[Federal Register Volume 65, Number 90 (Tuesday, May 9, 2000)]
[Proposed Rules]
[Pages 26776-26781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-11551]


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FARM CREDIT ADMINISTRATION

12 CFR Part 611

RIN 3052-AC00


Organization; Stockholder Vote on Like Lending Authority

AGENCY: Farm Credit Administration.

ACTION: Proposed rule.

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SUMMARY: We propose new regulations to carry out territorial consent 
requirements of the Farm Credit Act of 1971, as amended (Act).\1\ 
Section 5.17 of the Act allows Farm Credit System (FCS or System) 
stockholders in certain areas of the country to vote on charters 
involving like lending authorities. The charter amendments would 
provide eligible customers the opportunity to obtain lending services 
from more than one association.
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    \1\ Pub. L. 92-181, 85 Stat. 583 (Dec. 10, 1971).

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DATES: Please send your comments to us by June 8, 2000.

ADDRESSES: You may send comments by electronic mail to ``[email protected]'' or through the Pending Regulations section of our Web 
site at ``www.fca.gov.'' You may also send comments to Patricia W. 
DiMuzio, Director, Regulation and Policy Division, Office of Policy and 
Analysis, Farm Credit Administration, 1501 Farm Credit Drive, McLean, 
Virginia 22102-5090 or fax them 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:

Eric Howard, Senior Policy Analyst, Office of Policy and Analysis, Farm 
Credit Administration, McLean, VA 22102-5090, (703) 883-4498, TDD (703) 
883-4444,

    or

Joy Strickland, Senior Counsel, Office of General Counsel, Farm Credit 
Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703) 883-
4444.

SUPPLEMENTARY INFORMATION:

I. Objectives

    We are committed to removing territorial restrictions that prevent 
customers of the FCS from choosing their System lender. Recently, we 
announced that direct lender associations may apply for national (also 
referred to as nationwide) charters. In order to facilitate national 
charters, stockholder votes must be conducted by certain associations 
in Alabama, Louisiana, Mississippi, and New Mexico. Our objectives for 
the proposed rule are to:
     Implement the stockholder approvals required by statute; 
and
     Ensure stockholders are adequately informed and votes are 
conducted quickly and fairly.

II. Background

A. FCA Initiative

    On July 14, 1998, the Farm Credit Administration (FCA or Agency) 
Board issued a Philosophy Statement on Competition (Philosophy 
Statement). The Philosophy Statement described the FCA Board's 
framework for the Agency's chartering, policy development, and 
regulatory activities involving System corporate structures and related 
statutory authorities. The FCA Board believes removing the geographical 
constraints of System entities will promote greater efficiency, improve 
customer service, and ensure that they continue to meet the current and 
future needs of rural America. To carry out our philosophy, we 
researched strategies that conform to the Act and increase 
opportunities for rural and agricultural borrowers. Based on this 
analysis, our first priority is to remove geographic barriers by 
granting national charters to FCS direct lender associations.
    We will accept applications from institutions for charter 
amendments. To facilitate the application process, we will be 
furnishing additional guidance to FCS institutions in the near future.
    We note that the proposed voting requirements only apply to the 
geographic areas specifically referenced in the Farm Credit Banks and 
Associations Safety and Soundness Act of 1992 (1992 amendments).\2\ 
Thus, they do not apply to nationwide charter requests outside of the 
areas covered by the 1992 amendments or any other FCA chartering 
actions not related to national charters.
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    \2\ Pub. L. 102-552, 106 Stat. 4102 (Oct. 28, 1992).
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B. Statutory Requirements for Stockholder Votes

    Before we can grant full nationwide charters, we must fulfill two 
requirements of the Act affecting certain institutions in four states. 
In the 1992 amendments, Congress required stockholder voting on 
competitive charters in these areas.
    The 1992 amendments require association stockholder votes in the 
geographic area in which the Federal Intermediate Credit Bank of 
Jackson or its successor (AgFirst Farm Credit Bank) is chartered to 
provide short-and

