ABA Report: Ag Lending Growth Tops 5 Percent in 2018

The nation’s farm banks increased agricultural lending by 5.3%, or $5.5 billion, to $108 billion in 2018, according to the American Bankers Association’s annual Farm Bank Performance Report released today. With non-performing loans remaining at a pre-recession level of 0.52% of total loans, asset quality was also healthy among the nation’s 1,772 farm banks.

“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.”

More than 94% of farm banks were profitable in 2018, with more than 63% reporting an increase in earnings, according to the report. Farm banks also served as job creators, adding more than 1,500 jobs in 2018, a 1.8% increase, and employing more than 86,000 rural Americans. Since 2008, employment at farm banks has risen 24.4%.

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 2018. Equity capital increased 6.1% to $48.7 billion, while Tier 1 capital increased by $3.3 billion to $46.7 billion.

The report notes that 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.)