12 U.S.C. § 2131 — Loans

Page 1319 TITLE 12—BANKS AND BANKING § 2132 Editorial Notes AMENDMENTS 2018—Subsec. (a). Pub. L. 115–334 struck out at end ‘‘In the case of a direct loan by the Central Bank, the borrower shall be required to own or invest in the nec- essary stock in a district bank or banks and such dis- trict bank shall be required to own a corresponding amount of stock in the Central Bank, but voting stock shall be in the one district bank, designated by the Farm Credit Administration.’’ 1988—Subsec. (a). Pub. L. 100–233 substituted ‘‘by the bank to invest’’ for ‘‘by the bank with the approval of the Farm Credit Administration to invest’’, ‘‘or upon such other basis as the bank determines’’ for ‘‘or upon such other basis as the bank, with the approval of the Farm Credit Administration, determines’’, and ‘‘in a district bank or banks and such district bank shall be required’’ for ‘‘in a district bank or banks as may be approved by the Farm Credit Administration and such district bank shall be required’’. 1980—Subsec. (a). Pub. L. 96–592 inserted provisions respecting entitlement to hold voting stock. § 2131. Loans (a) Interest rates and charges Loans made by a bank for cooperatives shall bear interest at a rate or rates determined by the board of directors of the bank from time to time. In setting rates and charges, it shall be the objective to provide the types of credit need- ed by eligible borrowers at the lowest reasonable cost on a sound business basis, taking into ac- count the net cost of money to the bank, nec- essary reserves and expenses of the bank, and services provided. The loan documents may pro- vide for the interest rate or rates to vary from time to time during the repayment period of the loan, in accordance with the rate or rates cur- rently being charged by the bank. (b) Security Loans shall be made upon such terms, condi- tions, and security, if any, as may be determined by the bank in accordance with regulations of the Farm Credit Administration. (c) Lien Each bank for cooperatives shall have a first lien on all stock or other equities in the bank as collateral for the payment of any indebtedness of the owner thereof to the bank. (d) Cancellation; application on indebtedness In any case where the debt of a borrower is in default, or in any case of liquidation or dissolu- tion of a present or former borrower from a bank for cooperatives, the bank may, but shall not be required to, retire and cancel all or a part of the stock, allocated surplus or contingency reserves, or any other equity in the bank owned by or allocated to such borrower, at the fair market value thereof not exceeding par, and, to the extent required in such cases, corresponding shares and allocations and other equity inter- ests held by a bank in another bank for coopera- tives (or any successor bank) on account of such indebtedness, shall be retired or equitably ad- justed. In no event shall the bank’s equities be retired or canceled if the retirement or cancella- tion would adversely affect the bank’s capital structure, as determined by the Farm Credit Ad- ministration. (Pub. L. 92–181, title III, § 3.10, Dec. 10, 1971, 85 Stat. 606; Pub. L. 96–592, title III, § 307, Dec. 24, 1980, 94 Stat. 3445; Pub. L. 99–509, title I, § 1033(c), Oct. 21, 1986, 100 Stat. 1877; Pub. L. 115–334, title V, § 5411(10), Dec. 20, 2018, 132 Stat. 4680.) Editorial Notes AMENDMENTS 2018—Subsec. (c). Pub. L. 115–334, § 5411(10)(A), struck out at end ‘‘In the case of a direct loan to an eligible cooperative by the Central Bank, the Central Bank shall have a first lien on the stock and equities of the borrower in the district bank and the district bank shall have a lien thereon junior only to the lien of the Central Bank.’’ Subsec. (d). Pub. L. 115–334, § 5411(10)(B), substituted ‘‘held by a bank in another bank for cooperatives (or any successor bank) on account of such indebtedness’’ for ‘‘held by a district bank in another district bank on account of such indebtedness’’. 1986—Subsec. (a). Pub. L. 99–509 struck out ‘‘, with the approval of the Farm Credit Administration as pro- vided in section 2205 of this title’’ after ‘‘from time to time’’. 1980—Subsec. (a). Pub. L. 96–592, § 307(1), inserted ref- erence to section 2205 of this title. Subsec. (d). Pub. L. 96–592, § 307(2), substituted ‘‘mar- ket’’ for ‘‘book’’ and inserted provisions respecting re- tirement or cancellation of equities as affected by the capital structure. § 2132. Earnings and reserves; application of sav- ings (a) Application of savings At the end of each fiscal year, the net savings shall, under regulations prescribed by the Farm Credit Administration, continue to be applied on a cooperative basis with provision for sound, adequate capitalization to meet the changing fi- nancing needs of eligible cooperative borrowers and prudent corporate fiscal management, to the end that current year’s patrons carry their fair share of the capitalization, ultimate ex- penses, and reserves related to the year’s oper- ations and the remaining net savings shall be distributed as patronage refunds as provided in subsection (b). Such regulations may provide for application of net savings to the restoration or maintenance of an allocated surplus account, reasonable additions to unallocated surplus, or to unallocated reserves after payment of oper- ating expenses, and provide for allocations to patrons not qualified under title 26, or payment of such per centum of patronage refunds in cash, as the board may determine. (b) Patronage refunds The net savings of each bank for cooperatives, after the earnings for the fiscal year have been applied in accordance with subsection (a) of this section shall be paid in stock, participation cer- tificates, or cash, or in any of them, as deter- mined by its board, as patronage refunds to bor- rowers to whom such refunds are payable who are borrowers of the fiscal year for which such patronage refunds are distributed. All patronage refunds shall be paid in proportion that the amount of interest and service fees on the loans to each borrower during the year bears to the in- terest and service fees on the loans of all bor- rowers during the year or on such other propor- tionate patronage basis as may be approved by the board of directors. (c) Loss carryover In the event of a net loss in any fiscal year after providing for all operating expenses (in-