(NDAgConnection.com) – Farm real estate debt at commercial banks grew modestly in the first quarter, while production loans remained steady. Alongside soaring farmland values, real estate loan balances increased at the fastest pace in nearly four years and drove an increase in overall agricultural lending.

Following a sharp pullback over the past two years, non-real estate lending was stable from a year ago. Farm loan performance also continued to improve, but performance at agricultural banks remained limited by compressed net interest margins and a glut of liquidity.

The farm economy remained strong alongside decade-high commodity prices that continued to support farm finances. Many producers have benefitted immensely from strong cash balances, but credit needs may rise as higher input costs weigh on profit margins.

Estimates of new loan activity among a sample of commercial banks showed that farm lending accelerated during recent months alongside an increase in the size of operating loans and many bankers have also reported expectations of higher loan demand in the months ahead.