Harvesting a New Maine Credit Union for Farmers
It is not easy to form a new credit union but a group of Mainers believe they have the recipe to potentially charter the first new one in the state in a quarter century.
Scott Budde, a former executive with pension fund TIAA-CREF, which primarily serves educators and health care professionals, is one of the driving forces behind the Maine Harvest Credit Project. The entity aims to serve the state's ever-expanding small farmer community.
The problem is that young farmers have no place to borrow money for land and equipment purchase, according to Budde.
In the Pine Tree state, the need for financing is certainly real. Farm revenues in Maine rose 24% from 2007 to 2012, according to the Bangor Daily News. The number of farmers under age 35 grew by 40% during that period, the publication noted. Nationally, that number was 1.5%.
Maine Harvest's plan is to obtain a state charter but it would also need NCUA insurance, Budde said. The minimum size for viability is around $10 million in assets and the start-up would need $1 million to $3 million in cash on hand, he added. Budde said he is hoping to secure the latter through grants.
“Ours is a very specialized [project],” Budde said. “There are many services we will not offer.”
For instance, if chartered, Maine Harvest, may not offer share draft accounts, he pointed out. The project's main purpose will be providing loans to farmers, who will, in most cases, have relationships with other financial institutions. Mortgages that range between $100,000 and $500,000 as well as equipment loans between $5,000 and $50,000 and seasonal loans are also set to be offered.
Maine Harvest is looking to partner with Synergent, a subsidiary of the Maine Credit Union League, for back-office services, including core processing and mobile banking. Budde said the hope is to plug into Synergent to address any regulatory questions about the reliability of the project's technology backbone.
Between the Maine Organic Farmers and Gardeners Association and the Maine Farmland Trust, a Belfast, Maine-based organization formed to protect family-owned farms, there are roughly 15,000 members, according to Budde. He estimated the organizations have about 1,000 farmer members who would want to use Maine Harvest for loans and many more might choose to open deposit accounts. That alone will give the institution a membership that would suffice for stability, he said.
Ted Quaday, executive director of the Maine Organic Farmers and Gardeners Association in Thorndike, Maine, said there is a need for more loan money.
“When you are a young or new farmer, it's virtually impossible to find money to borrow,” Quaday said. “[Maine Harvest is] a concept that is long overdue. A credit union will help farmers succeed.”
John Murphy, president/CEO of the Maine Credit Union League, is optimistic about Maine Harvest's future.
“If there's a group that can succeed in chartering a new credit union, it's this group,” he predicted. “They have had a positive response from many credit unions across the state. This is a very niche credit union. Organic is very popular today. No one underestimates the hurdles but they have developed a sound business plan.”
Maine has nearly 1.4 million arable acres, of which, maybe 800,000 are currently farmed, according to John Piotti, president/CEO of the Maine Farmland Trust. By his estimate, in the next decade, around 400,000 acres will come up for sale, typically due to retiring farmers. He said he wants to be sure there are sources of capital for would-be farmers to buy good land.
“There are a lot of beginning farmers who have trouble getting loans,” Piotti said. “A lot of it is the nature of farms – many lenders don't understand them.”
Piotti sees Maine Harvest as a possible way to provide financing and expects the Maine legislature will be supportive of the initiative.
“The legislature likes farms,” he said.
Maine is just not about potatoes and blueberries. According to state figures, dairy farms, and corn and broccoli are among many other crops including those grown in greenhouses are important to the economy.
The state is also ranked as the nation's second most locavore state, that is, Mainers are strongly committed to buying and eating locally grown products, according to Strolling of the Heifers, a Vermont-based local food advocacy group.
Piotti said in much of Maine, small farming may be the only realistic path to a functional economy.
Meanwhile, the enormity of the challenge of chartering new credit unions cannot be overestimated. According to the NCUA, only 13 credit unions were chartered between 2009 and 2014. It also federally insured two new state-chartered institutions. In December, the agency chartered Lutheran Federal Credit Union in St. Louis, making it one of three formed in 2014. Just one was chartered in 2013. The NCUA said that it generally has 15 to 20 new credit unions in its pipeline. Many never reach the finish line.
The hurdle is money, said Thad Moore, vice president at the $670 million Self-Help Credit Union in Durham, N.C., which was chartered in 1983.
Becky Holton, EVP at Self-Help, concurred. “Capital is the issue. It's tough,” she said.
Maine Harvest may have another advantage with its start-up efforts. Maine is very pro-credit union, according to Sam May, a former executive at investment bank US Bancorp Piper Jaffray and another key founder of Maine Harvest.
By his count, every other Mainer belongs to a credit union, but not one serves all of the state as Maine Harvest seeks to do and nobody is going after the small farmers the potential cooperative plans to target.
As for raising the capital they need to charter Maine Harvest, both May and Budde exuded optimism.
“We are in touch with foundations that may support us,” May said.
Budde offered, “The need is there and so is the funding.”
If Maine Harvest works in Maine, it may work in other states with significant locavore enthusiasm, May said.
“If we can do this, it will open up opportunities for others to do it in other places. Where there are locavores, and small farmers to feed them, there just may be a need for a specialty credit union, so if Maine Harvest works in Maine, it just might spawn more.”