January 2010 99 Statutes

bank" means any System bank whose participation in notes, bonds, 

debentures, and other obligations issued under subsection (c) or (d) 

of section 4.2 is insured under this part.

(5) STATE. The term "State" means any of the 50 States, 

the District of Columbia, any Territory of the United States, Puerto 

Rico, Guam, American Samoa, the Trust Territory of the Pacific 

Islands, or the Virgin Islands.

12 U.S.C. 2277a-1 SEC. 5.52. ESTABLISHMENT OF FARM CREDIT SYSTEM 

INSURANCE CORPORATION. 

There is hereby established the Farm Credit System Insurance 

Corporation which shall insure, in accordance with this part, the timely 

payment of principal and interest on notes, bonds, debentures, and other 

obligations issued under subsection (c) or (d) of section 4.2 on behalf of 

one or more System banks all of which are entitled to the benefits of 

insurance under this part.

12 U.S.C. 2277a-2 SEC. 5.53. BOARD OF DIRECTORS. 

(a) ESTABLISHMENT. The Corporation shall be managed by a 

Board of Directors that shall consist of the members of the Farm Credit 

Administration Board.

(b) CHAIRMAN. The Board of Directors shall be chaired by any 

Board member other than the Chairman of the Farm Credit Administration 

Board.

12 U.S.C. 2277a-3 SEC. 5.54. COMMENCEMENT OF INSURANCE.

Effective beginning on January 1, 1989, or 12 months after the date 

of the enactment of this part, whichever is later, each System bank shall be 

an insured System bank and shall be subject to this part. Each System 

bank that is authorized to commence or resume operations under a title of 

this Act shall be an insured System bank from the time of such 

authorization. A bank resulting from the merger or consolidation of 

insured System banks shall be an insured System bank.

12 U.S.C. 2277a-4 SEC. 5.55. PREMIUMS. 

(a) AMOUNT IN FUND NOT EXCEEDING SECURE BASE 

AMOUNT.

(1) IN GENERAL. If at the end of any calendar year the 

aggregate of amounts in the Farm Credit Insurance Fund does not 

exceed the secure base amount, subject to paragraph (3), the 

premium due from any insured System bank for the calendar year 

shall be equal to the sum of—

(A) the average outstanding insured obligations issued 
January 2010 100 Statutes

by the bank for the calendar year, after deducting from the 

obligations the percentages of the guaranteed portions of loans 

and investments described in paragraph (2), multiplied by 

0.0020; and

(B) the product obtained by multiplying-- 

(i) the sum of--

(I) the average principal outstanding for 

the calendar year on loans made by the bank that are in 

nonaccrual status; and

(II) the average amount outstanding for 

the calendar year of other-than-temporarily impaired 

investments made by the bank; by

(ii) 0.0010.

(2) DEDUCTIONS FROM AVERAGE OUTSTANDING 

INSURED OBLIGATIONS.--The average outstanding insured 

obligations issued by the bank for the calendar year referred to in 

paragraph (1)(A) shall be reduced by deducting from the obligations 

the sum of (as determined by the Corporation)--

(A) 90 percent of each of--

(i) the average principal outstanding for the 

calendar year on the guaranteed portions of Federal 

government-guaranteed loans made by the bank that are 

in accrual status; and

(ii) the average amount outstanding for the 

calendar year of the guaranteed portions of Federal 

government-guaranteed investments made by the bank 

that are not permanently impaired; and

(B) 80 percent of each of--

(i) the average principal outstanding for the 

calendar year on the guaranteed portions of State 

government-guaranteed loans made by the bank that are 

in accrual status; and

(ii) the average amount outstanding for the 

calendar year of the guaranteed portions of State 

government-guaranteed investments made by the bank 

that are not permanently impaired.

(3) REDUCED PREMIUMS. The Corporation, in the sole 

discretion of the Corporation, may reduce by a percentage uniformly 

applied to all insured System banks the premium due from each 

insured System bank during any calendar year, as determined under 

paragraph (1).

(4) DEFINITION OF GOVERNMENT-GUARANTEED 

LOANS OR INVESTMENTS. In this section, the term 

"government-guaranteed", when applied to a loan or an investment, 

means a loan, credit, or investment, or portion of a loan, credit, or 

investment, that is guaranteed—

(A) by the full faith and credit of the United States 

Government or any State government;

(B) by an agency or other entity of the United States 
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Government whose obligations are explicitly guaranteed by 

the United States Government; or

(C) by an agency or other entity of a State government 

whose obligations are explicitly guaranteed by such State 

government.

