Newsroom & Financials

CoBank Reports Third Quarter Financial Results

Posted 11/5/2014

CoBank has announced financial results for the third quarter of 2014.

Net income for the quarter increased 8 percent to $224.7 million, from $208.1 million in the third quarter of 2013, largely due to stronger net interest income. For the first nine months of 2014, net income increased 10 percent to $688.9 million, primarily as a result of increased net interest income and improvements in credit quality. The bank recorded a $25.0 million loan loss reversal in the first nine months of 2014, compared to a $20.0 million provision in the same period last year.

Net interest income for the quarter rose 8 percent to $299.2 million, compared to $276.4 million in the same period last year. For the first nine months of 2014, net interest income increased 5 percent to $919.5 million. The increases were driven primarily by higher loan volume as well as improved earnings from the bank’s balance sheet positioning.

Average loan volume for the quarter rose 7 percent to $75.0 billion, compared to $70.3 billion in the same quarter last year. For the first nine months of 2014, average loan volume rose 6 percent to $76.1 billion. The increases resulted from higher levels of borrowing in a number of customer segments, including food and agribusiness companies, affiliated Farm Credit associations and rural power providers.

“CoBank continues to deliver very solid financial performance on behalf of customer-owners across rural America,” said Robert B. Engel, CoBank’s chief executive officer. “We are benefiting from the underlying strength of the industries we serve, with increased loan volume along with continuing good credit quality. We also continue to focus intently on gaining market share, delivering exceptional customer service and positioning our balance sheet appropriately in the current low interest rate environment.”

At quarter-end, 0.61 percent of the bank’s loans were classified as adverse assets, compared to 0.71 percent at December 31, 2013. Nonaccrual loans improved to $111.7 million, compared to $147.8 million at December 31, 2013. The bank’s allowance for credit losses totaled $588.2 million at September 30, 2014, or 1.66 percent of non-guaranteed loans when loans to Farm Credit associations are excluded.

CoBank’s capital levels remain well in excess of regulatory minimums. As of September 30, 2014, shareholders’ equity totaled $7.1 billion, and the bank’s permanent capital ratio was 16.36 percent, compared with the 7.0 percent minimum established by the Farm Credit Administration (FCA), the bank’s independent regulator. At quarter-end, the bank held approximately $25.0 billion in cash and investments and had 161 days of liquidity, which is in excess of FCA liquidity requirements.

During the quarter, the bank initiated a redemption of all $136.8 million of its outstanding Series D non-cumulative perpetual preferred stock, which was issued in August 2009 and carried a dividend rate of 11 percent. The transaction closed on October 1, 2014.

“We’re pleased to have successfully redeemed this particular issuance of third-party capital, which was expensive relative to current rates in the market,” said David P. Burlage, CoBank’s chief financial officer. “We’re fortunate to have a strong capital position and ample capacity to serve the borrowing needs of our customers. We assess our capital structure on an ongoing basis and continue to look for opportunities to optimize the overall cost and quality of our capital.”

Engel noted that the market environment for financial service providers remains uncertain and volatile. “Competition within the banking industry is intense and continues to exert margin pressure on most institutions,” Engel said. “Meanwhile, the Federal Reserve’s exit from quantitative easing may cause unknown impacts in the months ahead. At CoBank, we will continue to concentrate on things we can control: serving our customers well, fulfilling our mission and positioning our business for success over the long term.”


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