RALEIGH, N.C. – Jim Blaine, president/CEO of $6 billion-State Employees Credit Union of North Carolina is not daunted by NCUA’s decision to not count as net worth a $1 million capital equity share investment from Self-Help Credit Union. He intends to continue to defend his position that federally-insured credit unions should be allowed to count alternative capital as part of their net worth. North Carolina state law permits alternative sources of capital, but that law is preempted by federal law, specifically CUMAA (the Credit Union Membership Access Act) which does not allow it. CUMAA takes precedence over state law. “There’s no question from our state regulator or by PriceWaterhouseCoopers, our external auditor, that alternative capital is proper and that our investment of equity shares with Self Help Credit Union should be treated as capital,” said Blaine. “The only question is with NCUA.” According to a June 25 letter to Blaine from Peter Coode, a partner with PriceWaterhouseCoopers, after his meeting with Blaine, Martin Eakes, president, Self-Help, and Jerrie Lattimore, administrator, North Carolina Credit Union Division and his review of documentation with other PriceWaterhouse partners, “Each of us agreed that the proposed investment should be treated as equity by SECU .” Blaine conveyed this information in his June 27 letter to Lattimore in which he asked for permission from the North Carolina Credit Union Division to accept the $1 million capital equity share investment from Self Help CU. Blaine said he appreciates that one of the main goals of prompt corrective action (PCA), according to CUMAA was to force federal and state regulators to follow the generally accepted accounting principles (GAAP) for all federally-insured credit unions and to prevent state regulators from making independent regulatory decisions. But, Blaine said, “The wrong thing is to simply say alternative capital is simply not allowed. It would be better for NCUA to say they’re going to allow it and to make sure it’s done in a safe and sound and prudent way,” said Blaine. “The thought that NCUA wouldn’t give credit unions the opportunity to use alternative sources for capital is beyond me,” Blaine added. “We shouldn’t let capital be a reason for credit unions converting to non-credit union charters. If other federally-insured financial institutions have access to alternative sources for capital, why shouldn’t credit unions?” Blaine said he was confident “NCUA will eventually find that everything falls back to GAAP” and allow federally-insured credit unions to have access to alternative capital. “Giving credit unions access to more capital can only improve their safety and soundness,” Blaine said. “So why would any federal regulation prevent any credit union from having more capital? That’s not what Congress intended when it passed H.R. 1151.” -

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