have dwindled in number as a result of years of industry consolidation. In 2007, before the recession, the city was headquarters to seven community banks. That figure is now at three, not counting Ballantyne-based Carolina Premier Bank because its holding company is in Washington, D.C.
“We’re almost the last true community bank in Charlotte,” Hipp said.
NewDominion’s recovery is ongoing. It remains under a consent order that state and federal regulators imposed in 2010, the year Hipp became CEO.
Hipp said the bank needs about $10 million in additional capital to fully satisfy the order. As long as the bank is under the order, it faces certain restrictions, such as how much loan growth it can have.
Hipp said NewDominion is in compliance with every aspect of the order except for the need for additional capital. He expects the bank to fully satisfy the order over the next 12 months or so.
Under Hipp, the bank has boosted its capital levels significantly. In a campaign that ended last year, the bank raised more than $10 million in capital from hundreds of individual investors, most of them in the Charlotte area.
Also under Hipp, the bank has been able to greatly narrow its annual losses. Last year, the bank posted a loss of $2.4 million. In 2010, it lost $24 million.
Starting at the bottom
Hipp grew up in a family that moved all over the Southeast because of his father’s career with retailers Sears and Montgomery Ward & Co.
After he got out of the Army, Hipp also tried his hand at retail, going to work for drugstore chain Eckerd in Charlotte.
Hipp didn’t care for that job, so he decided to give banking a try, joining Wachovia Corp. in the 1970s.
He started at the bottom with Wachovia, going door to door collecting payments and repossessing vehicles from Charlotteans who had fallen behind on their auto loans. It wasn’t his dream job, but Hipp said he learned an important banking lesson from it.
“It’s the best training in the world, because you see what happens when (loans) go bad,” he said.
Hipp worked his way up in Wachovia, and in the 1990s he was brought on to help turn around the troubled Rock Hill National Bank. It was his first job as CEO and first time being asked to fix a teetering lender.
“One of the things you learn is in a challenged bank … it is always worse than what you think,” he said.
Hipp said that when turning around a company, it’s important for its leaders to celebrate the small victories. “You’ve got to give people something to believe in.”
NewDominion was Hipp’s second opportunity to help a bank in turmoil.
At the time, he was living in Columbia and had recently retired as an executive for a Georgia bank. Hipp was doing some consulting work but had little interest in the intensive work required to fix a bank. Earlier that year, Hipp had undergone surgery for prostate cancer. After the treatment, doctors gave him a clean bill of health, he said.
He changed his mind about the NewDominion job after giving it more thought.
“I had this gut feeling … that if we could last two years, that we could turn it around,” he said.
Under Hipp, the lender convinced Greensboro-based NewBridge Bank to convert $10 million in debt into preferred equity in NewDominion. Hipp said that move bought NewDominion two years to raise capital.
To raise capital, NewDominion representatives initially spoke with private equity investors. But those large investors were interested only in banks that were bigger and had fewer distressed loans, Hipp said.
Hipp and other leaders at the bank decided to raise capital from small, individual investors instead. The yearlong effort, launched in the summer of 2012, involved the bank’s leaders traveling across the Carolinas, making pitches to hundreds of investors gathered at country clubs, restaurants and elsewhere.
Over the course of the effort, 250 investors put about $10.6 million in the bank, at an average investment of about $40,000.
It’s the most money raised from individual investors by a bank in the Southeast, Hipp said. Raising the money was not easy at a time when the economy was still recovering and banking was not a popular industry, he said. Also, Hipp had never had to raise capital before in prior CEO roles.
Tony Plath, a finance professor at UNC Charlotte, called the accomplishment “remarkable.”
“John really does need to be recognized as salesman of the year,” Plath said.
What advice would Hipp give other companies planning to raise capital in the same way? Have a compelling story to tell investors, he said.
“Not just some blue sky or hokey pokey,” he said. “I’m talking about a story that people can believe in. Our story was: ‘Look at (our) management, look at Charlotte. … Isn’t there a place for a successful community bank?’ Your story has to be credible, believable and also defendable.”
NewDominion’s chief financial officer, Blaine Jackson, will succeed Hipp as CEO.
Jackson will oversee a bank that has ambitions to expand by opening additional branches in the Charlotte region, such as in Ballantyne. NewDominion, founded in 2005, currently has only two branches: one at its midtown headquarters, the other in Lake Norman.
Hipp said NewDominion will need to raise more capital to fulfill its expansion plans.
Plath, the UNCC professor, said NewDominion faces other challenges that community banks elsewhere are coping with.
With community banks’ service charges typically lower than those of bigger banks, it remains unclear whether community banks can keep their customers if they charge them more to cover rising regulatory costs, build their capital base and provide a satisfactory return for investors, Plath said.
Hipp said NewDominion sold the 250 investors shares at 50 cents each. According to a third-party analysis conducted for the bank, the shares were worth 74 cents each around the beginning of 2014, he said.
Hipp, who bought a Rock Hill home this year, said it will remain his primary residence. He’ll also spend some of his retirement on his 100-acre farm outside of Columbia, where he plans to plant corn in the spring.
He said it’s hard to say whether he’ll take on other work, such as consulting for banks.
“I’ve retired several times,” he said. “Unsuccessfully.”