Rural Banks and Farm Loan Participation

Peter J. Barry

American Journal of Agricultural Economics, 1978, vol. 60, issue 2, 214-224

Abstract: Banking theory is used to develop a static, certainty model for evaluating profitability of farm loan participations for rural banks. Techniques are developed and applied to measure empirically the effects of participations on rural bank earnings attributed to farmer customer relationships and costs associated with demand balances required by correspondent banks. Model results show a decline in optimal levels and profits of loan participations for rural banks as correspondent balance requirements increase and as other parameters adjust to levels reflecting tighter monetary conditions. Participation strategies that may enhance the flow of funds into rural areas are also considered.

Date: 1978
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:60:y:1978:i:2:p:214-224.

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