Charlie Crawford, the chairman and CEO of Hyperion Bank, readily admits that his bank's geographic footprint "looks a little unusual."
The $170 million-asset bank has two branches. One is in Philadelphia, where the bank was founded in November 2006. The other office, which Hyperion recently opened, is in the Buckhead section of Atlanta.
By opening the branch, Hyperion became the latest bank to skip over large swaths of the country to target Atlanta.
The $753 million-asset Wallis Bank in Houston opened its first branch in the city over the summer. And the $33.1 billion-asset BankUnited in Miami Lakes, Fla., announced on Monday that it had hired a team to open a loan production office in Atlanta.
Several factors have made Atlanta an attractive play for banks looking to dip a toe into a new market.
The city remains a vibrant market; its population increased by 1.3% last year and its unemployment rate stood at 4% in August, according to government data. A number of local banks, including SunTrust, State Bank Financial and Brand Group, have been sold or have agreed to be sold.
Atlanta also offers relatively low-cost funding to growth-minded banks. Among major U.S. cities, the Atlanta market had one of the biggest declines in cumulative deposit rates in the third quarter, according to research by Keefe, Bruyette & Woods.
Many banks have been willing to “jump geographies” in hopes of benefiting from consolidation, said Sultan Meghji, the CEO of Neocova, a St. Louis fintech that aims to be a core provider to banks. “We’re seeing more than a few leverage that disruption to move into a new market.”
But there is more to Hyperion's decision than a desire to enter a far-flung market.
Crawford, hired to run the bank in August 2017, has extensive experience in Atlanta. He helped found three banks in area, including Private Bank of Buckhead, which was
After Private Bank's sale, Crawford planned to stay in Atlanta and serve as a regional executive for National Commerce. He changed his mind after getting a call from Troy Taylor, a Hyperion director who had also invested in Private Bank. The call turned out to be prelude to a job offer at Hyperion.
Crawford said he saw the offer as "an opportunity to create some value" at a bank that had been profitable only three times over its 13-year history. He also had some familiarity with Philadelphia, earning undergraduate degrees in economics and management at the University of Pennsylvania's Wharton School.
Crawford succeeded Lou DeCesare, who shifted over to become Hyperion's president and chief operating officer. He has since raised $18.3 million in capital — about 60% of the money came from Atlanta-area investors — and nearly doubled the size of Hyperion's loan portfolio, to $128 million.
"That first year, I spent a fair amount of time with investors, and some with the regulators,” Crawford said. “I was convinced the team had cleaned up most of the problems. The only thing they lacked was capital.”
Given the large amount of Atlanta investment, it seemed logical to look at the city for market expansion.
"Many of our investors encouraged us to bring Hyperion to" Atlanta, Crawford said.
"The new investors will want to monitor the bank, and that's a lot easier to do if it has facilities in Atlanta," said Rodney Ramcharan, an assistant professor of finance and business economics at the University of Southern California's Marshall School of Business.
Long-distance expansion can be capital intensive and risky, industry experts said.
"If you have a small, sub-billion-asset bank, it's not obvious that the economies of scale make sense to open a branch so far away," Ramcharan said. Still, he acknowledged that Hyperion is hedging against the possibility of a slowdown in Philadelphia.
Crawford, for his part, agrees that the move should help Hyperion diversify, in terms of its geography and the clients it serves. "We’re in two very nice markets,” he said. “Both are growing. It gives us geographic diversity and customer diversity.”
In Philadelphia, Hyperion had developed a specialty of lending to investors and developers involved in the construction and renovation of one-to-four-family housing, Crawford said. In Atlanta, the bank plans to follow Private Bank's playbook by making construction loans directly to homeowners seeking to build or renovate, while also offering business and personal banking services.
Crawford said he expects Hyperion to report a third-quarter profit that will offset $43,000 in losses in the first half of 2019.
“We’ve done more than I thought we could accomplish in 24 months,” he said.
