Harborstone Credit Union is preparing to join the ranks of credit unions offering member business services following research indicating its membership and local businesses wanted these services.
Harborstone-a community credit union whose geographic area includes the southern end of Puget Sound, south of Seattle-is the third largest CU in Washington State, but it has looked outside its own operation for expertise in managing its expanded services for small businesses. It recently hired three people from outside the credit union-Mike McKeon, John Rudisill and Dennis Flem-to add expertise to its small business banking unit.
John Renforth, Harborstone's senior vice president of marketing, told The Credit Union Journal the projected "hard launch" date for Harborstone Business Services is Jan. 1, 2004, preceded by a "soft launch" in October.
"We are beginning slowly. We have mentioned the small business banking unit in our quarterly magazine, which goes to 50,000 members and 22,000 non-members," he said. "This fall, we will directly approach the 2,500 members we have identified as small business owners."
Small Business Division
Harborstone currently does not have a small business division. Its CUSO, known as Harborstone Investment Services, offers insurance products and investment services. After Jan. 1, Harborstone Investment Services will operate as one arm of Harborstone Business Services.
Renforth said Harborstone Business Services will have a full range of deposit-based products, checking accounts, merchant card services, VISA cards, lines of credit, commercial loans. In addition, it will offer employee benefit programs, business insurance and financial services.
"Businesses will be able to get the products they get elsewhere, but not the bells and whistles large commercial banks offer large corporations-such as coin and cash services," Renforth explained. "We are not trying to compete with large commercial banks for large clients, but we will be very competitive for the small business market."
While the large banks, and even some community banks, are looking for high-margin clients, Renforth said Harborstone will be targeting companies that often are overlooked. This includes professional firms such as consultants, attorneys, doctors and accountants, wholesale firms, and small construction firms.
The optimum small business will have from 10 to 50 employees and $10 million or less in annual revenue, he added.
According to Renforth, Harborstone has experienced a recent change in its demographics. Members have shown a declining interest in consumer loans-which for years was its bread and butter, he said.
What The Research Showed
"We did research, which found businesses would switch to another service provider if it was attractive. Because of our size-we are larger than local community banks-we thought we could be competitive, especially by offering great, personal service," he said.
Loans are important, Renforth continued, but Harborstone management felt the CU should be able to offer services in three areas-loans, investments and insurance- because any of those three could be a "foot in the door" to build a relationship.
"For example, on our investment/insurance side, we are working to provide low-cost medical benefits."
Facing Challenges
Renforth said the most difficult part of launching a small business banking unit is preparing the staff. The CU has eight branches, is in the process of opening two more, and it has a phone center. "All of the people in these locations are good at serving our members, but the business market is different," he said.
Harborstone brought in McKeon, Rudisill, and Flem from the "outside" to help with the transition. McKeon, who previously worked at a community bank in the Tacoma area and a large commercial bank in the Southeast, has more than 30 years experience in community banking and commercial lending management. He will serve as vice president of business services.
Rudisill formerly was with Wells Fargo and is well versed in mutual funds, private banking, trusts and commercial banking. He also is a Certified Public Accountant. Rudisill will be president of Harborstone Investment Services.
Flem's background is in the insurance industry. He has served small businesses for 30 years. Flem will be the vice president of Harborstone Investment Services.
"To be competitive, we had to get the expertise of people who have been there and done that," said Renforth. "We want to be instantly credible in business owners' eyes. Those people don't expect credit unions to have expertise. One way to get over the credibility gap is to have those experienced people."
