Cranston-based Coastway Credit Union is looking to make a big change.
Managers of the seven-branch credit union with $302 million in assets want to switch the institution into a mutual savings bank. And leading the charge is Coastway President William A. White. He’s been Coastway’s president since 2000, when the former Warwick Credit Union – where White was president and CEO – merged with Coastway.
The credit union regularly ranks near the top of the U.S. Small Business Administration lenders in Rhode Island, and it is one of the largest credit union SBA lenders in the United States.
PBN: Where are you in the process of possibly changing from a credit union to a bank?
WHITE: Under [National Credit Union Administration] guidelines for a proposed charter conversion, credit unions are required to post a “Notice of Intention to Adopt a Plan for Conversion to a Mutual Savings Bank” for a period of 30 days. During that time, members are allowed and encouraged to offer feedback. We posted this notice on July 19, with the end of the comment period having been this past week. The Coastway board is now completing the review of all additional documentation, and weighing member feedback as well. If the board votes to move forward, then we could expect to begin the process soon, with a vote by the members potentially by year end.
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PBN: Many bankers complain that nonprofit credit unions receive tax benefits while being able to offer many products that banks offer. Why give up those tax benefits?
WHITE: The tax benefits of being a credit union come with corresponding regulatory restrictions. These restrictions are currently impeding the ability of Coastway to continue to grow in a way that allows us to best serve all our members. We have done a thorough analysis of remaining with the tax-exempt credit union charter versus moving to the member-owned mutual savings bank charter. We feel strongly that the benefits offered by the mutual savings bank charter far outweigh any tax burden. We believe this change will afford Coastway the best opportunity to continue to grow and provide our members with the highest level of service and product selection that they require.
PBN: Has this been a switch that a lot of other credit unions have made? Or are you one of the first?
WHITE: While we are the first in Rhode Island to propose a charter change from a credit union to a member-owned mutual savings bank, dozens of other credit unions across the country have successfully made this change.
Why switch to a Rhode Island-charted mutual savings bank versus a federally chartered bank?
WHITE: Our decision to become a Rhode Island-chartered mutual savings bank has mainly to do with our desire to remain a community-based, member-owned institution with a local focus. The primary difference that we saw in the federal charter versus the Rhode Island charter was that the federal charter offered the ability to branch nationwide. It is not our intention to branch outside Rhode Island.
The most prominent changes that members will notice will be our ability to expand current product offerings and to continue to grow by potentially adding new locations. We will also remain federally insured, moving from the present NCUA deposit insurance to FDIC [Federal Deposit Insurance Corporation] deposit insurance. More important will be the things that do not change as a result of the charter conversion. These include the Coastway name, the friendly staff, the locally focused community based efforts and most of all the ability to continue to work at meeting our members needs. In addition, our members will still own and run Coastway under the same one-member, one-vote rule.
PBN: How have your members reacted to the proposal?
WHITE: Reaction to date from our members has been overwhelmingly positive and very supportive. Rhode Islanders appreciate and support local community based businesses, and after 88 years, Coastway has earned their trust. They understand that this change will further our efforts to serve the local community and to remain independent, similar to Centerville Bank or BankNewport. It is also nice to see that the local economy does have some success stories, and we are proud to be one of those bright spots.
Coastway Credit Union is a $300 million, 30,000-member financial institution with its headquarters in Cranston and seven branches across Rhode Island. For more information about Coastway, or its philanthropic Coastway Cares Charitable Foundation Inc., visit www.coastway.com.
