Strong performance, asset quality and capital levels in 2017
U.S farm banks increased agricultural lending by nearly 6 percent, or $5.9 billion, to $106 billion in 2017, according to the American Bankers Association’s annual Farm Bank Performance Report.
Asset quality remained healthy at the nation’s 1,847 farm banks as non-performing loans fell to a pre-recession level of 0.52 percent of total loans. ABA defines farm banks as banks whose ratio of domestic farm loans to total domestic loans is greater than or equal to the industry average.
“We’re starting to see the effects of a weaker ag sector, but farm banks are still strong and ready to assist their farm and ranch customers,” said Brittany Kleinpaste, vice president, economic policy and research at ABA. “Banks continue to meet the credit needs of both large and small farms, and remain the largest supplier of agricultural credit in the U.S.”
More than 96 percent of farm banks were profitable in 2017, with more than 55 percent reporting an increase in earnings.
Farm banks also continued to build high-quality capital throughout 2017. Equity capital at farm banks increased 5.6 percent to $48.4 billion, while Tier 1 capital increased by $2.1 billion to $45.7 billion. Farm banks have built strong high-quality capital reserves, and are well-insulated from risks associated within the agricultural sector.
In 2017, farm banks added more than 1,600 jobs, a 1.9 percent increase, and employed more than 88,000 rural Americans. Since 2007, employment at farm banks has risen 25.3 percent.
Kleinpaste noted that the entire banking industry – not just farm banks – provides farmers and ranchers with the credit they need. At the end of 2017, banks held $180 billion in farm and ranch loans. The U.S. banking industry is also a major source of funding to small farmers with more than $76 billion in small and micro farm and ranch loans on the books at the end of 2017. A small farm loan is a loan with an original value of $500,000 or less and a micro farm loan is a loan with an original value of $100,000 or less.
The Farm Bank Performance Report also provides regional summaries:
- The Northeast region’s 13 farm banks increased farm loans by 19 percent to $1.2 billion. Ag production loans rose 7.6 percent and farmland loans rose 22.5 percent.
- The South region’s 192 farm banks increased farm loans by 7.9 percent to $8.3 billion. Ag production loans fell by less than half a percent and farmland loans rose 8.9 percent.
- The Cornbelt region’s 873 farm banks increased farm loans by 6.6 percent to $46.4 billion. Ag production loans increased 5.9 percent and farmland loans rose 7.2 percent.
- The Plains region’s 705 farm banks increased farm loans by 5.1 percent to more than $40.3 billion. Ag production loans increased 2.5 percent and farmland loans rose 8.3 percent.
- The West region’s 64 farm banks increased farm loans by 2.9 percent to $9.8 billion. Ag production loans increased 0.5 percent and farmland loans rose 5.1 percent.
The American Bankers Association is the voice of the nation’s $17 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $13 trillion in deposits and extend nearly $10 trillion in loans. Learn more at aba.com.