[[Page 26777]]

intermediate-term credit and the Farm Credit Bank of Texas is chartered 
to provide long-term credit. The 1992 amendments also require the 
consent of stockholders of three production credit associations (PCAs) 
in New Mexico that were reassigned pursuant to section 433 of the 
Agricultural Credit Act of 1987. \3\
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    \3\ Pub. L. 100-233, 101 Stat. 1568 (Jan. 6, 1988).
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C. Statutory Requirements for Bank and Certain New Mexico Association 
Boards of Directors Votes

    In addition to a stockholder vote by each of the covered 
associations, the 1992 amendments require the approval of the board of 
directors of their affiliated banks. Thus, the boards of directors of 
the Farm Credit Bank of Texas, AgFirst Farm Credit Bank, and the Farm 
Credit Bank of Wichita must vote to approve the issuance of competitive 
charters or charter amendments in certain areas. The 1992 amendments 
also require the approval of the board of directors of the New Mexico 
PCAs that were reassigned.

III. The Proposed Regulations

    We are proposing regulations to carry out the statutory requirement 
for stockholder approvals. In addition, we believe the stockholders of 
the covered associations should have the opportunity to express their 
views on the issue of other institutions being able to lend in these 
geographic areas.
    We have two primary objectives in setting up this approval process. 
The FCA Board believes an expedited process will be least burdensome to 
the stockholders and institutions involved and will best promote the 
implementation of the Philosophy Statement. We chose not to propose an 
alternative for implementing the statutory requirement. This 
alternative would have required the stockholders in the geographic 
areas covered by the 1992 amendments to vote on each nationwide charter 
application we receive. We believe that requiring multiple votes would 
be both costly and disruptive to the stockholders of the associations 
covered by the 1992 amendments.
    Our other primary objective is to ensure that the process provides 
stockholders with full and fair disclosure on the issue of charter 
amendments affecting the territory of associations where they do 
business. The discussion that follows explains each section of the 
proposal.

A. Section 611.1150--Definitions Used in the Proposed Regulations

    We provide definitions of four key terms in the proposed 
regulations. As part of our goal to use plain language in our 
regulations, we use the word ``you'' in the text of the proposed rule. 
We also use the term ``covered association,'' which means the 
associations subject to section 5.17(a)(2)(B), (a)(2)(C), (a)(13), and 
(a)(14), specifically: First South Production Credit Association; 
Louisiana Federal Land Bank Association, FLCA; Federal Land Bank 
Association of North Alabama, FLCA; Federal Land Bank Association of 
South Alabama, FLCA; Federal Land Bank Association of North 
Mississippi, FLCA; FLBA of South Mississippi; Production Credit 
Association of Southern New Mexico; Production Credit Association of 
Eastern New Mexico; and the Production Credit Association of New 
Mexico.
    We define the term ``days'' to mean calendar days unless otherwise 
specified. We also define ``we'' or ``us'' to mean the FCA.

B. Section 611.1151--What Stockholders Must Decide

    The proposed rule requires the covered associations to call a vote 
of their stockholders to decide the following question:

    Do you want a choice to borrow from other Farm Credit System 
associations?

    If stockholders vote to approve the question, they will have the 
opportunity to borrow from other System associations that will be 
chartered to lend in their current association's lending area. They 
will also continue to have the opportunity to borrow from their current 
association. Voting against the question means other System 
associations will not be chartered to lend in their current 
association's lending area. However, the stockholders will be able to 
continue to borrow from their current association.
    The FCA has several options for carrying out the requirements of 
section 5.17. For example, the stockholders in the areas covered by the 
1992 amendments could vote on each request for a nationwide charter in 
those areas. There are currently 165 direct lender associations within 
the System. We expect requests for nationwide charters from most of 
these associations. As a result, we believe separate stockholder votes 
for each request for nationwide charters would be expensive and 
disruptive to the individual stockholders and the covered associations. 
To reduce this burden, we are proposing a streamlined process for 
obtaining stockholder approval on this issue. Thus, the stockholders of 
each covered association will vote on whether any other Farm Credit 
association should be given a charter or charter amendment that would 
allow it to exercise lending authority in the territory of the covered 
association.

