Asset Quality
Agricultural Loans
Also known as Ag Loans
Agricultural loans finance farming operations and farmland — production loans for crops and livestock plus loans secured by farm real estate. They are a defining concentration for rural and farm-belt community banks.
Formula
Schedule RC-C reports agricultural production loans and farmland-secured loans. Together they define an 'ag bank' — institutions where this category is a large share of the book and earnings track the farm economy.
Why it matters
Agricultural lending ties a bank's fortunes to commodity prices, weather, and farm income, which are cyclical and correlated across a rural footprint. Ag-concentrated banks can see credit quality swing sharply with a bad crop year or a commodity-price downturn.
How to interpret
Read agricultural loans as a share of the book and against the farm cycle. A high ag concentration is not inherently risky in good years, but it magnifies exposure to correlated shocks — when farm income falls, problems tend to appear across the whole portfolio at once.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| Diversified | Strong | Limited ag concentration; varied loan book. |
| Moderate ag share | Adequate | Meaningful but balanced agricultural lending. |
| Ag-concentrated | Watch | Earnings closely tied to the farm economy. |
| Heavily ag-dependent | Concern | Correlated exposure to commodity and weather shocks. |
Worked example
Frequently asked
What qualifies as an agricultural loan?
Two categories: loans to finance agricultural production (operating loans for crops, livestock, and equipment) and loans secured by farmland. Together they make up a bank's agricultural lending on Schedule RC-C.
Why are agricultural concentrations risky?
Farm income depends on commodity prices and weather, which hit an entire rural region at once. A bank concentrated in ag loans faces correlated losses in a downturn rather than the diversification a varied book provides.
Sources
- FFIEC Call Report Schedule RC-C (Loans and Lease Financing Receivables)
See Ag Loans across 4,335 US banks
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