Maine's first new credit union in 33 years plans to focus on agriculture lending as other community banks in the region pull back from the product type.
Agriculture loan portfolios have decreased among banks in the Northeast over the last three years, and Maine Harvest Federal Credit Union hopes to take advantage by targeting small, local farmers and food producers in Maine, said co-founder, President and CEO Scott Budde.
"Fifty years ago, community banks understood how small farms work," he said in an interview. "But that expertise and knowledge and the relationships with local farms and food producers, that's gone in most parts of the country."
Maine Harvest FCU received its federal charter on Aug. 14 and will look to develop its membership by focusing on about 13,000 employees and members from two farming organizations: Maine Organic Farmers and Gardeners Association and Maine Farmland Trust.
In the credit union's market research, Maine farmers reported about $180 million in demand for small farm mortgages and land financing that they feel other financial institutions are not meeting, said Amanda Beal, one of the credit union's organizers and the current head of Maine's Department of Agriculture, Conservation and Forestry. She said farming contributes $3.87 billion to the state's economy but could have an even greater economic impact.
"The additional capital [Maine Harvest FCU] can make available to farmers is a key to supporting that growth," she said.
Farmers surveyed by Maine Harvest FCU said financial institutions in the state are not fulfilling two key financial needs: small farm equipment and mortgage lending. Budde said the credit union will focus on those products, which are typically not offered by banks because they lack the necessary specialists and are often too small for the Farm Credit Administration.
Agriculture lending makes up a small portion of loan portfolios for banks headquartered in the Northeast and has been decreasing. In the third quarter of 2016, the median agriculture lending concentration was just 0.20% of their loan portfolios. By the 2019 second quarter, the median figure was down to 0.13%, according to data from S&P Global Market Intelligence.
According to data from the National Credit Union Administration, or NCUA, federally insured credit unions reported $2.66 billion of agriculture-related commercial loans during the second quarter, compared to $2.44 billion in the year-ago quarter.
Identifying a field of membership and that group's unmet financial needs are important steps in chartering a credit union, said Carrie Hunt, executive vice president of government affairs and general counsel for the National Association of Federally-Insured Credit Unions, an industry trade group. A credit union's field of membership often allows it to serve specific communities that may otherwise lack credit options, such as Navy FCU serving military personnel, which helped lead to its rapid growth.
But new credit union charters are rare, in part because the process is lengthy and labor-intensive. Credit union organizers have to determine a field of membership, identify their financial needs, fundraise and work with regulators on a business plan. Maine Harvest FCU is only the second credit union to receive a charter in 2019, according to data from S&P Global Market Intelligence. It received its federal charter after six years of effort by co-founders Budde and Sam May.
Raising sufficient capital tends to be the most time-consuming part of the process, according to the NCUA. Maine Harvest FCU raised $2.4 million in three years.
Despite the long process, regulators welcomed Maine Harvest FCU's charter, Budde said.
"Credit union regulators are generally very positive about wanting new credit unions, even though there aren't very many of them," Budde said.