C. Section 611.1152--Bank and Certain New Mexico Association Boards of 
Directors Voting Requirements

    The proposed regulations implement the approval requirements for 
bank and certain New Mexico association boards of directors' votes. The 
approval requirements differ depending on the geographic area of the 
charter amendment. For the former Jackson district, the 1992 amendments 
require the approval of the board of directors of the Farm Credit Bank 
of Texas and AgFirst Farm Credit Bank.\4\
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    \4\ Under section 5.17(a)(20(b), for each of the covered 
associations, only its affiliated bank board of directors will vote 
on the question in proposed Sec. 611.1152(c).
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    For the reassignments under section 433 of the Act, the 1992 
amendments require the approval of the board of directors of the Farm 
Credit Bank of Texas and the Farm Credit Bank of Wichita.\5\ In 
addition to the stockholders' and bank boards of directors' votes, the 
New Mexico associations that were reassigned pursuant to section 433 
must conduct a vote of their boards of directors.
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    \5\ Under section 5.17(a)(13) and (14), for each of the covered 
associations, both the Farm Credit Bank of Texas and the Farm Credit 
Bank of Wichita will vote on the question in proposed 
Sec. 611.1152(c).
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    The banks' and certain New Mexico associations' boards of directors 
will vote on the following question:

    Should the Farm Credit Administration issue a charter or charter 
amendment that would allow any Farm Credit System association to 
exercise lending authority in the territory(ies) now served by [list 
affected association(s)]?

    Our proposal requires these votes to be completed and the results 
reported to the FCA on the first business day following notice by an 
independent third party as described in section F below.

D. Section 611.1153--Contents of the Information Statement

    The proposed rule identifies the information necessary to ensure 
stockholders receive complete disclosure to enable them to make an 
informed decision when voting on the stockholder question. The 
Information Statement must contain the following:
     Notice of Meeting;
     Proxy Ballot and Instructions;

[[Page 26778]]

     Brief Summary of the Question;
     Discussion of the Advantages and Disadvantages of 
Approving the Question;
     Association Board Statement or Recommendation (Optional); 
and,
     Statement by the Farm Credit Administration Board.
    The Notice of Meeting (Notice) must give the date, time, and place 
of the stockholders' meeting. The Notice must include the question that 
will be considered and voted on by the stockholders. It must identify 
the requirements for stockholder approval, pursuant to proposed 
Sec. 611.1157. It must also contain a reference to the proxy, proxy 
authorization, voting instructions included in the Information 
Statement, and the deadline for receipt of the proxy at the 
headquarters office. The Information Statement must be provided to all 
equity holders, including preferred stockholders, participation 
certificate holders, and others not eligible to vote. Although these 
non-voting equity holders cannot vote on the question, we are proposing 
to provide them with the Information Statement to keep them informed of 
the changes affecting their Association.
    The proposed rule contains customary instructions for voting by 
proxy. The proxy ballot and instructions must allow stockholders to 
select someone other than a director to serve as proxy, provided that 
this person is a voting stockholder and will attend the meeting. The 
proxy ballot and instructions must point out that a stockholder may 
cancel the proxy at any time prior to balloting at the stockholders' 
meeting. The documents must provide a space for the stockholder to sign 
and date the proxy authorization. The proxy ballot must be separate 
from the proxy authorization to ensure the stockholder's rights to a 
secret ballot as required by section 4.20 of the Act. Therefore, you 
must ensure that there are no signatures on the ballot.
    The Information Statement must include a brief summary of the 
question. The summary must provide background information on the FCA 
Board's Philosophy Statement. The summary must also include information 
on the territory currently served by the covered association. Finally, 
the summary must describe the question approval process.
    The Information Statement must also include a discussion of the 
advantages and disadvantages of approving the question to the 
stockholders of the covered association. The discussion must present a 
balanced view of the advantages and disadvantages and provide 
justification for all statements that project future financial results, 
such as changes in operating costs, stock retirements, interest rates, 
earnings, and services available to customers.\6\
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    \6\ Any financial projections must conform to the guidance 
provided in Bookletter BL-007 entitled ``Disclosure of Financial 
Forecasts'' dated March 2, 1990. Partial forecasts or projected 
information will be subject to the evaluative criteria set forth in 
this Bookletter.
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    The boards of directors of the covered associations may include an 
optional statement on the question. This statement may include the 
directors' views and recommendation on the question and the reasons for 
the recommendation.
    To further streamline the process, the FCA is including a model 
Information Statement with this proposal. We note, however, that 
although most of the requirements in the proposed rule are standard in 
stockholder disclosures, one item is unique. The FCA Board believes the 
disclosure should include information on its philosophy on competition 
to ensure that the stockholders can make an informed vote.

