CoBank, a leading cooperative bank serving agribusinesses and rural infrastructure providers throughout the United States, today announced fourth-quarter and full-year financial results for 2010. Full-year earnings and net interest income reached record highs, and loan quality continued to improve throughout the year.
CoBank’s full-year net income was a record $613.8 million, up 8.6 percent from $565.4 million in 2009. Net income for the fourth quarter of 2010 was $162.8 million, compared with $132.6 million in the same period in the prior year. Full-year net income reflected the benefit of refunds of Farm Credit insurance premiums paid in prior years, a lower premium in the current year, a lower provision for loan losses, and greater fee income. Those positive earnings drivers were partially offset by impairment losses in the bank’s investment portfolio and other factors.
Average loan volume during 2010 was $45.5 billion, up 2.3 percent from the prior year. A key driver was higher seasonal financing requirements from agribusiness customers due to the sharp increase in prices for grains and other agricultural commodities that occurred in the latter part of 2010. The bank also increased its lending to rural electric distribution cooperatives around the country. Those increases were partially offset by lower levels of borrowing from customers in the rural communications industry, where overall demand for debt capital remained weak. Average loans to other banks and associations in the Farm Credit System were essentially unchanged, reflecting relatively flat loan demand at the producer level of the U.S. farm economy. Total loan volume for the bank at December 31, 2010, was $50.0 billion, compared with $44.2 billion at the end of 2009.
Full-year net interest income for CoBank rose 0.5 percent to $950.8 million, from $946.0 million in 2009. In the fourth quarter, net interest income increased 20 percent to $275.9 million, compared to $229.9 million the prior year, largely due to the increase in agribusiness loan volume cited above.
In March, the bank will pay $284.6 million in total patronage distributions, including $194.1 million in cash and $90.5 million in common stock. For most customers, that represents 100 basis points of average loan volume, lowering their overall net cost of debt capital from CoBank.
U.S. AgBank Merger Update
In December 2010, the CoBank and U.S. AgBank boards of directors unanimously approved a letter of intent to pursue a merger during 2011. Based in Wichita, Kansas, U.S. AgBank is one of the four other funding banks in the Farm Credit System. The combined bank would continue to do business under the CoBank name and remain headquartered outside Denver, Colorado, but it would maintain U.S. AgBank’s existing presence and operations in Wichita and Sacramento, California.
The combined bank would have approximately $90 billion in assets and serve as a wholesale provider of financing to Farm Credit associations that provide credit and financial services to more than 70,000 farmers, ranchers and other rural borrowers in 23 states. It would also serve as a direct lender to farmer-owned agricultural cooperatives, other agribusinesses and rural electric, water and communications service providers throughout the country.
The merger requires the approval of CoBank and U.S. AgBank shareholders as well as the Farm Credit Administration. Since announcing the merger proposal in December, the banks have been conducting formal due diligence and preparing a comprehensive merger disclosure document, which will be submitted to the FCA for its review prior to distribution to shareholders later this year. FCA submission is scheduled for the end of March, with stockholder votes expected to take place in the summer. If stockholders endorse the transaction, the merger is expected to close on October 1, 2011.
Customer Meetings and 2010 Earnings Webcast and Conference Call
CoBank will provide information about the merger and its 2010 financial results at its upcoming series of regional customer meetings, which will take place in nine cities around the country between February and July of 2011. Managers and directors of any CoBank borrower are invited to attend these meetings, as are representatives of all Farm Credit institutions. For complete details about the meeting program, please visit the bank’s meetings page at www.cobank.com/meetings.
In addition, the bank will hold its annual conference call and webcast at 3 p.m. Eastern time on Tuesday, March 1. The 60-minute call will feature a presentation of 2010 financial highlights, a merger overview and Q&A with CoBank executives.
To join via phone, call 866-362-4820 and use passcode 16622859. To join via the Internet, visit www.cobank.com and click on the “2010 Earnings Webcast” link at the top of the page.