sociation from the standpoint of member and nonmember business, it should be borne in mind that at least 50 percent of its gross income must be derived from farmer members; therefore, the bank should determine whether the company may be required by State law to serve the public generally. If it may be so required, no loan should be made. An exception to this policy might be an isolated case where the type of territory served by such a cooperative might preclude the possibility of nonfarmer business becoming predominant. In such circumstances and if the association may not be required by state authorities to extend its operations to other areas, a loan need not be rejected merely because the cooperative is required to serve the general public. § 70.14 Same; cold storage companies. A bank for cooperatives is authorized to make loans to a cooperative cold storage company of farmers engaged in the renting of lockers for storage purposes and performing related services provided at least half of its operating income is derived from its farmer members, if the cooperative is otherwise qualified and eligible. § 70.15 Same; fish and oysters. Fish and oysters which are produced under fully controlled conditions are considered to be agricultural commodities within the meaning of the Agricultural Marketing Act, as amended. Insofar as these products are concerned, cooperatives handling them, if such associations are otherwise qualified, are eligible to borrow from the banks for cooperatives. § 70.16 Same; woodland products. If otherwise eligible, loans may be made to an association engaged in the handling, processing, and marketing of wood or wood products produced by farmers in connection with their farming operations, including tree farming. § 70.17 Organizations not eligible. The following types of organizations are not eligible to borrow from a bank for cooperatives: Credit unions and cooperative banks; rural hospital and health association; and soil conservation, irrigation, and reclamation districts. Subpart-Loan Policies § 70.20 Unconditional liability of bor rower. A bank for cooperatives is not authorized to make a loan under any conditions where the obligation of the maker to pay such indebtedness could be regarded as being other than unqualified and unconditional, regardless of the nature of the security therefor or other special or unusual conditions. § 70.22 Lending limits of district banks. Except with the written approval of the Director of Cooperative Bank Service, the lending limits of each district bank for cooperatives are hereby fixed so that loans to any one borrower outstanding at any time (exclusive of participations therein sold to others) may not exceed the following percentages of the net worth of the bank as of the close of the preceding fiscal year: (a) Facility loans, 20 percent; (b) Operating capital loans, 20 percent; (c) Commodity loans (excluding loans secured by Commodity Credit Corporation documents), 35 percent; (d) The sum of facility and operating capital loans, 20 percent; (e) The sum of facility, operating capital, and commodity loans (excluding loans secured by Commodity Credit Corporation documents), 35 percent; Provided, however, That a loan made within established limits, but which becomes excessive by virtue of a subsequent decrease in the net worth of the bank, may be retained and liquidated in an orderly manner. § 70.23 Lending limits of the Central Bank for Cooperatives. The total loans from the Central Bank for Cooperatives to any one farmers' cooperative association, exclusive of commodity loans, or of operating capital loans to finance commodities within the limits of Government price support programs, shall not at any time exceed 25 percent of the net worth of the bank. § 70.24 Limitation on lending operations of Central Bank. Pursuant to the provisions of law that any regulation affecting the lending operations of the banks for cooperatives shall be consistent with the principle that the Central Bank for Cooperatives shall make loans only in cases where it is not practicable for the loan to be made by a district bank, no loan application made to the Central Bank for Cooperative by a farmers' cooperative association shall be considered by the bank without the prior approval of such consideration by the Director of Cooperative Bank Service. § 70.25 par District banks-sale of ticipations; loans exceeding lending limits. The district bank shall request the Central Bank for Cooperatives (or, when approved by the Director of Cooperative Bank Service, another district bank) to participate in the extension of credit for amounts which exceed the lending limits set forth in § 70.22, and, except when otherwise agreed, such participation shall take place in the following order: First, commodity loans; second, operating capital loans; and third, facility loans. § 70.26 