This section of the FEDERAL REGISTER

contains notices to the public of the proposed

issuance of rules and regulations. The

purpose of these notices is to give interested

persons an opportunity to participate in the

rule making prior to the adoption of the final

rules.

Proposed Rules Federal Register

10639

Vol. 66, No. 33

Friday, February 16, 2001

FARM CREDIT ADMINISTRATION

12 CFR Parts 611, 618, and 620

RIN: 3052–AC03

Organization; General Provisions;

Disclosure to Shareholders

AGENCY: Farm Credit Administration.

ACTION: Proposed rule.

SUMMARY: The Farm Credit

Administration (FCA or Agency)

proposes to amend its regulations to

provide procedures for requesting

national charters. The proposed rule

would also require each association

with a national charter to extend sound

and constructive credit to eligible and

creditworthy customers in its Local

Service Area (LSA). In addition, the

FCA proposes to establish controls

through new business planning

requirements for an association with a

national charter. These new

requirements will help strengthen the

safety and soundness of the Farm Credit

System (System or FCS). These

requirements will also help ensure that

the FCS continues to meet its public

policy mission to provide adequate,

dependable, and competitive credit and

related services to agriculture and rural

America.

DATES: Please send your comments to us

on or before March 19, 2001.

ADDRESSES: You may submit comments

via electronic mail to ‘‘regcomm@fca.gov’’ or through the Pending

Regulations section of our Web site at

‘‘www.fca.gov.’’ You may also mail or

deliver written comments to Thomas

McKenzie, Director, Regulation and

Policy Division, Office of Policy and

Analysis, Farm Credit Administration,

1501 Farm Credit Drive, McLean,

Virginia 22102–5090 or send them by

facsimile transmission to (703) 734–

5784. You may review copies of all

comments we receive in the Office of

Policy and Analysis, Farm Credit

Administration.

FOR FURTHER INFORMATION CONTACT:

S. Robert Coleman, Senior Policy

Analyst, Office of Policy and

Analysis, Farm Credit Administration,

McLean, VA 22102–5090, (703) 883–

4498, TDD (703) 883–4444,

or

Jennifer A. Cohn, Senior Attorney,

Office of General Counsel, Farm

Credit Administration, McLean, VA

22102–5090, (703) 883–4020, TDD

(703) 883–4444.

SUPPLEMENTARY INFORMATION:

I. Objectives

Our objectives are to:

• Establish procedures for a direct

lender association to request a national

charter;

• Establish that each association with

a national charter must provide

dependable, sound, adequate,

competitive, and constructive credit and

related services to all eligible and

creditworthy customers within its Local

Service Area on a priority basis while

being responsive to other areas in the

nationally chartered territory;

• Establish controls through new

business planning requirements for a

direct lender association with a national

charter;

• Maintain safety and soundness and

improve risk management in the FCS;

and

• Strengthen the ability of the FCS to

achieve its public policy mission to

serve agriculture and rural America.

We welcome your comments on how

we should modify this proposed rule, or

whether we should consider a wholly

different approach that would better

enable the System to remain responsive

to the credit needs of agriculture in a

changing market.

II. Authority To Issue National Charters

The Farm Credit Act of 1971, as

amended (Act), gives the FCA broad

authority to issue and amend the

charters of System associations,

including specifying the territories in

which associations may carry on their

operations. Section 5.17(a)(2)(A) of the

Act authorizes the FCA, ‘‘[w]here

necessary or appropriate to carry out the

policy and objectives of this Act, [to]

issue and approve amendments to

Federal charters of institutions of the

System * * *.’’ Sections 2.0(b)(8),

2.10(c), and 7.8(b) of the Act specifically

give the FCA the power to provide for

the territory in which a direct lender

association may carry on its operations,

either in the terms of the association’s

charter or by regulation. These

provisions also give FCA the power to

approve amendments to the charters of

associations. Finally, section 5.17(a)(5)

of the Act authorizes the FCA to ‘‘[g]rant

approvals provided for under this Act

either on a case-by-case basis or through

regulations that confer approval on

actions of Farm Credit System

institutions.’’ These statutory provisions

authorize the FCA to issue and amend

charters, including charters to operate

nationwide, to direct lender associations

without notice and comment

rulemaking.

