Note 1 – Organization and Operations Organization Farm Credit West, ACA and its subsidiaries, Farm Credit West, FLCA and Farm Credit West, PCA (collectively, Farm Credit West or the Association) are member-owned cooperatives which provide credit and credit-related services to and for the benefit of eligible borrowers/shareholders for qualified agricultural purposes in its chartered territory. Farm Credit West’s chartered territory includes the California counties of El Dorado, Imperial, Inyo, Kern, Kings, Mono, Nevada, Placer, Sacramento, San Luis Obispo, Santa Barbara, Solano, Sutter, Tulare, Ventura, Yolo, and Yuba as well as portions of Butte and Los Angeles counties. In the state of Nevada, the chartered territory includes Esmeralda county and portions of Mineral, Nye, and Clark counties. In the state of Arizona, the chartered territory includes all counties except for those portions of Mohave and Coconino counties north of the Colorado River known as the “Arizona Strip”. Farm Credit West is a lending institution of the Farm Credit System (System), a nationwide system of cooperativelyowned banks and associations, which was established in 1916 by Acts of Congress to meet the credit needs of American agriculture and is subject to the provisions of the Farm Credit Act of 1971, as amended (the Farm Credit Act). At December 31, 2020, the System was comprised of three Farm Credit Banks, one Agricultural Credit Bank and 68 affiliated associations. Each System bank serves one or more Production Credit Associations (PCAs), Federal Land Credit Associations (FLCAs), and/or Agricultural Credit Associations (ACAs). PCAs, FLCAs and ACAs are collectively referred to as Associations. CoBank, ACB (CoBank or the “Bank”), its affiliated associations, and AgVantis, Inc. are collectively referred to as the District. CoBank provides the funding to associations within the District and is responsible for supervising certain activities of the District associations. CoBank is the funding bank of Farm Credit West. AgVantis, Inc. which is owned by the entities it serves, provides technology and other operational services to certain associations; however, it does not serve Farm Credit West. As of December 31, 2020, the CoBank District consisted of CoBank, 21 ACAs which generally have two wholly-owned subsidiaries (a FLCA and a PCA), and AgVantis, Inc. Farm Credit West purchases technology and other operational services from Financial Partners, Inc. (FPI), which is a technology service corporation. The Association is a shareholder in FPI along with four other FPI customers. The Farm Credit Association Captive Insurance Company is a reciprocal insurer that provides Farm Credit West insurance services such as directors and officers liability, fiduciary liability and a bankers bond. The Association is a shareholder in the Captive Insurance Company.
ACA parent companies provide financing and related services to customers through their FLCA and PCA subsidiaries. Generally, FLCAs make long-term loans secured by agricultural real estate or rural homes. PCAs make short-term and intermediate-term loans for agricultural production or operating purposes. Congress has delegated authority to the Farm Credit Administration (FCA) to regulate System banks and associations. The FCA examines the activities of System institutions to ensure their compliance with the Farm Credit Act, FCA regulations and safe and sound banking practices. The Farm Credit Act established the Farm Credit System Insurance Corporation (Insurance Corporation or FCSIC) to administer the Farm Credit Insurance Fund (Insurance Fund). The Insurance Fund is required to be used (1) to ensure the timely payment of principal and interest on System wide debt obligations (Insured Debt), (2) to ensure the retirement of protected stock at par or stated value, and (3) for other specified purposes. The Insurance Fund is also available for discretionary use by the Insurance Corporation to provide assistance to certain troubled System institutions and to cover the operating expenses of the Insurance Corporation. Each System bank has been required to pay premiums, which may be passed on to the Associations, into the Insurance Fund based on its pro rata share of Insured Debt outstanding until the assets in the Insurance Fund reach the “secure base amount.” The “secure base amount” is defined in the Farm Credit Act as 2.0% of the aggregate insured obligations (adjusted to reflect the reduced risk on loans or investments guaranteed by federal or state governments) or such other percentage of the aggregate obligations as the Insurance Corporation, in its sole discretion, determines to be actuarially sound. When the amount in the Insurance Fund exceeds the secure base amount, the Insurance Corporation is required to reduce premiums to maintain the Insurance Fund at the 2.0% level. As required by the Farm Credit Act, as amended, the Insurance Corporation may return excess funds above the secure base amount to System institutions. Operations The Farm Credit Act sets forth the types of authorized lending activity, persons eligible to borrow from Farm Credit West, and financial services which can be offered by Farm Credit West. Farm Credit West is authorized to provide, either directly or in participation with other lenders, credit, credit commitments, and related services to eligible borrowers. Eligible borrowers include farmers, ranchers, producers or harvesters of aquatic products, their cooperatives, farm-related businesses, and certain ag product processors/marketers. Farm Credit West also serves as an intermediary in offering appraisal services and credit life insurance to its borrowers as additional services. Farm Credit West's financial condition may be impacted by factors that affect CoBank. The CoBank Annual Report 2 0 22020 0 AANNUAL N N U A LREPORT R E P O R| T49
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