Once a credit union and now a bank, Coastway Community Bank is asking its members – all 26,000 of them – to take the next step in their plan to serve the financial needs of Rhode Islanders.
The bank is seeking membership approval to form a depositor mutual holding company.
Bank president and CEO Bill White said last week that a simple majority of members need to vote in favor of the action for Coastway to proceed to the necessary Federal Reserve Board, Federal Deposit Insurance Corporation and the Rhode Island Department of Business Regulation approval. If all of that happens, the designation as a depositor mutual holding company could take effect by late this summer. It would make Coastway the state’s third bank mutual holding company, along with Centreville Bank and BankNewport.
What it would allow Coastway to do, explained White, is to acquire other financial services without merging operations. For example, if Coastway were to buy an insurance agency or another bank, it could keep the name and identity of that operation and also the Coastway name.
So, what is Coastway looking to acquire?
“Nothing,” said White, “and that’s why it’s a good idea to do it now.”
“A mutual holding company is a depositor-governed financial institution that is organized to act as the holding company for a mutual bank, like Coastway. The mutual holding company will be a Rhode Island corporation,” according to a press release issued by Coastway.
“It’s the next step to give us a little more flexibility,” White said in the interview.
White made a pitch to members in a letter dated April 2, along with a ballot and the notice of a membership meeting April 30 at 6 p.m. at the Crowne Plaza in Warwick. Eligible to vote are Coastway members as of Sept. 30, 2010. Members get one vote regardless of what they might have in deposits or the number of accounts in their name.
In his letter, White assures the Coastway name will remain unchanged; that deposits will remain federally insured; there won’t be a change in employees; members will retain their voting rights; and that the bank will continue its personal service and “continue to price our credit and deposit products at or better than the competitive market.”
Anticipating questions that the bank is looking to convert to a stock-owned company, a flyer accompanying the letter reads, “Forming a mutual holding company does not mean that Coastway will be selling shares of stock in the bank.” It goes on to say that “technically speaking” shares of stock are being created and they will be retained by the depositor-governed mutual holding company.
White said the idea of the mutual holding company has been in the works for some time and the board gave its approval last September. White sees a mutual holding company as a natural progression in Coastway’s growth.
“We’ve become a bank in one of the worst economic periods,” said White.
Coastway made the conversion from credit union to bank three years ago. Since then, its assets, capital and savings have grown more than 11 percent.
In those three years, the bank has issued more than 1,800 mortgages for homes totaling $357 million and written 270 loans for local businesses totaling $91 million.
During that time, when most companies were reducing staff, Coastway added 15 jobs. In July it will add another 10 jobs when it opens its eighth branch. The new branch will be in East Greenwich and White says two more branches are on the drawing board.
While online banking has grown in popularity, White said, “There is still a segment that wants to see a physical location.”
Coastway, once Warwick Credit Union, has a 91-year history. It has assets of more than $310 million.
As White likes to remind, “We’re a Rhode Island success story.”