(b) AMOUNT IN FUND EXCEEDING SECURE BASE 

AMOUNT. At any time the aggregate of amounts in the Farm Credit 

Insurance Fund exceeds the secure base amount, the Corporation shall 

reduce the premium due from each insured System bank, as determined 

under subsection (a)(1) of this section, by a percentage determined by the 

Corporation so that the aggregate of the premiums payable by all System 

banks is sufficient to ensure that the aggregate of amounts in the Farm 

Credit Insurance Fund after such premiums are paid is not less than the 

secure base amount at such time.

(c) SECURE BASE AMOUNT. 

(1) IN GENERAL.--For purposes of this part, the term 

"secure base amount" means, with respect to any point in time, 2 

percent of the aggregate outstanding insured obligations of all 

insured System banks at such time (as adjusted under paragraph (2)), 

or such other percentage of the aggregate amount as the Corporation 

in its sole discretion determines is actuarially sound to maintain in 

the Insurance Fund taking into account the risk of insuring 

outstanding insured obligations.

(2) ADJUSTMENT.--The aggregate outstanding insured 

obligations of all insured System banks under paragraph (1) shall be 

adjusted downward to exclude an amount equal to the sum of (as 

determined by the corporation)--

(A) 90 percent of each of--

(i) the guaranteed portions of principal 

outstanding on Federal government-guaranteed loans in accrual 

status made by the banks; and

(ii) the guaranteed portions of the amount of 

Federal government-guaranteed investments made by the 

banks that are not permanently impaired; and

(B) 80 percent of each of--

(i) the guaranteed portions of principal 

outstanding on State government-guaranteed loans in 

accrual status made by the banks; and

(ii) the guaranteed portions of the amount of 

State government-guaranteed investments made by the 

banks that are not permanently impaired.

(d) DETERMINATION OF LOAN AND INVESTMENT 

AMOUNTS. For the purpose of subsections (a) and (c), the principal 

outstanding on all loans made by an insured System bank, and the amount 

outstanding on all investments made by an insured System bank, shall be 

determined based on—

(1) all loans or investments made by any production credit 

association, or any other association making direct loans under 

authority provided under section 7.6, that is able to make such loans 

or investments because such association is receiving, or has received, 
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funds provided through the insured System bank;

(2) all loans or investments made by any bank, company, 

institution, corporation, union, or association described in section 1.7

(b)(1)(B), that is able to make such loans or investments because 

such entity is receiving, or has received, funds provided through the 

insured System bank; and

(3) all loans or investments made by such insured System 

bank (other than loans made to any party described in paragraph (1) 

or (2)).

(e) ALLOCATION TO SYSTEM INSTITUTIONS OF EXCESS 

RESERVES.

(1) ESTABLISHMENT OF ALLOCATED INSURANCE 

RESERVES ACCOUNTS. There is hereby established in the Farm 

Credit Insurance Fund an Allocated Insurance Reserves Account—

(A) for each insured System bank; and

(B) subject to paragraph (6)(C), for all holders, in the 

aggregate, of Financial Assistance Corporation stock.

(2) TREATMENT. Amounts in any Allocated Insurance 

Reserves Account shall be considered to be part of the Farm Credit 

Insurance Fund.

(3) ANNUAL ALLOCATIONS. If, at the end of any 

calendar year, the aggregate of the amounts in the Farm Credit 

Insurance Fund exceeds the secure base amount, the Corporation 

shall allocate to the Allocated Insurance Reserves Accounts the 

excess amount less the amount that the Corporation, in its sole 

discretion, determines to be the sum of the estimated operating 

expenses and estimated insurance obligations of the Corporation for 

the immediately succeeding calendar year.

(4) ALLOCATION FORMULA. From the total amount 

required to be allocated at the end of a calendar year under paragraph 

(3)—

(A) 10 percent of the total amount shall be credited to 

the Allocated Insurance Reserves Account established under 

paragraph (1)(B), subject to paragraph (6)(C); and

(B) there shall be credited to the allocated insurance 

reserves account of each insured system bank an amount that 

bears the same ratio to the total amount (less any amount 

credited under subparagraph (A)) as--

(i) the average principal outstanding for the 

calendar year on insured obligations issued by the bank 

(after deducting from the principal the percentages of the 

guaranteed portions of loans and investments described 

in subsection (a)(2)); bears to

(ii) the average principal outstanding for the 

calendar year on insured obligations issued by all 

insured System banks (after deducting from the principal 

the percentages of the guaranteed portions of loans and 

investments described in subsection (a)(2)).

