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The Profitability of Agricultural Loans by Commercial Banks

Published online by Cambridge University Press:  10 May 2017

Eddy L. LaDue ,
Jerry L. Moss  and
Robert S. Smith
Eddy L. LaDue
Affiliation:
Department of Agricultural Economics, Cornell University
Jerry L. Moss
Affiliation:
Department of Agricultural Economics, Cornell University
Robert S. Smith
Affiliation:
Department of Agricultural Economics, Cornell University
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Abstract

Data collected from a sample of New York banks were used to assess factors expected to influence the profitability of the various loan programs of commercial banks. Loan loss and loan service costs were lower for farm loans than for either installment or commercial loans. Although not required to maintain compensating balances, farmer time and demand deposits represented 23 percent of outstanding loan balances. The high rate of turnover on farm mortgage loans resulted in an average loan repayment period of 6.2 years, only 40 percent of the original financing period. Lower farm loan costs indicate that banks could charge 3/4 percent lower interest on farm loans than commercial loans.

Type
Articles
Information
Journal of the Northeastern Agricultural Economics Council , Volume 7 , Issue 1 , April 1978 , pp. 1 - 5
Copyright
Copyright © Northeastern Agricultural and Resource Economics Association 

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References

LaDuc, E.L., Moss, J.L., and Smith, R.S. Farm Loans in New York State, Highlights of a Study on the Profitability of Agricultural Loans for Commerical Banks, New York State Bankers Association, 1977.Google Scholar