There is no risk-based lending, no relationship pricing. If you sign up for membership, you won't be confused about which checking account to choose because there is only one type.

"Members want low-cost, high-quality service. We have to provide Tiffany service at Wal-Mart prices. To do that you have to keep it simple. We do a few things very well," said Blaine.

If an institution offers a myriad of tiered checking and savings products, they have to spend money on different computer systems, more brochures, and staff expertise, said Blaine.

SECU has one credit card, with one rate. All the loan rates are the same, no matter if a member has $10 in their account or $10,000.

"Every different product you add, your costs go up geometrically. It's not one plus one equals two, it's one plus one equals twelve. If you dig into the guts of this credit union, we're very simple," he said.

Keeping it simple has helped SECU run at a 2.10% expense-to-asset ratio, one of the lowest in the country. That would make sense given its simple product and service menu, but what makes this quite astounding is SECU is the undisputed branching king of the industry – and branches cost money.

It operates approximately 200 branches throughout North Carolina. In typical SECU fashion, branches are one standard design to keep costs low. SECU does its homework before adding a branch.

It wants to make sure people will use it, and will go as far as getting locals to sign a petition saying they want the branch. Once it's built, SECU will call those people and say, "we're here, bring us your business."

Blaine believes a local presence trumps anything a competitor can bring to the table. "When you have local people in the community that's the biggest advantage ever because your kids are playing softball with my kids, and I see you in church and different environments. If you get in trouble, you want someone local to talk to, kind of like a doctor."

Being local is key to who SECU is structurally. Blaine describes SECU as a flat organization.

"Ninety-nine percent of decisions are made locally. Members get answers right in front of them across a desk. There's no calling all over, the local people make the call." The credit union has senior district managers responsible for multiple branches, but they must also run a branch themselves. "What we found is if we took our best guys and gals and made them district managers, they lost touch with what's going on. Now they also run a branch, so any decisions they make for everyone also applies to them."

SECU managers have huge discretion and pass very few decisions up the chain. This local decision making comes into play with lending.

 "Everybody can make the slam dunk loan, it's the grey area, the marginal accounts that take work. We want that to be personal, tell us your story." The CU's delinquency ratio is 0.23% and charge-offs are 0.16%. In addition to its branches, SECU has approximately 900 ATMs. It's a proprietary network "owned by the members", as Blaine likes to say.

Not only are the ATMs surcharge-free for members, but also nonmembers, making SECU one of the last institutions in the country to have such a policy. Blaine said the 50 cents or so interchange it receives from nonmember transactions is payment enough.

But with two million nonmember transactions a month at its ATMs, its nice to have the nonmember surcharge option available – "it's like economic power we hold in reserve," he said.

Managing a Monster

SECU is by any measure massive compared to just about any credit union. It employs approximately 3,300 people with an annual 2005 payroll of $150 million, including benefits. Of that 3,300 member staff, only 215 are considered managers.

You won't find former bankers or credit union execs joining SECU in high-ranking positions. The credit union has a strong policy of promoting from within.

"The whole organization is built on the idea that people want to learn more and more and more. We allow you to advance, all the way to the top. There are no excuses for those who want to succeed. There are no barriers. Half of our managers are women. Managers come in all kinds of colors and stripes," said Blaine.

Interestingly, the CU gives all employees two years to pass education modules focused on the credit union and their specific jobs.

"If you never get around to it or you can't pass them, you're out," said Blaine. SECU is not a place to get rich. "We pay fair wages, not higher not lower. If you're looking to make a lot of money fast, we're not your place, but if you're in it for the long haul, we are."

SECU offers no sales incentives or bonuses of any kind, and that's by design. "You get paid to do the job you were hired for. There shouldn't be any need to incent for anything."

It may get lost in the shuffle because SECU is so large, but the CU has doubled in size from $6.4 billion in 2000 to $12.7 billion at year-end 2005. How does it do it? It's certainly not advertising.

