KBRA Financial Intelligence

Agricultural Lending Rebounds as Government Shutdown Delays Farm Aid

Welcome to KFI Insights’ monthly Viewpoint. In this edition, we highlight the following key topics:

• The growth rate of bank lending to farmers rebounded in 3Q 2025, amid a simultaneous reduction in delinquency.

• Delayed aid payments and a temporary cessation of United States Department of Agriculture (USDA) loan activity due to the federal shutdown could have a lingering impact on banks’ agriculture (ag) lending data in 4Q 2025.

• Mergers and acquisitions (M&A) activity among U.S. lenders held steady in October, with 15 deals announced. That matched the number of announcements in the prior month.

Newly released call report data for 3Q 2025 shows that the year-over-year (YoY) pace of U.S. bank ag lending rebounded to 2.8%, up from 2% in the prior quarter, but trailing total bank lending growth of 4.7%. The largest portion of the rebound in ag lending was concentrated among loans to finance agricultural production, up 4.2%. Commercial real estate (CRE) lending secured by farmland has increased just 1.9%.

It remains to be seen how a 43-day U.S. government shutdown, the longest on record, might impact banks’ ag lending activity in 4Q. Many USDA Farm Service Agency county offices, which assist farmers with lending, commodity payments, disaster assistance payments and cost sharing, crop insurance liaison, and other farm-program interactions, were closed or operating with minimal staff throughout most of the shutdown period.

In addition to the resumption of regular activities, an imminent end to the shutdown means the long-delayed delivery of several billion dollars of tariff aid for farmers may also soon proceed. Earlier this year, China initiated a boycott of all U.S. soybean purchases, which totaled $12.8 billion in 2024. The White House reportedly plans to fill that gap with a similar sum, funded by the federal government’s surge in income from increased trade duties on imports.

Back in March, KFI suggested that a surge in federal support—along with policy shifts creating new deferment options, low-interest opportunities for distressed farm borrowers, and more flexible terms such as extended loan maturities, interest-only payments, and lower collateral requirements—could slow the pace of ag lending. Direct federal farm payments were already set to quadruple in 2025, reaching $40.5 billion. That figure represents around 6.5% of total gross cash farm income and is responsible for most of the year-over-year increase in net farm income.

While stronger crop prices are expected to boost farmers’ all-commodity cash receipts in 2025—the first annual increase since 2022—costs continue to climb. Between 2022 and 2024, total farm expenses increased 4.5%, and the USDA projects another 2.6% rise in 2025. This persistent gap between farm income and expenses reflects the impact of elevated inflation in recent years, which has driven up the cost of equipment, fertilizer, and other key inputs, as well as added pressure from higher financing costs.

According to USDA data, rising farm debt is set to push annual U.S. farm interest expenses above $32.5 billion in 2025, up from less than $19 billion in 2021. The 71% jump marks the steepest four-year increase in farm interest payments in more than 40 years. Although higher interest costs have led to moderate increases in farms’ debt service and debt-to-equity ratios during 2023-24, ag loans have generally maintained relatively low delinquency rates. In 3Q 2025, delinquency rates for both ag production and CRE farmland loans declined from the prior quarter, to 1% and 1.3% respectively—well below the 1.5% delinquency rate across all U.S. bank loans.

October 2025 M&A

Houston, Texas-based Prosperity Bank (NYSE: PB) (KFI Score: B+), parent of the $38.4 billion Prosperity Bank (KFI Score: B+), announced in an October 1 press release that it will acquire Southwest Bancshares, Inc. and its $2.5 billion commercial bank subsidiary Texas Partners Bank (KFI Score: B), based in San Antonio. The cash transaction, valued at approximately $268.9 million, is expected to close in 1Q 2026.

Rockland, Massachusetts-based Rockland Federal Credit Union (KFI Score: B) announced in an October 6 press release that the $3.4 billion institution will acquire the $183 million Community Credit Union of Lynn (KFI Score: B). The deal is expected to close in 1Q 2026.

Cincinnati, Ohio-based Fifth Third Bancorp (Nasdaq: FITB) (KFI Score: B), parent of $212.2 billion Fifth Third Bank, National Association (KFI Score: B), announced in an October 6 press release that the $212.2 billion institution will acquire Dallas-based Comerica Incorporated (NYSE: CMA) (KFI Score: B) and its $77.4 billion commercial bank subsidiary Comerica Bank (KFI Score: B). The all-stock transaction, valued at approximately $10.9 billion, is expected to close in 1Q 2026 and will create the ninth-largest U.S. bank.

