Ag Bankers Well-Capitalized Prior to Coronavirus Outbreak

WASHINGTON, DC – Prior to the outbreak of the coronavirus in the U.S., the nation’s farm banks were well-capitalized, with many raising equity capital according to the American Bankers Association’s (ABA) annual Farm Bank Performance Report released last week. Equity capital is a more conservative type of capital and increased at the nation’s 1,715 farm banks by 11.5 percent in 2019 ($52 billion). Tier 1 capital, meanwhile, increased by $3.3 billion to $47.9 billion. Farm banks increased agricultural lending by 3.6 percent, or $4 billion, to $105 billion in 2019. Almost all of the banks (98 percent) were profitable, with 63 percent reporting earnings increases. The report noted, however, that many ag producers were struggling with difficult conditions in the agricultural economy prior to the outbreak of COVID-19; farm banks reported that noncurrent ag loans ticking up to 0.84 percent. 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, the pressure will continue to weigh on the agricultural sector in 2020.”
(SOURCE: American Bankers Association)