| The commercial banking industry has dramatically changed partially due to geographic deregulation. This study evaluated the changed industry's impact on agricultural credit by determining if bank characteristics that may result from the industry re-organization significantly affect agricultural credit terms. Agricultural banks in Illinois, Iowa and Indiana were surveyed to attain agricultural credit term offered to three borrower types characterized as small, medium and large farms. These responses also permitted an assessment of bank differentiation of credit terms between different borrower demographic groups.; Implementing the research consisted of presenting a theoretical model to postulate how bank characteristics influenced the lending decision. Tobit and OLS econometric estimation assessed the effect of bank characteristics on loan amount and rate, and the differences in credit terms between the borrower types were evaluated using a paired comparisons approach.; Several bank characteristics and multiple levels of aggregated credit terms were evaluated. The selected parameters for the final models were bank ownership, organization size, number of markets in which the bank operates, agricultural loan ratio, cost of funds, and return on assets. The final models estimated bank characteristics' effects on credit terms for the operating note, total capital purchases and combined operating and capital notes.; The proportion of funds granted were not significantly influenced by the bank characteristics in a consistent manner. Bank ownership, bank organization size, market scope and profitability significantly, but intermittently, influenced the loan amount. The weighted average loan rates for the total capital purchases and the combined notes were significantly affected by one to six of the bank characteristics on a sporadic basis. Borrower characteristics also significantly influenced credit terms.; The paired comparisons results indicated that there was some differentiation in credit terms between the demographic groups. However, when the banks were categorized by ownership, size, location and degree of agricultural lending, there was no strong indication that one bank category differentiated between borrower groups to a greater degree than the other category.; These results showed no overwhelming evidence in favor of or against the trend toward commercial bank consolidation as it impacts agricultural lending. Therefore, further research into the issue is merited. |
