American AgCredit, Sonoma County's largest financial institution, reported earnings rose 14 percent last year even though assets declined.

The Santa Rosa ag lender reported an adjusted net income last year of $92.7 million, up $11.4 million from 2010.

The adjustment excluded $75.2 million in non-interest income that resulted from a merger involving a bank from which American AgCredit borrows funds. Without the adjustment, net income rose to $180.7 million last year.

American AgCredit said income increased because of improving interest rate margins and a reduction of funds set aside for potential loan losses.

Based on the 2011 earnings, American AgCredit paid out $34.7 million in dividends, up nearly 32 percent from the previous year and the largest amount since its formation in 1916.

Assets declined 3 percent to $4.7 billion. Total loans declined 4 percent to nearly $4.6 billion. It attributed the drop to a sluggish economy that held down new capital investments by farmers and other members.

In January, the association absorbed Farm Credit Services of the Mountain Plains of Greeley, Colo., its fifth merger since 2000. With the change, American AgCredit became the nation's sixth-largest farm credit cooperative.

Congress established the farm credit system in 1916 to provide loans and other financial services to farmers, ranchers, agribusinesses and rural homeowners.

American AgCredit, a member of that system, is owned by nearly 7,000 shareholders, each a borrower who owns a single share of stock valued at $1,000.

"We're extremely pleased with our financial results and business performance for 2011," said Ron Carli, president and chief executive officer of American AgCredit. "Despite an economic environment that remains challenging, we continue to serve as a dependable source of credit for farmers, ranchers and other types of agribusiness in our territories."