FDIC Reports Ag Banks are Beginning to Show Financial Stress05/31/2019
The FDIC released its quarterly banking report on Wednesday, revealing an uptick in the rate of farm loans that are past due. It’s the latest datapoint in the broader trend of worsening conditions in the farm economy, which is grappling with Trump’s trade wars, a five-year drop in income and the highest levels of farm sector debt since the 1980s crisis.
“Some farm banks are reporting asset quality deterioration,” said Diane Ellis, director of FDIC’s insurance and research division. The rate of noncurrent farm loans (those that are more than 90 days late or in “nonaccrual” status) at all FDIC-insured lenders was 1.26 percent in the first quarter of 2019 – the highest since early 2012, according to the data.
Community banks bearing the brunt: Ellis said the “emerging strain” in ag lending is largely hitting smaller banks “in the middle of the country.” The share of noncurrent farm production loans at community banks was 1.28 percent in the first quarter, higher than the long-term average, she said.
Keeping an eye on land values: Farmers have been able to borrow against their property, and farmland values have held steady, but FDIC officials warned that won’t always be the case. The Kansas City Federal Reserve Bank last month said there’s “potential for lower farmland values moving forward.”