As financial institutions go, agricultural banks have always been unique, especially in their financial performance, which has usually exceeded those of nonagricultural banks. Perhaps one reason is that agricultural banks, which tend to be located in rural areas, face less competition than banks located in urban areas. However, as the authors point out, there are times when the farm sector does not do well. The authors examine current financial measures of the nations’ approximately 3,000 agricultural banks and note that, in the event of a farm crisis, a significant number are as vulnerable to failure today as were those which failed in the crisis of the 1980s. They suggest that one-industry banks maintain higher capital ratios than banks with more diversified loan portfolios as a way to mitigate the effects of a crisis in that industry.

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