Same; other loans. Nothing contained in §§ 70.22 or 70.25 shall be construed to prevent a district bank for cooperatives from requesting the Central Bank for Cooperatives (or, when approved by the Director of Cooperative Bank Service, another district bank) to participate in the extension of credit to any borrower before its lending limits are reached. Any such participation by another district bank ordinarily shall be limited to $200,000, unless the Director of Cooperative Bank Service approves a larger amount. § 70.27 Term loan maturities. It is the policy that term loans ordinarily should not be made for a term of more than 10 years. If, in the opinion of a bank's loan committee (or executive committee), a term loan in excess of 10 years is warranted and a showing can be made in support of same, then the bank may make the loan for a term not exceeding the statutory 20-year limit, provided an escalator clause on interest at the 10-year and 15-year points is included in the loan agreement. NOTE: As to further provisions on interest escalator or adjustment clauses, see § 70.92. § 70.31 Territorial limitations on loans. A bank for cooperatives should make loans only to cooperative associations operating within, or with headquarters in, the farm credit district served by the bank for cooperatives. A bank for co operatives may make loans to an association operating in, or with headquarters in, another farm credit district provided: (a) The interests of the borrowing cooperative would best be served; and (b) The bank for cooperatives in the farm credit district in which the cooperative association is located and the Farm Credit Administration agree thereto. Cooperative associations operating in more than one farm credit district should apply for loans to the bank for cooperatives in the district in which the principal operating office of the cooperative association is located. § 70.32 Appraisal and loan fees. Appraisal and loan fees not to exceed one-half of 1 percent of the amount of a loan may be charged by the banks for cooperatives to applicant associations. A higher rate may be charged with the approval of the Farm Credit Administration. § 70.34 Loans to finance sales by or purchases from cooperatives and other purposes of farmers. Insofar as farmers may obtain loans for general agricultural purposes and their other requirements from production credit associations, there ordinarily should be no occasion for a bank for cooperatives to make a loan which would be used by the borrowing cooperative association to make loans to farmers of a type which may be obtained from production credit associations. However, a bank for cooperatives may make a loan to a cooperative association to enable it to capitalize a subsidiary or affiliated credit corporation. A bank for cooperatives also may make a loan to enable the borrowing cooperative association (which may be a credit corporation or other type of eligible cooperative) to extend credit or make a loan for the purpose of financing the sale of farm supplies, equipment, or services by such borrowing cooperative association or an affiliated cooperative association. Any such loans by the borrowing cooperative association may be made either to the farmer patrons or to an affiliated cooperative association which is furnishing the farm supplies, equipment, or services. Further, a bank for cooperatives may make a loan to enable the borrowing cooperative association to lend to farmers for a purpose other than the purchase of farm supplies, equipment, or services from the borrowing cooperative association or an affiliated cooperative association if the loan by the borrowing cooperative association for such other purpose is directly connected with and reasonably necessary for other eligible functions performed by the borrowing cooperative association or an affiliated cooperative association for such farmers. In any circumstances where the lending authority of a bank for cooperatives is deemed to overlap the lending authority of a Federal intermediate credit bank or the production credit associations, the farm credit board for the district should resolve how any needed loan service within such authority is to be rendered. (27 F.R. 5788, June 20, 1962] § 70.35 Relation of cooperative associations to general farm organizations. The Farm Credit Administration believes that there should be the closest cooperation between cooperative associations and general farm organizations. It desires to aid in every way within its proper functions the growth and progress of both types of organizations. With the best interests of both groups in mind, the Farm Credit Administration, insofar as the financing of cooperatives is concerned, desires to operate under a policy that limiting membership in a cooperative association to persons who are members of a general farm organization shall