ABA Report: Farm Bank Lending Increased to $99.6 Billion in 2021

Agricultural lending by U.S. farm banks increased 5.5% in 2021 to $99.6 billion, according to the American Bankers Association’s annual Farm Bank Performance Report. The report attributed the change to a 7.5% increase in outstanding loans secured by farmland and a 2.9% increase in agricultural production loans. According to the report, 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. 

“In 2021, farm banks continued to perform strongly amid ongoing challenges from the COVID-19 pandemic,” said ABA’s Chief Economist Sayee Srinivasan. “As we look ahead to the second half of 2022, the ag sector will continue to face challenges resulting from the war in Ukraine, inflationary pressures and ongoing supply chain disruptions. Nevertheless, farm banks are well-positioned to continue supporting their customers and the communities they serve well into the future.”

The report—an analysis by ABA's economic research team based on FDIC and USDA data—examines the performance of the nation's 1,553 banks that specialize in agricultural lending. ABA defines farm banks as banks whose ratio of domestic farm loans to total domestic loans is greater than or equal to the industry average.

According to the report, farm banks also supported rural communities via the Paycheck Protection Program. In 2021, farm banks originated 538,154 PPP loans worth $14.6 billion. Farm banks distributed these loans via more than 7,500 branches across rural America, preserving jobs at local small businesses and providing an important lifeline to the communities they serve.

The report also shows that farm banks are also a major source of credit to small farmers—holding more than $43.8 billion in small farm loans, including $9.9 billion in micro farm loans at the end of 2021. A small farm loan is a loan with an original value of $500,000 or less and a micro farm loan is a loan with an original value of $100,000 or less.

Farm banks’ asset quality improved in 2021, as consolidation and cash payments aided the paydown of loans by farmers. Noncurrent loans at farm banks stood at $2.1 billion at year-end 2021, representing 0.71% of the loan portfolio of farm banks. The median noncurrent loan ratio for farm banks dropped by 12 basis points to 0.33%. By comparison, the noncurrent loan ratio for the broader banking sector was 0.72%. 

Ninety-eight percent of farm banks were profitable in 2021, with 73.2% reporting an increase in earnings. Farm banks also served as job creators, adding more than 1,600 jobs in 2021, a 2.1% increase, and employing more than 80,000 rural Americans.

Farm banks have also built strong, high-quality capital reserves and are well-insulated from risks associated with the agricultural sector. Equity capital at farm banks increased 6.5% to $53.3 billion in 2021 while tier 1 capital increased by $4.5 billion to $46.0 billion.

The entire banking industry – not just farm banks – provides farmers and ranchers with the credit they need. At the end of 2021, banks held $179 billion in farm and ranch loans. The U.S. banking industry is also a major source of funding to small farmers. Small loans continue to make up almost half of banks’ farm and ranch lending with $69 billion in small and micro farm and ranch loans on the books at the end of 2021. This included more than 737,000 microloans worth over $16 billion.

The Farm Bank Performance Report also provides regional summaries:

• The Northeast region's 9 farm banks decreased farm loans by 10.96% to $1.2 billion in 2021. Ag production loans fell 7.09% from the year before while farmland loans increased 12.88%.
• The South region's 149 farm banks increased farm loans by 7.35% to $8.0 billion in 2021. Ag production loans rose 7.8% from the year before while farmland loans rose by 7.19%.
• The Cornbelt region's 747 farm banks increased farm loans by 6.61% to $47.6 billion in 2021. Ag production loans rose by 3.94% from the year before while farmland loans rose by 8.50%.
• The Plains region's 598 farm banks increased their farm loans by 4.45% to $37.7 billion in 2021. Ag production loans rose 2.29% from the year before while farmland loans increased 6.47%.
• The West region's 50 farm banks experienced a slight decrease in farm loans of 0.34% to $5.2 billion in 2021. Ag production loans fell by 6.0% from the year before while farmland loans rose 3.57%.

Read the 2021 Farm Bank Performance Report.

See ABA's infographic summarizing the report.