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FARM CREDIT SYSTEM INSURANCE CORPORATION

POLICY STATEMENT CONCERNING

THE MANAGEMENT AND DISPOSITION OF OWNED ASSETS

DATED: JUNE 8, 2022 

Background 

The Farm Credit Act of 1971, as amended (Act) established the Farm Credit System Insurance 

Corporation (FCSIC or Corporation) to protect the investors in Systemwide and consolidated 

securities issued by Farm Credit System (System) banks.1

 The Corporation may, from time to 

time, hold an interest in various types of assets. These assets may come under the control of the 

Corporation in its capacity as receiver or they may be assets held in its corporate capacity.2 The 

Corporation may also, from time to time, liquidate assets that have come under the control of the 

Corporation in its capacity as receiver or assets acquired in its corporate capacity.

Section 4.12(b) of the Farm Credit Act of 1971, as amended (Act), states that the Farm Credit 

Administration (FCA) Board shall have exclusive power and jurisdiction to appoint a receiver or 

conservator. The receiver or conservator for a System institution other than the Federal 

Agricultural Mortgage Corporation (FAMC) shall be the Corporation.3 As a receiver of a System 

institution, it is likely that the Corporation will take control of some, if not all, of the institution’s 

assets.

Section 5.61(a) of the Act authorizes the Corporation, in its sole discretion, to purchase the assets 

of a bank or direct lender association in order to facilitate a merger or consolidation. In addition, 

FCSIC in its corporate capacity may choose to purchase certain assets in order to prevent the 

placing of an institution into receivership, to restore the institution to normal operation, or to 

reduce the risk to the Corporation when severe financial conditions threaten the System. 

Section 5.61(b) of the Act sets forth the separate authority of the Corporation to, in its discretion, 

liquidate or sell any part of the assets of any System institution that have been placed in 

receivership or assets acquired in FCSIC’s corporate capacity. 

FCSIC will ensure that assets it owns, or controls are adequately valued, insured, and inspected 

for potential environmental hazards. FCSIC’s primary objective in disposing of assets is to 

minimize losses to the Farm Credit Insurance Fund (Insurance Fund) or the receivership estate. 

FCSIC staff need to establish an appropriate, timely and orderly marketing process that minimizes

losses to the Insurance Fund or the receivership estate with the goal of returning assets to the 

private sector. 

Proper and efficient valuation of assets under FCSIC’s purview by qualified appraisers is 

essential to accomplishing this objective. For purposes of this Policy Statement, we consider an

“appraisal” to be a written statement, independently and impartially prepared, by a qualified 

appraiser setting an opinion of the market value of property as of a specific date supported by the 

1 The Agricultural Credit Act of 1987, Pub. L. No. 100-233 (1988), amended the Farm Credit Act of 1971 to 

establish the Farm Credit System Insurance Corporation. (12 USC §§ 2277a-1 et seq.) 2 This policy statement does not apply to conservatorships. In a conservatorship, the institution’s policies and 

procedures would generally be followed in setting environmental hazard, insurance and appraisal requirements, 

except as those policies and procedures are modified by the Corporation acting as conservator.

3 FCSIC may also act as receiver or conservator for FAMC if appointed by the FCA Board.
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analysis of relevant market information.

4

 Although appraisals do not provide indisputable evidence 

of value, they do provide a reasonable basis for determining the course of action with respect to a 

given asset. In particular, this type of valuation is useful in making a determination of whether to 

sell property for a specific price. Appraisal costs generally are less than 1% of market value for a 

property and when properly conducted provide an objective independent evaluation of a property's 

value.

Ensuring adequate property and liability insurance coverage for owned or controlled assets is 

vital to protect FCSIC’s interests. Failure to secure adequate insurance coverage may result in 

significant, unexpected, and avoidable losses to the Corporation. 

Environmental issues have the potential to adversely affect the value of assets and to create 

liabilities if assets subject to environmental contamination are acquired. This Policy Statement 

provides environmental hazard risk guidance to FCSIC staff to avoid actions that may potentially 

result in losses or liabilities while fostering compliance with all relevant environmental laws and 

regulations. 

Policy Statement

Appraisals

Appraisals are required for real property or tangible personal property collateral that support 

nonperforming loans5 greater than $400,000 and for real property or tangible personal property6

held by the Corporation valued greater than $400,000 unless there is a government guarantee in 

place. For properties with book values greater than $5 million, the Corporation will obtain two 

appraisals to be ordered contemporaneously. Generally, new appraisals will not be required on 

property pledged as collateral where the associated loan is current and performing. If the appraisal 

for collateral supporting a performing loan is older than 18 months FCSIC should determine 

whether the appraisal meets FCSIC’s appraisal standard or consider getting a valuation report 

completed by a qualified evaluator.

