Rural Telephone Bank 2005 Interest Rates Determination

Content

ACTION:

Notice of 2005 fiscal year interest rates determination.

SUMMARY:

In accordance with 7 CFR 1610.10, the Rural Telephone Bank (Bank) fiscal year 2005 cost of money rates have been established
as follows: 6.18% and 5.00% for advances from the liquidating account and financing account, respectively (fiscal year is
the period beginning October 1 and ending September 30).

All loan advances made during fiscal year 2005 under Bank loans approved in fiscal years 1988 through 1991 shall bear interest
at the rate of 6.18% (the liquidating account rate). All loan advances made during fiscal year 2005 under Bank loans approved
during or after fiscal year 1992 shall bear interest at the rate of 5.00% (the financing account rate).

The calculation of the Bank's cost of money rates for fiscal year 2005 for the liquidating account and the financing account
are provided in Tables 1 and 2. Since the calculated rates are greater than or equal to the minimum rate (5.00%) allowed under
7 U.S.C. 938(b)(3)(A), the cost of money rates for the liquidating account and financing account are set at 6.18% and 5.00%,
respectively. The methodology required to calculate the cost of money rates is established in 7 CFR 1610.10(c).

FOR FURTHER INFORMATION CONTACT:

Jonathan P. Claffey, Deputy Assistant Governor, Rural Telephone Bank, STOP 1590—Room 5151, 1400 Independence Avenue, SW.,
Washington, DC 20250-1590. Telephone: (202) 720-9556.

SUPPLEMENTARY INFORMATION:

The Federal Credit Reform Act of 1990 (2

  U.S.C. 661a, *et seq*.) implemented a system to reform the budgetary accounting and management of Federal credit programs. Bank loans approved
  on or after October 1, 1991, are accounted for in a different manner than Bank loans approved prior to fiscal year 1992. As
  a result, the Bank must calculate two cost of money rates: (1) The cost of money rate for advances made from the liquidating
  account (advances made during fiscal year 2005 on loans approved prior to October 1, 1991) and (2) the cost of money rate
  for advances made from the financing account (advances made during fiscal year 2005 on loans approved on or after October
  1, 1991).

The cost of money rate methodology is the same for both accounts. It develops a weighted average rate for the Bank's cost
of money considering total fiscal year loan advances; the excess of fiscal year loan advances over amounts received in the
fiscal year from the issuance of Class A, B, and C stock, debentures and other obligations; and the costs to the Bank of obtaining
funds.

During fiscal year 2005, the Bank was authorized to pay the following dividends: The dividend on Class A stock as 2.00% as
established in 7 U.S.C. 946(c); no dividends were payable on Class B stock in accordance with 7 U.S.C. 946(d); and the dividend
on Class C stock was established by the Bank at 5.74%.

Dissolution of the Bank

At its quarterly meeting on August 4, 2005, the Board of Directors (the “Board”) approved a resolution to dissolve the Bank.
On November 10, 2005, the liquidation and dissolution process was initiated with the signing of the 2006 Agriculture Appropriations
bill by President Bush, which contained a provision lifting the restriction on the retirement of more than 5 percent of the
Class A stock held by the Government.

In accordance with the Board's resolution and the terms of the Loan Transfer Agreement between the Bank and the Government,
dated August 4, 2005, the Bank's liquidating account loan portfolio was transferred to the Government on October 1, 2005.
As a result of that transfer, there will be no more advances of liquidating account loan funds. Therefore, this is the last
notice that will report an interest rate for liquidating account loan advances.

The dissolution of the Bank will not affect future advances of financing account loan funds. Requests for financing account
advances will continue to be processed by employees of USDA Rural Development's Telecommunications Program, just as they were
while the Bank remained in operation. The terms and conditions of the financing account loans will not change, nor will the
method for determining the interest rates, including the determination of the cost of money rates after the end of the fiscal
year. The only significant change to the financing account advances is that effective October 1, 2005, no Class B stock in
the Bank will be purchased with a financing account loan advance.

Sources and Costs of Funds—Liquidating Account

In accordance with 7 U.S.C. 946(a), the Bank did not issue Class A stock in fiscal year 2005. There were no net issuances
of Class B stock because the rescissions of loan funds advanced for Class B stock exceeded the amount of issuances. The amount
received by the Bank in fiscal year 2005 from the issuance of Class C stock was $8,048.

