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[Federal Register Volume 66, Number 33 (Friday, February 16, 2001)]
[Proposed Rules]
[Pages 10639-10643]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-3942]

========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

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.

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

[[Page 10639]]

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.

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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 ``[email protected]'' 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

[[Page 10640]]

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 Sec. 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\;
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    \1\ Protected territory of First South Agricultural Credit 
Association is located in the States of Alabama, Louisiana, and 
Mississippi.
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     Louisiana Federal Land Bank Association, FLCA \2\;
---------------------------------------------------------------------------

    \2\ Except 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.
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     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 Sec. 611.1126(b) provides that an existing direct lender 
association (as defined in Secs. 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 farm-related 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 Sec. 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 Sec. 611.1126(c) establishes the procedures that an 
association requesting a national charter must follow. Under 
Sec. 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 
Sec. 618.8440, and has been adopted by the association's board of 
directors; and,

[[Page 10641]]

     Any other information or documents that the association 
wishes to submit in support of its application, or requested by the 
FCA.
    Proposed Sec. 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 Sec. 611.1126(c)(3), the FCA will inform the association of 
the approval or disapproval of its national charter application.
    Because Sec. 611.1126(c) would establish specific procedures for 
requesting a national charter, we propose to make conforming changes to 
Sec. 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 
Sec. 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 risk-tolerance levels 
in relation to risk-bearing 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 
Sec. 611.1126(c) and (d) and the proposed amendment to Sec. 618.8440 
provide additional safeguards to eliminate concerns that national 
charters expose System institutions to excessive risk.
    Proposed Sec. 611.1126(d) imposes rigorous safety and soundness 
criteria on each association that applies for and subsequently receives 
a national charter. Specifically, Sec. 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, Sec. 611.1126(d)(4) requires any association that receives a 
national charter to continue to meet safety and soundness standards, 
both those included in Sec. 611.1126(d)(1), and those listed in 
Sec. 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, Sec. 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 
Sec. 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 Sec. 611.1126(c)(1)(iv) and the proposed 
amendment to Sec. 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

[[Page 10642]]

lending and related services activities of any association that has a 
national charter. The proposed rule amends the shareholder disclosure 
regulation, Sec. 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 Sec. 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 Sec. 611.1120(b) to read as follows:

Sec. 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 Sec. 611.1121 or, in the 
case of national charters, Sec. 611.1126 of this part.
* * * * *
    4. Amend Sec. 611.1121 by revising the introductory paragraph to 
read as follows:

Sec. 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 Sec. 611.1126 to subpart G to read as follows:

Sec. 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 Secs. 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 
Sec. 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

[[Page 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 Sec. 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 Sec. 618.8440 to read as follows:

Sec. 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 
Secs. 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 Sec. 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 Sec. 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 Sec. 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:

Sec. 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
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