On May 3, 2000, the FCA issued

guidance to System direct lender

associations about how they could

apply for a national charter. Because

there was significant public interest in

national charters, we published our

guidance in the Federal Register on July

20, 2000 and invited comment. See 65

FR 45066, July 20, 2000. We received

over 1000 responses to the Federal

Register notice. Many commenters

believe the law requires the FCA to

pursue a notice and comment

rulemaking for national charters. Hence,

we are proposing this rule, which

codifies requirements for any direct

lender association requesting a national

charter. Notwithstanding this proposal,

we continue to believe that the FCA

may issue or amend charters without

conducting a rulemaking, and we

specifically reserve the right to do so

with other chartering actions.

III. Background

The FCA proposes to amend

regulations in parts 611 and 618 to

provide procedures for requesting a

national charter. Additionally, we

propose to amend the disclosure

requirements in part 620 to provide

shareholders with information about

lending activities if their associations

have national charters. National

charters, because they permit direct

lender associations to diversify their

loan portfolios geographically and by

commodity, will significantly enhance

safety and soundness opportunities for

these associations. The proposed rule

establishes new regulatory requirements

that, when taken with other provisions

of our existing regulations, will ensure

an association with a national charter

continues to operate in a safe and sound

10640 Federal Register / Vol. 66, No. 33 / Friday, February 16, 2001 / Proposed Rules

1Protected territory of First South Agricultural

Credit Association is located in the States of

Alabama, Louisiana, and Mississippi.

2Except in the parishes of Bienville, Bossier,

Caddo, Caliborne, DeSoto, Jackson, Lincoln, Red

River, Union and Webster Parishes, and that part of

Ouachita Parish west of the Ouachita River in the

State of Louisiana.

manner. In addition, these new

requirements will strengthen the

commitment of each direct lender

association with a national charter to

serve all eligible and creditworthy

customers in its local area.

IV. A National Charter Defined

Proposed § 611.1126(a)(2) defines a

national charter as a charter that

authorizes a direct lender association to

exercise all powers conferred on it

under the Act and FCA regulations

throughout the United States and the

Commonwealth of Puerto Rico or within

any lesser territory the FCA specifies in

accordance with section 5.17(a) of the

Act.

As discussed above, the FCA has the

authority under sections 2.0(b)(8),

2.10(c), 7.8(b), and several provisions of

5.17(a) to issue and amend charters for

System institutions. These provisions

give us broad discretion to issue

national charters to direct lender

associations that include most of the

United States and Puerto Rico. Section

5.17(a)(2)(B), (a)(2)(C), (a)(13), and

(a)(14) of the Act requires various

consents before the FCA may include

certain territories in an association’s

national charter.

Specifically, the following

associations and their supervisory banks

must consent before these associations’

territories can be included in the

national charter of any other

association:

• Ag New Mexico, Farm Credit

Services, PCA;

• Federal Land Bank Association of

North Alabama, FLCA;

• Federal Land Bank Association of

North Mississippi, FLCA;

• Federal Land Bank Association of

South Alabama, FLCA;

• Federal Land Bank Association of

South Mississippi, FLCA;

• First South Agricultural Credit

Association 1;

• Louisiana Federal Land Bank

Association, FLCA 2;

• Production Credit Association of

New Mexico; and

• Production Credit Association of

Southern New Mexico.

Under the Act, these associations’

shareholders must consent before the

territories of these associations can be

included in the charters of other FCS

associations. Additionally, the

association’s affiliated bank, and for the

three New Mexico production credit

associations, their boards of directors,

must consent to these charter changes.

An association’s national charter issued

by the FCA will specify its exact

territory. Separately, we have proposed

rules that would provide specific

direction on voting procedures by these

institutions. See 65 FR 26776, May 9,

2000 and 65 FR 58486, September 29,

2000.

V. Eligibility To Request a National

Charter

Proposed § 611.1126(b) provides that

an existing direct lender association (as

defined in §§ 619.9135 and 620.1, i.e.,

Federal land credit association,

production credit association, or

agricultural credit association) or an

applicant for a new direct lender

association charter may request a

national charter.

