Donald L. Hersman, who led a four-year salvage operation at Eastern Financial Federal Credit Union, is ready to steam ahead.
Having put problems caused by the ruin of sponsor Eastern Air Lines behind him, the chief executive has set an ambitious agenda for the Miami- based credit union.
"The last couple years we were trying to hold growth," said Mr. Hersman, 53, who was a banker for 18 years before entering the credit union movement at $860 million-asset Eastern Financial. "We're putting that behind us."
This optimism is a switch from years of dumping bad loans and shuttering branches across the country, Mr. Hersman's focus since he took the reins in January 1992 - six months after being hired as chief financial officer.
Eastern Financial will break ground next month on a $15 million headquarters. And Mr. Hersman predicted that deposit growth - a dismal 3% from 1993 through 1995 - would reach 8% this year and a similar level in 1997. Loan growth for the country's 25th-largest credit union is expected to be 16% this year.
"We're just going to be very aggressive in promoting our products," Mr. Hersman said.
Besides advertising, the credit union is relying on its extensive electronic delivery system and a sales culture instituted two years ago to drive growth.
Eastern Financial operates a network of 14 branches and 35 automated teller machines in the two states, Florida and Georgia, where the bulk of its 155,000 members live. But about 30% of the depositors live in areas where the credit union has no branches.
Because of the paucity of branches, Eastern Financial depends heavily on ATMs and the telephone. Members can perform more than 80 different functions - from applying for a loan to checking deposits to transferring money between accounts - on their telephones. The credit union handles about 600,000 phone transactions a month.
And thanks to a credit-scoring system introduced in 1993, the credit union can approve most consumer loans in 15 minutes. Last year it introduced a risk-based lending program, which allowed it to increase approvals by 20%.
On the human level, the credit union has sought to instill a sales culture and disperse its lending authority.
"Before, our retail operations were order takers," Mr. Hersman said. "You couldn't get a mortgage at one of our branches because no one knew how to do it."
The results show in the credit union's loan-to-deposit ratio. In 1995 it came in at 57%, nearly 20% higher than in 1993. Mr. Hersman hopes to pump this up to 75%.
But cranking out loans wasn't a priority when Mr. Hersman first came aboard in 1991. Survival was.
In 1989 the credit union had endured a grueling strike by Eastern Air Lines employees. In 1990, the carrier collapsed.
The credit union went into a tailspin, as delinquencies and chargeoffs soared and assets plummeted.
"I was hired to address the problems caused by the failure of Eastern Air Lines," Mr. Hersman said. "Between 1989 and 1992 the credit union charged off $40 million in loans."
Two factors saved Eastern Financial from crashing: double-digit capital - the credit union's capital-to-assets ratio now hangs at 13.8% - and a diversified membership base.
Foreseeing the demise of Eastern Air Lines, Mr. Hersman's controversial and outspoken predecessor, Arthur G. DeRusso, frantically added new employee groups from across the country to the credit union's membership base.
In 1982, nearly 100% of the credit union's members had some relationship with Eastern Air Lines; that proportion had skidded to 30% by 1990.
"Had this organization not diversified, it never would have survived the demise of Eastern Air Lines," Mr. Hersman said.
But one of Mr. Hersman's first actions was to dismantle some of Mr. DeRusso's work, by consolidating operations in Florida and Georgia - where most of its members were concentrated - and closing branches and dumping membership groups across the country. When Mr. Hersman took the helm, the credit union served more than a thousand different employee groups; it now has 700.
'There was no reason for us to be in all those states because Eastern Air Lines no longer existed," he said. "After a short while it became apparent that we were scattered far too far."
Last year, Eastern Financial completed the dismantling process by selling off the assets, deposits, and nearly 300 employee groups of a Kentucky credit union it acquired in 1990.
Eastern Financial netted a $700,000 profit by selling the $15 million in deposits and $12 million in loans to Park Federal Credit Union, Louisville, Mr. Hersman said.
Mr. DeRusso, now retired, agreed - to a point - with the contraction of what he built.
"We would have done that, but some of the branches that were eliminated would not have been because of the large number of members in the area," he said.
Mr. Hersman gives Mr. DeRusso credit for positioning the credit union for survival, but he isn't above criticizing him. Indeed, one close industry source said the two struggled before Mr. DeRusso retired in February 1992 at the age of 71.
Mr. Hersman knocked the lending system Mr. DeRusso oversaw.
"They had all the products but they didn't get them out," he said. "They didn't have a strong lending program - they had a poor lending program."
Mr. DeRusso took issue with that charge.
"I don't agree with that," he said. "We had to deal with the fallout from Eastern."
Mr. DeRusso also laughed off Mr. Hersman's description of him as autocratic.
"We could get into a match of him versus me, but I don't want to get into that," he said. "Yeah, I was tough to work for, but then survival was paramount."
But that's all past. Now the credit union is looking ahead to a future unencumbered by the Eastern Air Lines albatross.
'It's taken us four years to fully make it through the problems of that collapse," he said. "Now we're redefining our strategy."