The credit union doesn't spend one thin dime on advertising. "Things that are really important in your life are not influenced by advertising. You have to have high standards when you rely on word of mouth, that's what we rely on. Our members are our best advocates. If you betray your members they'll cut your throat, and they should," said Blaine.

"Growth is a result of good service. No incentives, no quotas are going to help. Our mission is to do the right thing, have great rates."

Blaine On Conversions

Blaine, who was a Russian History major at the University of North Carolina, will philosophize on credit unions with anyone willing to listen, but these days there's only one thing on his mind – he is scared to death of the bank conversion issue.

He fears it could spread like wildfire because there is so much money at stake. "It happened with S&Ls, happened with mutual insurance companies. There is so much money to be made with credit unions."

He himself was approached by one of the consultants pushing conversions. The gentleman came to North Carolina to give Blaine his pitch, and Blaine, who wanted to learn all he could about it, was amazed at the money the consultants are dangling in front of CEOs and board members.

He said it's tempting for even the most died-in-the-wool credit union leaders. Blaine, surprisingly, doesn't despise the conversion consultants out there selling the big payday.

"It's business to them. It's a practical, amoral transaction. What they're playing on is that this is legal, and it is. I have huge concerns that they find the ability to do this in OTS provisions. An agency of the federal government is endorsing, to me, legal thievery. The OTS is complicit, damaging in a whole lot of ways democracy."

He also believes former examiners and officials of the OTS are actively involved in some of the conversions. Blaine isn't against conversions if it's what the members want.

The problem, said Blaine, is member equity is being given away for a bargain basement price, and members aren't being told their options. "Members ought to have the right to sell the organization. You can sell a credit union to another credit union. Members would reap a good bit of value. Institutions sell for twice book value, that's not what's happening with these conversions," said Blaine.

He believes the boards of converting CUs are shirking their fiduciary responsibilities by not getting fair value for the credit union, and not getting members involved. Liquidation is another option. Members have the right to liquidate, in which case at least the equity would be distributed among the owners, said Blaine.

"Those alternatives are not being presented. In most credit unions, there is $1,000 worth of equity per member. When you do these conversions, 80% of members do not get an ownership interest. It is not a financially prudent transaction, does not pass the smell test. Clearly if it was a for-profit financial institution and they tried to do that, the investors would sue and win," said Blaine.

"If disclosure is full and fair and given to the members, conversions will not happen, never happen. I'm disappointed that CUNA, NAFCU and the leagues have not been willing to step forward aggressively on this issue."

He believes the story converting CUs tell their members is a bit of a canard because what the members are losing isn't being explained. That's why Blaine traveled to Texas last year to try and brings some awareness to the Community CU and OmniAmerican CU conversions.

Blaine visited with members who opposed the conversions and also talked to state regulators about conversion rules. "We tried to encourage more credit union folks that there should be different and better disclosures."

While valiant, Blaine's efforts failed to generate much attention in Texas. He said he was disappointed that the local media didn't cover the Texas conversions more thoroughly. Blaine went as far as sitting down with editors and reporters at the Dallas Morning News, but the coverage never came.

In typical Blaine fashion, he sent post cards to CEOs, lawmakers, members of the media, trade association execs and others to generate more interest in the conversions. Blaine, to this day, said his efforts weren't about attacking the Texas CUs; he wanted to raise awareness of the conversion threat nationally.

He believes credit unions and credit union organizations should be willing to fund a national group that can help spread awareness no matter where a conversion pops up. Member groups need legal advice and public relations help – things that require money that small member groups may not have.

Converting credit unions spend hundreds of thousands or even millions on pushing a conversion, small member groups need to have a war chest, said Blaine. Preying On The Weak

Blaine injected himself into the conversion issue in 2005, but that's not the only place he gained national attention. He is very outspoken about predatory lenders. In fact, Blaine was featured on 60 Minutes II last year in a payday lending segment.

"My appearance must not have done much, the show was cancelled a little while after. No agents called," he quipped. Blaine used the national spotlight to explain the indebtedness cycle that payday lenders can inflict on their users.