The Bank did not issue debentures or any other obligations related to the liquidating account in fiscal year 2005. Consequently,
no cost was incurred related to the issuance of debentures subject to 7 U.S.C. 948(b)(3)(D).

The excess of fiscal year 2005 loan advances from the liquidating account over amounts received from issuance of stocks, debentures,
and other obligations amounted to $794,953. The cost associated with this excess is the historic cost of money rate as defined
in 7 U.S.C. 948(b)(3)(D)(v). The calculation of the Bank's historic cost of money rate for advances from the liquidating account
is also provided in Table 1. The methodology required to perform this calculation is described in 7 CFR 1610.10(c). The cost
of the money rates for fiscal years 1974 through 1987 are defined in 7 U.S.C. 948(b) and are listed in 7 CFR 1610.10(c) and
Table 1 herein.

Sources and Costs of Funds—Financing Account

In accordance with 7 U.S.C. 946(a), the Bank did not issue Class A stock in fiscal year 2005. Advances for the purchase of
Class B stock and cash purchases for Class B stock were $4,570,841. There were rescissions of loan funds advanced for Class
B stock in the amount of $8,967; therefore, the amount received by the Bank from the issuance of Class B stock, per 7 CFR
1610.10(c), was $4,561,874. The Bank did not receive any amounts in fiscal year 2005 from the issuance of Class C Stock.

During fiscal year 2005, issuance of debentures or any other obligations related to advances from the financing account were
$91,416,689 at an interest rate of 5.250%.

The excess of fiscal year 2005 loan advances from the financing account over amounts received from issuance of stocks, debentures,
and other obligations amounted to $8,967. The cost associated with this excess is the historic cost of money rate as defined
in 7 U.S.C. 948(b)(3)(D)(v). The Bank's cost of money rate for advances from the financial account is provided in Table 2.
The methodology required to perform this calculation is described in 7 CFR 1610.10(c).

Dated: August 11, 2006. James M. Andrew, Governor, Rural Telephone Bank.
| FY 2005
source of bank funds | (a) Amount ($) | (b) Cost (%) | (c) (a)×(b) ($) | (c)/Advances
(%) |
| --- | --- | --- | --- | --- |
| Issuance of Class A Stock | | 2.00 | | 0.0000 |
| Issuance of Class B Stock | | 0.00 | | 0.0000 |
| Issuance of Class C Stock | 8,048 | 5.74 | 462 | 0.0575 |
| Issuance of Debentures and Other Obligations | | 0.00 | | 0.0000 |
| Excess of Total Advances Over Issuances | 794,953 | 6.19 | 49,194 | 6.1263 |
| Total FY 2005 Advances | 803,001 | | | |
| Calculated cost of money rate = | | | | 6.18 |
| Minimum rate allowable = | | | | 5.00 |

