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Blue skies ahead: Eastern Financial Credit Union survived the demise of its patron airline and now pursues an aggressive growth strategy in South Florida

South Florida CEO, Dec, 2004 by Richard Westlund

For decades, South Florida's credit unions have taken a low-key approach to growth, signing up groups of employees in the workplace. But, Stephen McGill, the new CEO of Eastern Financial Florida Credit Union, the region's largest credit union, is trying a far more aggressive strategy.

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"We're bombarding the market with billboards and broadcast messages," says McGill, who took over the top spot at the Miramar-based credit union in July. "Eastern Financial is one of the best-kept secrets around, and that's one of our challenges. We want to let more people in on the secret."

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With $1.8 billion of assets, and 193,000 members, Eastern Financial is South Florida's largest credit union. In the past three months, Eastern Financial has opened new branches in Doral, Pembroke Pines, Boca Raton and Clearwater, giving it a network of 22 branches in South Florida and Tampa Bay. McGill's goal is to reach 50 branches by 2008.

It is an ambitious--and expensive--strategy, as Eastern Financial invests its capital in new facilities, technology and staff. But McGill believes it is necessary for his 600-employee, member-owned, not-for-profit financial institution to remain competitive with local banks.

"It's still very difficult for South Floridians to understand what a credit union represents," he says. "We offer bank-like services, but while a bank is profit driven, we are member driven."

Unlike banks, which are fiercely competitive with each other, South Florida's credit unions often cooperate to promote the concept of membership and share ideas. And other major credit unions, including Tropical Financial and Power 1, are also seeking to grow their membership ranks. "When you look at the potential for credit unions, there's plenty of room for everyone," McGill says. "We definitely try to attract business from the banks rather than from other credit unions."

To date, South Florida commercial banks are not overly concerned about a credit union challenge. "Eastern Financial is one of the best credit unions in the market, but as far as vying with the large community banks, they are a non-competitor," says Bernardo J. Adrover, senior vice president and director of small business banking for BankUnited FSB, a Coral Gables-based institution with $8.7 billion of assets and 50 South Florida offices.

Adrover says credit unions focus more on transactional services--checking and savings accounts--while commercial banks are more relationship oriented. "We believe in looking at the entire customer experience, which may include business loans and deposits, as well as personal services," he says.

McGill agrees with that assessment--to a point. "Credit unions traditionally serve working-class members," he says. "That means credit unions are more transaction driven, while banks will offer private banking and other relationship services." But McGill is quick to add that credit unions like Eastern Financial are continually broadening their services.

In both South Florida and on a national level, banks clearly dominate the financial system. According to Fred R. Becker Jr., CEO of the Washington-based National Association of Federal Credit Unions, banks had $9.4 trillion of assets as of mid-2004 compared with $627 billion for credit unions.

"The typical bank is almost nine times the size of a typical credit union and both Bank of America and J.P. Morgan Chase are each larger than the entire credit union community," he says. "In the last 10 years, banks have increased their share of depository institution assets by 4.2 percent, while credit unions have grown less than 1 percent."

Banks and credit unions have wrangled for years in Washington. Advocates for credit unions say federal regulations restrict their ability to add members, limit the types of services they provide and make it more difficult for them to obtain capital.

Bankers argue that their institutions face extra regulations, such as Community Reinvestment Act (CRA) lending requirements, and object to credit unions' tax exemptions. Another point of contention is new federal rules that allow credit unions to offer business loans.

Eastern Financial, for instance, now offers Small Business Administration (SBA) and conventional business loans in the $100,000 to $500,000 range. "Most banks won't touch these small businesses," says McGill.

Serving fledgling entrepreneurs, and offering mortgages, investment products, insurance, dental plans and financial planning services to consumers is a clear indication of how far Eastern Financial has changed since its founding in 1937. At that time, the credit union was dedicated to serving the 40,000 employees of the now defunct Eastern Air Lines, and its main office was housed at Eastern's Miami International Airport headquarters.

"It was very sobering to go from that type of arrangement to losing your core sponsor in 1986 and being thrust into the real world," recalls McGill, who joined the credit union in 1984 as an accountant. Although the credit union had to write off $70 million in bad loans from Eastern employees when the airline went out of business, it had enough capital to open new branches in Dade and Broward counties. And it kept going.

Business Services Industry

Blue skies ahead: Eastern Financial Credit Union survived the demise of its patron airline and now pursues an aggressive growth strategy in South Florida

South Florida CEO, Dec, 2004 by Richard Westlund

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