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conform all parties that your lines of in place on the listen only mode at this time questions can be done through the WebEx today's call is also being recorded if anyone disagrees you may disconnect at this time I would now like to turn the call over to mr. Eloy Villafranca thank you and you may begin good morning or afternoon or evening or depending on whatever time zone you're joining us from we're happy that you're here the FDIC is honored to host today's webinar on utilizing role development loan guarantee programs to finance tribal projects I'm annoyed Villafranca the Radames regional manager for the community affairs branch of the FDIC the FDIC is committed to expanding economic inclusion for all we have five key areas of opportunity to define our particular strategies for economic inclusion first of all financial education and capabilities secondly promoting safe affordable insured transactions and savings accounts third increasing consumer access to strong and sustainable credit fourth encouraging responsible options for affordable mortgage credit and finally access to financial services for small business a little bit of what the Community Affairs staff do the lack of access to capital and credit has been a significant constraint on economic development in Native communities today's session will discuss US Department of Agriculture tools to meet those credit needs and share some recent successes although there are unique challenges for banks interested in commercial lending on Indian reservations there are ways to overcome these challenges using risk mitigation strategies such as well here today from the USDA guarantee programs now of course it would be a government presentation without our disclaimer that reference to any specific organization does not constitute an endorsement or recommendation or a favoring by the FDIC or the United States government okay we've got that out of the way due to the wealth of information our presenters will be sharing we will not have time today for an interactive Q&A session however we welcome questions using the chat function the presenters will consider all questions after the webinar and the responses will be sent out in the next few weeks along with the link to the webinar recording itself as a reminder the chat box can be open by clicking the chat icon now find that little cartoon bubble that you see in the middle on the bottom and click on that that will allow you to go to the chat function enter your question hit Send it and and everyone will be able to see that and we'll get those recorded and get those answered for you look at the drop down button for that and put in all presenters to send it out you can download the slides by clicking on the third icon that looks like a line with an arrow pointing upwards the universal sign for download that we see these days however you might want to just wait for the webinar recording that's going to have the slides in the audio altogether without further delay I would like to introduce our first introduce our first to USDA presenters Jackie Vaughn Taylor Zurich and Betty brand jackie has more than 13 years of leadership experience at USDA Rural Development leading the telecommunications and water programs for more than 11 years and critical agency-wide efforts to streamline programs and increases impact in rural areas she also served as rural development senior policy official leading consultation with tribal nations in a most recent role she served at the agency's first chief risk officer and is now leading a stand up of world development new Innovation Center Jackie's knowledge of rural development portfolio programs and staff will serve as a strong foundation in our new role leading rural development focused efforts in innovation after Jackie will hear from Betty Brant who serves as the administrator of the rural business service agency she came to USDA after 35 years with Farm Credit of the virginias where she most recently served as chief advocate for the agriculture industry and rural businesses prior to this bet he served as chief sales officer overseeing the business development of a 1.6 billion with a B credit portfolio managing a team of commercial agriculture and agribusiness lenders and supervising F CBS marketing and branding since her arrival to the USDA in January of 2018 Betty has prioritized increasing rural America's access to capital investing in innovative technology and helping business create jobs administer rand has a degree in animal science and an MBA from Virginia Tech we welcome both of those Jacky we hand it over to you good afternoon and thank you and thank all of you for participating in today's webinar I first want to thank FDIC for hosting this webinar series and for using today's webinar to focus on USDA Rural Development loan guarantee programs and how they can be used to finance tribal projects at USDA we recognize our unique relationship and responsibilities when it comes to serving and partnering with tribes tribal members and tribal organizations every day we work to meet our trust responsibilities by building partnerships to provide needed capital for projects that will improve the economic prosperity and quality of life throughout Indian country and Alaska we do this by delivering financing and technical assistance across a wide range of housing infrastructure energy and economic development programs to a network of USDA Rural Development offices spread out across rural America as you'll learn later in the webinar most of our financing dollars are made available in the form of loan guarantees where private lenders use their own capital to make a loan and Rural Development guarantees a portion of that loan from loss our loan guarantee programs provide several benefits first they increase the availability of credit as they don't count against the banks lending limit and the guarantees also increase the marketability of loans on the secondary market that's unlocking additional capital to finance more projects and last but not least while finding projects are benefiting communities by creating jobs creating businesses and improving the quality of life in rural and tribal communities the profitability of the lender is also enhanced by expanding its customer base and reach and limiting loss with that I want to thank you again for joining today's webinar and thank you for your interest in rural development programs we hope that you will find a product and an avenue to do business with us now let me introduce the administrator of rural development rural business service Betty brand to continue with our introductory remarks Betty yes Thank You Jackie I do want to thank the FDIC for hosting today's webinar we have a great lineup of speakers and