WASHINGTON -- The farm crisis of the 1980s receded further in 1991 as agricultural banks increased their earnings by about 10%, to $1.7 billion, the American Bankers Association said.

Improved loan quality, lower loan losses, and wider interest margins sent farm banks' return on assets to 1.04% - the highest since the 1.14% of 1982 and almost twice the 0.53% registered last year by the banking industry as a whole.

Agriculture banks also enjoyed an 11% return on equity for 1991, three basis points better than in 1990 and well above the entire industry's 7.8%, according to the ABA.

The farm banks' ROA has risen steadily from a low of 0.50% in 1986. A year before that, when their ROA was 0.60%, 68 of them failed and 185 reported that nonperforming assets exceeded their capital.

The ABA said 3,952 banks met the definition for being agricultural last year, meaning more than, 16.6% of loans were farm oriented.

That 16.6% is the average percentage of farm loans for all banks at yearend, according to the Federal Reserve Board.

The farm banks, which had total assets of $163 billion, bettered industry norms other than ROA & ROE.

* nonperforming assets were 1.24% of the total, down from 1.27% in 1990 and below the 2.99% industry figure.

* Farm banks in 1991 charged off 0.45% of their loans, while banks as a whole wrote off 1.6%.

Asset diversification and tougher underwriting standards at farm banks have convinced ABA officials that the industry is not vulnerable to a repeat of the 1980s.

"Although some weaknesses appeared in the customer base of agricultural banks during 1991, there is very little in the economic fundamentals of the current agricultural situation to suggest a repeat recession in the industry," added James Chessen, the ABA's chief economist.

There is concern that the fastest-growing component of farm bank portfolios is commercial real estate - the asset category most responsible for banking's current woes.

But at $936 million, real estate still makes up just 1.3% of farm bank's total loans.

Asset quality at these banks improved in 1991 for the fifth straight year. That is due at least in part to the better fortunes of farmers, who have whittled their debt-to-asset ratio to 16.2% from 23% in 1985.

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