CoBank posts record profit in 2009

Mar 5, 2010
by WLJ

CoBank, a major lender to U.S. agricultural interests and rural utilities, posted record earnings for 2009 despite a drop in loan volume and loan quality tied to the recession.

Net income was $565.4 million, up 6 percent from 2008, Denver, Coloradobased CoBank reported last Tuesday.

Fourth-quarter net income was $132.6 million, up 57 percent from a year earlier, helped in part by a smaller loan loss provision of $25 million, compared with $55 million in the fourth quarter of 2008.

Net interest income for Co- Bank, a customer-owned cooperative, rose 10 percent in 2009 to $946 million. CoBank officials said the bank, with assets of $58 billion, benefitted from a steepened yield curve environment.

But average loan volume for the year dropped 2 percent to $44.5 billion due to lower seasonal financing requirements from agribusiness customers as crop prices fell from record highs in 2008. The bank’s agribusiness operating segment saw net income for the year fall 6 percent to $288.5 million.

The decline was partly mitigated by growth in U.S. government-guaranteed loans for agricultural exports, loans to energy customers, and loans to and participations with affiliated associations and other partners across the U.S. Farm Credit System, CoBank officials said.

The bank saw big increases from its wholesale lending division, which generated $97 million in net income in 2009, a 43 percent increase from 2008.

The average loan volume in this “strategic relationships” division was $15.1 billion for the year, compared with $13.7 billion in 2008.

Loan quality slipped slightly, CoBank said. At year-end, 95.8 percent of the bank’s loan and lease portfolio was classified in the highest regulatory category used to grade creditworthiness, down from 96 percent at the end of the third quarter and down from 97.2 percent a year earlier. — DTN