Friday’s NCUSIF Fact

From the February 28, 2021 NCUSIF financial statement:


One T-note purchase for $600 million on February 15 with a fixed yield of  .90% for seven years.

This investment extended the NCUSIF’s average weighted duration from 1,184  to 1,243 days, or 3.45 years.

Would your CFO make a fixed-rate seven-year investment at this phase of the economic cycle for your credit union?  What would your examiner say?

Life at 75

In lieu of a personal reunion, my college sends out updates from alumni who wish to share aspects of their life, 55 years after graduation.

One brief observation:

“I’m not traveling much this year nor attending performances of classical music. . .Happy as long as I learn something new each day, talk to someone nice, and cook something tasty.  No longer powered by hormones or ambition.  Very glad to be alive.”

An Unexpected Surprise From a Competitive Board Election at Frontwave

The response to my request for blog topics was blunt: “Board governance! Perhaps stemming from the frustration I feel on my own board. No relevant questions. No strategic discussions. No pressing in on how we can be better. No self-evaluations. Credit unions won’t survive with boards who simple show up and say aye.”

Then I learned how one election stimulated a complete renewal of the board’s role.

The Story

Frontwave Credit Union CEO Bill Birnie was “stunned” to learn the number of members who applied to compete for three open board seats in the 2021 annual election of directors. “Normally we have to beat the bushes for board and supervisory members.”

This year was different. The nominating committee approved ten applicants for a spot on the ballot. All submitted written statements with their professional background and why they wanted to volunteer.

Contested elections were rare at Frontwave (renamed in 2018) and even in its earlier era as Pacific Marine Credit Union.

The credit union put out its routine “Calling all Leaders” appeal in July of 2020 via email, a web posting and a member mailing on September 15. Headlines included: “Frontwave members make good leaders” “Got Frontwave Values?” “Help Members Financial Dreams Come True,” along with facts on the open positions and terms.

Highly Qualified Applicants

Among the applicants were nine with college degrees including four with MBAs. Their occupations included an active-duty marine, VP of finance, SVP asset-liability manager and budget analyst. Most had experience in an area of finance or management.

In addition, they were active volunteers in the community. Some examples: a college trustee, school district board member, and current board or past officer of nonprofit organizations and educational associations.

Why the Surprising Interest?

Since renaming as Frontwave, the credit union has grown over 40% to $1.1 billion in the highly competitive San Diego market. Bill, the President, had rejoined the credit union 2015 after serving as CEO for Eagle Community Credit Union. Bill believes that the dramatic increase in volunteer interest is a response to the credit union’s innovative spirit shown by its rebranding, and its increased visibility in the community with 14 branches, only five of which are on base.

The credit union’s surveys documented a 35% increase in positive member satisfaction, another factor galvanizing participation. The volunteer surge, Bill believes, reflects a growing respect for the credit union in the community.

Reasons candidates gave for their interest included:

  • “To bring expertise, energy, and intellectual capital to power Frontwave’s success and strengthen our community. To represent the diversity and social culture of my community.”
  • “I would like to help Frontwave reach their objectives and build value for members…lead(ing) to greater financial success of our members.”
  • I want to have a “meaningful personal commitment to serve veterans and specifically Marines; real potential to have a tangible, lasting impact on their quality of life.”

The Vote by Members

The online voting period extended from February 24, 2021 to March 24, 2021. Members could submit ballots at any of the branches from March 8, 2021 to March 19, 2021. The vast majority voted online. The number voting, 583 members, was almost equal with the last election in 2018.

The electronic ballot form provided an opportunity for members to comment on the voting and election process. Their comments were positive, particularly placing the candidates’ information within the ballot:

  • “The (digital) interface is very easy to use…I like being able to open a page with all the bios while viewing the ballot at the same time.”
  • “The bios gave a very personal involvement.”
  • “The voting process is great reading all candidates listed in the process I didn’t know them, but by reading their bio gave me an idea of what they are all about. love it.”
  • “I was so sure that this online voting process would be difficult, but amazingly, it wasn’t and I’m glad I was able to vote. Thanks.”
  • “Very fast way to cast my ballot. I like to vote this way.”
  • “WOW a lot of qualified candidates. This is the first time I have seen so many people run for a voluntary position. Good luck.”
  • “I haven’t met any of these people, so I am voting based on the bios alone; they all seem like strong candidates to me.”

Lessons to Build On

Both management and board see this enhanced member interest as a “wake up” call for the credit union. Members were engaged in the election. The current age and tenure of the board suggests there will be more openings going forward.

