FEDERAL RESERVE BANK OF OCTOBER 1996 BANKING & COMMUNITYPP . erspectiveserspectives The One That Didn’t Get Away

Hughes Springs Catches Catfish Business By Leveraging Public And Private Resources

In 1993, GAF Fisheries Inc. in Hughes Springs, Texas, wanted to build a processing plant and expand its farm to produce catfish for 40 . restaurants operated by a related com- . pany, Great American Foods. Although . Texans eat about 25 percent of the . farm-raised catfish consumed in the . United States, only 2 percent of the fish . are produced in Texas. With a process- GAF Fisheries, a catfish processing plant in Hughes . ing plant and larger farm, GAF . . Springs, Texas. . Fisheries could ensure a steady supply . . and consistent quality for the David . . Beard Catfish Restaurants. . Fisheries purchased 1,500 acres of . “Before we built the plant and fish . land for the plant and fish farm. The . farm, we were purchasing approxi- . city, however, would need to upgrade INSIDE . . . mately $7.5 million of processed cat- . its wastewater treatment system and . fish from Mississippi each year to sup- . sewer and water lines to accommodate Sources of HMDA Data . ply our restaurants,” says Mike . GAF’s operations. ᮢ . Jenkins, president of GAF Fisheries. . “The city of Hughes Springs want- Helping Turn a Vision “With the new farm and plant, we can . ed the processing plant in its communi- Into Reality . raise some fish locally, and we can . ty, and other cities were competing to ᮢ process up to 80,000 pounds of live . have GAF move to their areas,” says A Small Bank with Big Ideas fish each day.” . Clay Meadows, business development ᮢ Hughes Springs, a town of 2,000, . director with Northeast Texas Economic Community Development was the logical site for the processing . Development District (NETEDD), a non- Through Service plant and expanded farm because . profit corporation established in the . GAF Fisheries and Great American . 1960s to facilitate economic develop- Foods are based in the area. GAF ment and growth in a 16-county region. (continued on page 2) ublic & Private Partnership

PP(continued from page 1) Hughes Springs needed access to state guarantees 80 percent of the bank can guarantee up to $10 million and is . and federal grant money to build the . loan, was crucial to a bank’s decision an excellent program” says infrastructure, according to Meadows. . to extend GAF Fisheries a loan Washington. “The program made it NETEDD assisted the city in . because the venture was essentially a easier for us to extend the loans.” obtaining approval for two grants for . startup and the loan guarantee would The bank loan commitments in infrastructure improvements, one from . help a bank offset some of the risk of turn helped cinch the $750,000 Texas the Texas Capital Fund and the other . the project,” says Meadows. Capital Fund grant and the $1.3 million . from the Economic Development . Denis Washington, vice president . EDA grant, used to improve the city’s Administration (EDA). . of lending services at Texarkana . sewer and water infrastructure, says One of the stipulations of the . National Bank, liked the opportunity to . Meadows. Texas Capital Fund was that GAF . use the USDA B&I program, and . The processing plant and farm Fisheries have a commitment for . extended two loans to GAF Fisheries . have created 82 new jobs in Hughes financing, which it did not. So Meadows . totaling $3 million. One, for $2,605,000, . Springs since the plant opened in . . worked with Jenkins to put together a . was used to refinance the fish farm . March 1996. This puts GAF well on its loan proposal that incorporated a busi- and construct the processing plant. . way to surpassing its commitment to ness and industrial (B&I) loan guaran- The other loan, for $395,000, provided . the city to create 100 jobs within three tee from the U.S. Department of working capital. Great American Foods . years. Agriculture (USDA)/Rural Development stockholders also injected $1.2 million . By creating jobs, rural economic . Program in Temple, Texas. for startup costs. . development such as this provides an “The B&I loan guarantee, which “The USDA B&I loan guarantee . incentive for families to stay in their . communities, says Meadows. . With the new water and sewer . infrastructure in place, Hughes Springs . is promoting development of contract . . fish farms that will sell fish to the pro- . cessing plant and create more jobs. In . addition to GAF’s farm, a 1,000-acre . fish farm is under construction in . Hughes Springs. . “Without the combination of public grant programs, Texarkana National Bank loans and the loan guarantee, this project would not have happened,” says Meadows. “It took each one to bring about the development. Programs such as the EDA grant, Texas Capital Fund and the Rural Development B&I loan guarantee are essential to rural communities’ ability to From left: David Beard, chairman, David Beard Catfish, Denis R. Washington, vice president, Texarkana attract and support businesses.” ᮢ National Bank, and Clay Meadows, Northeast Texas Economic Development District. 3

