Dayton Business Journal...
Banks set to harvest new business with farm loans
by DBJ Staff
Sunday, April 1, 2012 

American farmers had a good year overall in 2011, with strong farm income for the year and a rebound in farmland value. That growth in the agricutural industry also helped boost banks, particularly those rural farm banks that do the majority of the lending to the country’s farmers, according to a new report by the American Bankers Association    . 

That’s good news for Ohio and the Dayton region, which is rich in farmland and agriculture-related businesses. That’s also good news for banks in the region and state, as the outlook for the farm sector is again favorable for 2012. 

The banking industry continues to be the major source of agricultural credit, providing more than half of all outstanding farm loans, according to the American Bankers Association’s annual Farm Bank Performance Report. And farming remains a vibrant part of the Dayton-area economy. In Darke County alone, agriculture remains the leading business, accounting for more than $350 million in annual revenue. 

The nation’s 2,185 farm banks increased farm and ranch lending $3.8 billion, or 5.6 percent, in 2011, for a total outstanding balance of $72.3 billion. The banking industry overall provided $130 billion in farm loans last year, up from $127 billion in 2010. 

“The growth in farm loans shows banks continue to meet the credit needs of both large and small farms and remain the most important supplier of agricultural credit,” said John Blanchfield, senior vice president and director of ABA’s Center for Agricultural & Rural Banking. 

In the Dayton region, Steve Wilson, chairman and CEO of Lebanon-based LCNB Corp.    and chairman of the nominating committee for the ABA, said his bank has a handful of agricultural customers, most of whom are big producers. 

Lending to farmers isn’t that different than lending to a traditional small business, he said. 

“Farms are a small business, so you look it as you would with any small business lending. In the big picture, it’s just small business lending,” Wilson said. 

However, Wilson said government subsidized programs put in place in the past drove a lot of farm lending away from traditional banks. 

But tradiational farm banks, particularly those in rural areas, are benefiting from the surge in farm incomes recently. 

More than 95 percent of farm banks were profitable in 2011, with 65 percent reporting an increase in earnings, according to the ABA. Ninety nine percent of farm banks were well-capitalized in 2011, the highest capital rating given by bank regulators. 

Non-farm banks also are benefiting, including many of the top banks with the largest presence in the Dayton region. 

Wells Fargo & Co.    is the single largest bank lender to the farming industry, with more than $9.4 billion in loans last year, according to the ABA report. Bank of America    is fourth with $2.4 billion in lending and U.S. Bancorp    is the fifth-largest lender to farms in the United States with $1.5 billion last year. 

Other banks with big shares of the Dayton banking market among the top 100 farm lenders include JPMorgan Chase & Co.    at No. 10, KeyCorp    at No. 14, Fifth Third Bancorp    at No. 39 in the nation with nearly $300 million in farm loans last year, PNC Financial Services Group at No. 47 and Metlife Inc. at No. 87. 

As for Ohio-based banks, consolidated by holding company, the ABA report that three of the top 15 farm lending banks are incorporated in Ohio, and four of the top 40 nationwide are incorporated in Ohio. 

It comes as no surprise to many people that Ohio banks would have a big presense in lending to farmers. 

Ohio State Sen. Bill Beagle said recently that with an annual contribution of more than $100 billion to Ohio’s economy, agriculture-related industries have proven to be critical cornerstones of Ohio’s most recent successes. 

“Largely composed of family-owned farms and small businesses, agribusiness has long been a vital asset to the state of Ohio,” according to Beagle, who represents Ohio’s 5th Senate District, which includes Miami County and portions of Montgomery and Darke Counties in the Dayton region. “As our economic comeback continues, it is more important than ever before that we provide job creators with the necessary tools to ensure that they thrive in the years to come.” 

The ABA breaks down the growth among farm banks by region for last year: 

The Northeast region (264 banks) increased farm loans 6.5 percent and employment by 2.0 percent. 

The South region (585 banks) reported improved profitability and employed over 22,000 men and women. 

The Cornbelt region, which includes Ohio, (641 banks) increased farm loans by 6.6 percent and employment by 2.9 percent. 

The Plains region (491 banks) increased return on equity by 50 basis points and employed over 20,000 men and women. 

The West region (196 banks) noted a 2.2 percent increase in jobs along with improved capital and profitability. 

Read this and other articles at the Dayton Business Journal