I'm excited that we have so many folks on the line today so thank you for taking the time from your busy schedule to join us at USDA Rural Development we know that access to capital continues to be an issue for financing tribal projects throughout Indian country and Alaska we work to increase access to capital through our grant direct loans and loan guarantee programs we do this by working directly with tribes lenders tribal nonprofits and intermediary relending organizations including Native CDFIs we also understand and appreciate that there are other loan guarantee programs out there that can also be used to finance tribal deals we work closely with our colleagues at SBA the Department of Energy and at interior office of Indian energy and Economic Development to make sure that lenders and tribes are using the best product or products in combination for any given project in fact we've been working closely with SBA staff under an interagency MOU for some time and we just recently announced a new MOU institutionalizing our ongoing collaboration with the Department of Energy through today's webinar we are continue to spread the word about our portfolio of programs illustrating how banks have used these programs to invest in travel projects and thankfully you won't just have to take our word for it you'll also hear from two lenders that have used our programs to finance tribal deals a special thanks to Native American Bank and to Pacific premier bank first for using our programs to invest in trouble communities and secondly for partnering with us to share their experiences and show how USDA Rural Development programs worked for their bank's bottom line while benefiting the communities they serve it is these types of public/private partnerships that amplify the impact of rural development programs and rural and tribal communities we also recognize that there is plenty of room for growth in rural developments loan guarantee programs for financing additional tribal projects especially on tribal lands the only way we're going to improve on our history is to listen to lenders tribes and industry partners and be willing to innovate and adapt to increase access to capital that's never easy but we've shown that we are willing to work with partners to move the ball ever so incrementally in the right direction for instance today and tomorrow in South Dakota USDA Rural Development staff from Washington DC and South Dakota are visiting the Ogallala Sioux and the Cheyenne River Sioux tribes to celebrate new home ownership opportunities on tribal lands through an innovative pilot project between the two native CDFIs and USDA Rural Development it's one thing to have a good innovative idea and it's another thing to have the institutional patience commitment and know-how to implement such an idea and a prudent and efficient Manor and that's just what we did it took many hands many partners and a good amount of time and in the end this project pilot project is a testament to the links that USDA Rural Development is willing to go to increase access to capital on tribal lands on a similar note for some time now we have been working to consolidate and streamline several of our loan guarantee programs under one easier to navigate process the intent of this process is simple to make it easier for lenders to use a variety of Rural Development slum guarantee programs programs that will be initially included in the 1 Rd guarantee process include the business and industry guarantee program read or the rural energy for America program community facilities and water and environmental loan guarantee programs we've received a lot of good feedback from lenders and so stakeholders so far and currently we're hard at work simplifying and finalizing that new regulatory structure and we're looking forward to announcing and implementing those enhancements in the future in closing if you're listening today and you're motivated to use our programs but for some reason you haven't done so after today's webinar please take a moment to follow up with us so that we can answer your questions individually and we can put you in touch with the right program to contact and if you're experiencing a challenging a challenge and using our programs we'd like to hear all about that as well this really will help us better understand your issues and priorities on the ground and will help us to continue working toward improving rural development programs so we want to hear from you and thank you again for joining us on today's webinar remember together America prospers so I've now turn it back to FDIC to introduce the neck speaker thank you agree Australia brand I have the honor now of introducing Ted Bulow Ted is the Native American coordinator for USDA Rural Development in this role he works to increase access to the rural development programs for tribes tribal members and organizations focus on improving the quality of life and economic opportunity through Indian country in Alaska in between stints at USDA Ted worked for the CDFI fund on the Native American program team prior to that he worked for USDA's Rural Development Community Development programs as a desk officer for the Northwest region Ted began his federal career as a volunteer with a Peace Corps in the eastern high atlas National Park in Morocco Ted take us on our journey thank you and thanks again for hosting this webinar today thanks to Betty and Jackie for those great opening remarks and I'll try to go as quickly and clearly as I can through my slides so we can hear from our featured lenders at the end of today's webinar next slide please in about the next 20-30 minutes I want to give you a quick overview of USDA Rural Development about our agency and how we fit into the greater Department of Agriculture I'll then do a brief overview of our funding streams and our loan guarantee programs in general I'll do a slide each on program eligibility and security for loans and then I'm going to do a deeper dive on three of our loan guarantee programs today our rural energy for America program the business and industry loan guarantee program and our community facilities program and then I'll end with my contact info so you can follow up with me after the webinar next slide our secretary sonny perdue has set out seven strategic goals for usda two of which are particularly relevant to rural development the first is an overall reaching strategic goal dealing with improving our customer service so a rural development we take that very seriously and are working every day to increase our improve our customer service two tries into lenders into all of our customers USDA's fourth strategic goal is the one that specifically talks to rural development and our programs which is to facilitate robic asperity and economic development