E. Section 611.1154--Timeframes for Implementing the Regulations

    We are proposing a streamlined, fast-track process for implementing 
the rule. As previously discussed, we expect many requests for 
nationwide charters in the near future. The FCA Board believes the 
timely and efficient implementation of the Philosophy Statement and 
nationwide charters has the potential for lowering the cost of credit 
and improving service for customers. Thus, we are proposing a specific 
timeline for obtaining stockholder decisions on the question.
    The first step in the timeline is preparing the Information 
Statement. The covered associations must prepare and send the 
Information Statement to the FCA within 20 days of the effective date 
of this rule. We are requiring submission by facsimile, electronic 
transmission, overnight mail, or similar expedited delivery method so 
we can review and approve the statement in the most efficient manner. 
In addition, FCA's model Information Statement should shorten the time 
necessary for the associations to prepare the document. We also note 
that after the FCA Board adopts the final regulations, we send them to 
Congress for a 30-day review period before they are effective. As a 
result, the associations will have at least 50 days after we adopt the 
rule to submit the Information Statement. We are proposing a 10-
business day review period for the FCA, but plan to act on the 
Information Statements as quickly as possible. To ensure that the 
Information Statement provides accurate and complete information to 
stockholders on the question, we may change the Information Statement 
or require the association to change it.
    When the associations receive FCA approval, they will have 14 days 
to duplicate and mail the statement. The proposal requires that the 
association hold a stockholder meeting 16 days after distribution of 
the statement. This includes the standard 5-day mailing time and 10 
days for stockholder review. As a result, the stockholder meeting will 
take place on the first business day following the 10-day stockholder 
review period.

F. Sections 611.1155 and 611.1156--Vote Tabulation and Notification

    The proposed regulations require that the stockholder votes be 
tabulated by an independent third party within 2 business days of the 
meeting. Use of an independent third party is a standard measure to 
ensure accuracy and objectivity. The independent third party must 
notify the association, the appropriate banks, and the FCA of the 
results of the vote on the same day they are tabulated.\7\ Within 10 
days, the independent third party will provide us a certified copy of 
the stockholders' vote on the question.
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    \7\ When the association contracts with an independent third 
party, the association must instruct it as to which bank(s) must be 
notified of the results of the stockholder vote.
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G. Sections 611.1157, 611.1158, 611.1159 and 611.1160--Miscellaneous 
Issues

    For all the required votes, the proposed regulations incorporate 
the standard condition for approval or disapproval of the question by a 
majority of those stockholders and board members voting, at duly 
authorized meetings, according to the bylaws of the institution.
    The proposal also requires the associations to notify the 
stockholders of the results of the votes referenced in Secs. 611.1151 
and 611.1152 within 10 days of the stockholder meeting. In order for 
the associations to do this, we are requiring the banks' boards of 
directors to notify the associations of their votes within 2 business 
days.
    The proposed regulations contain the following prohibition: No 
director, officer, employee, or agent of a bank or an association may 
make any representation that appears to be a statement or 
recommendation of the FCA on the merits of the question. The FCA's 
position will be included in the Information Statement as required in 
proposed Sec. 611.1153(a)(6).

[[Page 26779]]

    Finally, in the event the stockholders' and boards of directors' 
votes identified in proposed Secs. 611.1151 and 611.1152, are not 
conducted, the proposed regulations provide that FCA will conduct the 
voting process.

List of Subjects in 12 CFR Part 611

    Accounting, Agriculture, Banks, banking, Rural areas.

    For the reasons stated in the preamble, we propose to amend part 
611 of chapter VI, title 12 of the Code of Federal Regulations 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. Add subpart J to read as follows:
Subpart J--Stockholder Vote on Like Lending Authority
Sec.
611.1150   What definitions are used in this subpart?
611.1151   What must your stockholders decide?
611.1152   What votes must be conducted by bank and certain 
association boards of directors?
611.1153   What must the Information Statement contain?
611.1154   What is the timeframe for this vote?
611.1155   How are the votes tabulated?
611.1156   Who is notified of the results of the stockholder vote?
611.1157   How many votes are needed for passage of the questions?
611.1158   What notifications must be made?
611.1159   Are there additional requirements?
611.1160   What if the votes are not conducted?
Appendix A to Subpart J--Model Information Statement

Subpart J--Stockholder Vote on Like Lending Authority


Sec. 611.1150  What definitions are used in this subpart?

