New York, NY (PRWEB) August 07, 2014
The historically low interest rates that have persisted throughout the duration of the five-year period have extensively damaged interest income for the Agricultural Banks industry. Industry operators specialize in providing farmland and farm production loans to the agricultural sector; more specifically, agricultural banks dedicate a portion of their total loans to agriculture. Revenue for agricultural banks is composed of interest income from lending products and non-interest income, which is largely derived from fees. According to the latest available data from the Federal Deposit Insurance Corporation, both total agricultural bank lending and loans to the agricultural sector specifically have increased moderately from 2009 to 2013. Yet, despite increased lending, low interest rates have caused interest income to decrease consistently over the same period. Consequently, industry revenue is expected to fall at an annualized rate over the five years to 2014; this decline includes a revenue dip expected in 2014, largely stemming from falling agricultural prices.
Moreover, industry wage costs have increased moderately, at an estimated annualized rate over the five years to 2014, despite falling revenue. Yet, the industry’s average profit margin has still managed to spike over the five-year period. The primary catalyst for this change has been the sharp fall in aggregate interest expenses for the industry. In addition, the industry’s improving asset quality, as depicted through a falling nonperforming loan ratio, has allowed operators to decrease their loan loss provisions, to the benefit of profitability.
For more information, visit IBISWorld’s Agricultural Banks in the US industry report page.