next slide please within the Department of Agriculture there are eight different mission areas many of you might be familiar with programs like our Food Safety and Inspection Service where our folks are colleagues stampy for our commodity programs or we provide food to folks who need supplemental food for for getting by day to day but at rural development we really have responsibility for about one eighth of of USDA's broader mission and our mission statement is that we're committed to helping improve the economy and quality of life throughout rural America next slide rural development is really not one agency it's an umbrella mission area made up of three separate agencies those agencies include the rural business cooperative service the rural housing service and the rural utility service underneath those three agencies we have nine major program areas and underneath those program areas we deliver over 40 different funding programs our staff thankfully is decentralized and sprinkled out sprinkled out across rural America with our leadership being back in DC currently our undersecretary for rural development position is vacant so our principal leader is DJ Lavoie who's our deputy undersecretary and then we have administrators that run each of the agencies you heard from Betty Brant who's our administrator for the rural business service Abreu slammers is the administrator for a rural housing service and chat group is the administrator for the Ruth's rural Utilities Service next slide please quickly we have basically three major funding streams that are provided through our forty or forty year plus programs we provide that funding through loan guarantees which we're going to focus on today but we also offered to Rek loans and grants the grants are great but they're very limited and I wanted to mention both of those funding streams in that we want in many instances to leverage our guaranteed loans alongside of our own direct loans and other loan programs as well as grants as we want to maximize those investments and wherever possible encourage public-private partnerships with our direct investments and once again investments that are that lenders are making our funding cycle they differ from program to program but many of our guarantee loan programs are available year-round so you can apply for them at any time our fiscal year runs from October 1st through September 30th many of you might know that we're currently under a continuing resolution which is set to expire on November 21st so when that happens Congress gives us a pro-rated amount of our program dollars based on fiscal year nineteen appropriations the fiscal year prior to the one we're currently in and we're able to use tho
e those funds to finance projects until the continuing resolution expires and then we'll see what Congress does come November 22nd next slide please this is a picture of our what our funding looked like last year it's not every program and every dollar that we had available but it's the summary of our major programs in yellow you'll see highlighted our loan guarantee programs I'm not going to be able to cover all of the programs today that are highlighted I'm not going to be able to get to multifamily housing or water environmental programs or bio finery assistance programs there just was not enough time to cover all of those programs but know that we also offer loan guarantees in those program areas you'll also notice that the numbers that are highlighted are rather large numbers compared to our direct loans and grants that are offered through our loan guarantee programs last year fiscal year 19 across all of our programs we had about twenty seven point two billion dollars available in loan guarantees which was sixty two and a half percent of our program money that we had available so I mentioned the grants I mentioned the direct loans but real development primarily in the projects that we financed is doing that through our loan guarantee programs so there is lots of room for growth and using those loan guarantee programs to finance tribal projects and we need to help more interested in motivated lenders so thanks again for for joining the webinar today next slide program eligibility it really depends on the program but depending on the program there's a piece of our programmatic pie for pretty much every type of entity on a reservation depending on the program tribes are directly eligible for our programs and some of our programs individual tribal members whether they be AG producers or world world small business owners or potential homeowners the individual tribal members themselves are eligible for our programs tribally designated housing entities are eligible for some of our programs native CDFI switch betty mentioned are eligible for some of our programs and not-for-profit and for-profit entities are eligible for some of our programs as well and they can be chartered under tribal state or federal law next slide security what type of security is required for a real development loan this slide is really through the lens of us as a direct lender but you as a direct lender as well will also have to consider what type of security to use to perfect your interest in the investments you're making in Indian country end up in Alaska at rural development security instruments can include lease old mortgages for projects on trust land whether they be for businesses or for home sites security agreements revenue bonds general obligation bonds are commonly used UCC liens tribal guarantees can be part of your security package and other adequate security we don't like to rule out anything out right off the bat but our legal counsel will get involved to help determine if it can be pledged as security and I underlined and bolded the word adequate because I think traditionally there been a tendency from some lenders to over secured ties or over collateralized loans on tribal trust land specifically because the land itself cannot be pledged as part of the collateral collateral package but at rural development the test that a lender is going to have to to meet end a potential borrower is just that the collateral is adequate to secure your interest in our interest and protect us both from loss when it comes to waivers of sovereign immunity that is not required by Rural Development we've had a legal opinion in place for over two decades now that clarifies why that is not a requirement of utilizing any of rural developments programs however a lender when using our loan guarantee programs can make a limited waiver of sovereign immunity part of their deal in their negotiations with a tribe or a tribal enterprise to extend their credits so we will not get in a way the way of that if that's a requirement of a lender but know that that's not specifically required by