U.S. farm bank lending increased 6.7 percent last year to $110 billion amid high production costs, volatility in commodity prices and a return to pre-pandemic government payment levels, according to the American Bankers Association’s 2023 Farm Bank Performance Report.
Total net income at farm banks fell 2.1 percent on an annualized basis to $5.8 billion amid a rise in other non-interest expenses and loan loss provisions. Other non-interest expenses increased 12 percent to $388.4 million, and loan loss provisions increased 51.1 percent to $396 million. Net interest income at farm banks increased nearly 5 percent last year to $15.1 billion.
Farm banks’ total loans increased nearly 10 percent to $333.6 billion. Total deposits increased 3 percent last year to $434 billion. Outstanding loans secured by farmland increased 4.5 percent to $64.1 billion from $61.3 billion. Ag production loans rose 10 percent to $45.9 billion last year.
According to the report, the nation’s 1,442 farm banks held 639,694 small-farm loans worth more than $44.6 billion as of last December, including $9.2 billion in USDA microloans.
The vast majority of farm banks were profitable last year, with 53.5 percent seeing a rise in earnings. Credit quality at farm banks remained strong last year following historically low delinquency rates in 2022. The median rate of loans at least 90 days past due and loans in nonaccrual status increased only minimally at farm banks to 0.23 percent, lower than the 0.27 percent for the broader banking sector. Non-current ag loans as a share of total ag lending fell two basis points to 0.38 percent last year.
ABA Chief Economist Sayee Srinivasan said farm banks had a strong 2023, “with robust loan growth and historically low delinquency rates. Moving forward in 2024, the agricultural sector will continue to face challenges due to monetary policy actions targeting persistent inflation in the U.S., as well as reduced federal support. Nevertheless, farm banks maintained their strong asset quality and consistent growth in high-quality capital, and they remain well-positioned to continue serving the needs of their customers and communities.”
Other report findings included:
- Banks provided 38.1 percent or nearly $200 billion in outstanding U.S. farm loans as of last December.
- Small loans made up more than a third of banks’ farm and ranch lending, with $70 billion in USDA small and micro farm and ranch loans on the books as of the end of last year.
- Equity capital for farm banks increased 14 percent or $5.8 billion.
- The median farm bank was 113 years old in 2023, while the medium size was $189 million.