Fast Facts DID YOU KNOW . . . ?

Sources of HMDA Data Hughes Springs, a rural Northeast Texas town of 2,000, is home to the state’s only commercial catfish processing plant. Development of On July 30, the Federal Financial the plant necessitated improvements in the city’s wastewater treat- Institutions Examination Council (FFIEC) ment facility and sewer and water lines. A combination of private announced the availability of 1995 mort- funds and a USDA loan guarantee were used for plant construction gage lending data. The reports reflect and public grants were used for infrastructure improvements. lending activity for the more than 9,500 institutions covered by the Home Technical Assistance Mortgage Disclosure Act (HMDA). Northeast Texas Economic Development District The public can obtain the data in the NETEDD assisted in obtaining approval for the Texas Capital following locations and formats: Fund and EDA grants for Hughes Springs. GAF Fisheries and • Financial institutions subject to the NETEDD also worked with Texarkana National Bank to package HMDA provide their disclosure statement the USDA B&I loan-guarantee application. at the institution’s home office and in at least one branch office in each additional Infrastructure Grants to City metropolitan statistical area (MSA) where Texas Capital Fund Infrastructure Program $750,000 it has offices. A grant for installation of water lines to the processing plant. • Each MSA has a central depository for HMDA data. Central depositories Economic Development Administration $1.3 million have HMDA disclosure statements for A grant for wastewater treatment, sewer, water and access individual financial institutions reporting in improvements to meet the processing plant’s needs. the MSA, as well as a statement that includes aggregate data for all reporting Business Loans institutions in the MSA. The location of Texarkana National Bank $3 million the central depository for a specific MSA Two loans to GAF Fisheries Inc.: a 10-year, $2,605,000 loan at may be obtained by contacting the an adjustable rate of 13/4 over prime to refinance the fish farm FFIEC at (202) 634-6526 or at and build the processing plant and a seven-year, $395,000 loan www.ffiec.gov/hmda on the Internet. at the same rate to be used for working capital. • The FFIEC makes HMDA data direct- ly available to the public. An order form USDA’s Rural Development Business and Industrial Loan Guarantee can be obtained by calling the HMDA Guaranteed 80 percent of the Texarkana National Bank loans. Assistance Line at (202) 452-2016. • Internet users can access HMDA For more information: information by geographic area or finan- Northeast Texas Economic Development District cial institution. Additionally, the user can P.O. Box 1967 determine a financial institution’s market Texarkana, Texas 75504 share of HMDA reportable loans for a (903) 794-3434 specified area. Access this information from the Internet at rtk.net/www/data/hmda_gen.html. Additional information regarding the availability of 1995 HMDA data is includ- ed in Notice 96-78 from the Federal Reserve Bank of Dallas. For a copy of this notice, contact the Dallas Fed’s Public Affairs Department at (214) 922- 5254 or (800) 333-4460, ext. 5254. ᮢ JoAnn Kane— Executive Director, McAuley Institute ommentary