The proposed rule states that any

direct lender association that is under a

cease and desist order that has become

final, as defined by section 5.25 of the

Act, is ineligible for a national charter.

The FCA is authorized under part C of

title V to issue cease and desist orders

against any System institution that

operates in an unsafe or unsound

manner or violates a statute or

regulation.

VI. Local Service Areas

Section 1.1 of the Act states that the

Farm Credit System is ‘‘designed to

accomplish the objective of improving

the income and well-being of American

farmers and ranchers by furnishing

sound, adequate, and constructive credit

and closely related services to them,

their cooperatives, and to selected farmrelated businesses * * *.’’ The FCA

believes the System should be

responsive to all types of agricultural

producers and other eligible borrowers

who have a basis for credit and related

services.

Each direct lender association that

receives a national charter must remain

responsive to the needs of eligible FCS

customers. Accordingly, proposed

§ 611.1126(a)(3) and (e) establishes a

Local Service Area for each direct

lender association that receives a

national charter. The LSA of an existing

direct lender association will be its

chartered territory immediately before it

receives a national charter. The FCA

will designate the LSA of any newly

chartered association.

The Local Service Area establishes

where each association with a national

charter must offer credit and related

services. The FCA believes the LSA

requirement will ensure that the System

carries out its public policy mission of

extending credit and related services to

farmers, ranchers, and other eligible

customers in every part of the United

States as described in section 1.1 of the

Act. Therefore, each association with a

national charter must provide

dependable, sound, adequate,

competitive, and constructive credit and

related services to all eligible and

creditworthy customers within its LSA

on a priority basis, consistent with safe

and sound lending practices.

Furthermore, each association must be

responsive to the needs of customers in

other areas of its nationally chartered

territory.

Existing regulations require that all

System lenders extend credit and

related services in a safe and sound

manner. Accordingly, every association

with a national charter must maintain

sufficient capacity and expertise to

provide credit and related services

within its LSA before it can serve other

areas in its national charter.

In section 4.19 of the Act, Congress

intended that the System would make

special efforts to serve young,

beginning, and small farmers. We

anticipate that each association will

make specific efforts to reach out to

serve those farmers in its Local Service

Area. In conjunction with business

planning for an association’s national

charter, we encourage System

institutions to review FCA Policy

Statement 75, dated December 10, 1998,

when they plan, develop, and

implement program revisions for young,

beginning, and small farmers.

VII. Procedures for Requesting a

National Charter Amendment

Proposed § 611.1126(c) establishes the

procedures that an association

requesting a national charter must

follow. Under § 611.1126(c)(1), a

national charter applicant must submit

the following information to the FCA:

• A statement of the provision(s) of

the charter that the association proposes

to amend and the proposed

amendment(s);

• A statement of the reasons for the

proposed amendment(s), the impact of

the amendment(s) on the association

and its stockholders, and the requested

effective date of the amendment(s);

• A certified copy of the resolution of

the board of directors of the association

approving the amendment(s);

• A business plan, revised to reflect

the proposed national charter, that

includes an LSA Plan addressing the

matters set forth in § 618.8440, and has

been adopted by the association’s board

of directors; and,

Federal Register / Vol. 66, No. 33 / Friday, February 16, 2001 / Proposed Rules 10641

• Any other information or

documents that the association wishes

to submit in support of its application,

or requested by the FCA.

Proposed § 611.1126(c)(2) requires

any association that applies for a

national charter to simultaneously send

a copy of its application to its

supervisory bank. The proposed rule

also allows the supervisory bank to

provide comments on a related

association’s national charter

application to the FCA within a

reasonable period of time. Under

proposed § 611.1126(c)(3), the FCA will

inform the association of the approval or

disapproval of its national charter

application.

Because § 611.1126(c) would establish

specific procedures for requesting a

national charter, we propose to make

conforming changes to § 611.1121. We

propose to amend that provision, which

sets forth general procedures for

requesting charter amendments, to

exclude national charter applications

from its scope.

