By Ray Birch
UNITY, Maine–Nearly every credit union in the country is striving to be members’ primary financial institution. But one startup CU here has no interest in being a PFI.
Instead, the brand new Maine Harvest Credit Union, which opened its doors with $2.4-million in assets, is seeking to serve the unique needs of the roughly 13,000 members of the Maine Organic Farmers and Gardeners Association and the Maine Farmland Trust by offering business loans to small farms, farmers and other food producers within its field of membership.
The credit union is looking to fill a gap in the market by offering land-backed mortgages in the $100,000 to $400,000 range, small-business loans of $60,000 to $125,000 and equipment loans of $20,000 to $40,000.
“We're really focused on these types of business loans,” said CEO Scott Budde. “So, no traditional consumer lending, which is the mainstay of many credit unions. We are not offering checking, we're just offering savings and CDs. We're not trying to be people's primary financial institution. It's a very unique and specialized business model.”
Of all 50 states, Maine is ranked fifth on the national
Locavore list, meaning it is one of the strongest local food producers in the country.
Can a credit union with such a unique and specialized business model make a go of it today?
“I have worked in financial services for many years, and I'm 60. I have found in my experience the more focused an institution is, often the more successful it is,” said Budde. “That's not a critique of full-service institutions, because when credit unions are focused on a local community they need to be full service.”
The founders have worked on Wall Street and combine 60+ years of financial experience with deep roots
in Maine. Co-founder Sam May was the senior wireless technology analyst for US Bancorp Piper Jaffray in
Silicon Valley. Co-founder Budde founded TIAA’s first department focused on impact investing strategies. Growing up in Midcoast Maine in the 1950s, May spent considerable time on a dairy farm, while Budde graduated Bowdoin College in 1981. Budde and May took on this project because they believed it is a needed catalyst for growth within this sector. Starting in 2013, the duo raised $2.4M in philanthropic capital, completed years of market research and analysis and drafted a 1,000 page application to successfully gain a NCUA charter.
FDR’s Granddaughter on Hand
Budde said the Maine Harvest–which had the granddaughter of President Franklin Delano Roosevelt on hand when it officially opened–has surveyed Mainers and learned they are “happy” with their current primary financial relationships.
“There are 55 credit unions in Maine that cover the entire state that are great on full service, and we are happy to refer members to them for the products we don’t offer,” explained Budde.
Budde emphasized the goal of Maine Harvest is to fill a specific lending gap not being filled by banks and other institutions when it comes to providing small agricultural loans to farms in Maine. His team of four, including himself, work “out in the field” with farmers to meet their borrowing needs.
“That might seem challenging, since we serve the entire state, but we don’t think it will be,” Budde told CUToday.info. “We have two seasoned business loan officers who will primarily be working away from the office. I will be in the field myself, as well. We are centrally located in the state, and there is a great part of Maine that is uninhabited.”
Online Services, Shared Branching
According to Budde, from the outset Maine Harvest members are receiving sophisticated online accessibility to the one-office credit union. It offers online banking, online account opening, online loan application and closing, remote check deposit, and a strong mobile platform.
“Members can also use shared branching and the comprehensive CO-OP ATM network,” he said.
Scott Budde
Budde said a full-service business model would have been more challenging for the small shop.
“We’d have many more transactions to deal with, more compliance issues, more payments issues, more security issues …,” he said. “Our model is much simpler.”
A Six-Year Effort
When NCUA granted Maine Harvest its charter recently, it marked the end of a six-year effort by the CU to get underway.
Budde acknowledged the charter did not come as quickly as he expected.
“Before we got started on this effort I talked with people at Inclusiv and they told me to expect to wait about three years,” recalled Budde. “But I thought we could get it done in two, and I was wrong.”
What most slowed down the credit union’s organizers on their path getting the charter was raising the initial funding—the goal was set at $2.4 million to open its doors.
“That startup grant capital took much longer to raise than I expected,” said Budde. “I guess we could have gotten started with less, but I did not want to change from our goal, so we stayed with the $2.4 million. There were 23 donors for the $2.4 million, and we probably also raised another $300,000 to keep the project going.”
Budde is projecting steady asset growth over the next six to eight years. “I expect we will be in the $15-million asset range then,” he said.
The Most Important Thing
Most important, the CEO added, is the credit union in the years ahead will be meeting a need currently not being filled for small farms, which wil help to keep many in the agricultural business on their land and successful.
Maine Farmland Trust estimates there is about a $186-million financing gap among Maine farmers and food producers and lending institutions.
“Again, small farmers in Maine are having a difficult time getting the loans they need to stay in business,” said Budde. “Bridging that gap will keep farmers on their land, help others scale and grow and generally act as a catalyst for this entire industry.”