rural development next slide please so now I'm going to shift gears a little bit and do a deeper dive on three of our loan guarantee program I'm going to start first with the rural energy for America program I don't think either of our lenders today are going to speak towards this program so I'll move through it relatively quickly but know that it's a resource for your bank to utilize and if if you're doing business and industry loan guarantees there might be some space for you to also move into these renewable energy type deals so the purpose of the reap program is to provide grants and guaranteed loans to AG producers and rural small businesses to purchase and install renewable energy systems and to make energy efficiency improvements now I'll start with the guaranteed loan side of things but I'll circle back to the grants because they can be leveraged nicely to to make a deal possible for the guaranteed loans using that guaranteed loan you can pay for up to 75% of the total project cost there's a twenty five million dollar maximum and a five thousand dollar minimum on the guaranteed loans and you can provide up to eighty five percent loan guarantee as the amount of a loan goes up similar to the BNI program which I'll speak to later which you might be familiar with as the amount of the loan goes up our percentage of the loan guaranteed goes down so for loans of six hundred thousand dollars or less we can provide that eighty five percent guarantee six hundred thousand to five million eighty percent guarantee five million at ten million seventy percent guarantee and ten million up to that twenty five million dollar limit it's a sixty percent guarantee the rates and terms are negotiated between the lender and the applicant they're subject to our approval and the terms of the notes customarily for real estate we're looking at thirty-year terms if it's combined real estate and equipment also thirty years if it's only a machinery and equipment 15 years and maximum term for capital loans is is seven years when it comes to applicant eligibility reap is is unique in that the only eligible applicants are agricultural producers and rural small businesses so tribal governments themselves are not directly eligible but in our work with tribes tribal II the tribal section 17 corporations tribal corporations tribal utilities and tribal members small businesses and Agrabah grocers can all be eligible for the program for guarantee loans the continuous application cycle like I mentioned initial fee of one percent on the guaranteed loan and there's an annual renewal fee of 0.25 percent on the outstanding principal for those loans I did mention that there's grants also that are associated with the program the grants do have application deadlines and the grants are limited to 25 percent of the overall project cost or two dollar maximum so for renewable energy systems we can provide grants up to $500,000 for 25% of the project cost whichever is less or for energy efficiency improvements the grant can be once again 25% of the total project cost or up to $250,000 and those grants and loans can be used in combination once again with our overall support of the project being limited to 75% if you sum up the grants and the guaranteed loan there are some upcoming deadlines for for grants for applications for grants of $20,000 or less that are combined with a guaranteed loan there's two application dates this year October 31st and then March 31st of 2020 if you're looking at larger grants higher than $20,000 being leveraged with the with a guaranteed loan those applications are due March 31st and then there's also a stream of money for for energy audits and renewable energy development assistance and those applications are due January 31st and that's for more the pre-development work for the renewable energy projects that would benefit once again small businesses or AG producers we've done a number of projects with tribes primarily through the grants program the reap grant program so we're looking for more interest in being able to finance more guaranteed loan more projects through our guaranteed loan portion of the reap program as well next slide next program is the business and industry guaranteed loans program now the purpose is to improve developer finance business industry and employment throughout rural areas and improve the economic and environmental climate in rural communities so we're really looking to help create new businesses 16 sustain existing businesses create new jobs and sustain existing jobs in rural and tribal areas across the country rural for actually both the reap program and the BNI guaranteed loan program are limited to communities of 50,000 people or less and the eligible applicants for the BNI program are much broader than in the reap program so for BNI guaranteed loans federally recognized tribes are eligible applicants tribally owned businesses and enterprises are eligible so those businesses and enterprises owned by the tribe specifically are eligible for loans and business is owned by tribal mentor members are eligible for BNI loans and nonprofits cooperatives and public bodies are also eligible applicants for for the business and industry loan guaranty program so pretty wide window of the type of applicants that are eligible for the program most loan guarantees in the BNI program are 10 million dollars or less but we do have the authority in certain circumstances to go up to 25 million in in the BNI program as well the maximum guarantee customarily for BNI loans of loans up to five million dollars is 80 percent and in parentheses you'll see it says with certain exceptions that's because we have a small pot of money each year that's available for a 90 percent guarantees and there's a worksheet that you'll work with our staff that targets those 90 percent guarantees for areas of the country that are in different types of economic distress and maybe have suffered through a recent emergency a federally declared disaster so work with your local real development staff on that worksheet and especially if you're you're investing in a in a low income high poverty project that's on a tribal piece of tribal trust land make sure you're at least trying to figure out if we can do those 90 percent guarantees because it could make the difference from you making an investment or not but there's a process and a checklist that you'll have to work with to qualify for those 90 percent guarantees similar to the reach program as the dollar amount of the loan goes up our percentage of guarantee goes down so up to five customary 80% guarantee five to ten million you're looking at a 70% guarantee on the loan and ten million to 25 million it's a 60% guarantee there are fees the initial fee is customarily 3% once again there are certain exceptions