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SNL: Farm Lending on Long March Upward, but Concerns Emerge

 

June 28 - Farm country continues to produce riches for the nation's community banks, particularly those doing business in crop-rich swaths of the Midwest, an SNL Financial analysis found.

Total farm loans tapered off some in the first quarter of this year due to seasonality, the first quarter is typically a slow one in the sector but over the last six years such credits have steadily climbed, thanks to robust agricultural earnings and rising land values, which have provided farmers with handsome levels of equity and made it easier for them to secure credit in order to invest in new equipment and more land. SNL data show that loans secured by agricultural land rose to roughly $72 billion at the end of 2012, a 38 percent increase from the close of 2006, and such loans grew at a rate of 6.28 percent last year.

And despite the first-quarter slowdown nationally, banks in many pockets of the country grew loans during the period when compared with a year earlier, with notable strength in the Midwest and advancements in Texas and parts of the West.

But there are some concerns in farm country. John Blanchfield, senior vice president of the American Bankers Association's Center for Agriculture and Rural Banking, said regulators are increasingly mindful of a possible land-price bubble forming in many areas, as prices have steadily climbed for several years, not unlike home prices boomed in the 2000s before collapsing late in the decade and causing wide-ranging woe for both lenders and their customers.

And there are some other signs of caution. Subsidiaries of big banks such as Wells Fargo & Co. and Regions Financial Corp. that are major farm lenders saw their total first-quarter lending in the sector decline from a year earlier, according to the SNL analysis. Others such as Bank of America Corp. and KeyCorp posted only modest gains.

Click here to read the full SNL Financial report.


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