VIII. Business Planning Requirements

Section 618.8440 continues to address

business planning requirements for

System institutions. The proposed

amendments to this regulation would

add a provision that specifically

requires any association with a national

charter to develop and implement a

Local Service Area Plan.

A. Current Business Planning

Requirements

Each association that obtains a

national charter must update its

business plan to reflect changes in its

operating environment. In addressing

the requirements set forth in the

proposed amendments to § 618.8440,

each association should take into

account the following considerations

when it updates its business plan:

• Economic and market conditions

facing the association;

• The effect that lending outside the

association’s LSA may have on meeting

the association’s objectives within its

LSA;

• The effect programs that provide

credit and related services to a broader

customer base will have on the

association’s organizational efficiency,

customer service, risk management, and

operational capabilities;

• Specific operating objectives and

strategies for any new credit or related

services programs, including delivery

and servicing mechanisms;

• The types and projected amounts of

credit and related services that the

association will offer and the geographic

markets in which it will operate;

• The risk associated with providing

credit and related services in new

markets, including establishing risktolerance levels in relation to riskbearing capacity and loan portfolio

concentrations; and

• Policies, underwriting standards,

and controls for the association’s

lending and related service activities in

any new territory, so that such activities

are conducted in a safe and sound

manner.

Business planning is an integral

component of any financial institution

operating in a safe and sound manner.

An association’s board of directors is

responsible for and in the best position

to assess the association’s strategic

strengths and weaknesses and to set

proper limits and internal controls on

lending operations and related services.

The FCA will exercise its examination

and supervisory powers to evaluate

whether each System association is

operating in a safe and sound manner as

it executes its plans to extend credit and

offers related services in its national

charter territory.

B. Safety and Soundness Requirements

for National Charter Applicants

National charters, when planned and

implemented properly, can improve

safety and soundness by diversifying

geographic and industry concentrations

in the loan portfolios of FCS

associations. Because they provide

enforceable safety and soundness

controls, proposed § 611.1126(c) and (d)

and the proposed amendment to

§ 618.8440 provide additional

safeguards to eliminate concerns that

national charters expose System

institutions to excessive risk.

Proposed § 611.1126(d) imposes

rigorous safety and soundness criteria

on each association that applies for and

subsequently receives a national charter.

Specifically, § 611.1126(d)(1)

incorporates by reference existing

regulations that address capital

adequacy; loan underwriting

requirements; loan servicing

requirements; internal controls; and

compliance with regulations governing

consumer protection, equal credit

opportunity, and fair lending practices.

Further, § 611.1126(d)(4) requires any

association that receives a national

charter to continue to meet safety and

soundness standards, both those

included in § 611.1126(d)(1), and those

listed in § 611.1126(d)(2) such as asset

quality, management, and earnings

performance. Once an association

receives a national charter, the FCA

reserves its right to restrict the

association’s operations if it fails to

operate in a safe and sound manner. In

addition to safety and soundness,

§ 611.1126(d)(3) requires each

association that applies for and receives

a national charter to demonstrate that it

has implemented a program to serve

young, beginning, and small farmers in

its LSA.

C. Local Service Area Plan

The proposed rule establishes new

business planning requirements for each

association applying for a national

charter. Existing § 618.8440 requires

each FCS institution to adopt an

operational and strategic business plan

on an annual basis that covers at least

the succeeding 3 years. Proposed

§ 611.1126(c)(1)(iv) and the proposed

amendment to § 618.8440 will require

each direct lender association that

applies for a national charter to develop

an LSA Plan that addresses how it will

continue to serve its local customers.

Any association that receives a national

charter must update its LSA Plan

annually as part of its planning process

and explain how it will continue to

serve local areas by providing sound,

adequate credit and related services to

all eligible and creditworthy customers.

A direct lender association’s LSA Plan

must include its assessment of its LSA

and its strategies to ensure adequate

service in its LSA. At a minimum, each

association’s LSA Plan must:

• Describe all segments of its existing

market (including both existing and

potential customers);

• Evaluate how well it is currently

serving each segment of its existing

market (including both existing and

potential customers);

• Assess underserved segments in its

existing market;

• Assess its capacity to serve all

segments of its existing markets

(including both existing and potential

customers) and any constraints on this

capacity; and

• Describe the strategies it will

pursue to ensure that it provides

adequate service within its LSA.

