Report: Ag lending increased at community banks in Q1

Agriculture loans increased 4.6 percent at community banks from a year ago in the first quarter of this year amid rising input costs, according to a July 30 report from the Federal Reserve Bank of St. Louis. .The value of outstanding ag loans at community banks stood at $162.6 billion at the end of the first quarter. Growth was especially significant in ag production loans, which increased 6.1 percent on an annualized basis. As of March 31, real estate loans represented 62 percent of ag lending at community banks, with the rest in ag production loans, said Author Krista Williams, St. Louis Fed senior operations specialist. “The year-over-year growth in agricultural production loans is consistent with increasing input costs for farmers, who require greater financing to maintain operations,” Williams said. “Additionally, carryover debt may contribute to this loan growth.” Williams said strong ag lending growth could lead to a more concentrated creditor base, as the industry is highly concentrated. As of the first quarter, agricultural banks were 20 percent of overall U.S. banks but accounted for 40 percent of outstanding ag loans, she added. Farm purchases are picking up as relatively lower interest rates push prices lower, said Tanner Davis, a loan officer at La Porte City, Iowa-based Cedar Valley Bank & Trust. Also, farmers are looking to borrow more due to working capital shortfalls. Farmers that held onto grain last fall are now forced to market at lower prices, he added. Davis sees predicting the next 12 months as complicated, especially after the volatility of the ag market over the last couple years amid rising fuel costs, trade deals and tariffs. Whatever conditions, he said Cedar Valley Bank & Trust, as a community bank, will communicate with customers to help them through challenges.