Maine Farm and Food Credit Union(In process of formation )

SMM November 2012

Maine Farm and Food Credit Union

For Maine’s new & expanding farmers / food processors / harvesters

Member owned, Non-profit , State Chartered institution , Focused on $5k to $45k Working Capital and Infrastructure

loans. About 120 $25k loans per year. $10mm cumulative over 3 years.

Working to fill a “Donut Hole” in Maine Ag finance for new / small producers

Will Coordinate with existing institutions, so that successful members can “graduate” to traditional financings

About Credit Unions

Credit unions are member owned not-for-profit financial institutions that provide members with a place to save money, get reasonable rates on loans, and receive a level of service not available at other financial institutions.

They serve groups with a common feature, such as employee groups, geographical communities or shared association membership

Credit unions operate under the philosophy "not for profit, not for charity, but for service"

- NCUA

Credit Union Conceptual ProposalKeep services simple, and fill un-met members’ needs

Provide Loans under $50k each ( for working capital and infrastructure)

Agency guaranteed loans such as SBA and FAMELow cost Credit card processing & sponsorship, including smart

phone based for farmers’ marketsSavings, checking and deposit accounts, using Synergent 157

branch state wide branch network and 4950 branch national network + 000’s of ATMs

Manage, but not “own” a farm mortgage fund sponsored by Maine Farmland Trust

Credit Union Conceptual Proposal

“Virtual” Organization with a few part time professionals, one shared office

Enlist help from State, ME CU League, Synergent, NCUA, CDCU, CU Business

Group, MOFGA, MFT Your organization?

Become a Community Development Credit Union, Possibly with “low Income” status for preferential funding

Network all involved constituencies before formal launch State Ag Dept, Governor, Legislature, Maine Bankers Assoc., Farm

Credit, USDA,CEI, Maine Food Producers Association , etc

Ag Finance in Maine TodaySources▪ Friends and family▪ Maine Farm Credit▪ Small Business

Administration programs ▪ USDA loan guarantees▪ Local Commercial / Savings

Banks▪ Credit Cards▪ Private investors▪ CEI▪ Slow Money Maine▪ Maine Farmland Trust

Challenges▪ US FDIC regulations on business

profit and credit score standards - Need 3 profit years

▪ Fear of “unfamiliar” business/collateral

▪ Securitization demands “vanilla” loans

▪ Farmer income limited during start ups

▪ ME Banks not familiar with crop loans

▪ Farmland / home already mortgaged

▪ Available Funders too small or too large

▪ Former Funders have new/ different targets

▪ Few grants for “for profit” producers

Why a Farm and Food Credit Union in Maine?Maine has many commercial and savings banks – but they do not generally

make farm loansMaine is well served by Maine Farm Credit – over $900mm in assets and one

of strongest in Nation, but focus is on larger loans and well established producers

Private investors often focus on transactions over $500k, while friends, families and credit cards rarely fund more than $5 or 10k

CEI has ~$1.5mm in farm / food loans and makes ~10 or so such loans per year. and is focused on needed grocery store projects at present

SBA credit standards have become very tight“Credit unions often make the small business loans that other

lenders avoid. A 2011 Small Business Administration-commissioned study also found that more than 80 cents of every dollar in credit union member business lending is an entirely new source of capital not available in the market today.” – CU Times Nov. 2012

Maine Business Lending Statistics

At year end 2008 there were 67 credit unions in Maine serving 601,268 members

(then roughly 46% of the state's population - still about the same today)

Credit union data is from NCUA.

Bank data is from FDIC. Produced by CUNA's

Economics & Statistics Department.

2008 Credit Unions Banks Total Assets: $4.8 B $18.5 BAverage asset size: $71.30 MM $616.20 MMMarket share of deposits: 17 % 83 %

# offering Business loans 34 all

Total business lending: 116.5$ MM 4.6$ B3 Year Change : $52.6 MM -9.6 B

82 % (68) %

Share of business loans 2 % 98 %Business as a % of assets: 2 % 25 %

Financial rulesCan be State or Federally regulated, but all depositors are Federally Insured up to $250k/$500k

Can generally make farm loans up to $50k per borrower

State expects minimum asset base of $10mm after 3 yrs for viability

State Target of 10%+ capital, but better to match ME Farm Credit at 18-19% capital

Non- returnable donations to create capital can be tax deductible

Financial requirements

Assuming asset base of $10mm after 3 yrs and Target of 18% + capital ratio:

Need ~$2mm capital in 2 tranches to support $1omm+ loans

Need ~ $900k commitments for first 3 years expenses

Need ~ $50k for formation costsNon- returnable donations to create capital can be tax

deductibleSome capital contributions may be able to pay a small,

permanent dividendIf achieve LICU status, can qualify for some capital

grants

Required InfrastructureStaffing Professional Loan Officer on Staff Paid Supervisory Staff (s) Trained (but not necessarily paid) Credit Committees and Board

of Directors Other staff / services can be contractedOffices One physical office – can be shared with a sponsor organization Membership in ME CU league /Synergent gives access to 157 ME

branches and 4950 nationwide + ooo’s of ATMs

Networking to date

ME State Bureau of Financial Institutions Superintendent - Lloyd LaFountain IIIDeputy Superintendent - Robert Studley Deputy Superintendent - John Barr

SMM / Bonnie Rukin & Sam May, MOFGA/Russell Libby, Maine Farmland Trust / John Piotti

ME Credit Union League, SynergentBetter Harvest Federal Credit Union (in

organization)CEI / Gray Harris

Volunteers / supportersSam Bishop – Consultant

for bakeries, food producers

Warren Cook – MOMMatt Fadiman – Bank

Operations ConsultantNorm Levesque – Financial

AdvisorRussell Libby - MOFGASam May – Former Wall St

Analyst / Current Ag Investor

Taylor Mudge - MFTJohn Piotti - MFT

Bonnie Rukin – Slow Money Maine

John Sharood – Consultant / Mushroom Farmer

Dick Spencer – Drummond Woodsum

Linzee Weld - SMM

YOU?

Questions & Suggestions?

Thank You – and Please VolunteerJohn SharoodSam MaySam Bishop

Appendix- Partner capabilities

CU Business Group LLC

Synergent

▪ We focus on the best solutions for your credit union, so you can focus on your members.

▪ We have been specializing in credit union products and services since 1971. At Synergent, you can choose to use one of many intelligent solutions, or a synergy of all we have to offer.

▪ Technology Services

▪ We provide the most powerful, stable and flexible system available, with enhanced efficiencies so you can do what you do best - serving your members.