12 U.S.C. § 2277a–4 (BANKS AND BANKING)
§ 2277a–4. 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 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 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), 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 2279b of this title, that is able to make such loans or investments because such association is receiving, or has received, 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 2015(b)(1)(B) of this title, 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 1 of each insured system 2 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 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
(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.
(Pub. L. 92–181, title V, § 5.55, as added Pub. L. 100–233, title III, § 302, Jan. 6, 1988, 101 Stat. 1612; amended Pub. L. 100–399, title III, § 302(c)–(e), Aug. 17, 1988, 102 Stat. 994; Pub. L. 101–220, § 6(a), Dec. 12, 1989, 103 Stat. 1879; Pub. L. 104–105, title II, § 215(a)(1), (2)(A), (b), (c), Feb. 10, 1996, 110 Stat. 175, 176, 179; Pub. L. 107–171, title V, § 5403(a)(1), May 13, 2002, 116 Stat. 350; Pub. L. 110–234, title V, § 5404, May 22, 2008, 122 Stat. 1154; Pub. L. 110–246, § 4(a), title V, § 5404, June 18, 2008, 122 Stat. 1664, 1916.)
heading: Codification
text: Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.
heading: Amendments
text: 2008—Subsec. (a)(1). Pub. L. 110–246, § 5404(a)(1)(A), in introductory provisions, substituted “paragraph (3)” for “paragraph (2)” and struck out “annual” before “premium”.
Subsec. (a)(1)(A) to (D). Pub. L. 110–246, § 5404(a)(1)(B), added subpars. (A) and (B) and struck out former subpars. (A) to (D) which described how to calculate the annual premium due from an insured System bank.
Subsec. (a)(2) to (4). Pub. L. 110–246, § 5404(a)(2)–(6), added par. (2), redesignated former pars. (2) and (3) as (3) and (4), respectively, in par. (3), struck out “annual” before “premium”, in par. (4), inserted “or investments” after “loans” in heading and, in introductory provisions, substituted “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—” for “As used in this section and section 2020(b) of this title, the term ‘government-guaranteed loans’ means loans or credits, or portions of loans or credits, that are guaranteed—”, and struck out former par. (4). Prior to amendment, text read as follows: “In this section and sections 2020(b) and 2277a–5(a) of this title, the term ‘Government Sponsored Enterprise-guaranteed loan’ means a loan or credit, or portion of a loan or credit, that is guaranteed by an entity that is chartered by Congress to serve a public purpose and the debt obligations of which are not explicitly guaranteed by the United States, including the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Federal Home Loan Bank System, and the Federal Agricultural Mortgage Corporation, but not including any other institution of the Farm Credit System.”
Subsec. (b). Pub. L. 110–246, § 5404(b), struck out “annual” before “premium”.
Subsec. (c). Pub. L. 110–246, § 5404(c), designated existing provisions as par. (1), inserted heading, substituted “(as adjusted under paragraph (2))” for “(adjusted downward to exclude an amount equal to the sum of (1) 90 percent of the guaranteed portions of principal outstanding on Federal Government-guaranteed loans in accrual status made by such banks and (2) 80 percent of the guaranteed portions of principal outstanding on State government-guaranteed loans in accrual status made by such banks, as determined by the Corporation)”, and added par. (2).
Subsec. (d). Pub. L. 110–246, § 5404(d)(1), (2), in heading, substituted “loan and investment amounts” for “principal outstanding” and, in introductory provisions, substituted “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—” for “For the purpose of subsections (a), (c), and (e) of this section, the principal outstanding on all loans made by an insured System bank shall be determined based on all loans made—”.
Subsec. (d)(1) to (3). Pub. L. 110–246, § 5404(d)(3), (4), in pars. (1) to (3), inserted “all loans or investments made” after par. designation and, in pars. (1) and (2), inserted “or investments” after “such loans”.
Subsec. (e)(3). Pub. L. 110–246, § 5404(e)(1), substituted “the secure base amount” for “the average secure base amount for the calendar year (as calculated on an average daily balance basis)”.
Subsec. (e)(4)(B). Pub. L. 110–246, § 5404(e)(2), added subpar. (B) and struck out former subpar. (B) which read as follows: “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 the average principal outstanding for the 3-year period ending on the end of the calendar year on loans made by the bank that are in accrual status bears to the average principal outstanding for the 3-year period ending on the end of the calendar year on loans made by all insured System banks that are in accrual status (excluding, in each case, the guaranteed portions of loans described in subparagraph (C) or (D) of subsection (a)(1) of this section).”
Subsec. (e)(6)(A). Pub. L. 110–246, § 5404(e)(3)(A)(i), struck out “beginning more than 8 years after the date on which the aggregate of the amounts in the Farm Credit Insurance Fund exceeds the secure base amount, but not earlier than January 1, 2005” after “calendar year” in introductory provisions.
