ABA Banking Journal
The nation’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 released today. With non-performing loans falling to a pre-recession level of 0.52 percent of total loans, asset quality also remained healthy among the nation’s 1,847 farm banks.
“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 ABA VP Brittany Kleinpaste. “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, according to the report. While total net income was down 3.1 percent to $4.7 billion from the previous year, farm banks hold a positive outlook for the future as unnecessary regulatory burdens are addressed and their customers and communities begin to benefit from the new tax law.
Farm banks — defined by ABA as banks with ratios of domestic farm loans to total domestic loans greater than or equal to the industry average — also continued to build high-quality capital throughout 2017. Equity capital increased 5.6 percent to $48.4 billion, while Tier 1 capital increased by $2.1 billion to $45.7 billion. 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.)