Coastway Credit Union.
Coastway Credit Union president continues to find
success despite a fierce banking environment
Bill White
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Position: President and CEO, Coastway Credit Union, based in Cranston
Background: Branch manager, Old Stone Bank; Branch manager and
commercial lender, Hospital Trust Bank; v.p. corporate lending, Fleet Bank;
and president, Warwick Credit Union (later became Coastway)
Education: Bachelor’s degree from Rhode Island College and master’s
degree from University of Phoenix
Age: 47
Residence: South Kingstown
PBN: Coastway has evolved over the years. Tell us where it
is at now.
WHITE: Coastway started in 1920 as the Telephone Workers’
Credit Union and over the course of the years the credit union has evolved.
In 1986, the credit union changed its name to Coastway, as its membership base
grew more diverse and a little less reliant on the telephone company. In 2000,
I was the president of Warwick Credit Union. I met with my counterpart at Coastway,
who was about to retire, to see if there was a way to combine the two credit
unions to form a better organization. The two credit unions combined were about
$135 million in assets.
Q. How has the bank grown since the merger with Warwick Credit
Union?
A. When we merged in March of 2000, the credit union
was at $135 million in assets. Today, we’ve grown to $220 million in assets
so we have almost doubled in size. I think a lot of that is phone company employees
who live in the suburbs who now see that we have branches in Warwick and Cranston,
where before our only branch was in Providence. A lot of these people have returned
to the credit union. I think the other thing that has driven growth and new
membership is some level of discontent with the banks. It’s difficult when you
pick up the newspaper and read about transactions like Bank of America and Fleet.
Some people get a little disfranchised by that, as they look for something smaller.
By the same token, small is nice but they also want it to come with all the
services available to Fleet customers. You cannot simply offer them small-town
products, without being able to deliver big-city services.
Q. Is the idea of having a credit union specific to a company
or organization, like the telephone company, a thing of the past?
A. In the state of Rhode Island you have a mixture of
the closely held credit unions and the community credit unions. I don’t think
there would be a lot of interest on anyone’s part to do that. Companies today
are paying more attention to their core business. The concept of branching off
to form a credit union for its employees is a huge task.
Q. As the big banks get bigger and have many more resources
in reaching new customers, how do institutions like yours use your marketing
dollars?
A. We do a lot more direct mail to our members, communicating
to them every month. What really drives the equation is what happens when people
walk in the door. We can do all the marketing in the world, but if we don’t
supply the goods, the marketing money has been wasted. We spend an equal amount
of our marketing budget in training. When you walk into a Coastway Credit Union
branch people understand who you are and they know you are there because you
want something different from what is offered at the larger banks. We spend
a lot of money and a lot of effort in training our employees to provide the
personal service.
Q. Is it difficult finding the workers who understand the
credit union’s mission?
A. Yes, because we look for a particular type of employee.
I’m looking for somebody who has an interest in his or her job, somebody who
wants to come in and do his or her job better.
Q. Commercial lending is a big part of your business. Do you
see that being an area that is growing more popular with credit unions?
A. We are very active in commercial lending. We are one
of the few credit unions in the state that do some type of business lending.
It is very unusual for credit unions to be doing this, but more and more are
seeing the benefits of commercial lending. It is a means of generating loan
volume. We have been doing it for dozens of years. Last year we were the fourth-ranked
SBA lender in the state. We have had the ranking now for three years, and we
are not that far off from No. 3 or No. 2. Some of the smaller businesses in
Rhode Island felt that they were too small to be attractive to the bigger financial
institutions, and we came along as a viable option.
Q. What does your typical small-business loan customer look
like?
A. We do a number of startup loans. These are folks who
have maybe 20 years of experience working for a big company and now want to
use their skills for themselves. We do loans to companies like a printer shop,
which might have $2-$3 million in revenue. That’s something that might fall
under the radar screen for a big financial institution. That’s a good size loan
for us. We have a few dozen borrows that have million-dollar loans, which were
done as straight business loans or loans done in conjunction with the SBA.
Q. Are you concerned that – based on your success – more credit
unions will target commercial lending?
A. They will. It’s good business. They will start to
chip away, but it’s our hope that they will chip away at the big banks. If we
do our job then we won’t have an issue.
Q. The Rhode Island Credit Union League is active in providing
services to the small credit unions that need resources. What are your thoughts
on the group?
A. Ironically, we are one of three credit unions in the
state, I think, that are not a member of the association. We broke away a couple
of years ago. The credit union industry used to be a very cooperative industry.
We all existed and we all helped each other. Over the last 10 to 12 years, you
started to see credit unions compete with each other. In my eyes the gloves
were dropped. Once we started to compete with each other, the camaraderie had
to disappear. I’m sure you didn’t see (former Fleet CEO) Terry Murray call Larry
Fish (Citizens Bank president) to find out if it is OK to do a certain thing.
Once you know you are in competition with others you need to watch out for your
own shop. Some of the smaller credit unions continue to rely on the League,
which provides them with marketing services, legal advice. The League does have
a purpose, but I don’t think it has a purpose for Coastway.
Q. As banks merge to become more competitive, does it make
sense for credit unions to merge as well?
A. I think you’ll see it to a certain extent. Again,
economies of scale are going to drive a lot of it. Right now it’s difficult
for any financial institution to make money because rates are so low. The bottom
lines will start to erode and members will demand more sophisticated and expensive
services, so the smaller institutions are going to find the going much more
difficult. They are not going to be able to achieve the economies of scale because
they don’t have branches or some of the products and services members are looking
for. That may drive some more merger activity. Some of the larger credit unions
have talked, but I don’t see anything that is inevitable. I think for the smaller
institutions it may be, but they also do a great job of managing their business
line and understand what they are good at.
Q. Is Coastway looking for a merger?
A. No. At this point we are satisfied with who we are
and what we are. We are looking to grow more. We have other branches in the
works. If a merger came down the pike, I wouldn’t say no, as long as it was
in the best interest of the membership.
Q. Speaking of mergers … What kind of impact do you think
the Bank of America/Fleet deal will have on smaller banks and credit unions?
A. That’s the great unknown. The last time we went through
this cycle, when Fleet merged with BankBoston, there was a tremendous windfall
for the small institutions. When I say smaller I mean everyone that is smaller
than Fleet and Citizens. I think that same type of thing may happen again, although
Bank of America claims that it is much more retail oriented and do a better
job. We prefer to think that there is some opportunity out there.
Q. From a regulatory standpoint is it getting easier or more
difficult to operate as a credit union in recent years?
A. It’s more difficult right now because growth places
a strain on capital and the level of capital that’s required by the National
Credit Union Administration is substantially higher than the level of capital
required by banks. While we don’t pay taxes, the only way we can generate additional
capital is to earn more money. When they need capital, financial institutions
that are bigger and publicly owned can go out and raise money by selling stock.
We are not allowed to do that. That is a pretty hefty item for us, it’s something
that we all have to deal with as we go forward.