Subsec. (e)(6)(A)(i). Pub. L. 110–246, § 5404(e)(3)(A)(ii), added cl. (i) and struck out former cl. (i) which read as follows: “subject to subparagraphs (D) and (F), pay to each insured System bank, in a manner determined by the Corporation, an amount equal to the lesser of—
“(I) 20 percent of the balance in the insured System bank’s Allocated Insurance Reserves Account as of the preceding December 31; or
“(II) 20 percent of the balance in the bank’s Allocated Insurance Reserves Account on the date of the payment; and”.
Subsec. (e)(6)(A)(ii). Pub. L. 110–246, § 5404(e)(3)(A)(iii), substituted “subparagraphs (C) and (E)” for “subparagraphs (C), (E), and (F)” and “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).” for “, of the lesser of—
“(I) 20 percent of the balance in the Allocated Insurance Reserves Account established under paragraph (1)(B) as of the preceding December 31; or
“(II) 20 percent of the balance in the Allocated Insurance Reserves Account established under paragraph (1)(B) on the date of the payment.”
Subsec. (e)(6)(C)(i). Pub. L. 110–246, § 5404(e)(3)(B)(i), struck out “(in addition to the amounts described in subparagraph (F)(ii))” after “an amount equal to $56,000,000”.
Subsec. (e)(6)(C)(ii). Pub. L. 110–246, § 5404(e)(3)(B)(ii), added cl. (ii) and struck out former cl. (ii) which related to wind down and termination of the Allocated Insurance Reserves Account established under subsec. (e)(1) of this section.
Subsec. (e)(6)(F). Pub. L. 110–246, § 5404(e)(3)(C), struck out subpar. (F) which related to determination of amount of initial payment made to each payee under subsec. (e)(6)(A) of this section.
2002—Subsec. (a)(1)(A). Pub. L. 107–171, § 5403(a)(1)(A)(i)(I), substituted “loans provided for in subparagraphs (C) and (D)” for “government-guaranteed loans provided for in subparagraph (C)”.
Subsec. (a)(1)(D). Pub. L. 107–171, § 5403(a)(1)(A)(i)(II)–(IV), added subpar. (D).
Subsec. (a)(4). Pub. L. 107–171, § 5403(a)(1)(A)(ii), added par. (4).
Subsec. (e)(4)(B). Pub. L. 107–171, § 5403(a)(1)(B), substituted “loans described in subparagraph (C) or (D) of subsection (a)(1) of this section” for “government-guaranteed loans described in subsection (a)(1)(C) of this section”.
1996—Subsec. (a). Pub. L. 104–105, § 215(a)(1)(A), substituted “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 (2), the annual premium due from any insured System bank for the calendar year” for “Until the aggregate of amounts in the Farm Credit Insurance Fund exceeds the secure base amount, the annual premium due from any insured System bank for any calendar year”.
Subsec. (a)(2), (3). Pub. L. 104–105, § 215(a)(1)(B), (C), added par. (2) and redesignated former par. (2) as (3).
Subsec. (b). Pub. L. 104–105, § 215(a)(2)(A), substituted “Farm Credit Insurance Fund” for “Insurance Fund” in two places, and “subsection (a)(1)” for “subsection (a)”, and struck out “for the following calendar year” after “each insured System bank”.
Subsec. (d). Pub. L. 104–105, § 215(c), in introductory provisions, substituted “subsections (a), (c), and (e) of this section” for “subsections (a) and (c) of this section” and “an insured System bank” for “a Farm Credit Bank”, and in pars. (1) through (3), substituted “insured System bank” for “Farm Credit Bank”.
Subsec. (e). Pub. L. 104–105, § 215(b), added subsec. (e).
1989—Subsec. (a). Pub. L. 101–220, § 6(a)(1), added subsec. (a) and struck out former subsec. (a) which read as follows: “Until the aggregate of amounts in the Farm Credit Insurance Fund exceeds the secure base amount, the annual premium due from any insured System bank for any calendar year shall be equal to the sum of—
“(1) the annual average principal outstanding for such year on loans made by the bank that are in accrual status, multiplied by 0.0015; and
“(2) the annual average principal outstanding for such year on loans made by the bank that are in nonaccrual status, multiplied by 0.0025.”
Subsec. (b). Pub. L. 101–220, § 6(a)(2), inserted “, as determined under subsection (a),” after “calendar year”.
Subsec. (c). Pub. L. 101–220, § 6(a)(3), inserted “(adjusted downward to exclude an amount equal to the sum of (1) 90 percent of the guaranteed portions of principal outstanding on Federal Government-guaranteed loans in accrual status made by such banks and (2) 80 percent of the guaranteed portions of principal outstanding on State government-guaranteed loans in accrual status made by such banks, as determined by the Corporation)” after “such time”.
Subsec. (d). Pub. L. 101–220, § 6(a)(4), in introductory provisions, substituted “subsections (a) and (c) of this section” for “subsection (a) of this section” and struck out “intermediate term” after “outstanding on all”, inserted par. (1), and struck out former par. (1) which read as follows: “by the production credit associations in the district in which such bank is located;”.