FCSIC staff will rely upon a valuation report, completed by a qualified evaluator, in a format 

sufficient to establish the property’s market value, for properties with book values less than 

$400,000. On a case-by-case basis, the Chief Operating Officer (COO) of FCSIC has delegated 

authority to provide exceptions, in writing, to the requirements of this policy statement for 

properties with book values greater than $400,000. For example, in a receivership there may be an 

opportunity to conduct a bulk sale of loan assets to maximize value and reduce the holding period, 

making the requirement to obtain an appraisal on each asset unnecessary.

Insurance

The Corporation’s policy is to maintain adequate property and liability insurance coverage on: (1) 

all property or other assets acquired during the liquidation process; (2) collateral under the control of 

4 This is also the definition used in FCA rules. See, 12 C.F.R. § 614.4240(b). 5 A loan is nonperforming when payments of interest and principal are past due by 90 days or more, or at least 90 

days of interest payments have been capitalized, refinanced or delayed by agreement, or payments are less than 90 

days overdue, but there are other good reasons to doubt that payments will be made in full.

6 For purposes of this policy statement, the term “tangible personal property” means all assets that are not real estate 

and are not “intangible property.” For purposes of this policy statement, “intangible property” includes, without 

limitation, franchises, trademarks, patents, copyrights, goodwill, equities, securities, loans, interests in loans, loan 

participations, contracts and other nonphysical assets. Examples of tangible personal property include, without 

limitation, livestock, equipment, vehicles, furniture, and tools. 
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the Corporation;

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and (3) any property that may be held by the Corporation through the normal 

course of business for which coverage is appropriate. Assets should be insured using a 

blanket/multi-peril insurance policy from an insurer with a Financial Strength Rating from A.M. 

Best Company of B+ or better and is licensed to provide coverage in the state where the asset is 

located. Certain types of assets, for example growing crops or livestock, may be excluded from a 

blanket/multi-peril policy, in which case the Corporation should endeavor to obtain separate 

coverage. When coverage is appropriate and cost effective, the Corporation, as receiver, may 

assume insurance contracts on assets where coverage already exists. Further, the Corporation will 

not self-insure owned assets unless sufficient portfolio diversification or cost savings is achieved 

to justify the risk of self-insurance. 

The COO of FCSIC has delegated authority to provide exceptions, in writing, to the requirements of 

this paragraph on a case-by-case basis.

Environmental Assessments

The Corporation will require completion of a Phase I Environmental Site Assessment (ESA) that 

meets the standards outlined by the American Society for Testing and Materials (ASTM) for all 

assets greater than one acre. The Phase I ESA will need to also include sampling for Business 

Environment Risks (asbestos, radon, mold, and petrol products) and a determination on whether 

the property is considered a Special Resource as these are beyond the scope of standard Phase 1 

ESAs. 

The Corporation shall solicit the expertise of an environmental hazard expert for all 

environmental issues. The Corporation must consult legal counsel, environmental consultants, or 

other experts throughout the environmental risk assessment process. The Corporation shall seek 

advice of outside attorneys to assist in complying with environmental laws and regulations and 

specifically with environmental warranty and disclosure issues related to asset sales. For 

example, specialists are required for the completion of an ASTM Phase I ESA or to meet the 

requirements of the Environmental Protection Agency’s “all appropriate inquiry rule,” which 

states that the individual conducting the investigation and signing the report must meet the 

definition of an “Environmental Professional.”8

 This rule establishes, among other things, 

protection from cleanup for a new owner of property as long as the owner meets certain statutory 

requirements. Therefore, FCSIC shall ensure that outside experts meet necessary qualifications 

in order to limit FCSIC’s liability.

The Corporation will rely on the advice of environmental experts in determining remediation 

efforts, if any.

Sale of Assets

When disposing of assets as a receiver, FCSIC must comply with the requirements of 12 U.S.C. 

2277a-10c(b)(13)(E) (section 5.61C(b)(13)(E) of the Act).9 For all asset sales it is the Board’s 

7 This applies in instances where borrowers fail to maintain adequate insurance coverage under the terms of their 

loan contracts and agreements. 8 See 40 C.F.R. § 312.20. See also 40 C.F.R. § 312.10 (defining “Environmental Professional”). 9 5.61C(b)(13)(E) provides:(E) DISPOSITION OF ASSETS.—In exercising any right, power, privilege, or authority 

as receiver in connection with any sale or disposition of assets of any System institution for which the Corporation is 

acting as receiver, the Corporation shall, to the maximum extent practicable, conduct its operations in a manner 
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goal to dispose of assets as soon as practicable in order to return assets to the private sector where 

they can be more productive while minimizing losses to the Insurance Fund or the receivership 

estate. FCSIC will liquidate assets in an orderly manner to achieve the most favorable rate of 

return. Initial market prices will be established based on the appraised value of the asset or other 

approved valuation method. In general, the Corporation will attempt to sell assets for cash. 

