U.S. agricultural lenders recorded higher balances of agricultural production and farm loans in 2022 and their lowest delinquency rates in more than a decade.
Record low industry delinquency rate
Delinquencies in agricultural loans ebbed further in the last three months of 2022 to about 0.91% of total agricultural loans in the fourth quarter, according to S&P Global Market Intelligence data. The delinquency rate had first fallen below 1% a quarter earlier to 0.94%.
Farmers Bank recorded the biggest increase in delinquency rate in farm loans year over year, as they climbed to 6.6% of a total $53.3 million in farm loans at year end 2022.
For agricultural production loans, Regions Financial Corp. recorded the highest delinquency rate at 28.9% of total $218.0 million agricultural production portfolio. The Birmingham, Ala.-based company grew its agricultural portfolio 17.8% year over year, but it still accounted for just 0.2% of its gross loans in 2022.
Quarterly loan growth continues
Combined agricultural production and farm loans at U.S. banks and thrifts grew 5.7% year over year in the fourth quarter of 2022 to $190.45 billion, continuing a growth trend that began in the fourth quarter of 2021. Total U.S. agricultural loans were $186.08 billion in the third quarter of 2022.
Fourth-quarter 2022 farm loans climbed to $113.70 billion from $111.53 billion a quarter earlier and $106.140 billion a year ago. Agricultural production loans rose to $76.75 billion in the final quarter of 2022 from $74.55 billion in the third quarter and $74.10 billion in the fourth quarter of 2021.
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Top agricultural lenders
John Deere Capital Corp. was the largest agricultural U.S. lender in 2022, with agricultural loans totaling close to $23 billion, more than half of its gross loan portfolio. The Reno, Nev.-based funder of retail purchases of agricultural and turf equipment boosted its agricultural loans by 14.3% year over year.
Bank of America Corp. remained a distant second, with total agricultural loans of $5.46 billion in 2022, up 9.9% from a year ago. Its agricultural loans portfolio was just 0.5% of its gross loans for the entire year. Wells Fargo & Co. was the third-largest agricultural lender in 2022, with a portfolio loan balance of $4.89 billion, up 2.8% from a year ago.
First Interstate BancSystem Inc. recorded the biggest year-over-year increase in total agricultural loans, nearly tripling its portfolio to $1.57 billion from a year ago. The Billings, Mont.-based bank completed its acquisition of Sioux Falls, S.D. Great Western Bancorp Inc. last year, which provides agribusiness banking.
U.S. farmers in the fourth quarter of 2022 felt more optimistic about their current situation and expectations for the future, according to the Purdue University/CME Group Ag Economy Barometer, which surveys agricultural producers' sentiments about the economy.
James Mintert, the barometer's principal investigator and director of Purdue University's Center for Commercial Agriculture, said in a release that the improved sentiment was due to a better feeling about financial conditions as farmers estimated their 2022 income following the autumn harvest.