US bank agricultural delinquencies spike in Q1 amid headwinds, trade anxiety

US banks' agricultural and farm loan delinquencies spiked in the first quarter.

The industry's ratio of delinquent agricultural production loans — or those for funding agricultural production including crops and livestock — surged to 1.62% in the first quarter, its highest point since 1.97% in the first quarter of 2021. The delinquent farm loan ratio also jumped in the quarter to 1.51%, reaching a multiyear high from 1.60% in the third quarter of 2021. Farm loans are those secured for farmlands and improvements on them through mortgages and liens.

The credit quality deterioration comes as the farming industry has faced several headwinds in the first part of the year, such as threats from President Donald Trump's tariffs and severe weather throughout the Midwest and Southeast in May. Those events continued what was already a tough year for farmers in 2024.

"Despite strong yields last year, income pressures from declining commodity pressures and prices, weather-related losses and higher input costs have strained profitability. Farmers are adjusting their 2025 planning strategies based on anticipated market prices and cost structures," Southern Missouri Bancorp Inc. Chairman and CEO Greg Steffens said on the company's first-quarter earnings call on April 22. "Declining equipment values and cautious real estate activity indicate a tight financial environment and many producers remain concerned about profitability, hoping for higher commodity prices and meaningful legislative support."

At the end of March, farmers' sentiment was "decidedly less optimistic" than the month prior, and their outlook for US agricultural exports reached "an all-time low," Purdue University and CME Group Inc.'s Ag Economy Barometer survey for March found. Falling crop prices combined with increasing uncertainty around agricultural trade and farm policy were key factors behind the sentiment shift, CME Group said in a press release.

Amid the headwinds, agriculture loans at US banks and thrifts dipped to $202.15 billion in the first quarter, reversing the consistent growth of 2024, which ended with a more-than-a-decade-high of $205.20 billion, according to S&P Global Market Intelligence data.

Agricultural production loans made up $83.86 billion of that total in the first quarter, down from $86.63 billion in the previous quarter. Farm loans accounted for the other $118.29 billion, also declining from $118.57 billion in the fourth quarter of 2024.

Both agricultural production and farm loans, however, were still higher than the year-ago levels.

US banks with highest agricultural loan delinquency ratios

Among US banks and thrifts with at least $50 million in farm loans as of March 31, Santa Rosa, California-based Summit State Bank reported the highest delinquency ratio at 21.87% in the first quarter. However, that was an improvement from 33.27% in the previous quarter and 38.67% a year ago.

The bank's exposure to farm lending has shrunk both quarter over quarter and year over year, as its farm loan balance decreased to $70.9 million in the first quarter from $76.5 million in the fourth quarter of 2024 and $80.4 million in the year-ago quarter.

Augusta, Wisconsin-based Unity Bank booked the second-highest delinquency rate in farm loans at 17.62%, marking a 30-basis-point decline sequentially and a 250-basis-point decline year over year.

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Florence, Alabama-based First Southern Bank, which had zero delinquent farm loans a year ago, posted the third-highest farm loan delinquency ratio of 16.79% in the first quarter, nearly three times its farm loan delinquency ratio of 5.86% in the previous quarter.

First Southern Bank also registered the highest delinquency ratio in agricultural production loans in the first quarter at 30.71%, after reporting zero delinquent agricultural production loans in the first and fourth quarters of 2024.

Gothenburg, Nebraska-based Dayspring Bank and Porterville, California-based Sierra Bancorp were second and third in the list of banks and thrifts with the highest agricultural production loan delinquency ratios in the first quarter, posting ratios of 13.84% and 13.71%, respectively.

Top agricultural lenders

Reno, Nevada-based John Deere Capital Corp. remained the biggest US agricultural lender in the first quarter with $26.70 billion in agricultural loans. Agricultural production loans, which made up all of the company's agricultural loans, still accounted for more than half of its gross loan portfolio.

Kansas City, Missouri-based UMB Financial Corp. landed in 10th place among the top US agricultural lenders in the first quarter, booking $1.30 billion in agriculture loans after acquiring Denver-based Heartland Financial USA Inc. in January. Heartland had a history of being among the top US banks by agricultural loans.

Only four of the 20 US banks with the most agricultural loans grew this portfolio sequentially, compared with growth for 14 of the 20 banks year over year.