FDIC Report Highlights Continued Strength of Farm Banks Despite Periods of Challenge

Farm banks have held up well despite challenges to the agriculture industry since 2014, and problem loan levels have remained modest, according to a new report from the FDIC.

Cautious real estate lending during a boom in farmland values has given farm banks the flexibility to work with financially stressed borrowers by tapping into their farmland equity, according a new report published in the FDIC Quarterly.

Net farm income for 2020 is expected to increase 46% to $121.1 billion, due in part to record levels of government assistance and a rebound in commodity prices, the report said, but “absent a sustained improvement in agricultural conditions, stress is likely to continue for some farmers and their lenders.” Meanwhile, “early forecasts suggest 2021 will not be as strong as 2020, but will still be above long-term average,” the FDIC said.

The paper also looks at weaknesses in the ag sector from 2014 through 2019, the effects of agricultural issues on farm bank condition during the downturn and potential challenges ahead, such as highly leveraged farmers.