CoBank reported record earnings last year despite declining farm commodity prices and lower loan demand.
The Greenwood Village-based cooperative bank, which lends to agricultural businesses and rural utilities, reported net income of $565.4 million in 2009, up 6 percent from $533.4 million reported in 2008.
That gain in earnings came despite a 2 percent drop in the volume of loans the bank provided. Lower commodity prices reduced the demand for debt, the bank said.
“Our customer base is more conservative. They are more cautious,” said CoBank president and chief executive Robert Engel.
Wider interest-rate spreads and more limited losses from bad loans allowed CoBank to boost its profitability.
Net income for the fourth quarter of 2009 was $132.6 million, compared with $84.6 million in the fourth quarter of 2008.
By comparison, the more than 8,000 FDIC-backed institutions had $914 million in profits during the same period, the FDIC said Tuesday.
Unlike a commercial bank, CoBank doesn’t take deposits to fund its loans. It borrows on the debt markets, a more expensive source of funds.
As the credit markets thaw, stronger regional and large community banks are putting their “toes back in the water” and trying to lure away CoBank’s stronger customers, Engel said.
CoBank operates higher up on the “food chain,” lending directly to agribusinesses such as food processors rather than individual farmers, although it helps them indirectly through loans to farm credit associations.
It also provides export financing and loans to build rural infrastructure — telecommunications, power and water. Infrastructure loans increased last year even as demand fell for agricultural loans.
Profits go back to customers in cash or shares, one reason they tend to be more loyal and careful about repaying, Engel said.
CoBank’s seriously delinquent loans decreased to $307.6 million in the fourth quarter from $442.5 million in the third. The bank has set aside $498.2 million in reserves for bad loans.
With $58.2 billion in assets, CoBank is nearly six times larger than FirstBank, the largest retail bank based in the state, and it operates in all 50 states.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