    (a) Days means calendar days unless otherwise noted.
    (b) You or covered associations means the associations subject to 
section 5.17(a)(2)(B), (a)(2)(C), (a)(13) and (a)(14) of the Farm 
Credit Act of 1971, as amended, specifically First South Production 
Credit Association; Louisiana Federal Land Bank Association, FLCA; 
Federal Land Bank Association of North Alabama, FLCA; Federal Land Bank 
Association of South Alabama, FLCA; Federal Land Bank Association of 
North Mississippi, FLCA; FLBA of South Mississippi; Production Credit 
Association of Southern New Mexico; Production Credit Association of 
Eastern New Mexico; and the Production Credit Association of New 
Mexico.
    (c) We or us means the Farm Credit Administration.


Sec. 611.1151  What must your stockholders decide?

    (a) You must conduct a vote of your voting stockholders, voting in 
person or by proxy, at a duly authorized meeting, on this question:

    Do you want a choice to borrow from other Farm Credit System 
associations?

    (b) Before the vote on the question, you must prepare an 
Information Statement, obtain Farm Credit Administration approval of 
it, and distribute it to your stockholders.


Sec. 611.1152  What votes must be conducted by bank and certain 
association boards of directors?

    (a) On the first business day following the notice from the 
independent third party required by Sec. 611.1156(a), the board of 
directors of the Farm Credit Bank of Texas, AgFirst Farm Credit Bank, 
and the Farm Credit Bank of Wichita must vote on the question in 
paragraph (c) of this section and report the results to us.
    (b) On the first business day following the notice from the 
independent third party required by Sec. 611.1156(a), the boards of 
directors of Production Credit Association of Southern New Mexico, 
Production Credit Association of Eastern New Mexico, and the Production 
Credit Association of New Mexico must vote on the question in paragraph 
(c) of this section and report the results to us.
    (c) The boards of directors listed in paragraphs (a) and (b) of 
this section, voting at duly authorized meetings, must vote on the 
following question:

    Should the Farm Credit Administration issue a charter or charter 
amendment that would allow any Farm Credit System association to 
exercise lending authority in the territory(ies) now served by [list 
affected association(s)]?


Sec. 611.1153  What must the Information Statement contain?

    (a) The Information Statement must include the question in 
Sec. 611.1151(a) and must substantially conform to the model 
Information Statement provided as an appendix to this subpart. The 
Information Statement must include a:
    (1) Notice of meeting;
    (2) Proxy ballot and instructions;
    (3) Brief summary of the question;
    (4) Discussion of the advantages and disadvantages of approving the 
question;
    (5) Association board statement or recommendation (optional); and
    (6) Statement by the Farm Credit Administration Board.
    (b) We may also require additional information in the Information 
Statement to ensure stockholders have accurate and adequate 
information.


Sec. 611.1154  What is the timeframe for this vote?

    (a) Within 20 days of the effective date of this section, you must 
prepare and send the Information Statement to us by facsimile, 
electronic transmission, overnight mail, or similar expedited delivery 
method.
    (b) Not later than 10 business days after receipt of the 
Information Statement, we will review the Information Statement and 
notify you of our approval or denial. We may change the Information 
Statement or require you to change it to ensure that it provides 
accurate and complete information to stockholders on the question.
    (c) Within 14 days of receipt of our approval of the Information 
Statement, you must mail the Information Statement to your voting 
stockholders.
    (d) A 10-day stockholder review period will begin on the sixth day 
after the day you mail the Information Statement.
    (e) A meeting of the stockholders must take place on the first 
business day following the end of the 10-day stockholder review period.


Sec. 611.1155  How are the votes tabulated?

    The votes will be tabulated by an independent third party within 2 
business days of the stockholder meeting.


Sec. 611.1156  Who is notified of the results of the stockholder vote?

