Are farm loans “toxic assets” for banks?

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According to a news report by the USBanker, banks who have at least a quarter of their loans in agriculture are facing increased regulatory scrutiny; despite the fact that these “farm banks” have historically outperformed the rest of the banking industry.

Lessons learned from the construction and real estate markets are being applied by regulators to banks who deal in agricultural loans. According to the news report, regulators want to guard against any “surprises.”

In some cases, farm loans have been viewed as toxic assets by regulators. In other cases, these loans have presented no problems for the regulators.

The failure of New Frontier Bank in Greeley, Colo., last year, has not make a good case for agriculture. New Frontier had a huge exposure to dairy and the Federal Deposit Insurance Corp., could not find a buyer for the bank, reports the USBanker.

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Source: USBanker

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