Stock Investment Program

Alabama Farm Credit is a cooperative, which means that its borrowers also own its stock. To receive a loan or qualify for financially related services, you must invest in capital stock or participation certificates of the association. This stock investment entitles you to certain benefits and privileges but is not without risk.

Answers to the most common questions about stock investments are included below. If you have additional questions, please contact us toll-free at 1-877-681-6087.

Farmers, ranchers and producers or harvesters of aquatic products who obtain a loan are required to purchase voting stock. The stock includes the right to vote on all matters on which stockholders have the right to decide, in accordance with the Farm Credit Act, regulations by the Farm Credit Administration and rules in Alabama Farm Credit's bylaws.

A holder of voting stock is entitled to:

  • nominate and vote in the election of directors to the association's board of directors
  • vote in the selection of members of the nominating committee
  • make motions and second motions at the annual stockholders' meeting
  • vote on measures brought before the meeting
  • vote on certain other matters relating to corporate governance.

In addition, a voting stockholder is generally eligible to serve as a director or as a member of the nominating committee.

Borrowers obtaining loans for rural homes and certain farm-related businesses are not eligible to hold voting stock but must instead purchase participation certificates. In addition, persons who are eligible to borrow may purchase participation certificates in order to qualify for financially related services. Owners of participation certificates do not have voting rights, except when stockholders authorize the issuance of preferred stock, and are not eligible to serve on the association's board of directors. In all other respects, stock and participation certificates have the same rights and restrictions.

The minimum level of stock-purchase requirements for loans and financially related services is determined by the association's board of directors within a range set forth in the association's capitalization bylaws, which are subject to the approval of stockholders. Currently, the required stock investment is the lesser of 2 percent of the borrower total relationship or $1,000.

Your association issues a receipt for stock and participation certificates at the time they are issued. Ownership of the stock or participation certificates is recorded on the books of the association.

Yes, owning stock or participation certificates may make you eligible to receive patronage refunds or dividends. Patronage refunds are based on the amount of business you have done with the association, and dividends are based on the number of shares of voting stock or participation certificates you hold. Declarations of patronage and dividends are made at the sole discretion of the board of directors upon review of the association's financial performance.

The $5 per share par value of your association stock or the $5 face value of your participation certificates does not change, but the book value could increase or decrease depending on the financial condition of your association. Any retirement, however, will be at the lower cost of par value or book value.

The association will have a first lien on your stock or participation certificates as additional collateral for your loan(s) or any other indebtedness to the association. In the event of a default on the loan(s), all or part of the stock may be applied to the loan(s), or under certain circumstances, may be otherwise disposed of as deemed to be appropriate by the association.

Your ownership of stock or participation certificates is an investment that allows you to share in the association's earnings through patronage refunds and/or dividends, but which is also subject to certain risks that could result in a partial or complete loss of the investment. It is not a compensating balance. The ultimate value of the stock is dependent on the future financial performance and condition of the association over time. Therefore, you cannot assume that stock will be redeemed on demand or upon a certain date or upon the happening of any event, such as a repayment of the loan (as could be the case if the investment were considered a compensating balance). You are responsible for the full amount of your loan, including the amount borrowed to pay for your stock or certificates, regardless of their book value. Borrowers are advised to review the financial reports of Alabama Farm Credit, the association's capitalization bylaws and other available information about the Farm Credit System, copies of which are available from the association upon request.

If the association is liquidated, the law prohibits stock retirements until the assets of the association are used to meet its liabilities. The remaining assets after the liquidation is completed are all divided on a pro rata basis among current stockholders according to the proportion of stock they own.

Stock requirements are at the sole discretion of the board of directors based on the association's capital strength and financial performance. They cannot be retired on demand or on a certain date. However, the association board has policies and procedures to maintain adequate capital and allow for the orderly retirement of stock, when requested by a stockholder, in a safe and sound manner.

When you have repaid your loan and finished with your financially related services, one of the following may happen:

  • You may elect to use the stock value to capitalize other debts with the association.
  • Your stock may be retired and the proceeds repaid to you either when your loan is repaid or at a future date as determined by the board of directors.
  • Stock will not be retired if the association fails to meet the capital adequacy standards of both the Farm Credit Administration and association bylaws.

Yes. As of the date of this disclosure, Alabama Farm Credit meets or exceeds the minimum permanent capital adequacy standard established by the Farm Credit Administration and the standard set by the association board.