12 U.S.C. § 2074 — Production credit association capitaliza-

Page 1303 TITLE 12—BANKS AND BANKING § 2074 sions against losses occasioned by employees, but no director shall, within one year after the date when such director ceases to be a member of the board, serve as a salaried employee of the association on the board of which he served; (18) elect by the board of directors of the as- sociation a loan committee with power to ap- prove applications for membership in the asso- ciation and loans or participations or, with the approval of the bank, delegate the ap- proval of applications for membership and loans or participations within specified limits to other committees or to authorized officers and employees of the association; (19) perform any functions delegated to the association by the bank; (20) exercise by the board of directors or au- thorized officers or employees of the associa- tion, all such incidental powers as may be nec- essary or expedient to carry on the business of the association; and (21) operate as an originator and become cer- tified as a certified facility under subchapter VIII. (Pub. L. 92–181, title II, § 2.2, as added Pub. L. 100–233, title IV, § 401, Jan. 6, 1988, 101 Stat. 1630; amended Pub. L. 100–399, title IV, § 401(o), Aug. 17, 1988, 102 Stat. 997.) Editorial Notes PRIOR PROVISIONS A prior section 2073, Pub. L. 92–181, title II, § 2.2, Dec. 10, 1971, 85 Stat. 592; Pub. L. 96–592, title II, § 202, Dec. 24, 1980, 94 Stat. 3440; Pub. L. 99–205, title II, § 205(e)(2)–(5), title VI, § 604, Dec. 23, 1985, 99 Stat. 1704, 1711; Pub. L. 100–233, title VIII, §§ 802(j), 805(e), Jan. 6, 1988, 101 Stat. 1711, 1715, related to Federal inter- mediate credit bank stock, prior to the general amend- ment of this subchapter by Pub. L. 100–233, § 401. AMENDMENTS 1988—Par. (16). Pub. L. 100–399, § 401(o)(1), amended par. (16) generally. Prior to amendment, par. (16) read as follows: ‘‘prescribe by the board of directors of the association the bylaws not inconsistent with law pro- viding for— ‘‘(A) the classes of association stock and the man- ner in which the stock shall be issued, transferred, and retired; ‘‘(B) the officers and employees elected or provided for; ‘‘(C) the property acquired, held, and transferred by the association; and ‘‘(D) the general business conducted, and the privi- leges granted to the association by law exercised and enjoyed;’’. Par. (17). Pub. L. 100–399, § 401(o)(2), substituted ‘‘pro- vide by its board of directors for’’ for ‘‘elect by the board of directors of the association’’ and ‘‘serve as’’ for ‘‘be elected or designated’’. Par. (21). Pub. L. 100–399, § 401(o)(3)–(5), added par. (21). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1988 AMENDMENT 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 sec- tion 1001(b) of Pub. L. 100–399, set out as a note under section 2002 of this title. EFFECTIVE DATE Pub. L. 100–233, title IV, § 401, Jan. 6, 1988, 101 Stat. 1622, provided in part that this section is effective 6 months after Jan. 6, 1988. § 2074. Production credit association capitaliza- tion (a) In general In accordance with section 2154a of this title, each production credit association shall provide, through its bylaws and subject to Farm Credit Administration regulations, for its capitaliza- tion and the manner in which its stock shall be issued, held, transferred, and retired and, except as provided in subsection (b), its earnings dis- tributed. (b) Application of earnings At the end of each fiscal year, each production credit association shall apply the amount of the earnings of the association for the fiscal year in excess of the operating expenses of the associa- tion (including provision for valuation reserves against loan assets in accordance with generally accepted accounting principles)— (1) first, to the restoration of the impair- ment (if any) of capital; and (2) second, to the establishment and mainte- nance of the surplus accounts, the minimum aggregate amount of which shall be prescribed by the Farm Credit Bank. (c) Patronage When the bylaws of an association so provide and subject to the general directions of the Farm Credit Administration, available net earn- ings at the end of any fiscal year may be distrib- uted on a patronage basis in stock, participation certificates, or in cash. Any part of the earnings of the fiscal year in excess of the operating ex- penses for such year held in the surplus account may be allocated to patrons on a patronage basis. (Pub. L. 92–181, title II, § 2.3, as added Pub. L. 100–233, title IV, § 401, Jan. 6, 1988, 101 Stat. 1632; amended Pub. L. 102–552, title V, § 501, Oct. 28, 1992, 106 Stat. 4129.) Editorial Notes PRIOR PROVISIONS A prior section 2074, Pub. L. 92–181, title II, § 2.3, Dec. 10, 1971, 85 Stat. 593; Pub. L. 96–592, title II, § 203, Dec. 24, 1980, 94 Stat. 3440; Pub. L. 99–205, title II, § 205(e)(6), Dec. 23, 1985, 99 Stat. 1704, related to loans, discounts, participation, and leasing, prior to the general amend- ment of this subchapter by Pub. L. 100–233, § 401. AMENDMENTS 1992—Subsec. (b). Pub. L. 102–552 amended subsec. (b) generally. Prior to amendment, subsec. (b) read as fol- lows: ‘‘Each production credit association at the end of each fiscal year shall apply the amount of the earnings of the association for such year in excess of the oper- ating expenses of the association (including provision for valuation reserves against loan assets in an amount equal to one-half of 1 percent of the loans outstanding at the end of the fiscal year to the extent that such earnings in such year in excess of other operating ex- penses permit, or in such greater amounts as are deemed necessary under generally accepted accounting principles, until such reserves equal or exceed 31⁄2 per- cent of the loans outstanding at the end of the fiscal year, beyond which 31⁄2 percent further additions to such reserves may be made, if deemed necessary under generally accepted accounting principles) first to the restoration of the impairment, if any, of capital, and second, to the establishment and maintenance of the Page 1304 TITLE 12—BANKS AND BANKING § 2075 surplus accounts, the minimum aggregate amount of which shall be prescribed by the Farm Credit Bank.