America’s ag banks increased agricultural lending by 5.5 percent last year to $99.6 billion, according to the American Bankers Association’s annual Farm Bank Performance Report.
The increase was driven by a 7.5 percent rise in outstanding loans secured by farmland and a nearly 3 percent increase in ag production loans. “Farmland continues to provide a strong equity base for producers to tap as land values saw strong growth in 2021 after plateauing for several years,” the ABA stated.
Nearly all farm banks were profitable last year, with 73 percent reporting an earnings increase. The asset quality of farm banks improved last year as consolidation and cash payments helped farmers paydown loans, according to the report. There was $2.1 billion in noncurrent loans at farm banks at the end of last year, representing 0.71 percent of the loan portfolio. Farm banks remained well-capitalized last year, with equity capital increasing 6.5 percent to $53.3 billion while tier 1 capital grew by $4.5 billion to $46 billion. Farm banks added more than 1,600 jobs last year, a 2 percent increase.
Last year, U.S. farm banks originated $14.6 billion of PPP loans. According to the report, farm banks held nearly $44 billion in small farm loans — loans with an original value of $500,000 or less. Banks allocated just under $10 billion in micro farm loans, which have a value of $100,000 or less.
On a regional basis,
- The South region’s 149 farm banks increased farm loans by 7.3 percent to $8 billion, while ag production loans increased 7.8 percent from the year before and farmland loans increased 7.19 percent.
- The Cornbelt region’s 747 farm banks increased farm loans by 6.6 percent to $47.6 billion. Ag production loans increased 3.94 percent from 2020 while farmland loans increased 8.5 percent.
- The Plains region’s nearly 600 farm banks increased farm loans by 4.45 percent to $37.7 billion. Ag production loans increased 2.29 percent while farmland loans increased 6.47 percent.
- The West region’s 50 farm banks decreased farm loans by 0.34 percent to $5.2 billion. Ag production loans fell by 6 percent, while farmland loans increased 3.57 percent.
ABA Chief Economist Sayee Srinivasan said the ag industry will face challenges for the rest of the year as the war in Ukraine drags on, decades-high inflation readings continue and supply chain disruptions roil markets. “Nevertheless, farm banks are well-positioned to continue supporting their customers and the communities they serve well into the future,” he added.
The report consisted of a performance analysis of the nation’s more than 1,550 ag-lending banks by ABA’s economic research team, based on U.S. Department of Agriculture and FDIC data.