(5) USE OF FUNDS IN ALLOCATED INSURANCE 

RESERVES ACCOUNTS. To the extent that the sum of the 
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operating expenses of the Corporation and the insurance obligations 

of the Corporation for a calendar year exceeds the sum of operating 

expenses and insurance obligations determined under paragraph (3) 

for the calendar year, the Corporation shall cover the expenses and 

obligations by—

(A) reducing each Allocated Insurance Reserves 

Account by the same proportion; and

(B) expending the amounts obtained under 

subparagraph (A) before expending other amounts in the Fund.

(6) OTHER DISPOSITION OF ACCOUNT FUNDS.

(A) IN GENERAL. As soon as practicable during 

each calendar year, the Corporation may—

(i) subject to subparagraph (D), pay to each 

insured System bank, in a manner determined by the 

Corporation, an amount equal to the balance in the 

Allocated Insurance Reserves Account of the System 

bank; and

(ii) subject to subparagraphs (C) and (E), pay to 

each System bank and association holding Financial 

Assistance Corporation stock a proportionate share, 

determined by dividing the number of shares of 

Financial Assistance Corporation stock held by the 

institution by the total number of shares of Financial 

Assistance Corporation stock outstanding at the time of 

the termination of the Financial Assistance Corporation, 

of the balance in the Allocated Insurance Reserves 

Account established under paragraph (1)(B).

(B) AUTHORITY TO ELIMINATE OR REDUCE 

PAYMENTS. The Corporation may eliminate or reduce 

payments during a calendar year under subparagraph (A) if the 

Corporation determines, in its sole discretion, that the 

payments, or other circumstances that might require use of the 

Farm Credit Insurance Fund, could cause the amount in the 

Farm Credit Insurance Fund during the calendar year to be less 

than the secure base amount.

(C) REIMBURSEMENT FOR FINANCIAL 

ASSISTANCE CORPORATION STOCK.

(i) SUFFICIENT FUNDING. Notwithstanding 

paragraph (4)(A), on provision by the Corporation for 

the accumulation in the Account established under 

paragraph (1)(B) of funds in an amount equal to 

$56,000,000, the Corporation shall not allocate any 

further funds to the Account except to replenish the 

Account if funds are diminished below $56,000,000 by 

the Corporation under paragraph (5).

(ii) TERMINATION OF ACCOUNT.--On 

disbursement of an amount equal to $56,000,000, the 

Corporation shall--

(I) close the account established under 

paragraph (1)(B); and
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(II) transfer any remaining funds in the 

Account to the remaining Allocated Insurance 

Reserves Accounts in accordance with paragraph 

(4)(B) for the calendar year in which the transfer 

occurs.

(D) DISTRIBUTION OF PAYMENTS RECEIVED. 

Not later than 60 days after receipt of a payment made under 

subparagraph (A)(i), each insured System bank, in consultation 

with affiliated associations of the insured System bank, and 

taking into account the direct or indirect payment of insurance 

premiums by the associations, shall develop and implement an 

equitable plan to distribute payments received under 

subparagraph (A)(i) among the bank and associations of the 

bank.

(E) EXCEPTION FOR PREVIOUSLY 

REIMBURSED ASSOCIATIONS. For purposes of 

subparagraph (A)(ii), in any Farm Credit district in which the 

funding bank has reimbursed 1 or more affiliated associations 

of the bank for the previously unreimbursed portion of the 

Financial Assistance Corporation stock held by the 

associations, the funding bank shall be deemed to be the holder 

of the shares of Financial Assistance Corporation stock for 

which the funding bank has provided the reimbursement.

12 U.S.C. 2277a-5 SEC. 5.56. CERTIFICATION OF PREMIUMS.

(a) FILING CERTIFIED STATEMENT. On a date to be 

determined in the sole discretion of the Board of Directors of the 

Corporation, each insured System bank that became insured before the 

beginning of the period for which premiums are being assessed (referred to 

in this section as the "period") shall file with the Corporation a certified 

statement showing—

(1) the average outstanding insured obligations for the 

period issued by the bank;

(2)(A) the average principal outstanding for the period on the 

guaranteed portion of Federal government-guaranteed loans that are 

in accrual status; and

(B) the average amount outstanding for the period of Federal 

government-guaranteed investments that are not permanently 

impaired (as defined in section 5.55(a)(4));

(3)(A) the average principal outstanding for the period on 

State government-guaranteed loans that are in accrual status; and

(B) the average amount outstanding for the period of State 

government-guaranteed investments that are not permanently 

impaired (as defined in section 5.55(a)(4));

(4)(A) the average principal outstanding for the period on 

loans that are in nonaccrual status; and

(B) the average amount outstanding for the period of 

other-than-temporarily impaired investments; and
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(5) the amount of the premium due the Corporation from the 

bank for the period. 