Edmond, Oklahoma-based F&M Bancshares, Inc., parent of the $758 million F&M Bank (KFI Score: C+), announced in an October 7 press release that it will acquire the $127 million Community National Bank of Okarche (KFI Score: A). The transaction of undisclosed value is expected to close in 4Q 2025.

Casper, Wyoming-based Hilltop National Bank (KFI Score: B+), a $1.1 billion commercial bank subsidiary of Midland Financial Corporation, announced in an October 13 press release that the bank agreed to acquire $30 million Cheyenne State Bank (KFI Score: B-) of Cheyenne, Wyoming on October 13. The cash transaction’s value was not disclosed and is expected to close in 1Q 2026.

Covington, Indiana-based Piper Holdings, parent of the $674 million The Fountain Trust Company (KFI Score: B), announced in an October 15 press release that it will acquire The Gifford State Bank (KFI Score: A-) of Gifford, Illinois, which reported $193 million in assets. The transaction of undisclosed value is expected to close in 1Q 2026.

Pueblo, Colorado-based Pueblo Bancorporation, parent of the $671 million The Pueblo Bank and Trust Company (KFI Score: B+) announced in an October 20 press release that it will acquire Ark Valley Bankshares, Inc. and its $148 million commercial bank subsidiary The State Bank (KFI Score: A-) of La Junta, Colorado. The transaction of undisclosed value is expected to close in 1Q 2026.

Denver, Colorado-based Climb Credit Union (KFI Score: B-) announced in an October 20 press release that the $678 million institution will acquire Commerce City’s Community Choice Credit Union (KFI Score: B), which reported $96 million in assets. The deal is expected to close in 1Q 2026.

Lake Jackson, Texas-based Texas Dow Employees Credit Union (KFI Score: B-) announced in an October 22 press release that the $4.9 billion credit union will merge with Houston-based Smart Financial Credit Union (KFI Score: B), which reported $801 million in assets. The deal is expected to close in 1Q 2026.

Columbus, Ohio-based Huntington Bancshares Incorporated (Nasdaq: HBAN) (KFI Score: B), parent of the $209.5 billion commercial bank The Huntington National Bank (KFI Score: B), announced in an October 27 press release that it will acquire the $53.3 billion Cadence Bank (NYSE: CADE)(KFI Score: B) of Tupelo, Mississippi. The all-stock transaction, valued at $7.4 billion, is expected to close in 1Q 2026.

Dallas, Texas-based FirstSun Capital Bancorp (Nasdaq: FSUN) (KFI Score: B+), parent of the $8.5 billion Sunflower Bank, National Association (KFI Score: B), announced in an October 27 press release that it will acquire Irvine, California-based First Foundation Inc. (NYSE: FFWM) (KFI Score: B) and its $11.9 billion commercial bank subsidiary First Foundation Bank (KFI Score: B-). The all-stock transaction is valued at approximately $785 million and is expected to close in 2Q 2026.

Newark, Ohio-based Park National Corporation (NYSE: PRK) (KFI Score: B+), parent of the $9.8 billion The Park National Bank (KFI Score: B), announced in an October 27 press release that it will acquire Dyersburg, Tennessee-based First Citizens Bancshares, Inc. (OTC: FIZN) and its $2.6 billion commercial bank subsidiary First Citizens National Bank (KFI Score: B-). The all-stock transaction is valued at approximately $317 million and is expected to close in 1Q 2026.

Phoenix, Arizona-based ServBanc Holdco, Inc., parent of the $1.1 billion Servbank, National Association (KFI Score: A), announced in an October 28 press release that it will acquire IF Bancorp, Inc. (NASDAQ: IROQ) and its $862 million subsidiary Iroquois Federal Savings and Loan Association (KFI Score: B) of Watseka, Illinois. The transaction of undisclosed value is expected to close in 1Q 2026.

Lakewood, Ohio-based First Federal Savings and Loan Association of Lakewood (KFI Score: B), a $2.9 billion subsidiary of First Mutual Holding Co. (KFI Score: B), announced in an October 28 press release that it will acquire First Federal Savings and Loan Association of Centerburg (KFI Score: B-), which reported $24 million in assets. The transaction of undisclosed value is expected to close in 1Q 2026.

Mattoon, Illinois-based First Mid Bancshares, Inc. (NASDAQ: FMBH) (KFI Score: B+), parent of $7.8 billion First Mid Bank & Trust, National Association (KFI Score: B) announced in an October 29 press release that it will acquire Burlington, Iowa-based Two Rivers Financial Group and its $1.1 billion subsidiary Two Rivers Bank & Trust (KFI Score: B). The all-stock transaction is valued at approximately $94.1 million and is expected to close in 1Q 2026.

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