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Coastway Looks Forward after Conversion, IPO
BY LINDA GOODSPEED
I
t may sound counterintuitive, but at the beginning of the Great Recession, and then again during the painfully slow economic recovery that followed, Coastway Community Bank twice had to alter its structure to accommodate its rapid growth. Coastway, headquartered in Warwick, Rhode Island, spent the first 89 years of its existence as a credit union, first for the telephone workers union in Rhode Island, and later as Coastway Credit Union. But by 2009, credit union regulations were strangling Coastway’s growth and the services it could offer its members. The organization, which had about $270 million in total assets at the time, found itself at a crossroads, explained William A. White, president and CEO. “We had developed certain areas of expertise,” White said. “We had started to define our self with good small business lending. But credit union regulations at the time restricted what we were doing. Business lending is not something you can get in and get out. If you are in, you’re in. If we were going to continue to be a credit union, we were going to have to abandon certain things. The choice was to stop doing what we were doing, or become a bank. We felt we could offer more to our members and our employees as a bank.” Coastway’s members agreed, and in 2009 voted to convert to a mutual holding bank structure. “The good news was our members overwhelmingly approved the conversion,” White said. “The bad news was we became a bank at the worst possible time” – less than a year after Lehman Brothers collapsed, touching off the worst recession in more than 75 years. But with the shackles off – even in the midst of the Great Recession, in one of the hardest-hit states in the Northeast – Coastway took off. “We made some good loans, suffered some losses like everybody else, but survived that period of time,” White said. “And just as we predicted to our members, we were able to grow and be more competitive.” And grow Coastway did. Between 2009 and 2014, Coastway granted nearly $1 billion in mortgages. In fiscal year 2014, Coastway was the state’s top Small Business Administration lender, granting more loans for more money than any other bank in Rhode Island. Also in 2014, the Association of Fund Raising Professionals named Coastway Community Bank the outstanding philanthropic business of the year. The bank was operating on all cylinders. But by this time, Coastway was once again hampered by its structure. 10 BANKING NEW ENGLAND
William A. White President & CEO
“We were growing so rapidly that it became an issue in itself,” White said. “Capital was getting skinny. We had a great team on both the mortgage and commercial side. We looked at that and said, ‘If we had more capital, we would be able to grow more and leverage what we’ve got.’” The decision was made to go public, and once again, members overwhelmingly agreed. The public offering in January 2014 raised about $48 million, exceeding the bank’s expectations. Today, Coastway Community Bank has about $650 million in total assets and nine branches, all in Rhode Island. The bank provides a full complement of financial services to individuals and small businesses in Rhode Island. Its loan portfolio of more than $500 million is about equally divided between commercial and residential loans, a mix White likes. “It is working well for us,” he said. As for the future, White, who has led the bank and its predecessor credit union since 1994, said Coastway was focused on absorbing its rapid-fire growth. Since converting to a bank, Coastway has opened two new branches, but White said no others are planned. “We’re working hard to keep it simple,” he said. “We’re trying to be a better bank by doing what we do more efficiently.” Part of that efficiency revolves around technology. Like the rest of the industry, Coastway is focused on adapting to the new tech scene. The bank has a full mobile platform, including remote check deposit and other services, and will continue to add other features. White admits Coastway’s success might make it a future target for acquisition, but says the bank and board are committed to remaining independent. “We have no intention of doing anything different,” he said. “There are still excellent opportunities, especially in Rhode Island, for us to continue to do what we do – plenty of room for us to continue to grow and be a viable alternative to bigger banks.” BNE