By Roger Shirley, MP&F
Four years ago, Chattanooga banker Hamp Johnston was managing a middle market banking team for J.P. Morgan Chase in a region that included Chattanooga, Knoxville, and the Tri-Cities.
He was excited to be back on the commercial side of the business at Chase, which he joined in 2014 after spending almost 12 years at First Tennessee in its private banking group. He and his team were focused on commercial lending, treasury management, merchant services, 401k record keeping, and investment banking for clients in East Tennessee.
The last thing he was thinking about was starting a de novo bank. Then Hamp got a phone call from Steve Frost of Tuftco Corporation, and he asked “Hey, can you come and see me?”
“I got really excited,” Johnston said, “thinking we might have an opportunity to work with him.” Steve called back later and added, “Don’t bring anyone with you.” Now, Johnston was excited and intrigued.
Johnston arrived at the meeting with no idea what might be coming. After exchanging pleasantries, Steve cut to the chase. “This meeting is not going to be what you expected,” he told Johnston. “We are thinking about starting a new bank. Do you have any interest in being involved in that?”
Turns out he did, eventually.
It took a few years following that initial conversation for RockPoint Bank to launch, but Johnston is now at the helm as president and CEO of the first de novo bank in Chattanooga since the Great Recession of 2008.
RockPoint opened March 15 in downtown Chattanooga and currently has 23 employees, including commercial bankers, universal bankers and a financial center manager, and it will add more as the bank realizes the growth Johnston and his executive team of industry veterans expect. It will have a strong C&I focus and offer private banking but not wealth management or trust services. “We don’t have the size and scale to be all things to all people,” Johnston said.
The opening was preceded by an over $33 million equity raise that was carried out in the shadow of the pandemic, which derailed the original timeline and tested the strategic flexibility of the organizing group. But those days are in the rearview mirror, and now the RockPoint team is looking ahead to its 7-to-10-year goal of gaining 10% of the Chattanooga MSA’s $12 billion market, which would make it a billion dollar-plus bank.
Helping guide that effort is an impressive 12-member board of directors with deep local ties, chaired by John Haddock, a banking veteran who now serves as CFO and chief compliance officer at Transcard, a payments technology solutions company. Other directors include Harshad Shah, who led the board’s equity raise efforts, and Piet Dossche and Eric Storey, who were recently elected to serve on the board (subject to regulatory non-objection) to add North Georgia and North Alabama representation, respectively, to align RockPoint’s board composition with its market area.
‘Are We Crazy?’
Hamp Johnston knows the Greater Chattanooga area well, living there all his life except for his time in Lexington, Va., attending Washington & Lee University—where he majored in history—and an 18-month stint in Memphis while in First Tennessee’s commercial lending training program.
During his senior year at W&L, Johnston says, “it was made clear that I needed to start earning a paycheck when I graduated.” He heard First Tennessee (now First Horizon) was interviewing for spots in its management training program, and he signed up to check it out.
“I had no idea I wanted to be a banker, but I interviewed, and they offered me a job. And my thought process going into it was: This is a good opportunity, I’ll learn something and get exposure to the business world. And now, 25-plus years later, it turned out I really liked it.”
Johnston returned to Chattanooga from Memphis to finish the last half of the three-year program in his hometown, where he rotated through all the different commercial departments. Upon completion, he landed a vice president position in the bank’s financial institutions division, aka correspondent banking, covering the Georgia region. (Interestingly, he helped a couple of de novo banks start in Georgia.)
After a five-year stint at SunTrust, he returned to First Tennessee to join its private banking group as a vice president relationship manager and was later promoted to senior vice president and manager of the bank’s private banking and trust team in Chattanooga. In 2014, J.P. Morgan Chase recruited him to manage its commercial banking for East Tennessee.
It was about three years into his job at Chase that Johnston received the call about the idea of starting a new Chattanooga bank.