Credit unions are the institutions best suited to take these organizations on, believes Blaine. Payday lending was banned in North Carolina back in 2001, but that wasn't enough to keep them down.

The so-called "rent a bank" approach was used so out of state banks can partner with North Carolina institutions and claim they are not subject to North Carolina's laws.

Late last year, the North Carolina Banking Commissioner ruled that practice was illegal, but it hasn't squashed all the payday lenders just yet. In 2001, after many SECU managers complained about an increasing number of checks being presented for payment by payday lenders on payday for state employees, SECU surveyed its members and discovered over 4,000 checks being presented by payday lenders.

SECU responded with its salary advance loan program. Members can qualify as long as they are not in bankruptcy and they have not caused a loss to the CU. The maximum loan amount is $500, at an interest rate of 12% with the maximum interest charge per month of $5.

SECU also requires any member who takes this type of loan to put 5% of the loan amount in a special savings account to try and encourage savings.

The results of this program speak for themselves. The credit union has made $500 million worth of these loans. In 2005, charge-offs were just .21%, and even more gratifying, said Blaine, is the 5% forced savings has grown to a tally of $8.1 million, with many members achieving balances over $1,000.

"We save people in North Carolina over $2 million a month with this. They pay $15 per $100 at payday lenders. That's $75 for a $500 loan – we charge $5," said Blaine. Blaine doesn't think credit unions have done enough to make payday lenders irrelevant.

"Credit unions are going to complain about it, but they ought to have an alternative. A lot of credit unions haven't stepped up." The average wage of state workers in North Carolina, the men and women SECU serves, is $33,000. "They're not poor, not affluent. You have teachers starting at $24,000. These people need the help of the credit union."

With programs like its salary advance loans, Blaine says bring on the regs requiring CUs to show how they are documenting the underserved. "I think it's great that data is being gathered. It's time for credit unions to produce evidence of what they do. Under any circumstances, credit unions easily match and exceed others," he said.

Gathering data by ZIP code would be the simplest, most effective way to see who credit unions are serving, said Blaine. Salary advance is an example of how SECU responds to members. Another is a bridge loan for newly retired government employees.

Some changes in state government caused a flood of state workers to retire, however the government was ill prepared and many retirees were not getting their state payments on time. SECU created a bridge loan that charges retirees 50 cents, no matter the loan amount.

 "We're involved down here with what's going on. You can say a lot about us, but don't say we're not involved."

Bankers? Not So Bad

Despite the ongoing banker attacks, Blaine isn't anti-banker by any stretch. He doesn't agree with their political agenda against credit unions or some of their business practices, but he respects them. "We have excellent relationships with banks here and the banking trade associations. They are extremely important to our economy," said Blaine.

SECU and banks in North Carolina cooperate on many levels. "We have professional courtesy. I don't agree with their political sniping, but that's it. The only thing they find unfair is the tax-exemption. If that went away, I don't think, other than trying to outdo each other, they could have any problem with us," said Blaine.

He doesn't believe credit unions should be taxed, but if it happened, SECU could still carry on as a credit union. "Our operating costs are two-thirds to one-half the bankers, and it has nothing to do with the tax-exemption. We would still have an advantage," said Blaine. "The credit union charter is the best charter taxed or untaxed. Members have free capital. If you buy bank stock, you expect them to perform to 15 to 18% return. We have a 15 to 18% cost advantage.

"It's not just an emotional thing with me, credit unions by theory and by financial practice are the best institution for the working man and woman on the consumer side. I can't say that for the business side, because I think banks do a great job there."

SECU has not entered the business services arena yet, and Blaine, for now at least, doesn't expect it to because it can't deliver the value that banks can.

"I would make a horrible banker, I've been trained to view the world differently. As a banker my job is to maximize investor return. Credit unions advocate for the member all the time, we leave the money in their pockets."

SECU, The Mentor

Everyone involved in the credit union industry has some understanding of the historic AT&T Family FCU lawsuit, which eventually led to the passage of H.R. 1151, the Credit Union Membership Access Act.

