Low interest rates taking toll on ag lenders

Low interest rates have provided a lifeline to many farmers during the downturn in the farm economy.  But Kansas City Federal Reserve Bank economist Cortney Cowley tells Brownfield low rates are taking a toll on ag lenders.

“Agricultural banks have remained financially strong, but we are starting to see some of those financial indicators that we look at like net interest margin being historically low.”

She says a low interest rate environment often makes it more difficult for banks to make money.

But surveys from the Kansas City Fed indicate banks are increasingly optimistic as commodity prices climb, and Cowley doesn’t seem too concerned.

“Because the return on assets and equity capital ratio to agricultural banks has remained historically high, but certainly something to keep an eye on as we move forward.”

The Kansas City Fed covers the 10th District which includes Nebraska and portions of western Missouri.

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