CC Our work with community-based non- Helping Turn a profits has been as diverse as the geo- graphic areas we serve in the District. Vision Into Reality In Pasadena, Texas, for example, we are working with a consortium of McAuley Institute believes that women’s shelter providers to build tran- In Houma, Louisiana, for example, housing should be a core element of sitional housing for survivors of domes- we worked with local leaders to launch community-based development activi- tic violence. Farther south, we made a a comprehensive redevelopment plan ties. It is hard, if not impossible, to loan to Proyecto Azteca to finance the to rebuild the community after the rav- dream of safe neighborhoods without first six units in its self-help housing ages of Hurricane Andrew. including in the picture well-built project in San Juan, Texas. Proyecto “When I came in, the work Catholic homes, with children playing, flowers has gone on to produce an additional Housing Services had already done blooming and generous neighbors. 35 units. with McAuley gave the organization a This image’s hold on our imagination In Louisiana, we worked with the year’s head start on groups that hadn’t and housing’s great impact on the . Southern Mutual Help Association to worked with McAuley,” says Paul economy ensures that this form of . secure development deposits to subsi- James, program manager of Catholic development will always be high on . dize affordable housing development Housing Services. local development agendas. Housing . for former sugarcane workers. Upon completion of a multitiered also mirrors the communities it . Recently, we have been working with planning process, Catholic Housing . serves—reflecting confidence, eco- . the association to create a separately and McAuley focused on implementa- nomic stability and a thriving home life . incorporated housing development tion of the housing program’s compo- if well-maintained, and dragging down . organization. nents: construction of new single-family the community if left to deteriorate. . These programs are examples of the homes, rehab of existing housing and Since 1983, the McAuley Institute . training and resources McAuley home ownership counseling. Early on, has worked with 2,000 nonprofit orga- . employs to move a vision to reality. An a consortium of local lenders provided . nizations and housing development . analysis of recent projects shows that . $100,000 for a down payment assis- projects across the country to help . requests for assistance fall into three . tance program. bring their dreams to reality. McAuley, . categories: technical assistance, fund- . ing through a revolving loan fund and . Revolving Loan Fund a national nonprofit intermediary spon- . . sored by the Sisters of Mercy of the organizational support. . Predictable access to affordable and Americas, targets low-income commu- . flexible development capital is the nities where resources have been sys- Technical Assistance . lifeblood of community-based housing tematically withdrawn or lost through Technical assistance is the soup-to- . development. McAuley operates a disinvestment. We especially focus on nuts category—helping groups . revolving loan fund that is ideally suited respond to housing needs in ways that . to the complexity of community devel- projects and strategies that serve low- . income women and their families. are well matched to the community and . opment and can be flexibly used to In the past three years, a growing can adapt to change over time. . ease the challenges of working with proportion of McAuley’s work has been Assistance is customized to each . multiple contributors. in the Federal Reserve’s Eleventh locale, weaving a unique mixture of . Our funds are most often used in the District, from its urban areas to the bor- program models, problem-solving tech- . early stages of development, for land der regions of Texas and New Mexico. niques and project design. . acquisition, construction or rehabilita-

