The Chairman of the Federal reserve told a group of senators that in spite of the deterioration of the farm economy, banks are in good shape to make ag loans. This is in stark contrast to the top 30 banks showing a nearly four billion dollar decline in agriculture loans held in there collective portfolios. For example, back in 2008, JP Morgan began growing its ag holdings which reached nearly 75% by 2015. Now, with incomes being reduced and Chapter 12 bankruptcy filings on the rise, they seem to be pulling back from the farm economy despite what the Federal Reserve Chairman says.

Many rural banks are now in a hard spot having to turn away longtime customers because they cant accept any more risk on there balance sheets. However, this may well force some of these producers into the Chapter 12 that the lenders fear. This is reflected in FDIC reports that 1.5% of farm loans were 90+ days late or lenders had stopped charging interest because they were nonperforming and not likely to be paid as agreed.

If you have a local bank that is still lending, shake their hand because they are having a hard time as well!

About the Author: Tim Hadley, ALC, is an agent with Keller Williams Realty in Gladstone, MO. He joined the REALTORS® Land Institute in 2017, serving on the 2019 Future Leaders Committee.