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 retiringand 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 seniorofficers 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 recentsuccess. 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 responsibilityfor 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 thingwe 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 yearwe 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 regulationsand 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 andearnings 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 beopening 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 goingto 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 didnot 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 pastthree 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 seethe 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 oninternal 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 otherkinds 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 notrenewing 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 goalswe 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 organizationmust grow to create opportunities for employees. We are going to keep working on this.

As told to Brooke C. Stoddard

February 10, 2020

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