to that we have pots of money available for 2% and 1% fee loans as well so work with rural development staff and see if your loan might qualify for those reduced fees and there's an annual renewal fee of of 0.5% on the outstanding principal in those lamp loans when it comes to equity requirements for for BNI it's 10% tangible balance sheet equity for existing businesses and 20% for for new businesses which can be an issue especially for tribal member owned businesses so just be aware that there are those thresholds for for equity requirements or BNI when it comes to the types of projects we can finance we're looking at commercial deals once again to create businesses and jobs rather than list what we can finance it's easier to tell you what we cannot finance at least generally with P&I loans you can't finance racetracks or gaming facilities you cannot finance golf courses lines of credit owner-occupied or rental housing and agricultural production pretty much is off the board with a certain number of small exceptions for like aquaculture and a couple other exceptions so that's not a complete exhaustive list of what's ineligible but those are the major ones that that you cannot finance with the BNI guarantees alone in this program we have had some success financing Native owned businesses as well as tribally owned businesses I wanted to specifically point to Arizona one of our lenders is going to speak to at least one of these deals later on so I don't want to steal his thunder but in Arizona alone we've financed 18 loans through the BNI program banks of Finance I should say we guaranteed the loan on three reservations for upwards of thirty two million dollars and those types of projects have ranged from convenience stores and gas stations to to a industrial park with lease space to many different types of tenants some hotels and restaurants another convenience store and gas station and a block plant a pretty wide range of projects that we've helped finance alone through the BNI program in Arizona and the special thanks to our program director there Gary Mack who's done a really good job cultivating relationships with lenders and getting them comfortable with how to use our program the BNI program specifically on tribal trust land with the tribes in Arizona next slide last program I'm going to mention is the community facilities program this program when compared to the BNI program we're looking at non commercial type facilities in this program that we're financing an essential community facility really can be a lot of different types of facilities but primarily community centers health care centers public safety and educational facilities the schools libraries hospitals police stations fire stations drug treatment facilities and the the necessary equipment to help run those facilities they're all eligible costs under the community facilities program eligibility is a little tighter than the BNI program federally recognized Indian tribes are eligible directly public bodies and community-based nonprofit corporations are the three type of eligible entities for a facilities in this program there's loan guarantees direct loans and a small amount of grant money that's made available through the program each year we get the most money in this program through our Direct Loans last year we had about a program level of 2.8 billion dollars with a smaller pot of money for loan guarantees so it's the program where we really try to leverage the loan guarantees alongside of the directly when possible for a number of reasons which I'll get to in just a minute or two the repayment term is long and can be up to 40 years or the useful life of the facility whichever is shorter the guarantee percent is a straight 90 percent guarantee of the eligible loan fees are straightforward 1.5% initial fee and an annual renewal fee of 0.5% and I mentioned those Direct Loans earlier the Direct Loans offer a low-interest long-term financing so it's the same terms forty years or the useful life of the facility whichever is shorter and the current interest rate in the program market rates three percent and that's in place through the end of the calendar year calendar year so it's very affordable money and so if there's a way where a bank or a lender might not be able to finance the deal in its entirety with a guaranteed loan we love to try to leverage in a direct loan to bring down that blended interest rate for the borrower to incentivize the bank to be able to make their investment and for the tribe to get their their project built the grants are very very small they tend to be $50,000 or less customarily more around $30,000 so they're usually not a part of the building itself not a part of the construction of the facility I should say but use more so for that necessary equipment within those facilities the last thing I'll mention is there's also a technical assistance and training funding stream to that program as well that can pay for some of the upfront development costs the picture on this particular slide is of the Nisqually Indian Youth Center which Rural Development Finance the number of years ago with with the tribe was a two and a half million dollar direct loan and then 9.8 million dollars of additional financing from a commercial lender to help build the facility so had the chance from the pleasure to visit that it's b
en some time ago since I was there but it's a wonderful beautiful state facility for for the Native youth there at the Nisqually tribe to be safe to be kids and and to have a good time it's also where the tribe would shelter in place if they were to encounter an emergency do RCF program we financed a lot of direct loans we also financed a good amount a fair amount of guaranteed loans through the program to tribes specifically but as with the other programs there's there's room for growth next slide I want to leave you with the message that it's our belief and it's our experience that loans to tribes into tribal corporations or low-risk there's a number of reasons why I think that's the case tribes and have a diverse revenue stream our diverse revenue streams I should say that can be pledged as security for for these types of projects those funding streams sometimes allow for the tribes to have liquid assets that they can also pledge for these types of projects I think tribes have a particularly steep reputational risk when it comes to staying current on those loans because tribes are going to have to go back and access access those markets and programs and and the credit from lenders again for additional infrastructure and and tribal projects that are going to be needed for their tribal community so all of that has really led to in our experience low delinquency and default rates and just this past April Jackie was was