Independent Banker - September 2023 - 53

The rise of scoring models
The arrival of new scoring models, a popular one being Farmer
Mac's AgXpress, is making it faster and easier to grant ag
borrowers loans.
" With AgXpress, we're trying to compress the amount of time
it takes a lender to close a loan with Farmer Mac, " says Patrick
Kerrigan, vice president, business development at Farmer Mac.
" Bankers can deliver information to us through online portals, and
we can turn around and get them a credit decision in less than
one day. "
When the service launched four years ago, AgXpress loans
could not exceed $750,000, but as the model has demonstrated
its success, the loan limit has increased to $3 million.
A few years ago, First Financial Bank in El Dorado, Ark., began
using third-party scoring models with information pulled from
credit bureaus to grant loans more quickly, says Kevin Stith, vice
president of underwriting. He explains that inputting information
into AgXpress might take 30 minutes, relative to the hours once
needed to gather three to five years of past tax returns, a balance
sheet history and cash flow data.
In addition to reducing the time to issuing a loan decision to 24
hours from two-to-three days, loans through AgXpress and other
scoring models are performing well.
" With these scored models, we're collecting less data but we're
finding that charge-offs and delinquencies are equal to or less
than what we see with traditionally underwritten loans, " Stith says.
" Many people refer to agriculture
as the backbone of the country, and
we believe that wholeheartedly. But
it takes a community bank to get a
farmer set up financially with the
necessary funding, " says Sartor.
" So, we're backing the banks that
are backing the farmers that are the
backbone of America. "
INSPIRATION FROM OTHER
INDUSTRIES
Potts envisions bankers starting
to create new ag lending products
based on a model followed by
some commercial lenders in the
construction industry. Here,
bankers have begun allocating
money based on hitting key
milestones in the completion of a
building. He is convinced that the
same concept could be extended to
vicissitudes of weather.
Although its still in its early days,
Tackach maintains that " higher prices
and [concerns about] availability of
water are changing the game here. "
PRECISION FINANCING
When it comes to rethinking lending
for the farm-tech revolution afoot,
newer, more flexible lending models
are one answer (see sidebar on
page 51).
" Bankers are competing for loans
with other ag lenders, " says Patrick
Kerrigan, vice president, business
development, at Farmer Mac.
" Speed is of the essence, because the
consumer-the farmer, the rancher-
wants a very quick decision. The
technology helps speed the decision
so bankers can move faster in
meeting consumers' financial needs. "
Another answer is finding ways
to equip community bankers with
digital lending solutions that rely on
previously untapped data to make
better, faster decisions.
Croptell, a fintech debuting an
ag lending solution backed by data
science this month, is eliminating
paper and even digital loan
applications in early stages of the
borrowing process. " We're using
metadata to approve loans in a
prequalification step, " says Scott
Sartor, founder and CEO of the
Hernando, Miss.-based startup.
Such prequalifications, which
exemplify what he's dubbing
" precision financing, " aren't designed
to replace traditional underwriting
but rather to point bankers toward
prospects worth approaching earlier
than ever before.
the agricultural space.
" With all of those steps going
from raw dirt to an ear of corn, you
have a lot of milestones, and so the
lending process could be unbundled
in different ways and managed with
better data and better access, " says
Potts. " This way, lenders could get
more creative in the types of loans
they make. "
While ag lending might be on the
brink of a radical transformation,
some community bankers are
steadfast in their commitment
to maintaining the best of
traditional banking.
" We communicate more through
drop boxes and texting, " says
Tompkins' Werley, " but even if
customers send tax returns and
financial statements by email,
I'm still going to stop out at their
operations just to say hello. "
He concludes: " We're a
community bank, and so the focus
is on the face-to-face. We'll always
want that personal touch. " 
Elizabeth Judd is a writer
in Maryland.
independentbanker.org // 53
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Independent Banker - September 2023

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