In this article, Michael T. Belongia and R. Alton Gilbert analyze a sample of farm banks to isolate the likely causes of failures. By looking at 1981 data, they rule out weaker balance sheets or lower earnings prior to the farm sector downturn as potential causes of farm bank troubles: Banks that failed and those that survived were similarly capitalized and profitable in 1981. However, the banks that failed held somewhat riskier portfolios than those who did not. For example, the failed banks invested more of their assets in loans generally, and farm loans particularly, than did the surviving banks. The failed banks also held fewer federal government securities, which are free of default risk. Of the surviving banks in 1986, Belongia and Gilbert find that about 70 percent are in sound financial condition. Finally, they find that most counties in the sample still are served by at least one healthy agricultural bank.