The board is embarking on a self-assessment to evaluate their current skills and ascertain what the credit union needs going forward. The directors will provide the nominating committee guidance about the qualities and experiences they seek in candidates. The timeline, candidate qualifications and selection process may require further refinement with this new level of engagement.

While initially surprised, Bill Birnie now views this elevated interest as an opportunity to enhance the board’s contribution and engagement. The election has begun a process of board renewal: “We’re required to hold an annual meeting of the membership and, if needed, conduct an election. If we are going to do this, we are going to do it right.”

My reader above opined: “Credit unions won’t survive with boards who simply show up and say aye.” This example could be the best response to this “board governance” challenge.

Watermelon Flavored Oreos Offer Insights into Individuals’ Behavior

In June 2013, Nabisco’s Oreo, the best-selling cookie brand in the world, introduced a “refreshing” new product extension.

The new Oreo had a watermelon flavor filling to create an association with its summer market launch. The internal flavor coloring aligned well with its Golden Oreo product. Children were a prime target because of their willingness to try new flavors.

One does not have to be a market research guru or have a sweet tooth addiction to suspect this might not be a great consumer success.

On Twitter, responses ranged from, “These sound heavenly,” to “i looked up ‘abomination against nature’ in the dictionary and there was a picture of watermelon oreos.

One media outlet asked its Facebook followers for comment and received a deluge containing one word, “Eww.”

An econlife review opined: If you really want that “fun, summer flavor,” stick with the real thing and dive into an organic watermelon. They’re limited edition summer treats too, with much healthier benefits.

Harbingers of Failure

Marketers study failures, not just success stories.

In a 2015 paper, marketing scholars from MIT, Northwestern, and Hong Kong University of Science and Technology looked at consumer demand for new products. After gathering data on 8,809 new supermarket products, 439,546 transactions, and 77,744 customers, they concluded that success didn’t necessarily equate to sales growth. The explanation was that consumers who liked the items most were not representative of the total market.

Analysis identified these buyers as exhibiting what marketers labelled “Flop Affinity.” These are people who buy something that really doesn’t resonate with the majority of the market, such as Crystal Pepsi or Lemonade Doritos. These individuals are also more likely to buy a type of toothpaste or laundry detergent that fails in the broader the market.

Traditionally, companies want increased demand. But demand is about more than the quantities; it involves knowing who likes your product. If sales increase because “harbingers of failure” purchase something that most would avoid, then a firm can have a flop on its hands.

But just as important, an NBC story on the study found these group preference choices work the other way around. The data found those “who tend to purchase a successful product like a Swiffer mop are more likely to buy other ultimately successful products, like Arizona Iced Tea.”

The Watermelon Oreos Phenomena in other Contexts

Researchers are exploring how widely this “harbingers of failure” pattern applies in other areas, from everyday shopping selections to financial markets.

Is the concept applicable to behaviors other than choosing consumer products? Do credit union leaders tend to join with others around similar performance patterns?

Can the Watermelon Oreo research also identify behaviors or mindsets that exist within organizations; that is, micro-cultures that can compromise or promote purpose and performance?

Responding to External Demands for Change

In addition to ongoing market competition, every institution today is confronting external pressures for change. These range from the operational pivots responding to Covid to the social and political demands for accelerating equity and economic inclusion.

Northwestern’s Kellogg School identified a range of leadership responses ranging from the least to most meaningful when an organization reacts to external demands. Least effective were public statements of support. The most consequential was finding champions for the cause within the organization and tasking these internal believers in the change to develop the organization’s response.

The Watermelon Oreos case suggests that people’s choices, even if popular in the moment, are not indicative of long-term success. Winners tend to align with other winners in their behaviors whether within an organization or in the distribution of consumer preferences.

Effective leaders put those who believe in the required change in charge and not let the doubters harm their brand or organization’s reputation.

Credit Unions’ Annual Meetings in a Zooming World

The digital experience as a result of Covid lockdowns is so pervasive that demographers are calling current school age children the “zoom generation.”

But all generations are learning to navigate this ever expanding medium. Zoom and all its online counterparts are becoming embedded in every traditional social, educational and entertainment activity.  Church services, weddings, funerals and all kinds of family interactions have online expressions.

Colleges offer not only virtual classes, degrees, and lectures for current students, but also reunions inviting thousands of alumni.  They can participate by submitting short video updates instead of the traditional “class notes.”

