The rebound of Pacific Northwest agriculture is showing up on the books of Northwest Farm Credit Services, the lending cooperative that finances farmers, ranchers and other rural customers in Washington, Oregon, Idaho, Montana and Alaska.
Northwest FCS reported second quarter earnings of more than $63 million, a 32 percent increase over the same period of 2013. For the year, earnings are at $117.5 million, up 22.5 percent over the first six months of 2013.
Tom Nakano, an executive vice president and chief administrative and financial officer, said credit goes to the recovery of agricultural markets.
“That’s the driver of this,” Nakano said. “The majority of our customers overall are doing very well the last couple years.”
Improved markets and good prices allow producers to stay current on their loans. As a result, FCS doesn’t have to set aside as much to cover loan losses, and earnings show a sharp increase, he said. In addition, the FCS loan portfolio and asset base have increased, another “healthy indicator,” Nakano said.
Nakano doesn’t expect such spectacular earnings reports to continue. Instead, “We’ll see pretty nice, modest growth. “We feel pretty good about that.”
Because of the cyclical nature of agriculture, FCS takes a conservative approach, maintains a “prudent” allowance for loan losses and does not over-steer in response to market changes, he said.
In that regard, the diversity of Northwest agriculture buffers the region against major economic swings.
“We’re very fortunate here,” Nakano said. “We don’t have large concentrations of a few commodities like in the Midwest with corn and soy. I don’t see anything major changing except for the normal cycles.”
Northwest FCS counts 19,000 customers in five western states and has 45 branch offices, with headquarters in Spokane, Wash. It’s part of the farm credit system, established by Congress in 1916 to finance farming, logging, agribusiness and rural home buyers.