The purpose of an LSA is to ensure

each direct lender association does its

part to help the FCS meet its public

policy mission. This mission includes

providing dependable, sound, adequate,

competitive, and constructive credit and

related services to all eligible farmers

and ranchers, aquatic producers and

harvesters, farm-related businesses, and

rural homeowners.

D. Shareholder Reporting Requirements

for Nationally Chartered Associations

The proposed rule establishes

reporting requirements that provide

association shareholders and the FCA

with useful information about the

10642 Federal Register / Vol. 66, No. 33 / Friday, February 16, 2001 / Proposed Rules

lending and related services activities of

any association that has a national

charter. The proposed rule amends the

shareholder disclosure regulation,

§ 620.5, to require any association with

a national charter to disclose in its

annual report information about the

volume of loans, leases, and related

services both inside and outside its

LSA. Specifically, proposed

§ 620.5(a)(3) would require an

association that has a national charter to

disclose to its shareholders summary

information on the percentage and total

dollar amount of loans, leases, and

related services extended both inside

and outside the LSA. Additionally, the

FCA, through its call reporting, may

request more detailed information about

loans, leases, and related services that

nationally chartered associations offer

outside their LSAs.

IX. Effective Dates for National

Charters

We expect that national charters

approved by the FCA will have the same

effective date for all System associations

that apply by a specified target date. The

effective date for national charters and

the target date for submitting

applications will be determined by the

FCA once a final rule is adopted.

Effective dates for national charters for

subsequent applications will be based

on the timing of the applications

received. We welcome your comments

on any unique business aspects that we

should consider when we establish a

uniform effective date for national

charters.

X. Governance and Supervising Bank

Relationship

National charters will not change FCA

regulations on FCS corporate

governance. A borrower who is an

eligible farmer, rancher, aquatic

producer or harvester is entitled to hold

voting stock and to serve as a director

in the System association from which he

or she has a loan, regardless of

geographic location. As required by

section 4.15 of the Act, each association

with a national charter must make

efforts to ensure that borrowers from its

chartered territory are adequately

represented on its board of directors.

Additionally, representation on an

association’s board should reflect the

types of agriculture practiced by its

borrowers. The proposed rule does not

change the affiliation between a

nationally chartered association and its

current funding and supervisory bank.

List of Subjects

12 CFR Part 611

Agriculture, Banks, banking, Rural

areas.

12 CFR Part 618

Agriculture, Archives and records,

Banks, banking, Insurance, Reporting

and recordkeeping requirements, Rural

areas, Technical assistance.

12 CFR Part 620

Accounting, Agriculture, Banks,

banking, Reporting and recordkeeping

requirements, Rural areas.

For the reasons stated in the

preamble, parts 611, 618, and 620 of

chapter VI, title 12 of the Code of

Federal Regulations are proposed to be

amended to read as follows:

PART 611—ORGANIZATION

1. The authority citation for part 611

continues to read as follows:

Authority: Secs. 1.3, 1.13, 2.0, 2.10, 3.0,

3.21, 4.12, 4.15, 4.20, 4.21, 5.9, 5.10, 5.17,

7.0–7.13, 8.5(e) of the Farm Credit Act (12

U.S.C. 2011, 2021, 2071, 2091, 2121, 2142,

2183, 2203, 2208, 2209, 2243, 2244, 2252,

2279a–2279f–1, 2279aa–5(e)); secs. 411 and

412 of Pub. L. 100–233, 101 Stat. 1568, 1638;

secs. 409 and 414 of Pub. L. 100–399, 102

Stat. 989, 1003, and 1004.

2. Revise the heading of subpart G to

read as follows:

Subpart G—Mergers, Consolidations,

and Other Chartering Actions of

Associations

3. Revise § 611.1120(b) to read as

follows:

§ 611.1120 General authority.

* * * * *

(b) The Farm Credit Administration

may make changes in the charter of an

association as may be requested by that

association and approved by the Farm

Credit Administration pursuant to

§ 611.1121 or, in the case of national

charters, § 611.1126 of this part.

