Texas and Oklahoma banks that lend to drought-stricken farmers will catch a break from the Federal Deposit Insurance Corp. during the next round of exams.
The FDIC said in a memo to those banks that they will not be criticized for altering terms on farm loans. The regulator announced that it is encouraging banks to work with farmers whose crops have been hurt or destroyed by the region's hot, dry summer.
"Efforts to work with borrowers in communities under stress can be consistent with safe and sound banking practices," wrote Nicholas J. Ketcha Jr., director of the FDIC's Dallas regional office, in a letter to bank chief executives.
This month, Texas Banking Commissioner Catherine A. Ghiglieri warned that the drought would lead to loan losses for many banks that lend to farmers. She said she expected regulators would have to downgrade some agriculture lenders to problem status.
Farmers in Texas and Oklahoma have been plagued with dry weather and afternoon temperatures exceeding 100 degrees for most of the summer. State agencies have estimated farmers and ranchers' losses will top $2 billion.