The federal land banks are central mortgage bond institutions. The country is divided into twelve districts, with boundaries conforming to state lines because the federal land banks have to conform to the state laws affecting real property, entail, etc. In each district is a federal land bank, in a central city selected largely from considerations of convenience, and the bank is named after the city. The minimum capital of each federal land bank is fixed at $750,000, to be subscribed by the national farm loan associations and by the public, the government to subscribe any necessary residue. The subscription by the government and the public, however, is to be absorbed later by the loan associations as loans are placed by them.

The twelve banks began operations in the spring of 1917 with an aggregate capital of $9,000,000, of which $8,892,130 was subscribed by the government and $107,870 by individuals. During the first year and part of the second the banks were run at a loss; but by January 31, 1919, these deficits had been made good, and by December 31,1920, $2,059,450 of the government's subscription to capital stock had been retired and the aggregate capital stock of the banks had risen to $24,591,515. No dividends were paid on the government's holdings. Up to December 31,1920, the twelve banks had carried $2,861,326 to reserve and undivided profits and all had declared dividends on stock owned by loan associations and the public. No limitations are put on the dividends that may be declared. A reserve equal to 25 per cent of the stock held by the loan associations is to be held, either in cash or in liquid securities; and one-fourth of its net earnings must be carried to this reserve until it reaches 20 per cent, and thereafter only one-twentieth. Up to September 30, 1919, of the payments due from borrowers to the banks 1.4 per cent was overdue, but one-half of this amount was overdue less than 30 days.

The law provides that the federal land banks may establish branches in their districts in order to bring the service of the system nearer to the borrower. An amendment of February 27, 1921, extended the system to Porto Rico by authorizing the Federal Farm Loan Board to designate some federal land bank which is permitted to establish a branch at such place on the island as the board may direct.