But the predecessor to that case was down in North Carolina in the `70s where bankers sued to restrict credit union field of memberships. SECU was at the heart of that debate as it tried to add local and county government employees to its membership roles. SECU lost the lawsuit, but the battle was not over.

Born from the loss was a new federally chartered CU, Local Government FCU. Blaine describes LGFCU as SECU's "Siamese twin, we operate very closely." LGFCU piggybacks on SECU's computer systems, and other back-office support.

More importantly, LGFCU members can use any one of SECU's 200 branches. The result is LGFCU has grown to a $600 million credit union serving 138,000 members, with a staff of about 20, unheard of for a CU that large.

It's spreading its wings later this year when it moves into a new building. Blaine describes LGFCU CEO Maurice Smith as a "brilliant marketer, the best."

The new LGFCU headquarters will include a conference center to be used by local government employees. Smith said what better way to market than have its members be close to the CU. (This is a story for another day.)

LGFCU isn't the only one born from SECU. It also helped create Latino Community CU, a thriving small CU that is serving a growing Latino and immigrant population in the Raleigh-Durham area.

Blaine said SECU is proving that a large CU can help a small CU get off the ground, but money isn't the answer. "The mistake that is being made is a lot of new credit unions with great potential are getting money from larger credit unions and sponsoring groups. What they need is the expertise, more than the money. What we contributed to Latino is the full operating support and expertise of our organization. We know they're not going to fail. Throwing money at a situation is never the best answer."

Blaine said start-up CUs get bogged down in procedures and policies and understanding the regulations of their new world. They need the help of medium and large credit unions, who Blaine believes, can mentor a start-up CU with very little extra burden.

Latino is already a great story, but it is still evolving. Chartered in 2000, it has grown to $24 million with 40,000 members.

Credit Union Times visited Latino's main branch in downtown Durham. It was a frenzy of activity with members pouring in the doors. CEO Luis Pastor is focused on giving its members a complete menu of products and services, and is introducing credit cards into the mix this year.

He said SECU's support has proven invaluable, but Blaine, who sits on the board of Latino, said Latino is setting its own pace and finding its own niche – SECU is just the backstop to ensure it has what it needs.

At Home With Blaine

Credit Union Times spent time with Blaine on his own turf, not just at his CU, but his home. Two things became very clear. If you want to watch TV, Blaine's house isn't the place. There are no TVs in the Blaine house.

Blaine, 56, said this helped make he and his wife Jean's five children (Jim, Eleanor, Sarah, Thomas and Mary) great readers. Blaine said the no TV thing is also, selfishly, about saving him. "I love TV. I'm trying to avoid an addiction. It's so easy to get sucked in."

The other thing that is very apparent is he and Jean (married for 31 years) are soul mates. "She's who I answer to," said Blaine. Jean, a school teacher, obviously hears a lot about credit unions from her husband.

She also displayed a passion and knowledge about the industry. Blaine said after his infamous debate with then ABA chairman Ken Ferguson at CUNA's 2004 GAC he came off stage and his wife said, "why'd you let him get away with that."

That was a far different take than many in the credit union industry who criticized Blaine for some of the language he used, most notably comparing banks to brothels. "I learned, I do it different now," said Blaine.

Blaine and Jean live on 75 acres in a small North Carolina town. Cell phone reception is nonexistent and they have to rely on dial-up Internet because the big providers of broadband haven't made it out there yet.

Other than his unquenchable passion for credit unions, Blaine spends his free time on his farm.

"I raise bush hogs. I work the farm," said Blaine. Blaine does have a green thumb for daffodils, but according to him, that's not saying much.

"You don't do a thing to them and they'll come. You need to plant them with a bulldozer and cover them and they'll come up. I planted 2,000 with a Bobcat last year. You'll get more and more every year. They just keep coming."

Spending time with Blaine, it's apparent that running a credit union is more than just a job, it's his way of life, his passion.

"My hobby and my work are the same, generally you'll find that with fanatics. Credit unions are the best thing since sliced bread, and the working man and woman need them."

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