FEDERAL RESERVE BANK OF DALLAS OCTOBER 1996 (continued on page 8) 5

ESOURCE

A small Dallas bank has learned receives payment for each invoice. The that pairing the right loan product with bank then handles the billing of receiv- the right customer benefits the bank, the RR ables and processes payments on the customer and the local economy. A Small Bank business’ customer accounts. First Texas, a $135 million bank After using the Cash Flow Manager located in a low- to moderate- income With Big Ideas product for four months, First Texas pur- neighborhood, specializes in loans to chased more than $1 million in invoices small minority businesses that manufac- from Business Control, helping free the First Texas Bank Helps Finance ture and provide services to the area’s company’s working capital. Business Minority-Owned Businesses economy. Control could then take advantage of “Small businesses and the mom remaining 75 percent. trade discounts and other business and pop shops are the heart and soul of In January 1988, First Texas Bank opportunities. our economy,” says William E. Stahnke, . worked with the BCF to originate a In addition to the BCF loan and the president of First Texas. . $250,000 line of credit for Business Cash Flow Manager products, First . Control Systems Inc., which provides The bank helps area businesses by . Texas created a menu of loan products making loans that are partnered with a . computer-related services to many U.S. government-sponsored loan or other . corporations. Business Control began types of lending resources such as the . as a small certified minority business Business Consortium Fund Inc. (BCF). . enterprise led by Bernie and Diane BCF is the minority business devel- . Francis, a husband and wife team with . opment arm of the National Minority . 40 years experience in the data pro- Supplier Development Council. The BCF . cessing industry. provides contract financing to certified . First Texas Bank renewed Business ethnic minority-owned businesses . Control’s line of credit in 1989 and in across America through a network of . 1991 approved a $200,000 loan without local participating banks and Regional . BCF involvement. As Business Control . Minority Purchasing Councils/Regional . began to grow, it established a good . Minority Supplier Development Councils. . credit history, enabling the bank to raise . The loan program is funded through sev- the credit line to $400,000 in 1994. . . From left: William E. Stahnke, president, First Texas eral types of sources including corpora- As the company continued to grow . Bank; Bernie Francis, owner, Business Control tions, state governments and founda- at a fast pace, more working capital . Systems Inc.; Ralph Jones, senior vice president and loan officer, First Texas Bank tions. To qualify for a loan, the borrower was needed. The bank worked with . . must be a member of a Regional Business Control to find credit options . that meet the specific needs of its cus- Minority Purchasing Council or Regional that would suit the company’s needs. In . tomers and allow the bank to share its Minority Supplier Development Council. December 1995, the bank approved an . credit risk, according to Stahnke. For The bank acts as a conduit when it $800,000 Cash Flow Manager line of . instance, the bank offers a Department uses a BCF loan program in tandem credit. Cash Flow Manager is an . of Transportation loan program, similar with its loan products. The bank intro- accounts-receivable management and . to the BCF program, for small disadvan- . duces the BCF program to the small financing program purchased by the . taged business enterprises in the trans- business, and the bank performs a bank to better serve its small business . portation industry. financial analysis to ensure the small customers. As a part of the program, . “If you put the right product with the business can repay the loan. The BCF the bank purchases receivables that are . right company, the company will grow, requires the bank to provide 25 percent submitted by the business on an ongo- . the bank will grow, and the economy will of the loan, while the BCF lends the ing basis. Within 24 hours, the business . grow,” says Stahnke. ᮢ

FEDERAL RESERVE BANK OF DALLAS OCTOBER 1996 EPORT

When El Paso Habitat for Block Grant funding applications for Humanity, a nonprofit organization dedi- rural communities. cated to providing affordable housing RR Community development services for low- and moderate-income people Community also include providing credit counseling received assistance from a local finan- and financial planning to promote cial institution, it was not in the form of a Development affordable housing and community loan or monetary donation. . . development. In Monroe, Louisiana, Instead, Bank of the West provided . . Central Bank assisted in developing the technical assistance by helping the non- . Through Service . Monroe Affordable Homeownership profit complete a grant application for . . Community Housing Development . . funds from the Federal Home Loan Bank . their responsiveness to the community’s . Organization, which provides education of Dallas’ Affordable Housing Program . needs. . and counseling to low- and moderate- (AHP). The bank’s help with the applica- . A small institution’s provision of com- . income individuals. Classes are held in tion enabled Habitat to structure the . munity development services, including . churches or community centers in low- information in a way that maximized its . their innovativeness and responsiveness, . and moderate-income areas of Monroe. potential for receiving the AHP money . are considered, at the institution’s option, . Central Bank is also participating in . . ultimately awarded to the organization. . in determining whether the institution . Project Independence, a counseling “Affordable housing in El Paso is a . merits an “outstanding” rating. . and financial-planning training program big issue, and this program has gotten . A community development service . that targets women who are welfare the ball rolling for revitalization and new . has community development1 as its pri- . recipients. construction here,” says Eric Hjalmquist, . mary purpose, relates to the provision of . Residents of Dallas–Fort Worth are vice president at Bank of the West in El . financial services and is not considered . benefiting from a team approach to . . Paso. “Anything we can do to support . part of an institution’s provision of retail . credit counseling, homebuyer counsel- and nurture the process of building . banking services. Community develop- . ing and financial planning. Eight finan- affordable housing here is rewarding. . ment services must also benefit the insti- . cial institutions and the Consumer This was a situation where we were able . tution’s assessment area or a broader . Credit Counseling Service have formed to sit down with Habitat and help them . statewide or regional area that includes . the Dallas Credit Coalition, which spon- complete the grant application.” . the assessment area. . sors a six-week, hands-on workshop . . Under the new Community . First State Bank of Livingston, . entitled Fundamentals of Good Credit. Reinvestment Act regulation, such com- . Texas, offers an example of a community . The workshop is designed to help indi- munity development services may be . development service in which the bank . viduals develop good financial manage- considered in the performance assess- . provides technical expertise to low- and . ment and learn about the use of credit. ment of both large and small financial . moderate-income individuals. “The bank . “The class is designed for people institutions. Large financial institutions— . assists members of a local Indian tribe in . who want to straighten out their credit or . . with assets of at least $250 million or . applying for HUD grants to build or . for those who just want to know more affiliates of a holding company with total . upgrade their homes,” according to Tony . about how credit works,” says Alfreda banking and thrift assets of at least $1 . Taylor, vice president and senior loan . Norman, vice president for Bank of billion— are typically evaluated for CRA . officer of commercial lending. . America in Dallas and executive finance performance under lending, investment . Additionally, First State Bank CEO Ben . chairman of the Dallas Credit Coalition. and service tests. Examiners of large . Ogletree has served on a regional board . “It is an opportunity to let customers . . institutions consider community devel- . of the Texas Department of Housing and . understand that it is OK to talk to their opment services under the service test. . Community Affairs, where his financial . bank about credit or other financial Examiners assess how innovative the . expertise played a significant role in . issues.” institution’s services are, their extent and . evaluating Community Development . The Credit Coalition pro-

