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Ag lenders lead 2010 banking industry recovery

Published on March 4, 2011 3:01AM

Last changed on April 1, 2011 7:19AM

Net income increased even as some institutions failed


Capital Press

Agricultural lenders were at the head of the pack as the overall U.S. banking industry recovered in 2010, according to several key measures tracked by federal regulators.

The Federal Deposit Insurance Corp. reports that agricultural banks had a stronger return on equity in 2010 compared to the overall industry: 9 percent compared to 6 percent.

The rate of loans charged off as bad debt among ag lenders was roughly three-fourths lower than the 2.5 percent industry average.

Fewer than 7 percent of agricultural banks were unprofitable in 2010, down from about 11 percent the prior year. To compare, roughly 20 percent of U.S. lenders reported losses last year, down from about 30 percent in 2009.

The entire banking industry earned profits of about $87.5 billion in 2010, compared to a $10.6 billion loss the prior year.

The industry's net income improved even as 157 banks failed in 2010, costing the FDIC about $22 billion. The agency's Deposit Insurance Fund is currently running a deficit of more than $7 billion.

Agricultural lenders reported a net income of about $1.9 billion, up from about $1.5 billion in 2009. Roughly two-thirds of ag lenders saw profits rise in 2010, which is in line with the industry average.

Even so, three agricultural banks failed last year and 35 others were merged into other institutions.

The Farm Credit System, a government-sponsored network of ag lenders tracked separately from the banking industry as a whole, also reported healthy profits in 2010.

Net income among all system lenders grew nearly 23 percent, to about $3.5 billion, as their total loan volume increased more than 6 percent to about $175 billion.

The Federal Farm Credit Banks Funding Corp., which funds and monitors system lenders, attributes the growing loan portfolio to higher commodity prices and more real estate lending.

Non-performing loans within the system -- such as those past due and subject to bankruptcy -- fell by about 4 percent, to about $3.4 billion, after rising sharply for several years.

Even so, bad debt losses increased 15 percent last year among system lenders to $596 million.


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