testifying at in front of the Senate Committee on Indian Affairs and we did a little analysis of our delinquency rates on some of our programs in that that we're serving tribes and in the CF program the communities program that I mentioned we found that our tribal loan portfolio through our direct loan programs now not through the guaranteed loans but our direct loans that we are providing directly to tribes our delinquency rate was 2% lower than our overall portfolio and at that moment in time our our tribal CF portfolio actually had zero zero delinquency so there was a zero percent delinquency and default rate in that program this past April and I don't think that was a distal and anomaly we've done 149 of those totaling over 410 million and I'll say it again I think it's it's worth repeating that in April none of those gnomes were delinquent which which was better than our overall portfolio the same thing held true in our multifamily housing direct loan portfolio of the 86 loans that we had provided for over 53 million dollars in capital the tribal loan portfolio was 1.3 percent lower in its delinquency rate than our overall portfolio so these loans aren't bulletproof they're not necessarily always easy but they are low risk and I think it's especially with the risk mitigation that our our guarantee loans offer there they can be good deals for your lending institution so with that next slide please here's my contact information I do you encourage any of you to follow up with me or your local staff if you're interested in their programs or if you have any specific questions and I'll now introduce our first lender speaker of the afternoon who is Joel Smith so Joel has served as the senior vice president and chief credit officer of Native American banks since 2013 he's an enrolled member of the Caddo Nation of Oklahoma he has 15 years of experience in commercial credit lending and management Joel worked as a credit officer and credit examiner at Co Bank a hundred billion dollar Farm Credit institution for the five years immediately prior to rejoining Native American Bank Joe also spent four years working at Native embanked Native American Bank in credit and as an a VP of business development and in 2008 he holds a MBA & finance from the University of Colorado Denver and a dual BBA and finance and accounting from the University of Oklahoma Joel also is an alumnus of the Graduate School of banking at Colorado and holds an RM a credit risk certification designation Joel also currently serves on the board of directors for the Denver Indian Center in the Rocky Mountain Indian Chamber of Commerce both which are nonprofits devoted to serving Denver's native population he's also previously served as board president for Hasina gaming enterprises and economic development enterprise of the Caddo Nation of Oklahoma and he's also genuinely a very nice guy so with that Joel Smith thanks very much Ted that was a sweet little additional note at the end Thank You Deena and all to help put the call together I'm very glad to contribute to this important topic again my name is Joel Smith I'm a member of the Caddo Nation of Oklahoma and I am chief credit officer Native American Bank I want to start with just a quick little context first about Native American Bank in our experience we are a nationally chartered bank owned by a consortium of different tribes and tribal entities and we were formed with the express mission to serve Indian country and bank reservation communities and we lend commonly to tribes and native businesses nationwide I will also echo what Ted's experience was related to the delinquencies and the loss rates that we've experienced with our tribal lending have been far stronger than our other segments of lending in general and I think that's a big part of the story about lending in Indian country that might be something of a misconception but the the credit strength has really been exemplary that being said Indian country has been so grossly underserved from a lending perspective historically that we at need American bank would love nothing more than to see other lenders start meeting the needs of the space and so we're glad to share our experience to hopefully inspire other lenders as that furthers na Bea's mission today particularly I will talk about utilizing the USDA lending programs which we view as among the most powerful tools lenders can use to successfully bring capital to tribes it does happen that most of the tribal communities in the u.s. happen to be in rural areas that make USDA too rules available or eligible in many rural communities the tribal government is the main driver of economic development activity so being able to successfully serve the tribe itself is paramount we do applaud the the USCA for the strides that it's made helping to facilitate facilitate lending in Indian country by dedicating extra resources lender education and providing flexibility within its program so successfully financing tribal transactions comes with a host of complexities that do make it more challenging for many lenders than is confession conventional lending transactions are in large part take longer and patience is required due to a host of factors including for instance seeking approval and title reports from the Bureau of Indian Affairs as in their role as land trustee for a lot of the tribal trust land on the reservation in addition you know underwriting and tribal government or its business arms is sometimes unfamiliar to many lenders but I'll say that the the USDA personnel that we've worked with have really shown a commitment to understanding the differences and getting their arms around what it takes to underwrite a tribe and utilize their internal USDA resources as necessary to make that happen particularly particularly when the tribal government is the business owner there is flexibility in the usual process and expectations of the owner providing a guarantee on alone both the the business engine C program and the community facilities program work well we believe with tribal lending one of the biggest advantages that nav has utilized with the BNI program in particular is the ability to work alongside new market tax credits which is a another program that provides funding into projects in low-income areas where there's a need for seed capital or down payment that can be a real barrier to try transaction that piece of financing can be met with new market proceeds and per the USDA guidelines is counted as equity into the project which was a game-changer for making a lot of projects happen when we were approached by the Red Lake band of chippewa to finance a replacement of their trading post utilizing new market tax credits we immediately looked to utilize the BNI USDA guarantee product so NAB worked for a period of