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May 21, 2019

Maine Harvest Credit Union, with a focus on agriculture, poised to open

Photo / Tim Greenway Scott Budde, left, and Sam May, co-founders of the Maine Harvest Credit Union, which is expected to open in Unity this summer. It will become Maine's 56th credit union and the country's first devoted to farmers and food entrepreneurs. The founders are pictured here at Broadturn Farm in Scarborough.

A six-year effort to create Maine's first credit union in three decades, and the first ever focused on farmers and food producers, is poised to become a reality.

Maine Harvest Credit Union, which will offer loans to the agriculture and food producer industries, is waiting approval of its charter before it can start accepting members and offering loans.

The founders of the credit union have submitted a charter application to the National Credit Union Administration, and hope to get approval next month. Maine Harvest Credit Union, which will have an office in Unity, is not only the first new Maine credit union in 30 years, but also the first ever aimed at the agricultural community, providing loans for agriculture and farming businesses, said cofounders Scott Budde and Sam May.

"Farms are a complicated model for small business," said May, chair of the credit union's advisory board. He said the model is one small community banks aren't often set up to tackle.

The credit union will focus on specifics of loans for equipment and land, said Budde, who is CEO. "We're not doing anything with consumer lending. There are so many [financial institutions] available there's no need. What there is a need for is funding to operate small farms."

Both stress the credit union's aim is not to replace a member's regular banking institution.

"The real focus is to supply loans for farmland access," May said. That includes everything from land to equipment to solar installations.

Maine Harvest reached its $2.4 million fundraising goal last fall, which allowed it to apply to the National Credit Union Administration for a federal charter. The NCUA operates for credit unions much like the Federal Deposit Insurance Corp. does for banks — insuring deposits for members.

The charter application process is a lengthy one — Harvest's application is about 1,000 pages, Budde said.

Once it opens at 69 School St. in Unity, the credit union will begin to put the mechanism in place to take deposits, which should take another couple of months, May said. They hope to start taking loan applications in September.

A rare opening

The rarity of a credit union opening in the state is largely because its capital must be raised through donations and grants, unlike banks, which raise it through stock.

"It's a lot of money to raise," Budde said.

"I know on the state side it's been years [since a credit union has been chartered]," said Lloyd LaFountain III, state superintendent of the Bureau of Financial Institutions. While Maine Harvest is federally chartered, not state chartered, so doesn't come under the oversight of LaFountain's office, he said that he agrees with Maine Harvest's founders that it's been decades since one has opened in Maine.

He said that's tied to how difficult it is to raise the money to start an institution. "To get the upfront money is a different pool of financing than banks," he said. 

He said, too, that most of the state's 55 credit unions are community-based or tied to an employer, and the focus of Maine Harvest is new for Maine. Maine's credit unions have more than 702,309 members with $7.97 billion assets, according to the Maine Credit Union Directory.

"They did a lot of research," LaFountain said. He said that, particularly since the recession, the process to open a financial institution has become more complex.

"There are more, I wouldn't call them hurdles, but there are a lot of requirements by the NCUA," he said. He said that Maine Harvest did its homework. "NCUA wouldn't give them insurance unless their plan was feasible," he said.

Maine Harvest's funding came from Maine foundations, individual donors, a USDA grant and support from the Maine Credit Union League, according to its website.

Digital presence

Also making it different from a lot of the state's credit unions is that it will largely be online.

While Maine Harvest's four employees will operate out of the office in Unity, in a building owned by the Maine Farmland Trust, it's expected most customers will do business online, said May and Budde. The institution will be part of the Maine Credit Union League, which shares ATMs throughout the state.

"We wanted to cover the entire state," May said. 

Members must be members of Maine Farmland Trust or the Maine Organic Farmers and Gardeners Association to join the credit union. The initial fee to join will be $35.  The credit union is under the auspices of the farmland trust.

Before any of that starts, they must be chartered, the founders said.

They're optimistic after six years of effort, that the process will be completed successfully.

New concept in old school

Both men were working on the concept separately when the idea was formed. Budde, who is a Bowdoin graduate, was in finance in New York, and did research across New England, talking to those in the farm industry about the financial challenges of getting a business off the ground, before settling on Maine.

Budde said the robust agriculture structure, supported by MOFGA and the Maine Farmland Trust, were in the state's favor.

May was working with MOFGA and the Maine Farmland Trust and recognized the same issue — that the growing number of young farmers and new farmers in Maine needed a way to get mortgages and loans.

"Farmers and food producers weren't being served adequately by traditional banks and loan funds," May said. 

Maine Farmland Trust estimates there is about a $186 million financing gap among Maine farmers and food producers and lending institutions. “Bridging that gap will keep farmers on their land, help others scale and grow and generally act as a catalyst for this entire industry,” Amanda Beal, president and CEO of Maine Farmland Trust said in a news release when the financing goal was realized.

Maine has more than 8,000 farms that produce $3.8 billion in sales and create 24,000 jobs statewide, according to the organization.  The agricultural sector is one of the largest that brings younger people to Maine, with 40% farmers aged 34 or younger.

May said that the credit union will combine the modern — digital banking, access to the credit union league's ATMs, a new approach to lending for the industry — with the old school. Literally. The officers will be in a former schoolhouse the farmland trust renovated four years ago. 

Besides Budde, there will be a chief loan officer, and assistant loan officer and a chief operating officer.

The credit union also has a 15 member organizer group who will also be its first members that includes Budde, May, Beal; Aaron Bell, owner and farmer, Tidemill Farm; Gray Harris, senior program director, Coastal Enterprises Inc.; Katia Holmes, owner and farmer, Mistybrook Farm; Logan Johnston, farmer, Oaklands Farm and a MOFGA board member; James Lawrence, Maine Farmland Trust board member; Steve Levy,  Steven C. Levy Consulting LLC; Rosa Libby, homesteader; Anna Eleanor Roosevelt, president and CEO, Goodwill Industries of Northern New England; John Sharood CFO, Mousam Valley Mushrooms; Sarah Smith, owner and farmer, Grasslands Farm; Christian Van Dyck, vice president and  compliance officer, cPort Credit Union; Linzee Weld, board treasurer, Maine Grains LLC.

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