Most employers have transitioned all routine office functions to virtual –hiring, staff meetings and all aspects of customer interaction.  Firms specializing in travel now offer virtual tours, some live and others recorded.

The Annual Meeting

One required credit union activity that has gone virtual is the annual meeting.  For many credit unions the event is a mere administrative formality.  Minutes approved, reports read or referenced, and election by acclamation as the number of board openings equals the nominations.  Everything is over in minutes.  The required quorum is largely staff and board.

Last week I watched Patelco’s annual virtual meeting, it’s 84th. Most of the agenda followed the in-person format.  The primary item was  CEO Erin Mendez’s annual update lasting almost 20 minutes.  It went far beyond the Annual Report.  The presentation was comprehensive, concrete and comparative.  Patelco’s financial performance was juxtaposed with credit union and banking peers, a truly professional accounting.

Her speech is worth listening to should Patelco post the video.

The Power of the Medium Still Evolving

Zoom communications offer a much more dynamic opportunity than just translating the current process into a new media.  Rather it is an opportunity to connect with members in totally new ways.  And thereby enhance the member-owner relationship.

But for zoom to transform this member experience, we have to get the old ideas and ways of thinking about this required event out of the way.  In addition to the virtual broadcast, other new capabilities via zoom include:

  • Expanded reach into every home and geographic area with internet, far beyond local members;
  • Instant feedback from attendees via polling and chat comments;
  • Breakout rooms for members to converse with specific credit union experts;
  • Speakers from any location, live or recorded;
  • Video can be integrated into the event;
  • Recording is simultaneous so the event is available anytime and is more complete than summary minutes.

These interactive capabilities are regular features in many zoom academic sessions.  They enable a learning experience much more effective than a one-way lecture.  One professor has encouraged his students to participate actively in the chat window using hashtags: #question; #debate to bring in real diversity of thought; #aha if you have an insight to share; #onfire if you desperately want to get into the conversation right now.

The “Woodstock” of an Annual Meeting via the Internet

Last year Warren Buffett held Berkshire’s annual meeting virtually.  Normally over 40,000 attend in Omaha, NB which has earned the occasion the title of “Woodstock for Capitalists.”  In 2020 the  entire agenda was broadcast live on Yahoo finance and attracted hundreds of thousands of viewers and participants  from around the world.

This year’s meeting will be held on Saturday May 1.  The three-part event Yahoo Pre-meeting Show at 1:00, Question and Answer Period 1:30 – 5:00, and the Formal Shareholder Meeting 5:00 – 5:30 will all be live at

Buffet does not use the full array of digital options listed above.  However, he is an example of a CEO’s total public access and accountability that is unusual today.

The event demonstrates Buffett’s ability to pivot and leverage the power of an enhanced virtual platform for the required shareholder’s meeting.  Buffet began his leadership with Berkshire in 1962.  If this 90-year-old can master the power of this virtual evolution for his shareholders, should credit union leaders aspire to do any less?




The Members’ Vote: A Reminiscence on Patelco’s Annual Meeting Day

Patelco Credit Union’s 2021 Annual Meeting is being held today virtually. The following is an excerpt from a Credit Union Times story of December 17, 2002 about the credit union:

SAN FRANCISCO-Patelco Credit Union caught the eyes of the credit union community in 2002 when it announced its plan to convert from federal deposit insurance to a private fund.

Patelco’s members overwhelmingly passed the measure to convert to the American Share Insurance fund with 40,734 votes in favor out of a total 66,755 or more than 61%. Only 20% of the credit union’s membership or 38,241 total votes were required for the decision.

Patelco’s conversion was spurred by the credit union’s $480 million in uninsured deposits, which was only growing with the current flight to safety. ASI provides primary deposit insurance coverage up to $250,000 per account and does not limit the number of accounts an individual can have insured. The National Credit Union Share Insurance Fund provides just $100,000 in coverage per account for a limited number of accounts per member.

Additionally, “one size fits all” regulation from NCUA through the NCUSIF was also cited at Patelco’s Web site. The conversion of the $2.9 billion credit union is the largest to date.

While acknowledging the conversion as an individual credit union decision to convert, the switch was not particularly well received by the NCUA Board members. . .

A Reminder for Today

The members’ voice is empowering when called upon.

The NCUA Board’s Actions Positioning the NCUSIF for the Future

The NCUSIF’s 1984 Annual Report describes the founding actions positioning credit union’s Fund and the cooperative system for the future.