| Fiscal year | (a) Cost of money (%) | (b) advances ($) | (c) (a)×(b) ($) | (c)/Total
Advances (%) |
| --- | --- | --- | --- | --- |
| FY 1974 | 5.01 | 111,022,574 | 5,562,231 | 0.231 |
| FY 1975 | 5.85 | 130,663,197 | 7,643,797 | 0.318 |
| FY 1976 | 5.33 | 99,915,066 | 5,325,473 | 0.221 |
| FY 1977 | 5.00 | 80,907,425 | 4,045,371 | 0.168 |
| FY 1978 | 5.87 | 142,297,190 | 8,352,845 | 0.347 |
| FY 1979 | 5.93 | 130,540,067 | 7,741,026 | 0.322 |
| FY 1980 | 8.10 | 199,944,235 | 16,195,483 | 0.673 |
| FY 1981 | 9.46 | 148,599,372 | 14,057,501 | 0.584 |
| FY 1982 | 8.39 | 112,232,127 | 9,416,275 | 0.391 |
| FY 1983 | 6.99 | 93,402,836 | 6,528,858 | 0.271 |
| FY 1984 | 6.55 | 90,450,549 | 5,924,511 | 0.246 |
| FY 1985 | 5.00 | 72,583,394 | 3,629,170 | 0.151 |
| FY 1986 | 5.00 | 71,582,383 | 3,579,119 | 0.149 |
| FY 1987 | 5.00 | 51,974,938 | 2,598,747 | 0.108 |
| FY 1988 | 5.00 | 119,488,367 | 5,974,418 | 0.248 |
| FY 1989 | 5.00 | 97,046,947 | 4,852,347 | 0.202 |
| FY 1990 | 5.00 | 107,694,991 | 5,384,750 | 0.224 |
| FY 1991 | 5.43 | 163,143,075 | 3,858,669 | 0.368 |
| FY 1992 | 6.14 | 84,940,822 | 5,215,366 | 0.217 |
| FY 1993 | 6.05 | 84,605,366 | 5,118,625 | 0.213 |
| FY 1994 | 6.15 | 54,530,897 | 3,353,650 | 0.139 |
| FY 1995 | 6.04 | 35,967,133 | 2,172,415 | 0.090 |
| FY 1996 | 6.05 | 30,965,187 | 1,873,394 | 0.078 |
| FY 1997 | 5.98 | 32,602,587 | 1,949,635 | 0.081 |
| FY 1998 | 5.96 | 20,673,798 | 1,232,158 | 0.051 |
| FY 1999 | 6.01 | 17,796,518 | 1,069,571 | 0.044 |
| FY 2000 | 6.01 | 10,436,622 | 627,241 | 0.026 |
| FY 2001 | 5.95 | 6,638,107 | 394,967 | 0.016 |
| FY 2002 | 6.51 | 1,864,500 | 121,379 | 0.005 |
| FY 2003 | 6.05 | 604,800 | 36,590 | 0.002 |
| FY 2004 | 6.18 | 880,504 | 54,415 | 0.002 |
| Total advances | | 2,405,995,574 | | |
| Cost of money | | | | 6.19 |

| FY 2005
source of bank funds | (a) Amount ($) | (b) Cost (%) | (c) (a)×(b) ($) | (c)/Advances
(%) |
| --- | --- | --- | --- | --- |
| Issuance of Class A Stock | | 2.00 | | 0.0000 |
| Issuance of Class B Stock | 4,561,874 | 0.00 | | 0.0000 |
| Issuance of Class C Stock | | 5.740 | | 0.0000 |
| Issuance of Debentures and Other Obligations* | 91,416,689 | 5.250 | 4,799,659 | 5.0003 |
| Excess of Total Advances Over Issuances | 8,967 | 5.956 | 534 | 0.0006 |
| Total FY 2005 Advances | 945,987,530 | | | |
| Calculated cost of money rate = | | | | 5.00 |
| Minimum rate allowable = | | | | 5.00 |
| * RTB borrowed $99,306,000 from the financing account in FY 2005; the remaining funds will be used to cover other obligations
of the fund. | | | | |

| Fiscal year | (a) Cost of money (%) | (b) Advances ($) | (c) (a)×(b) ($) | (c)/Total
Advances (%) |
| --- | --- | --- | --- | --- |
| FY 1992 | 7.38 | 4,056,250 | 299,351 | 0.055 |
| FY 1993 | 6.35 | 23,839,200 | 1,513,789 | 0.278 |
| FY 1994 | 6.40 | 56,838,902 | 3,637,690 | 0.669 |
| FY 1995 | 6.88 | 37,161,517 | 2,556,712 | 0.470 |
| FY 1996 | 6.42 | 44,536,621 | 2,859,251 | 0.526 |
| FY 1997 | 6.54 | 34,368,726 | 2,247,715 | 0.413 |
| FY 1998 | 5.71 | 34,446,458 | 1,966,893 | 0.362 |
| FY 1999 | 5.54 | 38,685,732 | 2,143,190 | 0.394 |
| FY 2000 | 6.05 | 31,401,867 | 1,899,813 | 0.349 |
| FY 2001 | 5.17 | 55,405,896 | 2,864,485 | 0.527 |
| FY 2002 | 6.05 | 60,232,919 | 3,644,092 | 0.670 |
| FY 2003 | 5.67 | 55,835,695 | 3,165,884 | 0.582 |
| FY 2004 | 5.36 | 67,074,751 | 3,595,207 | 0.661 |
| Total advances | | 543,884,534 | | |
| Cost of money | | | | 5.96 |
[FR Doc. 06-6970 Filed 8-15-06; 8:45 am] BILLING CODE 3410-15-M

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