CoBank Reports Record Profit in 2011

The largest lender in the government-backed Farm Credit System reported record profits in 2011 as higher prices for key commodities such as corn, wheat and soy led to increased loan demand from large cooperatives and agribusinesses.

CoBank, based in Denver, said Tuesday that its full-year earnings climbed 15% from 2010, to nearly $707 million. The increase was driven primarily by a 10% increase in loan volume year over year and a 13% jump in net interest income, to $1.1 billion.

Loan volume weakened in the fourth quarter, however, as commodity prices began to fall. For the quarter, CoBank said that earnings fell 12% from the same period a year earlier, to $144 million.

CoBank makes loans to agribusinesses, rural power, water and communications providers in all 50 states and is a wholesale lender to smaller Farm Credit System lenders in 23 states. In January; CoBank merged with another wholesale provider, U.S. AgBank of Wichita, creating an $85 billion-asset institution. All future results will reflect the performance of the combined entity.

While CoBank said that loan growth was strong in its agribusiness and rural infrastructure segments for much of the year, it was relatively flat in its strategic relationships group, which primarily lends to smaller Farm Credit System lenders. Robert B. Engel, CoBank's president and chief executive officer, said that the higher prices that fueled loan demand among larger borrowers suppressed demand from small farmers and ranchers.

"Many farmers around the country experienced strong profits in 2011 and opted to finance their operations with cash, reducing their need for loans from associations," Engel said in a news release.