CHICAGO — U.S. AgBank and CoBank, two of the nation's largest agricultural lenders, plan to merge next year, expanding their reach as the farm economy booms.
The banks are two of the five banks that make up the Farm Credit System, a federally chartered network that accounts for more than a third of lending in the rural U.S. The banks serve as wholesale providers of financing to farm credit associations and lend to agribusinesses and rural utilities directly.
The banks said in a joint press release the merger would add geographic diversity and allow them to serve virtually every key agricultural commodity. CoBank has $60 billion in assets and serves lenders in Washington, Alaska, Montana and the eastern coastal states from New Jersey to Maine. U.S. AgBank has $25 billion in assets and provides loan funding for farm credit associations in Kansas and Western states.
"The merged bank will enjoy substantial diversification benefits through the combination of two highly complementary loan portfolios, enhancing its ability to withstand risk," CoBank President and Chief Executive Robert B. Engel said in the release.
The U.S. farm economy has been a bright spot during the economic downturn, as incomes are supported by rising prices for commodities ranging from corn to livestock. Farmland values in the heart of the Midwest have also surged.
The merged bank would operate under the name CoBank and be based at CoBank's headquarters outside Denver. U.S. AgBank operations in Wichita, Kan., where it has its headquarters, and in Sacramento, Calif., would remain. Engel would be chief executive of the combined entity. Darryl Rhodes, chief executive of U.S. AgBank, will retire after the merger.
The two banks will continue to operate as a borrower-owned cooperative. No staff reductions are planned as part of the merger, the banks said.
The banks expect the merger to close on Oct. 1. It must be approved by shareholders of the two banks, which also must submit a merger disclosure document to the Farm Credit Administration, the independent regulator for the Farm Credit System, for its review and approval.
"This merger is all about strengthening the organization for the future and not about cost reductions," Rhodes said.
The other three banks in the Farm Credit System are AgriBank, Ag First Farm Credit Bank and Farm Credit Bank of Texas.