Progress 09/01/20 to 04/30/21

Outputs
Target Audience:agCredit has two customer segments: 1) community banks who subscribe to the tool for improved loan processing, to aid in lead generation, to buy into the loan pool, and for streamlining FSA guarantee underwriting to mitigate risk, and 2) producers seeking an online/mobile ag loan and are not associated with a bank (competing with Farm Credit Servicesand other non-bank lenders). Target Lender Profile. U.S. agricultural banks with branch banks located in rural areas: Bank Charters with Concentrations of Agricultural Loans Greater than 25% of Leverage Capital:Nebraska (144), South Dakota (48), Wyoming (18), Colorado (35), and Kansas (178) (Data provided by Federal Reserve Bank of Kansas City, September 2020) Farm Service Agency Preferred Lender Program (PLP) or Certified Lender Program (CLP) Approved Lenders:Nebraska (121), South Dakota (54), Wyoming (18), Colorado (42), and Kansas (130) (Data provided by USDA FSA National Office, March 2020) Initial Target Market Location:Nebraska, South Dakota, Wyoming, Colorado, and Kansas Target Producer Profile. Agricultural producers in rural areas: Gross Revenues:Less than $250,000 (includes approx. 88% of 2 million farms in the U.S.) Off-Farm Income: Greater than $25,000 Experience: 3 to 10 years of operating a Farm or Ranch Loans: Less than $100,000 Production Concentrations: Beef Cattle, Corn, Soybeans, Wheat, Hay, and Pastureland. Initial application development will focus on commodities produced in middle America, yet the design will be adaptable and scalable to producers of agricultural commodities across the U.S., including urban agriculture. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?In Phase I of the project, agCredit confirmed, throughmockup demonstrations and surveys to extension educators and producers, that financial literacy would play a large role in the overall success of the application. The process helped agCredit envision essential features to be included in follow-on development, including financial literacy features that aid user comprehension.agCredit plans to add hover definitions to financial terms that producers may be unfamiliar with. In addition, many beginning farmers and ranchers do not know how to fill out a balance sheet and cash flow statement. agCredit plans to implement the ability to create a balance sheet and cash flow statement inside the app. Inexperienced producers will be aided in the process via intuitive questions, resulting in producers with a better understanding of the financial ins and outs of their agricultural operation. How have the results been disseminated to communities of interest?Over the course of the project, AC engaged multiple stakeholders who share the mutual benefit of keeping the business of banking relevant in rural America. Due to the Covid-19 pandemic, these meetings took place primarily over video-conferencing, with follow-up information sent via e-mail. The following overviews those stakeholders: Community banks (banks) are essential for maintaining the viability of rural communities: First National Bank (Chadron, NE), Bruning Bank (Bruning, NE), Points West Bank (Torrington, WY), Nebraskaland National Bank (North Platte, NE), MNB Bank (McCook, NE) and Homestead Bank (Cozad, NE) USDA Farm Service Agency (FSA) partners with community banks to issue loan guarantees to farmers and ranchers: National Office, Nebraska State Office, and South Dakota State Office Educators provide resources to beginning and established farmers and ranchers: Chadron State College, University of Nebraska-Lincoln, Nebraska Extension, and South Dakota Extension Trade organizations representing user segments: Nebraska Bankers Association, American Bankers Association, Nebraska Cattleman, Nebraska Sorghum Board, and Nebraska and Colorado agricultural leadership programs. Vendors providing essential services to community banks: Moody's Analytics, FarmerMac, Computer Services, Inc., and Federal Reserve Bank of Kansas City. Regulatory Compliance: FNB Compliance Officer Olson, OCC Office of Innovation, and Mark Quandahl, the former Director of the Nebraska Department of Banking. AC leveraged feedback from the stakeholders to 1) define the target users, and 2) determine the most important features to include in the minimum viable product (MVP). Also, through these meetings, the team compiled extensive notes and have been able to delineate opportunities to align with regulation, understand market conditions and programmatic logistics, and consider opportunities to respond to additional pain points raised. For example, representatives from the Federal Reserve noted an opportunity to use the tool to better target the traditionally underbanked, like Native American reservations (credit deserts) and the Colorado Department of Agriculture identified that urban agriculture could benefit from the expertise of experienced ag-based lenders. These conversations also solidified the importance of this project, as all parties recognized the need for increased access to credit for ag producers searching for a digital alternative to traditional face-to-face ag lending. