ABA VICE CHAIRMAN SAYS BANKS ARE SUCCESSFULLY MANAGING FARM REAL ESTATE LOAN RISK

ABA VICE CHAIRMAN SAYS BANKS ARE SUCCESSFULLY MANAGING FARM REAL ESTATE LOAN RISK

WASHINGTON, DC – March 10, 2011 – (RealEstateRama) — Banks are successfully managing agricultural loan risk associated with rising farmland prices, said Matthew H. Williams, president of Gothenburg State Bank in Gothenburg, Neb., and vice chairman of the American Bankers Association at an FDIC symposium on U.S. farmland prices held today.

The demand for U.S. farm products world-wide is very strong and continues to grow, and that demand  has driven up farmland prices.

“Farmers, especially those who produce crops, are enjoying some of the best profitability they’ve seen in a generation,” Williams said. “As a result, farmers are carrying less leverage today than they did just a few years ago.”

Williams said he and his staff at Gothenburg State Bank have more than 110 years of combined agricultural lending experience, which helps them better measure repayment capacity when evaluating farm real estate loans.

“Managing credit risk is our job,” he said. “Banks that specialize in agricultural lending use conservative underwriting practices. Knowing our customer is a fundamental tenant of our business, and that includes knowing about the enterprise we are financing, understanding how the loan will be repaid and what risks our customer faces.”

Williams said many  resources exist to help banks manage farm  real estate lending risk.  They include: software that allows bankers to thoroughly analyze repayment and stress test their portfolios; a secondary market for agricultural real estate mortgages — Farmer Mac — that enables banks to originate mortgages and then sell them into this secondary market; and the USDA’s Farm Service Agency loan guarantee program that helps banks mitigate repayment and collateral risk.

Bank customers  have also changed, Williams said.

“Farmers have a better understanding of the limitations of leverage and have become very sophisticated business people – they utilize crop price risk protection, they hedge input costs, and they avail themselves of other types of risk management tools such as crop insurance.”

The American Bankers Association represents banks of all sizes and charters and is the voice for the nation’s $13 trillion banking industry and its two million employees.   Learn more at aba.com.

ABA Media Contact:
Margot Mohsberg Johnson
(202) 663-5470
E-mail:
Follow us on Twitter @ABABankingNews

SHARE
ABA

Founded in 1875 and based in Washington, DC, the American Bankers Association (ABA) brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America's economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry's $13.6 trillion in assets and employ over 2 million men and women.

American Bankers Association
1120 Connecticut Avenue, N.W.
Washington, DC 20036

Toll free: 1-800-BANKERS

Media Contact:
Jim Eberle
Phone: (202) 663-5477

Previous articleRECOVERY ACT CHANGED APPROACH TO BUSINESS, LAID FOUNDATION FOR AMERICAN CITIES TO WIN THE FUTURE
Next articleABA SUBSIDIARY’S MORTGAGE PROGRAMS SAVE MEMBERS $27 MILLION