Page:United States Statutes at Large Volume 85.djvu/636

 606

PUBLIC LAW 92-181-DEC. 10, 1971

[85 STAT.

the F a r m Credit Administration, determines will provide adequate capital for the operation of the bank and equitable ownership thereof among borrowers. I n the case of a direct loan by the Central Bank, the borrower shall be required to own or invest in the necessary stock in a district bank or banks as may be approved by the F a r m Credit Administration and such district 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 F a r m Credit Administration. (b) Notwithstanding the provisions of subsection (a) of this section, the purchase of stock need not be required with respect to that part of any loan made by a bank for cooperatives which it sells to or makes in participation with financial institutions other than any of the banks for cooperatives. I n such cases the distribution of earnings of the bank for cooperatives shall be on the basis of the interest in the loan retained by such bank. SEC. 3.10. IxTKREST RATES; SECURITY: L I E N; CANCELLATION; AND APPLICATION ON INDEBTEDNESS.— (a) 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, with the approval of the F a r m Credit Administration. I n 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 account the net cost of money to the bank, necessary reserves and expenses of the bank, and services provided. The loan documents may provide 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 currently being charged by the bank. (b) Loans shall be made upon such terms, conditions, and security, if any, as may be determined by the bank in accordance with regulations of the F a r m Credit Administration. (c) 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. I n 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. (d) I n any case where the debt of a borrower is in default, or in any case of liquidation or dissolution 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 book value thereof not exceeding par, and, to the extent required in such, cases, corresponding shares and allocations and other equity interests held by a district bank in another district bank on account of such indebtedness, shall be retired or equitably adjusted. SEC. 3.11. EARNINGS AND RESERVES; APPLICATION or

SAVINGS.—(a)

Each bank for cooperatives, at the end of each fiscal year when said bank shall have stock outstanding held by the Governor of the F a r m Credit Administration, shall determine the amount of its net savings after paying or providing for all operating expenses (including reasonable valuation reserves and losses in excess of any such applicable reserves) and shall apply such savings as follows: (1) To the restoration of the amount of the impairment, if any, of capital stock, as determined by its board of directors; (2) 25 per centum of any remaining net savings shall be used to create and maintain a