* * * * *

4. Amend § 611.1121 by revising the

introductory paragraph to read as

follows:

§ 611.1121 Charter amendment

procedures.

This section applies to any request by

an association to amend its charter,

except it does not apply to applications

for national charters.

* * * * *

5. Add § 611.1126 to subpart G to read

as follows:

§ 611.1126 National charters.

This section applies to any

association that requests or receives a

national charter.

(a) Definitions—(1) You means a

direct lender association as defined in

§§ 619.9135 and 620.1 of this chapter.

(2) National charter. A charter that

authorizes you to exercise all powers

conferred on you under the Act and

regulations of the Farm Credit

Administration throughout the United

States and the Commonwealth of Puerto

Rico or within such lesser territory as

specified by the Farm Credit

Administration in accordance with

section 5.17(a) of the Act.

(3) Local Service Area (LSA). (i) If you

are an existing direct lender association,

your LSA is your chartered territory

immediately before you receive a

national charter.

(ii) If you are a newly chartered direct

lender association, your LSA is any

territory the Farm Credit Administration

designates as such.

(b) Eligibility to request a national

charter. (1) An existing direct lender

association or an applicant for a new

direct lender association charter may

request a national charter.

(2) No direct lender association that is

under a cease and desist order that has

become final as defined by section 5.25

of the Act is eligible to request a

national charter.

(c) Procedures for requesting an

amendment to an existing charter that

would result in a national charter. (1) In

requesting an amendment to an existing

charter that would result in a national

charter, you must submit an application

to the Farm Credit Administration that

contains the following information:

(i) A statement of the provision(s) of

the charter that the association proposes

to amend and the proposed

amendment(s);

(ii) A statement of the reasons for the

proposed amendment(s), the impact of

the amendment(s) on the association

and its stockholders, and the requested

effective date of the amendment(s);

(iii) A certified copy of the resolution

of the board of directors of the

association approving the

amendment(s);

(iv) A business plan, revised to reflect

your proposed national charter, that

includes an LSA Plan addressing the

matters set forth in § 618.8440 of this

chapter and has been adopted by your

board of directors; and

(v) Any additional information or

documents that you wish to submit in

support of your application or that the

Farm Credit Administration requests.

(2) You must simultaneously send a

copy of your national charter

Federal Register / Vol. 66, No. 33 / Friday, February 16, 2001 / Proposed Rules 10643

application to your supervisory bank.

The supervisory bank may provide

comments on your national charter

application to the Farm Credit

Administration within a reasonable

period of time.

(3) The Farm Credit Administration

will notify you of its approval or

disapproval of the amendment request.

(d) Criteria for issuing national

charters. (1) You may apply for a

national charter if you are in

compliance with:

(i) Capital adequacy requirements in

subpart H of part 615 of this chapter;

(ii) Loan underwriting requirements

in subpart D of part 614 of this chapter;

(iii) Loan servicing requirements in

subpart N of part 614 of this chapter;

(iv) Internal control requirements in

subpart J of part 618 of this chapter;

(v) All applicable laws and

regulations pertaining to

nondiscrimination in lending

requirements in part 626 of this chapter,

and other Federal statutes and

regulations governing consumer

protection, equal credit opportunity,

and fair lending practices.

(2) The Farm Credit Administration

will grant national charters only to

direct lender associations that it

determines are operating safely and

soundly in accordance with capital,

assets, management, earnings, liquidity,

interest rate sensitivity, and other safety

and soundness standards.

(3) If you apply for a national charter,

you must demonstrate to the Farm

Credit Administration that you have

implemented a program that serves

young, beginning, and small farmers in

your local service area, and that you

have complied with § 614.4165 of this

chapter and other Agency guidance.

(4) After you receive a national

charter, you must continue to comply

with all the requirements in paragraphs

(d)(1), (d)(2) and (d)(3) of this section.

(e) LSA requirement. If you receive a

national charter, you will have a LSA.

Once you receive your national charter,

you must extend credit and offer related

services to all eligible and creditworthy

customers in your LSA, consistent with

safe and sound lending practices.

