As many banks chase automated solutions to process and service Payment Protection Program loans for existing small to medium sized business customers exclusively, Farm Bureau Bank is taking a different approach.

The Sparks, Nev.-based bank is leveraging the program to reach new customers and jumpstart its SMB lending business — and is doing so with a deliberately manual approach.

“We were reluctant to pursue any of these automated solutions because of the lack of ability to test before [the second round of PPP] got started, so we did an all-hands-on-deck approach,” said Mark Cromer, Farm Bureau’s chief technology operations officer. “Going in there, we thought that was our best chance to be responsive — because we could control and adjust on the fly.”

Farm Bureau, which operates in 41 states and had $769 million in assets at yearend 2018, is using the program to gain new customers and grow deposits. Although an SBA-approved lender prior to the pandemic, Farm Bureau hadn’t deeply penetrated SMB lending, and the stimulus program presented a unique opportunity for the bank to pursue new business.

“It’s allowed us to reach out to a whole new segment of the Farm Bureau membership that we had not been able to help before, from a business perspective,” Cromer said. “Even though it took a lot of resources for us to get it done, we think we’ve got a lot of potential for deposit and bigger loan business now as we go forward.”

Farm Bureau has funded north of $20 million for PPP borrowers, with average loans of $50,000. About one-third of the bank’s PPP loans have gone to current Farm Bureau members and businesses that had prior relations, one-third went to insurance agents listed as independent contractors and one-third went to completely new relationships, Cromer said, noting that there might be some additional opportunities stemming from “large banks that have let some of the smaller borrowers down.”

The manual approach to processing the loans worked well, Cromer said. The U.S. Small Business Administration had closed its E-Tran portal, where lenders submit PPP applications for approval prior to funding the loan, after the first $349 billion round of small business funds depleted. In the week between the first and second round of PPP loans, Farm Bureau was unable to test any new solutions that could speed up the process, Cromer said.

The SBA and Treasury updated guidelines April 28 — one day after the second round opened — following widespread reports that the E-Tran system was bogged down by volume and crashing, and said they would no longer accept PPP applications prepared by robotic process automation systems.

Another advantage was more control: It proved easier to train humans on the new PPP guidelines than to rebuild automated bots and processes designed to handle the loans in a certain way.

Extensive regulatory requirements associated with bringing on new small business customers have largely kept PPP-participating banks to their existing books of business.

Some regulations require lenders to know their customer or have customer information programs in place, according to David Barnhardt, chief experience officer of GIACT, a software provider that focuses on ID and account verification and authentication for financial services.

“The volume of new applications currently is so high, validating against these loads and ensuring compliance is somewhat of a daunting task for a lot of lenders and FIs, and doing so within a very short time window makes this nearly impossible,” Barnhardt said.

With that in mind, Farm Bureau poured resources into the PPP effort — in terms of the number of people and late hours worked — to manually validate documents, verify regulatory requirements and submit applications to the E-Tran system. For example, the bank allocated 15 employees to submit applications to the SBA, admitting that “they were lucky if one out of five could access the system,” Cromer said.

Moving forward, Farm Bureau is exploring a sales follow-up to convince new customers to move other existing business accounts to the bank, but so far has been focused on the origination process. Overall, the PPP has helped raise awareness within the Farm Bureau network that it is a full-service bank with a commercial lending arm. “Once that window closes, we’ll have plenty of time to think about what’s coming downstream,” Cromer said.