Can a community bank CDC produce big results?
In 1999, First National Bank of Edinburg, Texas, a $2.6 billion subsidiary of First National Bank Group, Inc., formed First National Bank Group Community Development Corporation (First National CDC). The bank CDC’s goal was to fund loans to local individuals and businesses that could make a difference to the well-being of their communities.
First National CDC takes a proven CDC approach to community lending, using relatively small loans to leverage human resources as well as capital.
• Responding to the need for more downtown businesses, First National CDC loaned a local optometrist 100 percent of the funds she needed to buy an office building to house her practice and create other small offices. She used her own funds to complete renovations, and now has a thriving downtown practice.
• A staff assistant at a nonprofit health center in Pharr, Texas dreamed of going to medical school, but couldn’t qualify for a market-rate loan. The CDC loaned him the funds he needed, and the clinic guaranteed the loan. In exchange, he promised to work at the clinic for at least four years after graduating. Today, making good on that promise, Roel Esteban Cantu, MD, is bringing critically needed health care to local residents.
• The CDC made a subdivision development loan to a small nonprofit, Mercedes Affordable Housing Corp., which used the money to develop 72 lots in a new affordable-housing development. The nonprofit was able to sell all the lots and repay the CDC within a few years.
• Eleven families in Edinburg, Texas were able to move from Section 8 rental housing into homes of their own when the CDC loaned them a total of $529,276. Although all of the borrowers had three-year track records of successful rent payments, without the CDC’s help they wouldn’t have been able to overcome their unfavorable credit histories.
• To help downtown Harlingen, Texas attract more visitors from throughout the Rio Grande Valley, the CDC loaned a local real estate investor the funds to acquire property and convert it into an antique zone. Several dealers have moved in, creating a lively commercial neighborhood, and they have joined forces to promote their antique district on a regional basis.
First National CDC’s loans have given the people in Hidalgo, Cameron, and Webb counties access to better health care and the opportunity to become homeowners. One community has a more vibrant downtown center and another has a place where neighbors can gather together.
Community development, south Texas-style, isn’t always about big-splash projects. It can also be about the ripple effects generated by small but strategically located loans.