Updated with graphic from American Bankers Association.
Farm banks increased agricultural lending by 7.9% in 2015 and held $100.3 billion in farm loans at the end of the year, according to the American Bankers Association’s annual Farm Bank Performance Report.
Asset quality continued to improve at the nation’s 1,976 farm banks as non-performing loans declined to a pre-recession level of 0.47% 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.
“With farm income forecasted to decline to its lowest level since 2002, banks are ready to assist their farm and ranch customers. Farm banks saw a solid performance in 2015, remain well-capitalized and are well positioned to continue serving the needs of their communities despite any potential turbulence in the ag sector,” said Brittany Kleinpaste, director, economic policy and research at ABA. “Banks hold nearly half of all farm loans and will remain an important source of ag credit.”
Kleinpaste noted that the entire banking industry – not just farm banks – provide farmers and ranchers with the credit they need. At the end of 2015, banks held $170 billion in farm and ranch loans. Small and micro loans made up almost half of bank agricultural lending with nearly $75 billion in small and micro farm and ranch loans on the books at the end of 2015. 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.
Farm banks are profitable
Farm banks continued to build high-quality capital over the year. Equity capital at farm banks increased 4.9% to $47.7 billion in 2015, while Tier 1 capital increased by $3.0 billion to $44.3 billion. Farm banks have built strong high-quality capital reserves and are well-insulated from risks associated with the agricultural sector.
In addition, more than 97% of farm banks were profitable in 2015, with 63% reporting an increase in earnings.
"Farm banks play a vital role in their communities by providing loans, creating jobs and paying taxes to support rural America,” Kleinpaste said.
Farm banks added more than 2,500 jobs, a 2.9% increase, and employed more than 90,000 rural Americans. Since 2007, employment at farm banks has risen 20.5%.
-The Northeast region’s 10 farm banks increased farm loans by 19.7% to $651 million. Ag production loans rose 7.3% and farmland loans rose 21.4%.
-The South region’s 211 farm banks increased farm loans by 10.3% to $7.4 billion. Ag production loans rose 14% and farmland loans rose 8.8%.
-The Cornbelt region’s 934 farm banks increased farm loans by 7.4% to $44.3 billion. Ag production loans increased 5.8% and farmland loans rose 9%.
-The Plains region’s 753 farm banks increased farm loans by 8% to more than $38.5 billion. Ag production loans increased 6.1% and farmland loans rose 10.5%.
-The West region’s 68 farm banks increased farm loans by 7% to $9.5 billion. Ag production loans increased 10% and farmland loans rose 4.4%.
Source: American Bankers Association