America’s ag banks increased agricultural lending by 8.1 percent last year to $103.1 billion, according to the American Bankers Association’s annual Farm Bank Performance Report.
According to the ABA, the increase was driven by a nearly 10 percent jump in outstanding loans secured by farmland and a 5.9 percent rise in ag production loans. According to the report, farmland continues to be a strong equity base for producers as land values increased in 2022 following several years of plateauing. The increase came even as supply chain challenges, commodity price volatilities and geopolitical conflicts impacted the broader economy.
Nearly all farm banks were profitable last year, with 48.7 percent seeing an increase in earnings. The asset quality of farm banks improved last year as loan delinquencies remained historically low. Farm banks had $1.5 billion of noncurrent loans at the end of last year, less than a half-percent of the group’s overall loan portfolio.
“Farm banks have also built strong, high-quality capital reserves and are well-insulated from risks associated with the agricultural sector,” the ABA said. “Equity capital at farm banks decreased 15.4 percent to $41.9 billion in 2022 while Tier 1 capital increased 8.7 percent to $50.9 billion.”
As of the end of last year, farm banks held more than $43.8 billion in farm loans of $500,000 or less, including $9.3 billion in farm loans worth $100,000 or less, at the end of last year. As of the end of last year, the entire U.S. banking industry had nearly $190 billion in farm and ranch loans.
On a regional basis,
- The Plains region’s 574 banks increased farm loans by nearly 6 percent to $37.7 billion. Ag production loans increased 2.5 percent while farmland loans increased 9 percent.
- The Cornbelt region’s nearly 700 ag banks increased farm loans 8.8 percent to $49 billion. Ag production loans increased 7.4 percent while farmland loans increased nearly 10 percent.
- The South region’s 137 farm banks increased farm loans nearly 12 percent to $8.5 billion. Ag production loans increased 14.8 percent from the previous year while farmland loans rose 11 percent.
- The West region’s 45 farm banks increased farm loans 10.4 percent to $5.2 billion. Ag production loans increased 13.86 percent while farmland loans increased 8.2 percent.
- The Northeast region’s nine farm banks decreased farm loans 13 percent to $1.3 billion. Ag production loans fell nearly 3 percent from 2021 while farmland loans increased 14.53 percent.
ABA Chief Economist Sayee Srinivasan said the ag sector will continue to face challenges from rising interest rates and ongoing geopolitical factors. “Nevertheless, farm banks remain well-positioned to continue serving the needs of their customers and communities, with strong asset quality and healthy capital levels,” he added.