Community First to use $10M gift to open credit union

Community First Fund plans to open a credit union in Lancaster County this summer for those underserved by other lending institutions.

Helping to get that started will be money from a $10 million gift from philanthropist MacKenzie Scott, which the Lancaster-based lender just announced. The donation also will underwrite several other initiatives coming soon.

Dan Betancourt, Community First Fund president and CEO, called the gift “a game changer.”

Over the past four months, Scott has given more than $4.15 billion to 384 organizations across the U.S. In a post on medium.com, she wrote that a data-driven approach was taken to identify organizations with strong leadership teams and results, with special attention to those operating in communities facing serious food insecurity, high measures of racial inequity, high local poverty rates and low access to philanthropic capital.

The credit union will be the fund’s first experience providing consumer services. Typically, the community development financial institution has approved loans to entrepreneurs and small-business owners.

The goal, Betancourt said, is for credit union members to build up family wealth, whether it’s buying a home, setting up a college fund or saving for retirement. Members will have access to credit builder loans, such as car loans and mortgages, as well as financial education workshops.

Many of the unbanked or underbanked rely on check cashers, which cost money. But as Lisa Servon wrote in “The Unbanking of America,” check cashing works for them because they know the cost in advance, Betancourt said. In contrast, with a bank they may not be aware of what an overdrawn account would cost, he said.

Community First Fund Federal Credit Union is targeted to them. And the need is there.

Surveys by the Center for Opinion Research at Franklin & Marshall College show that about a quarter of Lancaster County residents are unbanked or underbanked, Betancourt said.

As a nonprofit, the credit union has members, not shareholders, and “its purpose is to serve its members,” he said. “All profits go back to the members.”

Anyone who lives, works, worships or attends school in Lancaster County can join the credit union, Betancourt said.

Community First Fund submitted its application Dec. 16 to federal regulators and hopes to secure approval by spring 2021.

Projections are for the credit union to open this summer at the lender’s 51 S. Duke St. headquarters, with five employees and startup capital of $3 million.

Betancourt said $150,000 of that $3 million, over three years, is being provided by Lancaster County Community Foundation. Sam Bressi, president and CEO of the foundation, said opening a credit union “is a natural next step” for Community First Fund.

“They’re perfectly suited to do this and be exceptional,” he said. “… We’re really proud to be part of it.”

The fund also has $600,000 in commitments of institutional deposits from the City of Lancaster, United Way of Lancaster County, Everence Federal Credit Union in Lancaster, Community Action Partnership of Lancaster County, Hope Credit Union from the Mississippi Delta area, and a credit union in New York City.

Betancourt said Everence is sponsoring the application and planning to provide back-office services to get things up and running.

If the startup goes smoothly, the credit union could expand into the York and Harrisburg areas in two or three years, he said.

Eventually, it could operate wherever Community First Fund is.

In addition to Lancaster, the lender has offices in Philadelphia, York, Reading, Harrisburg and Allentown.

Community First Fund expanding executive team

Expecting a record year for lending and more growth, the Lancaster-based Community First Fund has been adding staff and restructuring its executive team.

The nonprofit economic development organization recently hired Michael Carper, the former CEO of the Housing Development Corp. MidAtlantic, to be its chief credit officer.

Community First Fund also contracted with a finance expert from Chicago to serve as CFO until it hires someone to the post full-time.

“We’re adding and growing dramatically,” said Dan Betancourt, the organization’s president and CEO.

Community First Fund provides financing for small businesses, affordable housing projects and nonprofit organizations located in low-income communities and serving disadvantaged groups, including Latino and African-American entrepreneurs.

And the need for services is rising.

The organization, which started out serving Lancaster, now covers 15 counties in Central Pennsylvania, the Lehigh Valley and suburban Philadelphia. Its staff has grown from 20 to 40 over the past five years and it is making more direct loans to businesses, with volume rising from about $10 million to $30 million in the past three years.

The nonprofit also has opened new loan offices in Allentown and Philadelphia where it would like to add more people to expand lending.

“We expect to go deeper into markets we are in,” Betancourt said.

But depth, he said, requires a bigger team. That starts at the executive level.

In addition to adding new execs, the nonprofit has made some internal promotions.

COO Joan Brodhead was recently named senior executive vice president and chief strategic initiatives officer, while senior vice president of lending James Buerger was elevated to executive vice president and chief lending officer.

Community First also has hired staff to work under each of the C-suite executives.

Opportunity knocking

The growth comes at a time when Community First has been positioning itself as a go-to resource for investors and developers interested in the federal opportunity zone program, in which investors can get a tax break on capital gains by investing in projects in qualified distressed areas, dubbed opportunity zones.

The investments typically will flow through what are known as qualified opportunity funds. Community First has been working to develop such funds, which could work in combination with other state and federal incentives.

Among the most notable of those is the New Markets Tax Credit program, a federal tax credit program operated by the U.S. Treasury Department that helps support large urban redevelopment projects.

Community First did not get any credits this year but hopes its clients still can take advantage of the incentives.
“We plan to work with clients and try to help them find an allocation through another organization,” Betancourt said.

And it has snagged other kinds of funding. Community First recently received a $1.5 million federal grant from the Treasury’s Capital Magnet Fund, a grant program that helps finance low-income housing projects.

Betancourt said the plan is to use that grant as seed capital in the form of low-interest loans to support developers who receive Low-Income Housing Tax Credits from the Pennsylvania Housing Finance Authority in Harrisburg.

Community First, meanwhile, will kick in $4.5 million of its own funds, bumping the total to $6 million. Betancourt said he hopes to be able to help finance about 400 affordable housing units across the organization’s footprint.

Community First also has rolled out an online application for small businesses looking for loans. Betancourt said this will help the organization process applications more quickly and at a higher volume, hopefully steering some small businesses away from predatory online lenders that charge higher interest rates and fees.

Community First is looking to cut a 60-day application process down to about 30 to 45 days, Betancourt said.

“I think we will be able to work with more clients,” he said.