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? Objective 1: Create a minimum viable product (MVP). The features of the MVP include a producer/lender digital portal to create a user account, secure document sharing, and communication and engagement. Project Director (PD) Spencer Morris, Authorized Representative (AR) Emily Rischling, and Lender Advisor Steve Cleveland worked closely with software developer, Don't Panic Labs (DPL), to developmockups for the MVP. After the mockupcompletion, PD and AR demonstrated themockups to Five agricultural producers, five agricultural bank executives, five agricultural lenders and two Farm Service Agency lenders. In addition, themockups were demonstrated to two Nebraska Extension Educators, and one South Dakota Extension Educator. After the demonstration, the AC team sent a survey to each participant to gather their feedback on the product. The feedback verified that the MVP account opening portals are functional and user friendly. Morris completed the build out of the MVP on April 21, 2021: the EasyLoan Application and Scorecard. Through application discovery, it was determined that document sharing and internal communicationare not in scope for the MVP because of the complexity, added cost, and development time of these features. Document sharing andinternal communicationwill be added in the next phase of features. The AR and PD completed the first round of testing of the MVP. Alpha testing began on April 22, 2021 witha Loan Officer at First National Bank of Chadron.TheLoan Officerconfirmed that the MVP was scoring loan applications correctly. His feedback confirmed that the MVP is "bug free" and ready for the next stages of development. Objective 2: Envision and plan for next round of features, re-alignment of the data management plan and architecture/infrastructure planning (for follow-on Phase II commercialization). Morris worked with DPL to determine a realistic scope and priorities for the MVP. Through research, discussions with agricultural producers and lenders, and the other collaborative stakeholders, it was determined that the features to be added in Phase II development are: The ability for lenders to deliver loan terms and for producers to review and negotiate loan terms, the ability for agCredit administrators to enlist new banks into the system, secure document uploading and sharing, the ability to pre-fill FSA EZ and PLP (Preferred Lender)loan applications, financial literacy features (hover definitions),a secure internal communication piece where lenders can communicate with producers through a chat feature within the application, and a multi-language (Spanish) version of each screen in the mobile application. The architecture and infrastruction of the MVP was built with these features in mind. Envisioned features for follow-on development are: A virtual collateral submission feature. Ability to create a balance sheet and cash flow statement inside the app. For producers with poor connectivity, agCredit is utilizing local storage to auto save loan applications as the user is filling them in with upload capabilities once any type of connection is found. AC has included development partner, DPL, in the Phase II budget for application discovery and development of next features. In addition, much of PD Morris's salary will go towards his contribution to development. Software development is agile and costsare subject tochange. Development of the next features (listed above) will take approximately two years. Software development is agile and timelines are subject to change. The agCredit team has updated the data management plan in preparation for Phase II Beta Testing. Since AC will exclusively serve federally regulated banks, it anticipates elevated vendor due diligence processes by its bank users. AC has been testing the adaptability of digital lending in FAR areas through the use of MVPmockup demonstrations, surveys, desktop research, and live use cases with their alpha test bank, First National Bank of Chadron. FNB was first certified as a USDA FSA preferred lender (PLP) in 2000, the 28th bank to receive a PLP designation. PLP allows the bank to apply customized and streamlined underwriting practices as defined in its credit management system (CMS). A PLP designation and accompanying CMS is reviewed and renewed every five years with the FSA national office. It may be amended as circumstances evolve. In November 2020, the FSA national office allowed FNB to amend its CMS to incorporate the 'EasyLoan Application and Scorecard' as a model to underwrite farm loan applications of $100,000 and less. This was a significant milestone achieved and helped AC to test and validate the 'EasyLoan' application and scorecard model through the live use cases. The model will be further validated in Phase II (beta development). Objective 3: Assess the impacts of the project on the socio-economic development of rural areas. agCredit worked with community bank stakeholders and Federal Reserve Bank economists to assess the economic, lending, and human capital capability impact digital lending will have on rural communities and community banks. Interviews and feedback from stakeholders confirmed, by overwhelming consensus, the importance community banks have on the economic health of rural communities. Simply, if community banks die, so do the rural communities that they serve. The pandemic accelerated the shift of producer behaviors from traditional, face-to-face interactions to digital delivery channels. Of bank executives, 100% surveyed believe that their bank has been negatively impacted by non-bank competition. These same respondents agree that the EasyLoan app could help them compete with non-bank competition. 86% of respondents agree that the EasyLoan app will make credit more accessible to small and mid-sized farmers, and 57% agree that it will improve long-term sustainability of production agriculture (43% of respondents were neutral). Socio-economic research concluded a digital lending business model for rural banks addresses an important economic and social development challenge in rural America: the decline of community banks.

Publications