Suncoast Credit Union in July named Kevin Johnson president and CEO, replacing Tom Dorety, who is retiring. Johnson has been with the Tampa, Fla.-based credit union since 1985 and most recently served as executive vice president and chief information officer. His appointment to CEO of Suncoast, which is the nation's 12th-largest credit union and the biggest in Florida, was effective Oct. 1.
In an interview with S&P Global Market Intelligence, Johnson spoke about the new loan-loss accounting standard known as CECL, commercial lending and the company's expansion plans. The following is an edited transcript of that conversation.
S&P Global Market Intelligence: How does your leadership style differ from what the credit union experienced under Tom Dorety, and what changes in strategy might you implement?
Kevin Johnson:
The NCUA's new member business lending rule has been a hot topic in the industry. How, if at all, will it impact your business lending?
Suncoast will remain a conservative business lender. However, we believe that removing the personal guarantee provision allows us to be more competitive, provides more of an equal playing field with competitor community banks and allows us to help members in ways that we could not have before.
How much of a push have you made to attract millennials, and how do you differentiate yourself to them from other financial institutions?
We understand that millennials use their phones to do business and life, so we will continue to enhance our mobile offering and streamline our processes to meet their demands for quick and efficient fulfillment. We believe we are differentiated because of our active support and involvement in financial literacy and our 34 student-run branches in Florida. We also sponsor a computer-based financial education tutorial program throughout many of the schools in our communities.
Which western Florida market are you most excited about in terms of lending opportunities?
As members recover from the recession, our greatest potential lies in areas where we have the largest concentration of members, primarily Hillsborough and Lee counties. We strongly expect to see growth in new members and an increased wallet share of our existing members throughout the 21 counties we serve. With our recent award of a CDFI grant, we plan to expand our First Time Homebuyer mortgage program, helping members achieve the goal of homeownership.
Do you see your overall branch footprint shrinking as digital offerings continue to handle more and more transactions?
Our new service center will have a smaller footprint, but personal service will always be offered to our members. We will focus on lending, member service and wealth management services in our service centers, and we will continue conducting daily teller transactions in the branches. We will create efficiencies by offering extended hours with live teller services through interactive teller machines.
Would you consider expanding your footprint to the central and eastern portions of the state?
In 2015, we added four new counties to our field of membership and will likely add offices in both Polk and Marion counties within the next few years. I would expect most of our expansion efforts in terms of offices to be directed toward high-growth areas within our current geographic footprint. The possibility of future expansion is not beyond consideration, but we feel we have plenty of growth potential within the 21 counties we serve today.
Speaking of growth, Suncoast now sits not too far below the $10 billion asset mark that would trigger increased regulatory scrutiny. Are you already preparing for that?
It’s exciting to see that number on our horizon and, of course, we expect an increase in regulatory scrutiny. We have already formed a committee to begin planning. Our credit union colleagues have also been helpful as we look toward that milestone.
There has been a lot of talk in the industry about CECL. What do you see as the biggest problem with the proposal in its current form?
The biggest concern is the impact during a recessionary period of our mortgage portfolio, since that loan pool has a longer life-of-loan (an average of seven to eight years). This past recession taught us that, while there was a significant impact on provision for loan loss, we had the ability to recognize it at a measured and manageable pace. This allowed us to continue lending and assist our local economy while we were recovering. Under CECL, we would have experienced accelerated losses on our current portfolio and, with no improvement in sight, we would have needed to heavily reserve new loans. We were already losing money, and it would have been difficult to justify continuing practices that would cause us to lose even more money. Lending through a recession is an important practice credit unions do to move their local community to an economic recovery. CECL threatens this ability.
In auto lending, who do you see as your primary competitors, and how do you take business from them?
We compete primarily with the captive auto lenders as well as major indirect lenders utilized by the dealers. Our auto loan rates are the best in the market, which has fueled our growth. We would much rather have our members come to us first, but we realize the mindset is often to find the vehicle first and then seek financing. This is evident by the amount of indirect business we do. We believe that our open, easier-to-understand membership eligibility has increased our auto loan business too. We do put some effort into marketing to these indirect members so that we can expand their relationship with Suncoast. We also think there is an opportunity to assist members who may have financed directly at the dealer by refinancing those loans and reducing their interest rates.
There has been talk that overall auto lending may be hitting a plateau. Do you agree and, if so, what adjustments might you make to compensate in your portfolio?
We have seen trends that concur, and demand may be easing. We will continue to be very competitive in the marketplace with our rates, but will also explore how we might be able to gain in the lending space. We know some consumers seek out the easiest and quickest ways to obtain a loan so we will address this demand by improving processes or by partnering in creative ways.