PART 618—GENERAL PROVISIONS

6. The authority citation for part 618

continues to read as follows:

Authority: Secs. 1.5, 1.11, 1.12, 2.2, 2.4,

2.5, 2.12, 3.1, 3.7, 4.12, 4.13A, 4.25, 4.29, 5.9,

5.10, 5.17 of the Farm Credit Act (12 U.S.C.

2013, 2019, 2020, 2073, 2075, 2076, 2093,

2122, 2128, 2183, 2200, 2211, 2218, 2243,

2244, 2252).

Subpart J—Internal Controls

7. Revise § 618.8440 to read as

follows:

§ 618.8440 Planning.

(a) No later than 30 days after the

commencement of each calendar year,

the board of directors of each Farm

Credit System institution must adopt an

operational and strategic business plan

for at least the succeeding 3 years.

(b) The business plan must include, at

a minimum, the following:

(1) A mission statement;

(2) A review of the internal and

external factors that are likely to affect

the institution during the planning

period;

(3) Quantifiable goals and objectives;

(4) Pro forma financial statements for

each year of the plan;

(5) A detailed operating budget for the

first year of the plan; and

(6) The capital adequacy plan adopted

pursuant to §§ 615.5200(b), 615.5330(c),

and 615.5335(b) of this chapter.

(c)(1) The business plan for each Farm

Credit System association that has

received a national charter, as defined

in § 611.1126 of this chapter, must

include a Local Service Area (LSA)

Plan.

(2) A LSA Plan is a plan that

addresses how the Farm Credit System

association will serve its LSA under

§ 611.1126(d) of this chapter. At a

minimum, a LSA Plan must:

(i) Describe all segments of the

existing market of the Farm Credit

System association (including both

existing and potential customers);

(ii) Evaluate how well the Farm Credit

System association is currently serving

each segment of its existing market

(including both existing and potential

customers);

(iii) Assess underserved segments in

the Farm Credit System association’s

existing market;

(iv) Assess the Farm Credit System

association’s capacity to serve all

segments of its existing markets

(including both existing and potential

customers) and any constraints on this

capacity; and

(v) Describe the strategies the Farm

Credit System association will pursue to

ensure that it provides full service

within its LSA.

PART 620—DISCLOSURE TO

SHAREHOLDERS

8. The authority citation for part 620

continues to read as follows:

Authority: Secs. 5.17, 5.19, 8.11 of the

Farm Credit Act (12 U.S.C. 2252, 2254,

2279aa–11); sec. 424 of Pub. L. 100–233, 101

Stat. 1568, 1656.

Subpart B—Annual Report to

Shareholders

9. Amend § 620.5(a)(3) as follows:

a. Remove the ‘‘;’’ at the end of the

third sentence and add a ‘‘.’’; and

b. Add two new sentences to the end

of this paragraph to read as follows:

§ 620.5 Contents of the annual report to

shareholders.

* * * * *

(a) Description of business. ***

* * * * *

(3) * * * For any association that has

a national charter, it must identify the

percentage and the total dollar amount

of loans, leases, and related services that

it extends to eligible customers. An

association with a national charter must

separately report the total loans, leases,

and related services that is made both

inside and outside its local service area;

* * * * *

Dated: February 12, 2001.

Kelly Mikel Williams,

Secretary, Farm Credit Administration Board.

[FR Doc. 01–3942 Filed 2–15–01; 8:45 am]

BILLING CODE 6705–01–P

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG–105946–00]

RIN 1545–AY31

Mid-contract Change in Taxpayer

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Notice of proposed rulemaking

and notice of public hearing.

SUMMARY: This document contains

proposed regulations concerning a midcontract change in taxpayer of a contract

that has been accounted for under a

long-term contract method of

accounting. A taxpayer that is a party to

such a contract will be affected by these

proposed regulations. This document

also provides notice of a public hearing

on the proposed regulations.

DATES: Written comments must be

received by May 17, 2001. Outlines of

oral comments to be presented at the

public hearing scheduled for June 13,

2001, at 10 a.m. must be received by

May 30, 2001.

ADDRESSES: Send submissions to

CC:M&SP:RU (REG–105946–00), room

5226, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. Submissions may be hand