CHICAGO, Ill. (Reuters) — U.S. agricultural banks boosted farm lending by about 14 percent in 2012 to $81.8 billion, reflecting a strong farm economy despite drought-related stress in the livestock and dairy sectors, the American Bankers Association said.
“The agricultural sector continues to outperform the broader national economy and, as a result, farm banks posted solid performance in 2012,” the ABA said in its Farm Bank Performance Report.
It cited a U.S. Department of Agriculture forecast for near-record 2012 U.S. net farm cash income of more than $133 billion US on the strength of high commodity prices and increasing global demand for food.
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“This has translated into a solid performance on the part of our nation’s farm banks. Farm banks reported a strong increase in earnings and improved asset quality in 2012. In addition, farm banks, as a group, remained well-capitalized through 2012,” the ABA said.
The association defined ag banks as those with a ratio of domestic farm loans to total domestic loans of at least 13.96 percent. It expanded its definition in 2012 to include banks that specialize in serving agriculture with more than $1 billion in assets.
In addition, in 2012 savings and loan associations began to be required to report farm-related lending activities and 32 were included in the ABA study.
Most farm banks are small institutions, with one of median size having $97.9 million in assets. However, there were 33 farm banks included with more than $1 billion in assets, the ABA said.
The ABA said the nation’s 2,215 farm banks added more than 3,615 jobs in 2012, a 4.2 percent increase, and employed 90,569. More than 95 percent of farm banks were profitable last year, with 67 percent reporting an increase in earnings.
Income before taxes and extraordinary items totalled $3.6 billion, up 7.4 percent. The nonperforming-loan ratio declined to 1.49 percent of total loans, close to pre-recession levels, it said.
Farm real estate loans grew at a rate of 14 percent compared to production loans at 13.7 percent.