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE Pub. L. 100–233, title IV, § 401, Jan. 6, 1988, 101 Stat. 1622, provided that this section is effective 6 months after Jan. 6, 1988. § 2075. Short- and intermediate-term loans; par- ticipation; other financial assistance; terms; conditions; interest; security (a) Short- and intermediate-term loans Each production credit association, under standards prescribed by the board of directors of the Farm Credit Bank of the district, may make, guarantee, or participate with other lend- ers in short- and intermediate-term loans and other similar financial assistance to— (1) bona fide farmers and ranchers and the producers or harvesters of aquatic products, for agricultural or aquatic purposes and other requirements of such borrowers, including fi- nancing for basic processing and marketing di- rectly related to the operations of the bor- rower and those of other eligible farmers, ranchers, and producers or harvesters of aquatic products, except that the operations of the borrower shall supply some portion of the total processing or marketing for which fi- nancing is extended, except that the aggregate of the financing provided by any association for basic processing and marketing directly re- lated to the operations of farmers, ranchers, and producers or harvesters of aquatic prod- ucts, if the operations of the applicant supply less than 20 percent of the total processing or marketing for which financing is extended, shall not exceed 15 percent of the total of all outstanding loans of all associations in the district at the end of its preceding fiscal year; (2) rural residents for housing financing in rural areas, under regulations of the Farm Credit Administration; and (3) persons furnishing to farmers and ranch- ers farm-related services directly related to their on-farm operating needs. (b) Rural housing (1) In general Rural housing financed under this part shall be for single-family, moderate-priced dwell- ings and the appurtenances of such not incon- sistent with the general quality and standards of housing existing in, or planned or rec- ommended for, the rural area where it is lo- cated. (2) Limitation The aggregate of such housing loans in an association to persons other than farmers or ranchers shall not exceed 15 percent of the outstanding loans at the end of its preceding fiscal year except on prior approval by the Farm Credit Bank of the district. The aggre- gate of such housing loans in any farm credit district shall not exceed 15 percent of the out- standing loans of all associations in the dis- trict at the end of the preceding fiscal year. (3) Rural areas For rural housing purposes under this sec- tion the term ‘‘rural areas’’ shall not be de- fined to include any city or village having a population in excess of 2,500 inhabitants. (4) Equipment Each association may own and lease, or lease with option to purchase, to stockholders of the association equipment needed in the op- erations of the stockholder. (c) Interest rates and charges (1) In general Loans authorized in subsection (a) shall bear such rate or rates of interest as are deter- mined under standards prescribed by the board of the bank subject to the provisions of sec- tion 2205 of this title, and shall be made upon such terms, conditions, and upon such secu- rity, if any, as shall be authorized in such standards. (2) Setting of rates In setting rates and charges, it shall be the objective to provide the types of credit needed by eligible borrowers, at the lowest reasonable cost on a sound business basis, taking into ac- count the cost of money to the association, necessary reserves and expenses of the associa- tion, and services provided to borrowers and members. (3) Varying rates The loan documents may provide for the in- terest rate or rates to vary from time to time during the repayment period of the loan in ac- cordance with the rate or rates currently being charged by the association. (4) Prior approval Such standards may require prior approval of the bank on certain classes of loans, and may authorize a continuing commitment to a borrower of a line of credit. (Pub. L. 92–181, title II, § 2.4, as added Pub. L. 100–233, title IV, § 401, Jan. 6, 1988, 101 Stat. 1632; amended Pub. L. 100–399, title IV, § 401(p), (q), Aug. 17, 1988, 102 Stat. 997; Pub. L. 101–624, title XVIII, § 1832(b), Nov. 28, 1990, 104 Stat. 3832; Pub. L. 115–334, title V, § 5411(3), Dec. 20, 2018, 132 Stat. 4679.) Editorial Notes PRIOR PROVISIONS A prior section 2075, Pub. L. 92–181, title II, § 2.4, Dec. 10, 1971, 85 Stat. 594; Pub. L. 95–443, Oct. 10, 1978, 92 Stat. 1066; Pub. L. 96–592, title II, § 204, Dec. 24, 1980, 94 Stat. 3441; Pub. L. 99–509, title I, § 1033(b), Oct. 21, 1986, 100 Stat. 1877, related to terms, prior to the general amend- ment of this subchapter by Pub. L. 100–233, § 401. AMENDMENTS 2018—Subsec. (d). Pub. L. 115–334 struck out subsec. (d) which described a special rule for providing credit and technical assistance in a district containing only two production credit associations. 1990—Subsec. (a)(1). Pub. L. 101–624 substituted ‘‘some portion of the total processing or marketing for which financing is extended, except that the aggregate of the financing provided by any association for basic proc- essing and marketing directly related to the operations of farmers, ranchers, and producers or harvesters of aquatic products, if the operations of the applicant sup- ply less than 20 percent of the total processing or mar- keting for which financing is extended, shall not exceed