RALEIGH, N.C. -- You could call State Employees Credit Union a little old-fashioned.

At a time when prophets of the information superhighway are reporting the death of the branch, State Employees president Jim Blaine expects to build 20 more offices to augment the 100 already operating.

Also, the country's secondlargest credit union plans to stick to core lines of business while others in the industry rush to offer mutual funds and other products.

Mr. Blaine, 45, is unapologetic about being out of step. That's not surprising: He has a reputation for being outspoken and concedes that some think he's "eccentric." Even his vita says he "can be testy" and is "known to argue."

"We're not going to be a supermarket," he said in a recent interview. "It's not our goal to be a one-stop shop or to be all things to all people. We want to be the best at what we do."

To be the best, the $3.8 billion-asset credit union must efficiently deliver its services to a membership group -- state employees and public school teachers -- that's scattered from the Atlantic coastline to the Appalachians, Mr. Blaine said.

To reach that membership base, 101 branches stand in every city and town with a significant member concentration. The credit union plans to open additional branches in about seven communities.

"Branches -- I know that's out of fashion, with people saying brick and mortar is a dinosaur," Mr. Blaine said. "But a local presence and a local face has tremendous impact."

State Employees supplements its branches with a proprietary network of 450 automated teller machines. Besides communities with too few members to justify a branch, the credit union has machines in the Raleigh-Durham International Airport and in 90 McDonald's restaurants.

With consumer loan rates 2% below banks' and interest on deposit accounts about 1% higher, State Employees stacks up as a stiff competitor.

First mortgages represent about half of the credit union's $2.3 billion loan portfolio. All the mortgages are variable rate, and the credit union keeps every one it makes.

"It's sleeping with the enemy to sell off loans," Mr. Blaine said.

One offering that "makes regulators' hair stand on end" is a 100% mortgage targeted at young, first-time homebuyers who are creditworthy but find it difficult to come up with the down payment.

"You have to walk on water to qualify," Mr. Blaine said. Over the last six years, the credit union has made $42 million worth of these no-money-down loans. The repayment on every one is current.

The credit unions treats all members alike when it comes to loan rates.

We don't negotiate, everyone gets the same' deal," he ;said. Giving someone a lower loan rate "goes against our cooperative principles." Offering uniform rates also helps control expenses, which Mr. Blaine sees as crucial to keeping costs as low as possible for members. He points to three North Carolina-based banks -- NationsBank, First Union, and Wachovia -- as models of cost cutting.

In 1993, State Employees' total expense-to-asset ratio was 1.78%, well below those of its banking neighbors and Navy Federal Credit Union, the country's largest.

Mr. Blaine acknowledged that NationsBank chief executive Hugh McColl doesn't lose sleep worrying about State Employees Credit Union. But officials of smaller banks very well might.

Tar Heel State community bankers have been some of the most vociferous credit union opponents in the country.

It was four North Carolina banks that sued the National Credit Union Administration in 1990 over its liberal field-ofmembership policy and encouraged bankers in other states to follow suit.

Indeed, some North Carolina banks sued State Employees in the early 1980s because it took in some city employees. The case went all the way to the state Supreme Court, where the credit union lost.

Nevertheless, Mr. Blaine believes bankers' fight to tighten fields of membership will fail because limiting access to credit unions is politically unpopular.

However, bankers ultimately will win the war to tax credit unions, he conceded.

"It's a false issue they're killing us with," he said, disparaging banker arguments to tax credit unions as "sophistry.7

Because credit unions are nonprofit, they have no income to tax after they pay dividends, operating costs, and statutory loss reserves, Mr. Blaine argued. Banks don't pay taxes until these expenses have been accounted for.

"Last year we reported $38 million in net income but all that went into statutory reserves," Mr. Blaine said. "We want to get that down to zero net income and give the money back to our members."

But bankers aren't the only ones who want credit unions taxed.

State Treasurer Harlan Boyles subscribes to the banker argument that the time has come for credit unions to lose their exemption because it gives them a competitive advantage.

"Investor-owned banks can't deduct dividends to investors, but credit unions can deduct interest they pay to depositors as equity owners," he said. He advocates taxing credit union income before dividends are paid to members.

Mr. Blaine, who has spent his entire career at the credit union, has little sympathy for bankers' complaints. He said ultimately banks exist only to make money while credit unions exist to give people a better deal.

"Saying credit unions are in the banking business is like saying GM and Ralph Nader are both in the car business.

"I'm a fanatic about this," he said. "That's what makes me dangerous."

Jim Blaine

Born: 1949, Chapel Hill, N.C.


MBA, Duke UniVersity, 1986 BA in political science, University of North Carolina, 1971

Career track:

1979-present - President, State Employees CU

1974-1979 - Assistant general manager, State Employees CU

1973-1974 - Loan officer trainee, State Employees CU


Wife, Jean; five children, Jim, Eleanor, Sarah, Thomas, and Mary

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.