ABA Report: Farm Banks Increased Capital Ahead of Pandemic

Prior to the outbreak of the coronavirus in the U.S., the nation’s farm banks were well-capitalized—with many raising equity capital—a more conservative type of capital—according to ABA’s annual Farm Bank Performance Report released last week. Equity capital at the nation’s 1,715 farm banks rose 11.5% to total $52 billion in 2019. Tier 1 capital, meanwhile, increased by $3.3 billion to $47.9 billion.

Farm banks increased agricultural lending by 3.6%, or $4 billion, to $105 billion in 2019. Almost all—98%—of them were profitable, with 63% reporting earnings increases. The report noted, however, that many ag producers were struggling with difficult conditions in the agricultural economy—from trade uncertainties to natural disasters to weakening farm balance sheets and land values—prior to the outbreak of COVID-19. Farm banks reported non-current ag loans ticking up to 0.84%.

Looking ahead, the report noted that with the onset of the pandemic, the ag sector has seen demand decline and supply chain disruptions and that “as lockdown and the virus persists, pressure will continue to weigh on the agricultural sector in 2020.” Read the report.

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