“Between July and October 1984, the NCUA board considered at great lengths how to implement the deposit plan.  Every effort was made to listen to credit unions and their representatives,  Whether by phone, letter or in person, communications were continuous, spirited and open. Because of this input, a very workable plan for all was reached when the board adopted final rules at its October 9, 1984 meeting to implement the capitalization legislation.

First, the board waived the entire 1985 insurance premium.  Second, it ordered the distribution of $81 million in Fund equity.  This amount constitutes the Fund’s equity in excess of the 1.3% fund equity insured shares ratio the board established for the Fund, once the 1% deposit was received.   Because of these actions, credit unions will only have to transfer 85% to 90% of their initial deposit obligation to the Fund yet it can carry the full 1% asset on their balance sheets.

(Editor’s note:  credit unions transferred only .89% of insured shares and were credited with 1%-the Fund’s first dividend)

Because of this legislative achievement by the credit union movement and the regulatory approach taken to implement it, the Fund contains some very advantageous structural improvements:

  • The insurance fund will be fully capitalized at all times;
  • Fund growth will automatically parallel credit union growth;
  • Congressional concern about the Fund’s adequacy and the need to build public confidence in it will likely lessen. Future legislation will probably focus on the FDIC and FSLIC (which happened often);
  • The numerous operating options within the new deposit plan framework provide future flexibility for credit unions and for the Fund;
  • Credit unions will have a direct financial stake in the operation of their Fund.

In 14 years, members of federally insured credit unions have gone from the least well protected depositors in financial institutions to be the best protected.”

Source: National Credit Union Share Insurance Fund 1984 Annual Report, pages 6 and 7.



Experts Predicting Doom–A Perennial Practice

The year 2007 was not a down year for credit unions. Slow sure, but there was no talk of an economic collapse on the horizon. And the housing market was booming.

Nonetheless the temptation is always present to burnish one’s reputation by forecasting doomsday. The issues and trends pointed to by these speakers are not false. Rather the straight line conclusion that everything is going to fall apart because these concerns will go unaddressed, is where the logic fails.

Regulators have a particular attraction for using this clarion call. They are supposed to monitor risk, but sometimes the futures they portray seem more to justify additional resources, not from  experienced insight.

Responding to challenges, seen and unforeseen, is what every manager tries to do. So listen, but then apply common sense.

Words: The Blogger’s Tool Chest

The initial premise from Joseph Pearce

“One of the most important treasures to desire is the possession of words. Words are necessary because they are the very things with which we do our thinking and liberate us from the slavery of ignorance. We can only make sense of the world, and our place within it, if we have the vocabulary to articulate our thoughts. It’s not simply that we need words to communicate with others; we need words, first and foremost, to communicate with ourselves. If we are unable to make sense of the complexity of our situation because we do not have the words in our mind to articulate what’s going on in our lives, we are doomed to the sort of frustration which leads to despondency and despair, and rage and violence which are their toxic fruits.”

I have forgotten the following writer’s names.

Words 1: Changing Minds

We all have filters, [such as] What do I already believe? Does this new idea or piece of information confirm what I already think? Does it fit in the frame I’ve already constructed?

Ideas that don’t fit easily will require me to think, and think twice, and maybe even rethink some of my long-held assumptions. That kind of thinking is hard work. It requires a lot of time and energy.

Words 2: Rules and Extreme Cases

A sagacious legal maxim states that hard cases make bad law. If we make a generally applicable law(or rule) to counter an extreme or extremist circumstance, we risk removing freedom from all people in order to restrict the freedom of the extremist.

Words 3: Generosity and Wealth

Generosity is simultaneously a moral and a material imperative, especially among people who live close to the land and know its waves of plenty and scarcity. Where the well-being of one is linked to the well-being of all. Wealth among traditional people is measured by having enough to give away.

Words 4: God’s Question to Job

The question:  Where were you when I laid the foundation of the earth? Who determined its measurements-surely you know?

We manage the contributions, loyalty and human capital of our founders going further back than our initial chartering dates—generations helping generations. It takes a community to create a credit union. We see in our time how this founding effort has been paying forward, establishing our present public standing. Whenever an enabling legacy is honored, this renewed awareness generates deep gratitude, even awe.




Jim Blaine’s “Inaugural” Address

As the CEO of America’s second largest credit union for 37 years, Jim Blaine had the unusual skill of translating simple cooperative concepts into profoundly valuable benefits for members.

