Going For Growth

After a period of rebuilding, Coastal Federal Credit Union posts three record-breaking years.

 
 

Coastal Federal Credit Union ($2.2B, Raleigh, NC) was chartered in 1967 to serve IBM. Although IBM is still an important part of Coastal’s business, the credit union now also serves 1,300 SEGs and associations. It has a significant presence in North Carolina’s Research Triangle — it has 15 branches in the region — but also serves 30,000 members outside the state. Chuck Purvis joined Coastal in 2001 after 20 years in the credit union industry, working with both the North Carolina League and the corporates. In July 2012 he became CEO, replacing Larry Wilson who had led the credit union for 38 years.

Our board approached me about three years ago and officially put me in a successor role as the second-ranked officer at Coastal. The board knew Larry Wilson would be retiring and decided to act early. I became responsible for leading Coastal’s team and operations, and Larry handled the external relationships — relations with the community, legislation, and the like. Over the past five years, we had two senior officers retire, so Larry and I had the opportunity to bring in outside talent before I took over as CEO. Thus my senior team was in place when I took over in July. We had a strong cadre of vice presidents, too, and they had been working on strategy, our business model, and our service model.

CU QUICK FACTS

  • Coastal FCU
  • HQ: Raleigh, NC
  • ASSETS: $2.2B
  • MEMBERS: 177,000
  • 12-MO SHARE GROWTH: 8.63%
  • 12-MO LOAN GROWTH: 15.16%
  • ROA: 1.43%

The transition in July was pretty much a non-event. There were no radical new plans, and the relationships among the leaders were established and solid. In fact, I think the collaborative team environment inside Coastal has been a big part of our recent success. That said, we’ll probably have several more senior officers retire over the next five years, so making sure we are developing a bench internally and assuring the collaborative nature continues as the team evolves is going to be a responsibility for me as CEO.

We work hard to develop talent from the inside. We train and move managers around so they gain exposure to different disciplines. Occasionally we have to go outside. One thing we have learned is that trying to build a new business around an internal team without the proper experience can be a risky endeavor.

Assessing The Situation

Like many credit unions, 2008 and 2009 were difficult. We took loan losses, but we are fully recovered now and have finished three record-breaking years. Last year we set an all-time record for net income. Loans and net worth were both up 16%, so we are in a strong position. As I look out a number of years, I see tremendous opportunities for credit unions. The community banks are getting hammered with regulations and capital constraints worse than credit unions. Consumers are still fleeing the big banks, so credit unions are well positioned to pick up a lot of new members and a lot of new business. Creating sufficient capital and earnings to handle that new growth is going to be a challenge.

Here at Coastal, we needed a couple of years to rebuild our capital, but now we are definitely in a growth mode. We are opening our first branch in five years and likely will be opening one additional branch each year or two for the foreseeable future.

Of particular significance to us this year is a conversion of our core banking system. It’s going to take 18 months to complete, and making it a successful conversion without degrading service to members or deflecting us from opportunities is going to be a challenge.

Reaching Out

We’ll use as many channels as we can to reach people. We have a full-time person on our marketing team working primarily on social media. We have 15,000 people following us on Facebook or Twitter. We expect to ramp up traditional advertising near the end of this year and into 2014. Once the core conversion is completed in the summer of 2014, we’ll increase our media even more. We see lots of opportunity for growth. And, as I said, not just for Coastal but also for all credit unions — we’re a best-kept secret and we don’t want to be secret for long.

To people who say there is no loan growth across the economy, we say be a bit more creative. 

The local economy here is somewhat mixed. Unemployment is a shade higher than the national average, higher in the rural areas than in the cities. But we did not have the real estate spikes seen in some states and so did not see the precipitous declines either. Delinquencies have come down dramatically over the past three years to what are normal levels for the type of lending we do. Right now we have no constraints on our lending programs. We are not trying to avoid lending or credit risk; rather we are trying to meet the credit needs of our members. We see the present circumstance as perhaps a once-in-a-generation opportunity to get people into low-rate mortgages and we are working to do so. We still do 100% mortgages, as we have for many years, for first-time homebuyers.

Specific Goals

We’ve set some specific goals for 2013, namely 16% for loan growth; 8% for shares; 8% for assets; and 70 basis points for ROA. We’ll focus on internal organic growth for a total member growth of 6-7% or approximately 12,000-15,000 new members. We think these goals are quite achievable. To people who say there is no loan growth across the economy, we say be a bit more creative. Find other kinds of loans to make, not necessarily riskier loans, and move with more boldness in the lending market. We are active in the loan participation markets, both as buyers and sellers.

Coastal has a history of being a successful lender. During most times we are pretty heavily loaned out. We feel the economy is in synch with the goals we have for this year. Bankers have been pulling back. We hear from members that their bankers are not renewing their loans, so those members are coming to us. We are picking up a good deal of business this way.

We have a 100% loan-to-equity home equity product. Laying off some of the default risk to an insurance company allows us to offer this product and we are happy we can provide home equity loans to people who might not otherwise be able to get them.

Driving Our Efforts

We use the Net Promoter Score to evaluate member loyalty and how well we are serving their needs. We’ve set a goal of 70 and we were close to that last year. We are going to be working on this heavily in 2013.

To motivate staff, we have an incentive program that covers every employee. It uses Net Promoter Score as well as other metrics, and it focuses our team on the goals we have set. Payments are in February, and this year they are the highest ever. We also work hard on transparency, that is, employees see our strategic plan and monthly financial statements. I am a firm believer in the notion that an organization must grow to create opportunities for employees. We are going to keep working on this.

As told to Brooke C. Stoddard

 

 

 

April 15, 2013


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