not make such cooperative association ineligible to borrow from a bank for cooperatives; Provided: (a) The applicant cooperative association does not collect from its members (by deductions from sales proceeds or from patronage dividends or otherwise) dues payable by such members to a general farm organization, except where the members from whom such dues are so collected have individually and specifically, and in a manner satisfactory to the bank for cooperatives, authorized the cooperative association to collect and pay such dues to the farm organization concerned; and (b) The applicant cooperative association will agree at the request of the bank for cooperatives, to serve qualified nonmembers of the association who do not desire membership in the general farm organization concerned, and to handle (within the limitations of the Agricultural Marketing Act, as amended) such nonmember business as may be necessary to serve such producers who have no other opportunity to market their products, or purchase their supplies, cooperatively. Subpart-Commodity Loans § 70.50 Authority to make commodity loans. Commodity loans (loans made on the security of commodities) are made under authority of section 7(a)(1) of the Agricultural Marketing Act, as amended (12 U.S.C. 1141e), and section 41 of the Farm Credit Act of 1933, as amended (12 U.S.C. 1134c). § 70.53 Eligible commodities. The following farm products and farm supplies have been approved by the Director of Cooperative Bank Service as security for commodity loans when marketable and in acceptable storage: Grains. Fibers (such as cotton, wool, mohair, etc.). under the authority of section 7(a) (1) of the Agricultural Marketing Act, as amended (12 U.S.C. 1141e). § 70.61 Security for operating capital loans. Operating capital loans can be made with or without security. These are usually short-term loans (repayable within the operating season), but may be made to replace or to supplement association working capital. Term loans are usually secured. Subpart-Facility Loans § 70.70 Authority to make facility loans; general. Facility loans to a cooperative association to assist it in the construction or acquisition by purchase or lease, or for refinancing the cost of such construction or acquisition, of physical facilities are made under the authority of section 7(a) (2) of the Agricultural Marketing Act, as amended (12 U.S.C. 1141e). § 70.71 Same; special. Loans made pursuant to sections 34 and 41 of the Farm Credit Act of 1933, as amended by section 417 of the Agricultural Act of 1949 (12 U.S.C. 1134c, 1134j), for construction of storage facilities with a commitment from Commodity Credit Corporation as to lease or utilization, are to be regarded as facility loans and are subject to the restrictions contained therein. § 70.75 Physical facilities defined. The term "physical facilities" ordinarily should be confined to land, buildings, fixtures, and equipment of relatively immovable character. Office and laboratory equipment, trucks, tractors, terracing machines, and other like articles are not physical facilities and loans made for the acquisition of such articles should be classified as operating capital loans. § 70.76 Security. Facility loans must be secured. § 70.77 Loan limitation. No facility loan shall be made in an amount (a) in excess of 60 percent of the appraised value of the security therefor if made pursuant to section 7(a) (2) of the Agricultural Marketing Act, as amended (12 U.S.C. 1141e), or (b) in excess of 80 percent of the cost of construction of structures for the storage of agricultural commodities if made pursuant to sections 34 and 41 of the Farm Credit Act of 1933, as amended by section 417 of the Agricultural Act of 1949 (12 U.S.C. 1134c, 1134j). § 70.79 Maturity. Facility loans, together with interest on the loans, shall be repaid upon an amortization plan over a period not in excess of 20 years (12 U.S.C. 1141e): Provided, however, That the words "shall be repaid upon an amortization plan" shall not be construed as preventing the full repayment of any facility loan in one payment if such action is agreeable to the bank and the borrowing cooperative. Subpart-Interest on Loans to § 70.90 General authority to determine rates of interest. Loans to cooperative associations made by any bank for cooperatives shall bear such rates of interest as the board of directors of the bank shall from time to time determine with the approval of the Farm Credit Administration, but in no case shall the rate of interest exceed 6 per centum per annum on the unpaid principal of a loan (12 U.S.C. 1141f). § 70.92 Interest escalator or adjustment clauses. Any policy providing for adjustment of the interest rate on outstanding loan balances of cooperative associations borrowing from a bank for cooperatives has the approval of the Farm Credit Administration so long