Every member received the same rate for the same kind of loan.  Believing home ownership was vital to members’ financial security, he designed a 100%, non-conforming first real estate loan for any member with a simple explanation: “Why compete with the government?” (Fannie/Freddie conforming products)

He railed against FICO-determined lending decisions and risk-based loan pricing. This early use of “artificial intelligence” offended his belief in the uniqueness of each person.  Character and judgment, not computer algorithms, should be the basis for granting credit to members.

Words Matter

In addition to steering State Employees North Carolina Credit Union, Jim was a wordsmith.  His blog, and his talks, were audacious, controversial, fun to read and based on core principles.  “Sometimes wrong, but never in doubt” was his tagline. His writing style and graphics were intended so that a reader immediately got the message.

He understood that a leader’s influence was in direct proportion to one’s ability to communicate. To the entire crowd: fellow-believers, opponents, the uninterested and the unwashed, meaning those who corrupted cooperative values for self-interest.

Some of his most scathing and widely read observations were about NCUA, a government agency which believed that its core purpose was to tell credit unions what to do, or not do.  Examiners would constantly challenge Jim’s traditional implementation of credit union purpose.  He would use the agency’s own words and facts to demonstrate the lunacy of their demands.   When he dared to break the code of silence NCUA imposed on examiner ratings and publish his credit union’s score, the regulator wreaked vengeance on the entire North Carolina state-chartered system.

Jim’s most enduring gift to the “movement” may be his writings.  As Churchill stated: “Words are the only thing that lasts forever.”

The Course to Be Pursued

In an inaugural address more than 157 years ago, the speaker gave “a statement of a course to be pursued.” That course concluded with this purpose:  “with charity for all; with firmness in the right, as God gives us to see the right, let us strive on to finish the work we are in; to bind up the nation’s wounds. . .to do all which may achieve and cherish a just and a lasting peace among ourselves. . .”

Lincoln used 722 words in 1864.  Jim’s 503 words address the legacy Lincoln hoped the civil war would resolve.

Jim speaks to the goal of a “lasting peace among ourselves” based on economic fairness and justice, core principles of the cooperative ideal. Diversity, equity, and inclusiveness are matters of the heart, much more than policy; something to practice in your life, rather than just preach.

Jim followed his own drummer when leading his credit union.  I believe these latest words will inspire all and even provoke some to answer his closing call for individual acts of rebellion!

Blaine’s “Inaugural” Address

(March 18, 2021)

“I am truly grateful to the African American Credit Union Coalition for this honor. The organization is remarkably successful and on the rise! I have known many of its leaders for a lifetime and have often sought, and even heeded, their advice! We shared a common bond – a belief in credit unions.

My life has been centered around my family, my wife Jean, and credit unions. Why credit unions? Because I could never accept that in America those who had the least and knew the least should pay the most for financial services. I believe that credit unions were created to correct that injustice. In the words of Thomas Paine – a true revolutionary in all respects – “I have always objected to wealth achieved through the misery and misfortune of others”.

That economic injustice continues to thrive in our financial system today. Credit unions remain the alternative, the best hope, the answer.

We all confront an uncertain future, and many folks would like to rewrite the past. You and I know we cannot change the past. But if we have credit union leaders with integrity, courage and character; we most certainly can reshape the future…but changing the future is very hard work. Arthur Ashe, the great American tennis player, described the credit union leaders we need. Ashe said: “True leadership is not the urge to surpass all others at whatever cost, true leadership is the urge to serve all others at whatever cost.”

One  word of caution as we look to the future and choose our new leaders; let’s make sure that diversity, equity, and inclusion is not a false guide, a false prophet. Can we really tell how diverse a credit union is by looking at the faces of our boards and leaders? Choosing our leaders by their race, their gender or their age is the old way – more of the same. We need a new way for credit unions.

And, the new way is to judge people not by how they look, but by how they think. As a famous preacher – I believe his name was King – said over fifty years ago: “Hopefully my children will be judged by the content of their character.”  Yes, let’s truly diversify and choose leaders based upon the content of their character. That is a more difficult, complex task, but our future depends upon it.

By the way, if you want to get a jump on reshaping the future, try starting a little personal revolution of your own. Next time you are filling out a form and come to the question of “Race?”, drop down to “Other” and write “Human”. When you reach the ethnicity question, drop down to “Other” and write “American”. And of course when you reach the question on “Sex”, drop down to “Other” and simply write in “Yes!”….and the world will begin to change!

Onward and upward – for all!… With the African American Credit Union Coalition leading the way!

Thank you again for this honor.”