“We actually looked at the opportunity pretty closely, but for different reasons—from a timing standpoint, from a personal standpoint—it just didn’t fit,” Johnston said. “But there was a group of us that continued having occasional conversations. Did we still have interest? Did we still think there’s an opportunity? Are we crazy?”
Filling a Void
Among those in that group were several who ultimately joined RockPoint Bank, either as board members or as part of the executive management team, which in addition to Johnston includes Chattanooga banking veterans Patrick Jensen, chief financial officer; Camille Daniel, chief banking officer; and Kerry Riley, chief credit officer.
“We had all been in banking in Chattanooga for 25-plus years. We were all in senior positions. Nobody needed a job,” Johnston said. What they needed, however, was to convince themselves that the risk was worth the opportunity. The conversations continued, and by early 2019 they concluded there indeed was a need for a new local bank—and that it could succeed.
“If you go back to 2015, local banks had 20-plus percent of the Chattanooga market share, but by 2019 there were only two remaining banks headquartered in Hamilton County and combined they had less than 5%,” Johnston said. “We just felt like there was a void we could help fill.”
In the summer of 2019, all four resigned from their respective banks and by August were working full-time on getting RockPoint up and running, gearing up for an equity raise and gaining the necessary regulatory approvals from the OCC and the FDIC. They had chosen to become a nationally chartered bank rather than a state bank, Johnston said, mainly because of existing relationships with the OCC on the part of the executive team and some of the organizing directors.
“When we started the process, we met with both the OCC and the state. We just finally decided that becoming a national bank was a better fit and would add more value for us,” he said.
In early 2020, the OCC qualified RockPoint’s initial capital raise, with a target of $30 million, and the team was ready to start soliciting investors. In February, at a meeting of organizational board members, discussions centered on the equity raise, expectations and kick-off preparations. Someone mentioned COVID and the response was “We don’t really know what it is, how it could impact us, but we are watching it.”
Less than a month later, everything had shut down.
“We immediately hit the pause button on raising money and shifted our focus to the regulatory front,” Johnston said. “We were able to get conditional regulatory approvals last spring and then ease back into the equity raise.” By June, it was full speed ahead.
“I think all equity raises are described at one point or another as a grind, but it’s a grind. I warned my wife, who was extremely supportive during all of this—please don’t get your feelings hurt because when we walk into a room, I can clear it. Nobody wants to make eye contact because they know what I’m going to ask.”
The target market for shareholders (and now bank customers) was local business owners/operators and professionals. “We were not pursuing private equity or institutional money because their typical timeframe is shorter than seven to 10 years, which is what we were laying out for potential investors,” Johnston said. “And we didn’t want large shareholders because then it becomes their bank. We very much wanted to have a Chattanooga community feel.”
RockPoint opened with roughly 350 shareholders with an average investment of just under $100,000, and no one has 10% or more ownership, which was the cutoff established by organizers. And while the pandemic was certainly not a welcomed development on the front end of an equity raise, Johnston said in hindsight it was a benefit in the sense that their shareholder base turned out broader than initial expectations.
“When the pandemic hit, a lot of people we were targeting wanted to preserve some liquidity because of the uncertainty. They were interested, and recognized the need for RockPoint, but they weren’t ready to invest. By the time the equity raise was nearing its end in the fall, many of them were more comfortable and chose to join us. We ended up with a broader base of shareholders—and with our expectation that shareholders will be customers, that’s a good thing.”
At some point down the road, of course, shareholders will be looking to liquidate or monetize their initial investments. Choices will be made on that front, whether it is to go public, do another private offering or sell. But Johnston believes strongly that Chattanooga will continue growing and so will bank consolidations. “The void we are filling now will only be bigger in seven to 10 years.”
“My hope, the management team’s hope, is that we earn the right to stay independent. Ultimately that is a board and shareholder decision. But we think if we are creating value, we will have the chance to do that. If you look back at Chattanooga’s history, there have been some really engaged, involved local banks who have played a big role in the community. That is what we aspire to.”