    (a) On the day the votes are tabulated, the independent third party 
must report the results to you, the appropriate bank(s), and us.
    (b) Within 10 days of the stockholder meeting, the independent 
third party must provide the Farm Credit Administration with a 
certified copy of the stockholders' vote on the question.


Sec. 611.1157  How many votes are needed for passage of the questions?

    The votes in Secs. 611.1151 and 611.1152 will be determined by the 
majority of those voting, in person or by proxy as appropriate, at a 
duly

[[Page 26780]]

authorized meeting in accordance with the associations' or banks' 
quorum requirements.


Sec. 611.1158  What notifications must be made?

    (a) You must notify the stockholders of the results of the votes 
referenced in Secs. 611.1151 and 611.1152 within 10 business days.
    (b) The board of directors of the Farm Credit Bank of Texas and the 
AgFirst Farm Credit Bank must notify each of the covered associations 
with which they have a funding relationship of the results of the vote 
in Sec. 611.1152(a) within 2 business days.
    (c) The board of directors of the Farm Credit Bank of Texas and the 
Farm Credit Bank of Wichita must notify the Production Credit 
Association of Southern New Mexico, the Production Credit Association 
of Eastern New Mexico, and the Production Credit Association of New 
Mexico of the results of the vote in Sec. 611.1152(a) within 2 business 
days.


Sec. 611.1159  Are there additional requirements?

    No director, officer, employee, or agent of a bank or an 
association may make any representation that appears to be a statement 
or recommendation of the Farm Credit Administration on the merits of 
the question. The Farm Credit Administration's position will be 
included in the Information Statement.


Sec. 611.1160  What if the votes are not conducted?

    In the event the stockholder and boards of directors votes 
identified in Secs. 611.1151 and 611.1152, are not conducted in 
accordance with this subpart, the Farm Credit Administration will 
conduct the voting process.

Appendix A to Subpart J--Model Information Statement

Table of Contents

A-1  Notice of Stockholders' Meeting of X Association
A-2  Proxy Instructions and Ballot
A-3  Proxy Form
A-4  Ballot (For Use as Proxy Ballot or Voting in Person) X 
Association
A-5  Brief Summary of the Question
A-6  Advantages and Disadvantages of Approving the Question
A-7  X Association Board Statement (Optional)
A-8  Statement of the FCA Board

    Note: Appendix A contains a model information statement to aid 
in compliance with subpart J of part 611.

A-1--Notice of Stockholders' Meeting of X Association

    A meeting of the stockholders of X Association will be held at 
(location) located at (address), on (date), beginning at (time).
    At this meeting, you will be asked to vote on the following 
question:
    Do you want a choice to borrow from other Farm Credit System 
associations?
    The Farm Credit Administration (FCA) Board will accept 
applications from direct lender associations for national (also 
referred to as nationwide) charters. National charters would enable 
other Farm Credit System (System) lenders to make loans in the 
territory now served by your Association. As a result, you could 
have greater choice of System lenders in your area.
    The Farm Credit Act of 1971, as amended (Act), requires approval 
by the voting stockholders of your Association before the FCA can 
issue a charter or amend a charter that would allow any System 
lender to make loans, of the same type as those that your 
Association can make, in the geographic territory now served by your 
Association. For the question to be approved, a majority of the 
voting stockholders of X Association voting, in person or by proxy, 
at a duly authorized meeting of such stockholders, must vote to 
approve the question. The Act requires other approvals before 
nationwide charters can be issued in the territory served by X 
Association. The approvals are explained in the brief summary of the 
question (Appendix A-5).
    Attached is a packet of information related to the question. The 
packet includes a brief summary of the question; advantages/
disadvantages of allowing other System associations to exercise 
lending authority for eligible customer in the geographic territory; 
a Board of Directors' Statement (optional); and a statement by the 
FCA Board.
    Information on balloting and proxies is included under Appendix 
A-2, including the deadline of (date) for receipt of the proxy forms 
by your Association. If you have any questions about the Information 
Statement or the question, you may discuss them at the stockholders' 
meeting on (date). Your board of directors urges you to vote in 
person or by proxy at the stockholders' meeting.
    If you are a nonvoting stockholder or holder of participation 
certificates, you cannot vote on the question. However, we sent you 
this Information Statement to keep you informed of the changes 
affecting your Association.