three years in concert with many other organizations to fund the development of a new grocery store for the Maine community on the Red Lake reservation there in northern Minnesota the tribal economic development company over conning enterprises was responsible for the operation of the old smaller grocery space in a in its trading post building which was in severe need of replacement the the store was too small to hold a sufficient variety of inventory and struggled to provide much and fresh fresh produce which contributed to the classification of the areas a fresh food desert and it resulted in tribal members having to drive roundtrip 70 miles to Bemidji for much of their shopping which was particularly dangerous during the winter months in northern Minnesota so it's definitely a safety aspect to the need for that project so the tribe worked with SuperValu Foods to design a new 27,000 square foot space to house the new expanded grocery store dollar store deli bakery and subway which provided 27 new jobs in addition to 30-plus existing jobs for that low-income community which was a major benefit of that transaction and a lot of the transactions we see in travel communities is really bringing the sorely needed jobs now that the project is located on tribal trust land which is eligible collateral per USDA guidance via a pledge of a long term ground lease which is a something that it takes a lot more effort but is not something a lot of lenders are familiar with so the the new market tax credit structure of that particular USDA loan dictated that the real property interest also had to be held in a unconventional structure as a pass-through for that new market transaction and the USDA programs had in place the flexibility within their guidelines to accommodate both the new market tax credit collateral structure and the the leasehold mortgage on the tribal trust land which were essential to making the project happen fundamentally you know the us a guarantee goes a long way to mitigate any of the perceived collateral weaknesses or challenges in liquidation of collateral and reservation jurisdictions is a key piece to making all of our lot of our transactions happen so the USDA on this particular credit agreed to extend the guarantee to cover not only the permanent financing but also the construction period which we needed and was essential for Native American Bank as a small bank in order to meet our legal lending limit compliance the Red Lake transaction actually represents the first time that new market tax credits was combined with the USDA guarantee on tribal trust lands which we think will be a good model for for other projects going forward in tribal communities and it was honored as the tribal transaction of the year in 2018 by the Native American finance Officers Association orna FOA with that project highlighted I'd also briefly like to talk a little bit about some of the work we're doing on the community facilities programs briefly we have one project in the process of closing with a Montana tribe that needs to replace a elder care facility that is falling out of compliance and needing to expand its capabilities so when when the tribe came to us we identified that the deal is far too large for our small bank to hold by ourselves but we were able to bring the USA in as a partner so that the tribe could utilize the direct community facilities lending program alongside Native American Bank who is providing a community facilities guarantee for the equipment and 25% of the project on a code lending basis alongside the USA direct program so we thought that was a powerful partnership that let the bank meet the needs of the community facility project for the tribe while providing long term low rate funding that that the kids that the project needed and for our part we contemplated selling of USDA guarantee on that permanent financing in the secondary market which we view is one of the biggest advantages of the USDA program as a bank here because it allows us to offer lower and longer-term fixed rates to the borrower then we were able we would be able to offer for loans that we entirely kept on our books with that on al closed with an invitation of sorts you know it if there's any lenders that are out there and are seeking to enter into the tribal project space please feel free to utilize Native American Bank as a resource permission that's what we're here for and we were commonly partnered with other banks to help them meet the needs of tribal customers where the bank doesn't yet have internal capability to navigate the process of providing credit to tribes and that concludes my comments for the day I'll turn it back over to you Ted thank you Joe and thanks for your continued partnership and for the partnership at Native American Bank it really is much appreciated so our next speaker is Rita Shaw Ritesh is the first vice president video with Pacific premier banks SBA lending division he has been with Pacific Peru bank for five years and has successfully closed more than 100 million in SBA in u.s. loans in the last five years and more than 200 million throughout his 15-year career in government guaranteed lending Pacific premier Bank is headquartered in Irvine California while ratash works out of his office in San Jose California ritesh was rican recently excuse me welcomed into the BNI subcommittee of the government relations committee of the National Rural lenders Association the nrla prior to Pacific premier bank Ritesh was employed by Umpqua Bank through acquisition and merger with sterling silver sterlin Savings Bank and prior to that with Borrego Springs Bank and Excel National Bank ritesh has been in this line of work since 2005 prior to that Ritesh worked in the semiconductor and high-tech industry Ritesh has a PhD in metallurgy from Georgia Institute of Technology and also has five patents to his credit I don't know him as well as Joel but he comes highly recommended and has a very strong working relationship with our staff in world development in Arizona and I'm sure he's equally as nice as Joel so with that ritesh ritesh you want to make sure and unmute your phone please give him just a moment to either on mute or rejoin the call if he got cut off operator can you tell if he's on the line it's just a guess but at moments in my life I've rather than hit the unmute button hits the drop call button so if that's the case we will buy a little time and I don't know if anything came in on the chat Gino's for us questions we do not have any questions on the chat but we did have some come in through email can we take a few and see if Ritesh is able to join in the next few minutes or so that would be great if you're willing and able this one is for you Ted how do you recommend a given tribe navigate all these different