CoBank, a leading cooperative bank serving agribusinesses and rural utilities throughout the U.S., has announced fourth-quarter and full-year financial results for 2009. Net interest income and net earnings reached all-time highs despite lower average loan volume during the year. Although loan quality declined as a result of impacts from the global recession on the bank’s customer base, CoBank’s overall levels of capital and liquidity remained strong.
"We’re extremely pleased with the financial performance CoBank delivered in 2009 on behalf of customer-owners across rural America," says Robert B. Engel, president and chief executive officer. "Despite a very difficult market environment, the bank continued to fulfill its mission as a highly dependable source of credit for all the industries we serve. We remain focused on meeting our customers’ borrowing needs, while protecting the bank’s foundation of strength and stability for the long term."
Full-year net income was a record $565.4 million, up 6 percent from $533.4 million in 2008. Net income for the fourth quarter of 2009 was $132.6 million, compared with $84.6 million in the fourth quarter of 2008. Fourth-quarter net income in 2009 included a $25.0 million provision for loan losses, compared to a $55.0 million loan loss provision in the fourth quarter of 2008. Total provisions for loan losses for 2009 and 2008 were $80.0 million and $55.0 million, respectively.
Net interest income for the bank rose 10 percent to $946.0 million, from $862.6 million in 2008. The increase was primarily driven by improved margins, including the positive impact of the bank’s balance sheet positioning throughout 2009. During the year, CoBank benefited from the steepened yield curve environment that resulted from actions taken by the world’s central banks to counter the global recession.
Average loan volume during 2009 was $44.5 billion, down 2 percent from the prior year primarily due to lower seasonal financing requirements from agribusiness customers. As previously disclosed, seasonal agribusiness lending was reduced during the year due to the substantial drop in prices for grains and farm inputs from 2008’s exceptionally high levels. Offsetting that decline was growth in other areas of the business, including U.S. government-guaranteed loans that support American agricultural exports, loans to energy customers, and loans to and participations with affiliated associations and other partners across the Farm Credit System.
"CoBank and its shareholders benefit from the diversification of our loan portfolio and the degree of balance we have among our agribusiness, rural infrastructure and Farm Credit System customers," Engel says.
In March, the bank will pay $268.9 million in total patronage, including $183.8 million in cash and $85.1 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.
"Patronage is an important benefit for organizations that choose CoBank as their lender," Engel says. "The strong patronage payout authorized by our board for 2009 underscores the strength of the cooperative model and the compelling value proposition that CoBank offers its customer-owners."