Maslak seeks to set North Island apart through improvement, expansion

"If you want loyal satisfied customers you have to have loyal satisfied employees," said Michael Maslak, CEO of North Island Credit Union. And that, he says, is the key to North Island. "Differentiation is the essence of strategy," Maslak says, sitting relaxed in his boardroom, "How are you different?"

North Island is currently the third largest credit union based in San Diego, behind Mission Federal Credit Union and San Diego County Credit Union, and the 10th largest in California. Its assets currently stand at about $1.5 billion, which puts it on par with some of the smaller community banks and within reach of Mission's $1.9 billion, but significantly behind SD County's $3.2 billion.

Maslak was appointed CEO in 1987 when North Island's assets stood at about $300 million. He modestly puts much of this growth down to the increase and diversification of wealth in San Diego, adding that North Island's market share has remained roughly the same.

But in the coming years North Island intends to accelerate, partly through a program of branch expansion with the aim of reaching 22 branches by 2010 -- it currently has 14. Despite the increasing moves to Internet and telephone banking, Maslak believes that the number of branches is still vital to an organization's growth, and not just for older clients: "It has to do with awareness and visibility," he argues.

North Island began to develop its business lending line five years ago when the union converted its charter from a military credit union into a community charter in order, Maslak says, to diversify its base.

He is keen to stress it is small businesses that the credit union targets -- the average on deposit total is $22,000 -- and as such doesn't compete with the big banks. But with a smile he adds: "Although it may compete with the small community banks."

For North Island, like many local financial institutions, its big growth opportunity came in the 1990s when many local banks were bought out by regional and national bodies. And that history is what he draws on when asked why a customer should consider using them, rather than one of the local community banks.

"I think either is fine," Maslak says. "But the question is whether that community bank will be around in three years from now. That is the question because if you look at history, typically they are acquired."

This business lending competition is controversial though. For a number of years banking industry lobbyists have been arguing that the traditional credit union exemption from federal income tax should be revisited. They argue that by getting into business lending, the credit unions are competing directly with banks and moving away from their core principles.

Unsurprisingly, Maslak is keen to emphasize the member-owned, not-for-profit nature of credit unions and what he sees as fundamental differences between banks and credit unions -- even once they become involved in business lending. "We have the slogan or the mantra that it is 'people before profit' and that is really an industry standard, it is part of our heritage," Maslak says.

Though he believes the exemption will remain, its removal "is one of our scenarios in our plan. What if that happens -- we discuss it every year."

The scenarios Maslak refers to are part of his adherence to the Malcolm Baldrige model of corporate assessment and improvement based around seven key areas ranging from leadership to customer service to future planning. An evangelist for corporate philosophy and improvement, Maslak was one the founding members of the California Council for Excellence and frequently speaks on the topic.

The Baldrige system, Maslak argues, "helps you assess all of your company's operations from leadership to planning to the human resources to the customers holistically....[it covers] every aspect of the company, not just the bottom line."

As to the million dollar question on whether it actually works, Maslak has no doubts, saying: "If you have experts looking at you and assessing you critically from outside your industry you are going to improve, you are going to learn things about your organization that you didn't know, so you have an opportunity to improve."

Improvement is a vocation for Maslak, and a term he brings up frequently in our interview. Recently to improve their understanding of customers' perception, the credit union started subscribing to the American Consumer Satisfaction Index, which Maslak describes as a further refinement of their feedback process. North Island has scored 86 under ACSI, the highest score for any financial institution, compared to the national average of 76.

And it is the staff members, for Maslak, who are at the core of customer satisfaction rates, which means robust pay and benefits as well as ensuring a positive workplace atmosphere. This does mean a higher wage bill than some competitors as, according to filings with NCUA, which regulates credit unions in a manner akin to the FDIC for banks, North Island paid its full-time employees an average of $64,162 in salary and benefits compared to its peers' average of $57,686.

But Maslak argues there are benefits to the bottom line in the long term. "Linking the employees' welfare with customer satisfaction, that does seem to be working in terms of the additional investment in our people -- which includes training and development -- it seems to be playing out in terms of our customer satisfaction, loyalty and referrals," he said.

And North Island has a whole stack of awards to bear out its claims to be a good employer -- including being ranked 21 on the list of "Best Small & Medium Companies to Work for in America 2005" from the Great Place to Work Institute and the Society for Human Resource Management (SHRM) and receiving the Governor's Award for Performance Excellence (CAPE) in 2005 -- the only financial institution ever to have won this award.

Maslak says these awards are both validating and gratifying, saying: "The award is nice, it is the wonderful pat on the back ... The real reason behind these awards relates to improvement and getting better." He is also shrewd enough to note they also enhance North Island's brand.

Personally, Maslak says his decision to stay at the credit union for 19 years -- when he could have personally earned much more money in banking - comes down to the difference he felt he could make and his belief that "your life is your message."

"I think it was the alignment of values and the fact that I can make a difference. It wasn't just about the bottom line, it was about people, not only the customer but also our employees -- enriching their life," he said.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.