programs not just you USDA but interior DoD etc I guess it's not necessarily a tribes job to understand all the different programs or the funding that might be available so my suggestion is for to use myself and my colleagues and our colleagues at other agencies if you'd want to sit down with the SBA and role development or set up a call and explore our loan guarantee programs and SBA s and Department of Indian energy economic developments the BIA loan guaranty program we'd be happy to do that and give you our pitch for our part of the pie I think there are lenders like Native American Bank that use all of those programs are interested in using all of those programs so you can reach out to lenders that might be SBA approved or USDA approved or have used the BIA loan guaranty program so my my suggestion is to use us as we're meant to be used to help you figure out which product might be best so if there's a particular project that you have in mind that's usually the most constructive so that we can talk about specifics but even if you have a number of economic development priorities and projects in mind we can at least let you know about the rural development programs from our DS perspective and like I said I don
t think the conversations have to happen in a vacuum if you'd like to have different service providers and lenders on the line we'd be happy to jump on a call with you said takes one conversation rather than multiple but I don't know if Joe has anything you'd like to add this is Eva with the FDIC this is also a great opportunity to have the FDIC help by bringing some banks to their different tribal organizations and and we can put together some roundtables and other things to discuss that and also work through some of the questions that are out there and that have to do with tribal sovereignty and reservation land and in the way that land is used in trust lands and such so all of us should be looked at as a resource to discuss how we might be able to help and always coming together in different ways to focus on on different types of needs so a Ritesh can you hear us now I see your chat that says that you can hear us and you're not on mute I thought for a minute I might have heard you in the background speaking yes I'm here wonderful thank you okay can you go Joe me yes we can okay sorry about that I don't know what happened so again thanks for the introduction don't hold my degree and my patterns against me but I do want to echo what Ted said that I do have a very good working relationship with a lot of the USDA offices across several states California Arizona Oregon I do a lot of work along the west coast so I'm very happy to work with the USDA BNI program I'm very passionate about the BNI loans with that I'm going to jump into the case study so a couple of years ago we got a loan request for a to finance a property in Chinle Arizona the land was you know owned by the Navajo Nation was Helena years trust and it was quite a big project but with the help from Gary Mac and his team and support from my bank the lenders the the exhibit Committee of the Navajo Nation and the BIA we were able to get the loan done along the way we had several problems or challenges that we had to face but overall it took us close to a year to get this project done and throughout that year the Arizona office stayed with us and guided us through the whole process the Navajo Nation people who had to sign off on the transfer of the property the sale of the property then the new lease and they also had to comply with a lot of bank requests on documentation such as the assignment of rents and the sovereignty waivers but they work with us throughout the whole process and also the BIA helped us out quite a bit and we were - we were able to get this project funded next slide so you know again the property was here on a ground lease but because the collateral was fully secured we were able to get a full 30 years of amortization on it we were able to offer a fixed rate to our borrower speaks for five years to protect them from interest rate rises which helped them quite a bit last year and but the fact that the DNI program gave us a guarantee they made some of the requirements a lot easier for us we were able to get this loan done under normal circumstances through the SBA or any other conventional lending program we would not have been able to do this lot quite honestly and so a lot of the credit for being able to do this loan and to help our client base all the credit goes to the USDA's BNI program we had to go through multiple levels again the whole process took one year but the Navajo Nation cooperated the Bureau of Indian Affairs cooperated the USD Office cooperated and not only the State Office but also the national office because you know we were coming up at the end of the year the fiscal year and the file had to go to the national office for additional funds but they all helped us out and I'm going to call a lot of the things that were said earlier that this program really really works it requires a lot of patience but the program works and we have been able to go into smaller markets and our default rate on this program is very low we have been able to get some excellent and very strong clients who would want to go into these smaller markets and and improve the their own customer base and the services they provide so those are some really key points about this particular project that we did and we have actually done a lot of programs on foundational land in Arizona and as a matter of fact I don't know whether Betty's on the line but I currently have one loan as a national office undergoing review for funds allocation so that also actually is in the Navajo Nation it's the land is not owned by them but it is right there in Navajo Nation and it is in a very tourist area and helps out the local Indian community there quite a bit so with that if you guys have any questions you're more than welcome to send it to the webinar administrators and they can send those to us and more than happy to to provide the answers that you need or any more details that you would need so with that I'm going to hand it back to the host thank you we would like to thank everybody for joining us today and thanks so much to our presenters for their imparting your wisdom and their knowledge as we said earlier just a reminder that this webinar has been taped and recorded and will you will be sent a link to it if you have questions either now through the chat line or later you may contact Gina vincit her information is on the next slide and we would be happy to put together written answers to your questions and send them out to you once they're prepared again thanks to our speakers to all our participants we hope you have a wonderful day wherever you are we thank you