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Name, Chief Executive Officer

Enclosures

A-2--Proxy Instructions and Ballot

    If you are entitled to vote and are unable to attend the meeting 
in person, you may appoint a proxy to vote as you direct. The 
following are instructions for completing the Proxy Ballot and Proxy 
Form:
    1. Complete the Proxy Ballot.
    a. Mark either ``APPROVE'' or ``DISAPPROVE'' in the appropriate 
box on the Ballot. Unmarked Proxy Ballots will be voted to approve 
the question.
    b. Enclose Proxy Ballot in the Ballot Envelope provided. Seal 
the envelope.
    2. Complete the Proxy Form.
    a. If you prefer, you may name as your proxy someone other than 
the directors named on the Proxy Form by writing in the name of the 
person in the blank space provided. Please note that for your vote 
to count, the person you name as proxy must be a voting stockholder 
of the association and must be present at the stockholders' meeting.
    b. Date and sign the Proxy Form in the space indicated.
    3. Enclose your signed and dated Proxy Form and sealed Ballot 
Envelope in the business reply envelope provided. Mail to your 
Association in the pre-addressed return envelope provided.
    For your vote to count, your Proxy Ballot and Proxy Form must be 
received in the association office no later than (time) on (date) or 
delivered to an election official prior to balloting at the 
stockholders' meeting. You have the right to cancel your proxy at 
any time prior to the beginning of balloting at the stockholders' 
meeting.

A-3--Proxy Form

    I, ______, as holder of stock and authorized to vote such stock 
in X Association, cancel any previous proxies and appoint (Name), 
Director, X Association, as my proxy, or I appoint ______, as my 
proxy to attend the association stockholders' meeting on (date), and 
any continuation or adjournment of the meeting, to vote for me on 
the question, and to act for me with the same effect as if I were 
personally present.
    I understand that I may cancel this proxy and the authority it 
represents at any time prior to balloting at the stockholders' 
meeting. Unless cancelled, this proxy will expire upon the official 
announcement of the results of the vote on the question. I also 
understand that, if necessary, the person I name as my proxy can 
substitute someone else as my proxy and can later cancel that 
substitution.

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Date:

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Signature*
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    * Please sign exactly as your name appears on the above label.

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Representative Title**
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    ** When signing as an executor, administrator, trustee, or 
guardian on behalf of a corporation or partnership, please sign your 
name on the first line and indicate your full representative title 
on the second line.
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A-4--Ballot (For Use as Proxy Ballot or Voting in Person) X 
Association

    QUESTION: Do you want a choice to borrow from other Farm Credit 
System associations?
    I direct that my Ballot be voted as follows:
    __ APPROVE (Voting to approve means you will have the 
opportunity to borrow from:
     Your current association; and
     Other Farm Credit System associations that will be 
chartered to allow them to lend in your current association's 
lending area, as explained in the enclosed Information Statement.)

[[Page 26781]]

    __ DISAPPROVE (Voting against means other Farm Credit System 
associations will not be chartered to allow them to lend in your 
current association's lending area. However, you will be able to 
continue to borrow from your current association, as explained in 
the enclosed Information Statement.)
    If I do not direct how this ballot shall be voted, I intend it 
to be cast to APPROVE the question.

    Note: For your vote to count, your Proxy Ballot and Proxy Form 
must be received in the association office no later than (time) on 
(date) or delivered to an election official prior to balloting at 
the stockholders' meeting. You have the right to cancel your proxy 
at any time prior to the beginning of balloting at the stockholders' 
meeting.

