Regardless of the worldwide financial slowdown in 2020 as a consequence of COVID-19, complete agricultural lending by U.S. farm banks remained strong at $98.6 billion, reducing by just one.8% from the yr earlier than based on the American Bankers Affiliation’s annual Farm Bank Performance Report. The report attributed the change to a 6.7% decline in agricultural manufacturing loans. Against this, excellent loans secured by farmland elevated 2.1% to $56.7 billion. In keeping with the report, rising prices, provide and manufacturing bottlenecks, value volatility, and a big improve in federal money funds depressed demand for agricultural manufacturing loans in 2020. Authorities funds additionally enabled producers to pay down present mortgage balances.
“American farm banks have remained healthy this past year and continued to play a critical role in supporting farmers and the broader US economy through the turbulence of 2020,” stated ABA’s Chief Economist Sayee Srinivasan. “While the agricultural sector will continue to face challenges as the economy reopens and recovers from the coronavirus pandemic, the strong asset quality and capital levels of America’s farm banks will help ensure that they continue to provide support to rural communities.”
The report—an evaluation by ABA’s financial analysis workforce primarily based on FDIC information—examines the efficiency of the nation’s 1,642 banks focusing on agricultural lending. ABA defines farm banks as banks whose ratio of home farm loans to complete home loans is larger than or equal to the business common.
In keeping with the report, farm banks additionally supported rural communities by way of the Paycheck Safety Program. On the finish of 2020, farm banks held 172,818 PPP loans value $12.7 billion on their stability sheets. Farm banks distributed these loans by way of greater than 7,700 branches throughout rural America, preserving jobs at native small companies and offering an essential lifeline to the communities they serve.
The report additionally exhibits that farm banks are additionally a significant supply of credit score to small farmers—holding greater than $45.2 billion in small farm loans with $10.5 billion in micro farm loans on the finish of 2020. A small farm mortgage is a mortgage with an unique worth of $500,000 or much less and a micro farm mortgage is a mortgage with an unique worth of $100,000 or much less.
In 2020, farm banks’ asset high quality improved barely regardless of a struggling ag economic system as consolidation and money funds aided the paydown of loans by farmers. Greater than 97% of farm banks had been worthwhile in 2020, with greater than 51% reporting a rise in earnings. Farm banks additionally served as job creators, including greater than 2,000 jobs in 2020, a 2.4% improve, and using greater than 81,000 rural People.
Farm banks additionally continued to construct strong, high-quality capital reserves all through 2020 and are well-insulated from dangers related to the agricultural sector. Fairness capital at farm banks elevated 9% to $52.6 billion, whereas Tier 1 capital elevated by $3.6 billion to $48.3 billion.
Your complete banking business – not simply farm banks – gives farmers and ranchers with the credit score they want. On the finish of 2020, banks held $174 billion in farm and ranch loans. The U.S. banking business can be a significant supply of funding to small farmers holding greater than 1.1 million small farm loans value $71 billion on the finish of 2020. This included greater than 744,000 microloans value almost $17 billion.
The Farm Bank Efficiency Report additionally gives regional summaries:
- The northeast area’s 10 farm banks elevated farm loans by 4.01% to $1.1 billion in 2020. Ag manufacturing loans fell 11.6% from the yr earlier than whereas farmland loans elevated 6.09%.
- The south area’s 164 farm banks elevated farm loans by 0.40% to $8.2 billion in 2020. Ag manufacturing loans fell 3.11% from the yr earlier than whereas farmland loans rose by 1.70%.
- The Corn Belt area’s 792 farm banks decreased farm loans by 1.93% to $46.0 billion in 2020. Ag manufacturing loans loans fell sharply by 6.89% from the yr earlier than whereas farmland loans rose by 1.93%.
- The plains area’s 626 farm banks decreased their farm loans by 2.29% to $38.0 billion in 2020. Ag manufacturing loans fell 6.75% from the yr earlier than whereas farmland loans elevated 2.27%.
- The west area’s 50 farm banks decreased farm loans by 2.40% to $5.3 billion in 2020. Ag manufacturing loans fell sharply by 7.56% from the yr earlier than whereas farmland loans rose 1.48%.
Supply: American Bankers Affiliation
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