Strong performance, asset quality and capital levels in 2018
U.S. farm banks increased agricultural lending by 5.3 percent, or $5.5 billion, to $108 billion in 2018, according to the American Bankers Association’s annual Farm Bank Performance Report. The report—an analysis by ABA’s economic research team based on FDIC data—examines the performance of the nation’s 1,772 banks that specialize in agricultural lending. 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.
In 2018, farm banks’ asset quality remained healthy and non-performing loans stayed at a pre-recession level of 0.52 percent of total loans. More than 94 percent of farm banks were profitable in 2018, with more than 63 percent reporting an increase in
earnings. Farm banks also served as job creators, adding more than 1,500 jobs in 2018, a 1.8 percent increase, and employing more than 86,000 rural Americans. Since 2008, employment at farm banks has risen 24.4 percent.
“Even in the face of a slowing ag economy and harsh weather, farm banks continue to perform strongly while meeting the credit needs of farmers, ranchers and their communities,” said ABA Chief Economist James Chessen. “They play a critical role in the success of farms large and small, and their civic engagement and the jobs they provide make them the lifeblood of many rural communities across the country.” Farm banks also continued to build high-quality capital throughout 2018 and are well-insulated from risks associated within the agricultural sector. Equity capital at farm banks increased 6.1 percent to $48.7 billion, while Tier 1 capital increased by $3.3 billion to $46.7 billion. The capital-to-assets ratio improved as well with the median Tier 1 leverage ratio for farm banks rising by 42 basis points during 2018.
The entire banking industry – not just farm banks – provides farmers and ranchers with the credit they need. At the end of 2018, banks held $186 billion in farm and ranch loans. The U.S. banking industry is also a major source of funding to small farmers with more than $78 billion in small and micro farm and ranch loans on the books at the end of 2018. 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 12 farm banks increased farm loans by 14.7 percent to $1.3 billion. Ag production loans rose 3.6 percent and farmland loans rose 17.66 percent.
- The South region’s 181 farm banks increased farm loans by 7.49 percent to $8.4 billion. Ag production loans increased 9.84 percent and farmland loans rose 6.55 percent.
- The Cornbelt region’s 842 farm banks increased farm loans by 5.24 percent to $47.9 billion. Ag production loans increased 3.31 percent and farmland loans rose 6.88 percent.
- The Plains region’s 677 farm banks increased farm loans by 4.64 percent to more than $40.3 billion. Ag production loans increased 2.6 percent and farmland loans rose 6.95 percent.
- The West region’s 60 farm banks increased farm loans by 5.4 percent to $10.1 billion. Ag production loans increased 5.64 percent and farmland loans rose 5.3 percent.
Read the 2018 Farm Bank Performance Report.
See ABA’s infographic summarizing the report.
The American Bankers Association is the voice of the nation’s $17.9 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard nearly $14 trillion in deposits and extend more than $10 trillion in loans. # # #