FEDERAL RESERVE BANK OF DALLAS OCTOBER 1996 Jim V. Foster — Community Affairs Specialist, 7 Federal Reserve Bank of Dallas

vides similar services in the Houston One’s Tarrant County market, served as metropolitan area. director of the William Mann Jr. Deposit services that reduce Community Development Corp. (CDC), costs and improve access to financial a multibank CDC that promotes eco- services for low- and moderate- nomic development in one of Fort income individuals are also consid- Worth’s low- and moderate-income ered community development ser- areas. Forbes remained employed by vices. Norwest Bank in Lubbock, for Bank One while helping to jumpstart the example offers low- and moderate- housing tax credit deals. CDC by soliciting potential investors, income individuals “Unbelievable “Nonprofit organizations that are developing a budget and identifying a Checking,” an account that provides trying to rehabilitate low- and moderate- permanent director to oversee the CDC. free checking services and does not . income areas are many times turned “I feel like a proud father because . down for permanent financing because require a minimum balance. . we worked through a lot to achieve what “Norwest Bank recognized that . underwriters are not familiar with the is considered a very successful pro-

Examples of community development services include, among other things: providing technical expertise for not-for-profit, tribal or government organizations serving low- and moderate-income housing needs or economic revitalization and development; lending executives to organizations facilitating affordable housing construction and rehabilitation or development of affordable housing; providing credit counseling, homebuy- ers counseling, home maintenance counseling and/or financial planning to promote community development and affordable housing; school savings programs; and other financial services the primary purpose of which is community development, such as low-cost or free government check cashing.

many of its customers were using . complex process,” says Arcilia . ject,” says Forbes. “I learned enough checking accounts for bill paying and . Carrasco Acosta, regional Bank One . about owning and operating a business CRA officer. “Bank One has recently . didn’t need special features,” according . . that now I can be sympathetic to small to Jay Freeman, Norwest director of . created a lending department that is . businesses that come to me to apply for sales and marketing support. . specially trained to underwrite low- a loan.” . . Lending executives to organizations income housing tax credit projects. . . 1 developing affordable housing and pro- Low-income housing tax credits are . Community development is defined in the revised CRA . regulation as: affordable housing for low- or moderate- moting economic development is anoth- definitely community partnerships, and . income individuals; community services targeted to low- er way a financial institution can perform if the financial organizations don’t step . or moderate-income individuals; activities that promote . economic development by financing small businesses or community development service. up to the plate, the projects can’t meet . farms; or activities that revitalize or stabilize low- or Bank One, Dallas officials work with their full potential.” . moderate-income geographies. nonprofits to provide information and In Fort Worth, Glenn Forbes, com- . training on how to develop low-income munity development officer for Bank .

