THE PROFITABILITY OF AGRICULTURAL LOANS BY COMMERCIAL BANKS
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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.