Jim Blaine, president/CEO of the $25 billion State Employees'Credit Union, said he doesn't know why the NCUA questions hisRaleigh, N.C., credit union's safety and soundness.

The NCUA Office of Inspector General said in a report released Tuesday that NCUA Region III Director HerbYolles wrote in a July 14, 2010 letter to Jerrie Jay, administratorof the North Carolina Credit Union Division, “SECU is notconsidered safe and sound at this time.”

All references to safety and soundness were redacted in theOIG's report, but the information was revealed when the CreditUnion Times copied and pasted text from the released PDFdocument to a Word file.

Yolles' statement led to a heated discussion during a Sept. 19meeting with NCUA administrators and the full SECU board in whichYolles said Jay had announced that the NCUA had begun the processof terminating NCUSIF insurance for the nation's second-largestcredit union.

The OIG's investigation centered around whether or not Yolleslied about what Jay said during the meeting, a complaint Blaine hadmade against the agency. However, the revelation that the NCUAquestions SECU's safety and soundness may be the bigger issue tocredit unions that support the NCUA's share insurance fund.

“You need to ask him, we can't get a straight answer,” Blainesaid, in response to a question asking why Yolles said SECU is notsafe and sound.

In 2011, the SECU board wrote a response to Yolles, Blaine said,stating it can't determine the NCUA's specific concern.

When asked about the safety and soundness charge, NCUA spokesmanJohn Zimmerman said the agency does not comment on supervisorymatters.

“I think it's a strategic issue with us, and not about the CAMELdisclosure,” Blaine said, referring to when he publiclyreleased his credit union's CAMEL rating, which launchedthe much-publicized dispute between the state and federalregulators and a wave of separate examinations of North Carolina'sstate-chartered credit unions.

The NCUA doesn't like SECU's practice of making non-conformingmortgage loans, Blaine said, but added “our portfolio isperforming.”

“We have a good track record, and if we're wrong, we say show usyour model and we can then tell you why we think you're right orwrong,” he said. “But they don't have a model. Their answer to ourboard is 'we would just sleep better at night'.”

Blaine said the issue is an example of why exam reform isneeded, and NCUA examiners should cite support for exam mandates.SECU manages its capital around 7%, and has done so through thefinancial crisis, he said.

“We're a mortgage lender, our investments are in Treasury bills,so I think we do a good job of balancing risk and providingliquidity,” he said. Blaine added that if he sold the $9 billionSECU has invested in T-bills, thus reducing his asset size, hiscredit union's net worth would be nearly 18%.