A-5--Brief Summary of the Question

    In a July 14, 1998, Philosophy Statement, the FCA Board 
expressed its view that competition is beneficial for customers and 
will help ensure that the System will continue to meet the current 
and future needs of rural America. To facilitate competition and 
improve services for all farmers, ranchers, and other eligible 
customers, the FCA Board indicated its support for several measures 
including the removal of geographical restrictions of System 
entities.
    The FCA Board will accept applications for national charters 
from System direct lender associations in the near future. Before 
the FCA can grant applications for full nationwide charters, 
however, the Agency must carry out two requirements of the Act that 
call for stockholder voting in certain areas of the country. 
Congress required stockholder voting in the geographic area in which 
the Federal Intermediate Credit Bank of Jackson or its successor 
(AgFirst Farm Credit Bank) is chartered to provide short-and 
intermediate-term credit and the Farm Credit Bank of Texas is 
chartered to provide long-term credit. Congress also required the 
consent of stockholders of three production credit associations in 
New Mexico pursuant to section 433 of the Agricultural Credit Act of 
1987.
    Your association serves the [counties/states of xxx], and 
(insert either (1) has territory that is within the geographic area 
of the successor to the former Federal Intermediate Credit Bank of 
Jackson or (2) reaffiliated under section 433.] As a result, you are 
being asked whether you approve the FCA's issuance of charters to 
associations that would allow them to make similar loans to you and 
other eligible customers in the territory of your Association.
    Approval of the question does not, however, guarantee that other 
associations will be chartered to lend in your Association's 
territory. Following the stockholder vote on the question, the board 
of directors of the [insert appropriate bank] [and insert 
associations if this Information Statement refers to section 5.17 
(a)(13) and (a)(14)] will also vote on the question. The question 
must be approved by a majority of the stockholders voting and a 
majority of the board of directors of the banks [and associations, 
if appropriate] before another System lender may be chartered to 
make similar loans in the territory of your Association. If approved 
by all parties involved, the FCA may grant requests from other FCS 
associations to serve the territory currently served by your 
Association.

A-6--Advantages and Disadvantages of Approving the Question

    There are advantages and disadvantages of your approval of the 
question. The following is a brief discussion of the principal 
advantages and disadvantages to the stockholders of your 
Association. This discussion does not claim to provide a complete 
analysis of all the expected outcomes of approval of the question. 
In addition, there can be no assurance that any expected advantage 
or disadvantage below will take place in whole or part. The 
realization of any advantages and disadvantages depends on how each 
association implements its nationwide charter. You should also 
consider that the advantages and disadvantages affect not only you 
but all other eligible FCS customers and potential customers.

ADVANTAGES

    Allowing other System associations to make loans in the 
territory of your Association may provide System customers in the 
[insert geographic area] with more choices for credit. You may have 
a greater choice of financial products because System lenders offer 
different loan products, interest rates, and repayment options. If 
the question is approved, you may have the freedom to select the 
System lender of your choice.
    Competition for loans within a geographic area may also provide 
associations the opportunity and incentive to become more efficient 
and more competitive. This competition is likely to lower the cost 
of credit and improve the quality of service for you and other 
customers.
    System lenders across the country may be better able to develop 
niche products and thus offer specialized lending services to 
customers in the territory of your Association and across the 
country. You may be able to obtain your main source of operational 
funding from one lender and specialized services from another. 
Nationwide charters may also enable System lenders to provide 
seamless credit to agricultural producers regardless of the 
producer's geographic location. E-commerce services may be enhanced 
after territorial restrictions are removed.
    Finally, approval of this question may heighten awareness of 
each System lender's public policy mission for service within its 
original chartered territory. The FCA will continue to ensure that 
each System association fulfills its responsibility to make services 
available to all eligible customers within its current chartered 
territory.

DISADVANTAGES

    As System lenders compete for customers, some associations may 
become less viable if added competitive pressures reduce profit 
margins. In addition, if the challenges associated with greater 
competition are not met, the capital investment of stockholders may 
be at a higher risk. There are 165 associations that may request 
nationwide charters. As a result, the management of your Association 
may be under increased pressure to provide efficient and cost 
effective services.
    In the long run, some associations may be forced to cut back or 
eliminate certain services. Also, associations entering new 
geographic areas may primarily focus on larger or more profitable 
borrowers while less attention may be given to the more marginal 
borrowers in the associations' new and existing chartered 
territories.
    Some associations may not be competitive in their present form 
and may have to merge or take other corporate restructuring actions 
to remain viable.

A-7--X Association Board Statement (Optional)

    The Association board of directors may state its views and 
recommendation on the question and elaborate on the reasons for its 
recommendation.

A-8--Statement of the FCA Board

    This statement will be provided during FCA's review period.

    Dated: May 4, 2000.
Nan P. Mitchem,
Acting Secretary, Farm Credit Administration Board.

[FR Doc. 00-11551 Filed 5-8-00; 8:45 am]
BILLING CODE 6705-01-P