However, in situations where private financing is not readily available, the Corporation will 

consider providing financing for the sale of certain assets on a case-by-case basis. During 

specified periods of marketing, purchase offers may be accepted within defined levels of 

appraised value in accordance with delegations of authority. In cases where assets prove difficult 

to liquidate, the Corporation may sell assets whenever an offer is received that is determined to 

reflect market value as established through an adequate marketing effort, regardless of appraised 

value. 

The Board delegates to the COO of the Corporation authority to make asset disposition decisions 

in all cases where the estimated market value of the asset is less than or equal to $25.0 million. 

This authority is limited to making decisions in cases where the amount of loss to be realized 

does not exceed 15 percent of the sum of a) the book value of the asset(s), minus b) any unearned 

discount, plus c) any interest accrued but unpaid. The COO will have the authority to re-delegate 

all or a portion of this authority to a committee established to review asset disposition proposals, 

to be known as the Asset Review Committee (ARC), or to Corporation staff, as appropriate. 

When disposing of assets, FCSIC staff should ensure that active, professional marketing is 

conducted to obtain the best sales price. FCSIC staff should pursue conventional methods for 

disposing of properties including listing with a broker or direct sale by Corporation personnel or 

contractors. It is the Corporation’s policy to use private sector firms when appropriate in all 

marketing and sales of assets, including asset management and disposition, contracting, 

brokerage, property management, and holding of auctions.

Corporation policy is to utilize target sales price ranges for real estate, and other assets where 

appropriate, based on the Net Realizable Value (NRV)10 of the assets. NRV’s shall be calculated 

by either FCSIC staff or outside experts and be based on expected cost of sale, cost to carry and 

marketing times, with the discount rates equal to the appropriate cost of funds. Price limitations, 

expressed as a percentage of NRV for a stated duration, establish minimum sales price levels. 

Offers which are below these minimums generally would not be accepted.

The following General Sales Price Limitations will apply: 

Marketing Period Price Limitation

0 to 6 months 90% of NRV 

6 to 12 months 80% of NRV

which—(i) maximizes the net present value return from the sale or disposition of such assets; (ii) minimizes the 

amount of any loss realized in the resolution of cases; (iii) ensures adequate competition and fair and consistent 

treatment of offerors; (iv) prohibits discrimination on the basis of race, sex, or ethnic groups in the solicitation and 

consideration of offers; and (v) mitigates the potential for serious adverse effects to the rest of the System.

10 NRV = Present Value (Pv) of Net Cash Flow that is projected to be recovered during a specified period of time. 

Net Cash Flow equals the difference between all projected gross cash flows and all projected direct expenses. Pv 

will be calculated based on the expected marketing time and a discount rate equal to the appropriate cost of funds for 

the institution.
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12 to 24 months 70% of NRV 

Over 24 months No limit

FCSIC staff shall consider the appropriateness of non-conventional marketing strategies such as 

auctions and sealed bid sales as methods of disposition on an asset-by-asset basis. An asset must 

be of sufficient size, require extraordinary holding cost or have unique characteristics for FCSIC 

to consider a non-conventional marketing strategy that FCSIC staff determine will produce a 

better overall price than conventional marketing efforts. The COO or authorized delegate must 

approve alternative marketing methods in advance. 

To avoid the appearance of impropriety, the Corporation will refrain from the sale of assets to 

parties who may have influence, or the appearance of influence, over the terms or conditions of 

sale. This includes employees of the Corporation, the FCA, the receivership or conservatorship, 

current or recent FCSIC board members, contractors, and members of the immediate families of 

any of these groups. The Corporation must also review all sales to ensure they comply with the 

statutory requirements of 5.61C(i) of the Act.

When statutory borrower rights are determined to apply, the Corporation will generally follow 

applicable borrower rights procedures established by the district bank or association where the 

asset is located.

This Policy Statement shall be supported by procedures that provide detailed instructions and 

guidance to FCSIC staff on obtaining appraisals, insurance, and environmental assessments for 

assets under the Corporation’s control as well as the process for disposing acquired assets.

Reporting to the Board

FCSIC staff will promptly report to the Board on any assets owned or managed by the 

Corporation or its contractors that pose an urgent environmental risk. Additionally, FCSIC staff 

will report to the Board at least quarterly on 1) the insurance coverage of all owned or managed 

assets covered by this Policy, 2) assets that are exposed to environmental risk, and 3) asset sales 

and status of marketing efforts.