(b) CONTENTS AND FORM OF STATEMENT. The certified 

statement required to be filed with the Corporation under subsection (a) of 

this section shall be in such form and set forth such supporting information 

as the Board of Directors shall prescribe, and shall be certified by the 

president of the bank or any other officer designated by its board of 

directors that to the best of the persons knowledge and belief the statement 

is true, correct, complete, and has been prepared in accordance with this 

part and all regulations issued thereunder.

(c) PREMIUM PAYMENTS.--

(1) IN GENERAL.--Except as provided in paragraph (2), 

each insured System bank shall pay to the Corporation the premium 

payments required under subsection (a), not more frequently than 

once in each calendar quarter, in such manner and at such 1 or more 

times as the Board of Directors shall prescribe.

(2) PREMIUM AMOUNT.--The amount of the premium 

shall be established not later than 60 days after filing the certified 

statement specifying the amount of the premium.

(d) REGULATIONS. The Board of Directors shall prescribe all 

rules and regulations necessary for the enforcement of this section. The 

Board of Directors may limit the retroactive effect, if any, of any of its 

rules or regulations.

NOTE: The amendments made by section 5403 of Public Law 107-171 

shall apply with respect to determinations of premiums for calendar 

year 2002 and for any succeeding calendar year, and to certified 

statements with respect to such premiums.

12 U.S.C. 2277a-6 SEC. 5.57. OVERPAYMENT AND UNDERPAYMENT OF 

PREMIUMS; REMEDIES.

(a) OVERPAYMENTS. The Corporation may refund to any 

insured System bank any premium payment made by the bank exceeding 

the amount due the Corporation.

(b) UNDERPAYMENTS.

(1) RECOVERY. The Corporation, in a suit brought at law 

or in equity in any court of competent jurisdiction, may recover from 

any insured System bank the amount of any unpaid premium 

lawfully payable by the bank to the Corporation, whether or not the 

bank has filed any certified statement under section 5.56, and 

whether or not suit has been brought to compel the bank to file any 

such statement.

(2) LIMITATION. Any action or proceeding for the 

recovery of any premium due the Corporation under paragraph (1), 

or for the recovery of any amount paid to the Corporation exceeding 

the amount due the Corporation, shall be brought within 5 years after 

the right accrued for which the claim is made. If an insured System 
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bank has filed with the Corporation a false or fraudulent certified 

statement with the intent to evade, in whole or in part, the payment 

of a premium, the claim shall not be deemed to have accrued until 

the Corporation discovers that the certified statement is false or 

fraudulent.

(c) FAILURE TO FILE STATEMENT OR PAY PREMIUM.

(1) FORFEITURE OF RIGHTS. If any insured System 

bank fails to file any certified statement required to be filed by such 

bank under section 5.56 or fails to pay any premium required to be 

paid by such bank under any provision of this part, and if the bank 

does not correct such failure within 30 days after the Corporation 

gives written notice to an officer of the bank, citing this subsection 

and stating that the bank has failed to so file or pay as required by 

law, all the rights, privileges, and franchises of the bank granted to it 

under this Act shall be thereby forfeited.

(2) ENFORCEMENT. The Corporation may bring an 

action to enforce this subsection against any such bank in any court 

of competent jurisdiction for the judicial district in which the bank is 

located.

(3) LIABILITY OF DIRECTORS. Every director who 

participated in or assented to a failure (described in paragraph (1)) 

shall be held personally liable for all consequential damages.

(d) EFFECT ON OTHER REMEDIES. The remedies provided in 

subsections (b) and (c) of this section shall not be construed as limiting any 

other remedies against any insured System bank, but shall be in addition 

thereto.

12 U.S.C. 2277a-7 SEC. 5.58. GENERAL CORPORATE POWERS. 

On the date of the enactment of this part, the Corporation shall 

become a body corporate and as such shall have the following powers:

(1) SEAL. The Corporation may adopt and use a corporate 

seal.

(2) SUCCESSION. The Corporation may have succession 

until dissolved by an Act of Congress. The Corporation shall 

succeed to the rights of the Farm Credit System Assistance Board 

under agreements between the Farm Credit System Assistance Board 

and System institutions certifying the institutions as eligible to issue 

preferred stock pursuant to title VI on the termination of the 

Assistance Board on the date provided in section 6.12.

(3) CONTRACTS. The Corporation may make contracts.

(4) LEGAL ACTIONS.

(A) IN GENERAL. The Corporation may sue and be 

sued, complain and defend, in any court of law or equity, State 

or Federal.

(B) JURISDICTION. All suits of a civil nature at 

common law or in equity to which the Corporation shall be a 

party shall be deemed to arise under the laws of the United 

States, and the United States district courts shall have original