Farm banks increased their agricultural lending by 5.3 percent in 2016 and held $103.4 billion in ag loans at year’s end, according to the American Bankers Association’s annual Farm Bank Performance Report. Despite overall declines in farm income, farm banks continued to maintain healthy asset quality and capital levels. More than 97 percent of farm banks were profitable in 2016, with 60 percent reporting increased earnings.
“We’re continuing to see a decline in farm income, but the good news is farm banks are in good shape to assist their farm and ranch customers as the ag economy takes a turn,” said Brittany Kleinpaste, ABA’s director of economic policy and research. “Banks hold nearly half of all farm loans and will remain an important source of ag credit in good times and bad.”
Farm banks reported continued improvement in asset quality in 2016, with the median noncurrent loan ratio falling 5 basis points to 0.54 percent, well below the industry-wide ratio of 1.41 percent. They also continued to build high quality capital, with equity capital rising 3.7 percent to $48.4 billion. In addition, loan-to-deposit ratios for farm banks rose to 79.8 percent as farm banks saw deposits grow to $15.5 billion, a 4.4 percent year-on-year increase.
The nation’s 1,912 farm banks — defined as those whose ratio of domestic farm loans to total domestic loans is greater than or equal to the industry average — added more than 2,600 jobs and employed more than 91,000 rural Americans. Since 2007, employment at farm banks has risen 24.3 percent.