Earnings performance at agricultural banks improved in 2025 alongside strong growth in farm loans, according to a survey of agricultural banks by the Kansas City Federal Reserve Bank.
Agricultural Banks are defined as banks with total agricultural loans comprising at least 25% of total loans, the Federal Reserve Bank said.
The survey data was compiled and reported by Federal Reserve Bank Associate Economist Ty Kreitman in an official Kansas City Federal Reserve Bank release.
FARM LOAN BALANCES INCREASE
According to Reports of Condition and Income, farm loan balances at agricultural banks increased about 7% from the previous year, Kreitman said. Returns on average assets also rose notably.
Strong loan growth and favorable loan yields boosted net interest margins, and bank liquidity tightened modestly, he said. Delinquency rates increased slightly last year but remained low despite ongoing challenges for many crop producers.
The outlook for the US agricultural economy remained subdued, and uncertainty was heightened alongside recent volatility in commodity and fertilizer markets, Kreitman said. Profit opportunities in the crop sector remained limited despite increases in crop prices as concerns surrounding a surge in fertilizer and fuel prices weighed on sentiment.
Demand for lending grew, and credit conditions tightened gradually alongside reduced working capital for crop producers over the year, he said. Despite persistent challenges, financial stress remained limited with support from resilient farmland values, direct government assistance and strong cattle revenues in some regions.
Farm debt grew considerably at agricultural banks in 2025, Kreitman said. Outstanding balances of non-real estate and real estate loans at agricultural banks increased about 9% and 6%, respectively, from the previous year. Growth was more constrained at non-agricultural banks but picked up slightly compared with earlier in the year.
DELINQUENCY RATES UP SLIGHTLY
Farm loan delinquency rates increased slightly but remained low, he said. Just over 1% of all agricultural loan balances were past due more than 30 days at the end of 2025. About a quarter of all agricultural banks had a farm loan delinquency rate of more than 1% and half had negligible or no delinquent farm loans.
Liquidity at agricultural banks tightened modestly in 2025, Kreitman reported. The loan-to-deposit ratio among agricultural banks remained higher than the long-term average and increased slightly from the previous year to about 79%. While farm and non-farm loan balances continued to grow, deposits also increased steadily.
Strong loan growth supported a notable improvement in financial performance at agricultural banks, he said. The return on average assets among agricultural banks increased to the highest level during the fourth quarter since 2019 alongside a considerable rise in net interest margins.
Earnings performance was boosted by higher interest income and reduced interest expenses, Kreitman said. Net income at agricultural banks increased by about 20% from the previous year.
The increase was attributed to continued growth in interest income from loans and lower expenses on deposits that offset a steady rise in non-interest expenses that has been cited as a challenge for many smaller community banks.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $234.93 per cwt to $238.55, compared with last week’s range of $234.91 to $248.00 per cwt. FOB dressed steers and heifers went for $369.25 per cwt to $372.04, compared with $369.34 to $377.44.
The USDA choice cutout Thursday was down $1.84 per cwt at $389.85 while select was down $3.83 at $391.66. The choice/select spread narrowed to a minus $1.81 from minus $3.80 with 73 loads of fabricated product and 21 loads of trimmings and grinds sold into the spot market.
The USDA-listed the weighted average wholesale price for fresh 90% lean beef as $448.67 per cwt, and 50% beef was $197.14
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $0.90 to $1.05 a bushel over the May corn contract, which settled at $4.67, down $0.00 1/4.
The CME Feeder Cattle Index for the seven days ended Wednesday was $363.24 per cwt, up $1.46. This compares with Thursday’s Mar contract settlement of $363.52, up $1.65.