FEDERAL RESERVE BANK OF DALLAS OCTOBER 1996 (continued from page 4) . tion, and gap financing. For the Kings The Enterprise Foundation’s . Small Corporate Offering Court Housing Foundation in San . Antonio, McAuley and the San Antonio Network Conference . Registration (SCOR) Seminar Housing Trust cooperated on the con- A Time of Change . A Capital Solution . for Small Businesses struction loan for 16 units of housing December 3–7, 1996 . for older neighborhood residents. A , Florida . $265,000 loan to Woman Inc. in . November 21, 1996 Pasadena partially financed 30 family- For more info call: (410) 715-2267 . Omni San Antonio Hotel sized units. With the acquisition of six . San Antonio, Texas . . city-owned units and funds from a . limits of resources and the boundaries . SCOR is a means for a small McAuley loan, Guadalupe . of self-interest—written with all the par- . Neighborhood Development Corp. . ties in the same room. In Washington, . business to raise up to $1 million in expanded its capacity in a troubled . D.C., we have been working with com- . equity capital by selling common . stock directly to the public. neighborhood of southeast Austin. . munity development lenders to test one . such collaborative concept. Organizational Support . For the past 18 months, participating Registration fee is $50 on or before The successful organization regularly . nonprofit lenders and city and corporate November 14, or $60 thereafter. employs planning and evaluation to . representatives have met regularly on help ensure accountability to communi- . efforts to lower the cost of processing For more information contact . Claudette Small: ty residents and contributors, as well . home loans, to ease confusion among as to identify fiscal and management . borrowers and lenders, and to more effi- Telephone: (214) 922-5276 efficiencies. McAuley staff often work . ciently match projects and resources. At Toll Free: (800) 333-4460 ext. 5276 with nonprofit staff and boards to this point, we have completed work on a . Sponsored by the Federal Reserve Bank determine the best programmatic bal- . common loan application, promissory of Dallas and the SCOR Task Force. ance for their organizations, while they . note, deed of trust and intercreditor . assess the strengths and weaknesses . agreement. While drafting the docu- of administration and funding—building . ments, the nonprofit lenders group also on past successes to ensure future met regularly with District of Columbia- . Perspectives impact. In this area of support, we area financial institutions, city officials, . Federal Reserve Bank of Dallas have been impressed by the contribu- . nonprofit developers and the Community Affairs Office tions of lending partners across the . Community Development Committee of P.O. Box 655906 . Dallas, Texas 75265-5906 country. The senior management of . the American Bar Association to define these lenders trained their community a collaborative process that will ease Gloria Vasquez Brown . Assistant Vice Prisident development partners in strategic plan- the difficulties of working across sectors. . Nancy C. Vickrey ning and business analysis. . We are eager to continue expanding Community Affairs Officer . our services in Texas and Louisiana Ariel D. Cisneros Community Affairs Specialist Partnerships . and to identify possibilities for our first Jim V. Foster If a successful neighborhood or . opportunity to work in New Mexico. This Community Affairs Specialist . Bobbie K. Salgado community can be measured by the spring, we committed $1 million for low- . Houston Branch quality of its housing, its long-term via- . interest loans to finance affordable Community Affairs Specialist bility will rise or fall with the quality and . housing in the Houston–Galveston area The views expressed are those leadership of its partnerships. . and look forward to making similar of the authors and should not be Partnership is a collaborative concept commitments of time and funds else- attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. easily invoked but rarely mastered. The where in the Federal Reserve’s Eleventh Articles may be reprinted on the condition best partnerships are cognizant of the District. ᮢ that the source is credited and a copy is provided to the Community Affairs Office.