as such policy: (a) Has been approved by the bank's board of directors; (b) Does not conflict with applicable State laws and is approved by district general counsel; (c) Is made uniformly and consistently applicable to all loans of any kind (i.e., commodity, seasonal operating capital, term operating capital, facility, short-term or long-term) which are covered by the policy: (d) Is set forth as a provision of each loan agreement to which it applies; Provided, however, That (1) all loan agreements covering term loans made with a final maturity date of more than 10 years, but less than 20 years, shall carry an escalator clause on interest at the 10- and 15-year points, and (2) each bank should keep the Farm Credit Administration currently informed of any changes made in its policy of loan interest escalator or adjustment clauses. § 70.93 Interest rates on renewals and extensions. The interest rate applicable to any renewal, extension or consolidation of any outstanding loan shall be governed by the policy established by the board of directors of a bank subject to the approval of the Farm Credit Administration. Such policy should be made uniformly and consistently applicable to all loans of any kind, class, or type which are covered by the policy. Subpart-Capital Stock, Surplus, § 70.140 Reserves General provisions. Loans and capital stock of a bank issued pursuant to the Farm Credit Act of 1933, as amended, and outstanding on January 1, 1956, shall be treated in accordance with that law and regulations issued pursuant to it, and, in the absence of agreement to conform to Title I of the Farm Credit Act of 1955, shall be treated as though the 1955 Act had not gone into effect. § 70.141 Retirement of capital stock issued before the effective date of Title I of the Farm Credit Act of 1955 (January 1, 1956). Shares of capital stock of a bank for cooperatives issued before January 1, 1956, and shares of stock having the same rights and subject to the same limitations issued on and after said date in accordance with firm loan commitments of the bank made prior to said date shall be retired only (a) when a holder thereof is entitled by law to have them retired, (b) when the debt of a holder thereof to the bank is in default, (c) when the proceeds of the retirement are to be immediately reinvested in class C stock or class B stock of a district bank or class B stock of the Central Bank for Cooperatives, or in such stock of both banks, or (d) when, with the approval of the Farm Credit Administration, such retirement is provided for in an agreement between the bank and a borrower to change a loan of the borrower to conform to Title I of the Farm Credit Act of 1955. § 70.142 Capital stock ownership required with respect to loans conforming to the Farm Credit Act of 1955; district banks. Each borrower from a bank for cooperatives shall be required to own at the time the loan is made at least one share of class C stock. The purchase price of such stock may be retained out of the loan. In addition, each borrower as defined by the Farm Credit Administration for purposes of this sentence, shall be required to invest quarterly in class C stock an amount equal to not less than 10 nor more than 25 per centum, as prescribed by the board of directors of the bank with the approval of the Farm Credit Administration, of the amount of interest payable by it to the bank during the calendar quarter. Payments for such stock shall be made quarterly or when the regular interest payments of the borrower are payable, but the stock shall be issued to the borrower as of the end of each fiscal year in the amount of the payments for stock made by it during the year. (Section 42(a) (3), Farm Credit Act of 1933, as amended; 12 U.S.C. 1134d.) § 70.143 Same; Central Bank. Each borrower from the Central Bank shall be required to own at the time the loan is made at least one share of class C stock in such district bank as the Farm Credit Administration shall designate and shall be required to invest quarterly in class C stock in such district bank or banks as the Farm Credit Administration shall designate an amount equal to not less than 10 nor more than 25 per centum, as prescribed by the board of directors of the Central Bank with the approval of the Farm Credit Administration, of the amount of interest payable by such borrower to the Central Bank during the calendar quarter. Payments for such stock shall be made quarterly or when the regular interest payments of such borrower are payable; but the stock shall be issued to the borrower as of the end of each fiscal year in the amount of the payments for stock made by it during such year. The district bank whose stock is so issued to such borrower shall purchase a corresponding amount of class C stock in the Central Bank. (Section 35, Farm Credit Act of 1933, as amended; 12 U.S.C. 1134k.) |