1988—Subsec. (d). Pub. L. 100–399, § 302(c), substituted in introductory provisions “intermediate term loans made by a Farm Credit Bank” for “loans made by a Federal intermediate credit bank”.
Subsec. (d)(2). Pub. L. 100–399, § 302(d), (e), substituted “section 2015(b)(1)(B) of this title” for “section 2074(a)(2) of this title” and “Farm Credit Bank” for “Federal intermediate credit bank”.
Subsec. (d)(3). Pub. L. 100–399, § 302(e), substituted “Farm Credit Bank” for “Federal intermediate credit bank”.
heading: Effective Date of 2008 Amendment
text: Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective May 22, 2008, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of Title 7, Agriculture.
heading: Effective Date of 2002 Amendment
text: Amendment by Pub. L. 107–171 applicable 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, see section 5403(b) of Pub. L. 107–171, set out as a note under section 2020 of this title.
heading: Effective Date of 1989 Amendment
text: Amendment by Pub. L. 101–220 effective for insurance premiums due to the Farm Credit System Insurance Corporation under this chapter on or after Jan. 1, 1990, based on the loan volume of each bank for each calendar year beginning with calendar year 1989, and effective for the calculation of the initial premium payment required under section 2277a–5(c) of this title, see section 6(c) of Pub. L. 101–220, set out as a note under section 2020 of this title.
heading: Effective Date of 1988 Amendment
text: Amendment by Pub. L. 100–399 effective immediately after amendment made by section 401 of Pub. L. 100–233, which was effective 6 months after Jan. 6, 1988, see section 1001(b) of Pub. L. 100–399, set out as a note under section 2002 of this title.
heading: GAO Reports on Risk-Based Insurance Premiums, Access to Association Capital, Supplemental Premiums, and Consolidation
text: Pub. L. 102–552, title II, § 204, Oct. 28, 1992, 106 Stat. 4106, as amended by Pub. L. 104–316, title I, § 106(e), Oct. 19, 1996, 110 Stat. 3831, provided that:
“(a) In General.—
The Comptroller General of the United States may investigate, review, and evaluate the feasibility and appropriateness, and report to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate, on the advantages and disadvantages of providing the Farm Credit System Insurance Corporation with—
“(1) the authority to directly or indirectly assess associations to ensure that all System capital is available to prevent losses to investors, including a study of—
“(A) the effects of direct assessments by the Insurance Corporation on associations, including interest rate charges to borrowers;
“(B) the effects of requiring that banks pass along the cost of insurance premiums to owner associations and other financing institutions having a discount relationship with the bank;
“(C) the effects of requiring owner associations to purchase stock in the district bank, if needed, to prevent a bank from having to return to the Insurance Corporation for financial assistance once the assistance has been given;
“(D) the effects of the purchase of stock from funds of the association (through funds obtained from other than the district bank) or allowing the bank to increase the direct line of credit to the association in order to fund the purchase; and
“(E) the effect that authorizing the Insurance Corporation to assess the association could have on the association’s incentives for building capital;
“(2) the authority to collect supplemental insurance premiums under certain circumstances, including a study of—
“(A) the possibility of the Insurance Fund being depleted more rapidly than it could be replenished under the current premium structure;
“(B) the effects of the depletion under alternate economic scenarios and the probability of the occurrence of each of those scenarios;
“(C) the effects on capital accumulation and interest rates of levying a supplemental premium; and
“(D) limitations on any authority to levy supplemental premiums and the underlying basis for the limitations; and
“(3) the authority to establish an insurance premium rate structure that would take into account, on an institution-by-institution basis, asset quality risk, interest rate risk, earnings, and capital.
“(b) Report on Consolidation.—
“(1) In general.—
The Comptroller General of the United States shall evaluate and report to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate on whether there are likely to be benefits to farmer and rancher borrowers of the Farm Credit System institutions of merging the 10 district Farm Credit Banks (and the Federal Intermediate Credit Bank of Jackson) into fewer regional Farm Credit Banks.
“(2) Factors.—
In preparing the report, the Comptroller General shall consider—
“(A) the potential reduction in services to farmers and ranchers;
“(B) the potential benefits of jointly providing services to farmers and ranchers among these proposed regional districts;
“(C) any economy of scale effects on a district-by-district basis;
“(D) the potential impact on the cooperative nature of the Farm Credit System;
“(E) the potential impact on bank and association relationships; and
“(F) the potential impact on System-wide bond issuances.
“(c) Potential Savings.—
The Comptroller General of the United States shall evaluate and report to the appropriate committees of Congress on the potential savings to the Farm Credit System and its shareholders that might occur if System institutions and the Farm Credit Administration were required to comply with General Services Administration standards for office space, furniture, and equipment.
“(d) Deadline.—
The reports required under this section shall be provided to Congress not later than 12 months after the date of enactment of this Act [Oct. 28, 1992].”