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* Quarterly earnings rise 7 pct
* CEO warns of challenges for 2013 earnings
By Carey Gillam
Feb 21 CoBank, a major lender to U.S.
agriculture through its role in the U.S. Farm Credit System,
reported higher quarterly earnings and its 13th consecutive year
of profit gains on Thursday, but warned 2013 would be a more
Denver-based CoBank, a $92 billion co-op bank and member of
the Farm Credit System, said net profit for the fourth quarter
rose 7 percent to $153.4 million for the quarter ended December
31, and year-end income climbed 21 percent to $853.9 million.
Profit gains for the year were driven by a 16 percent jump
in net interest income to $1.24 billion. Average loan volume was
up 40 percent to $70.3 billion for the year.
For the fourth quarter, net interest income rose 30 percent
to $312.9 million as total loans outstanding at December 31,
stood at $72 billion.
The rise in average loan volume was driven primarily by
CoBank's merger a year ago with U.S. AgBank. That deal gave
CoBank roughly $20 billion in wholesale loans to 25 Farm Credit
The Farm Credit System is a government-sponsored enterprise
aimed at providing a reliable source of credit to the U.S.
CoBank, which provides loans, leases, export financing and
other financial services to agribusinesses and rural power,
water and communications providers, also saw growth in loans
made to rural electric clients and in agricultural export
"Our merger with U.S. AgBank more than lived up to
expectations, delivering meaningful and enduring benefits for
our business," said CoBank CEO Robert Engel in a statement.
Engel said the earnings "environment" for 2013 was less
favorable due to "a number of ongoing challenges, including slow
overall economic growth, intensified competition for loans and
low interest rates that have significantly decreased returns on
Credit quality in the bank's loan portfolio improved
modestly during 2012, officials said. At year-end, 1.01 percent
of the bank's loans were classified as adverse assets, down from
1.03 percent at the end of the third quarter and from 1.25
percent a year earlier.
CoBank made a $50 million loan loss provision in the fourth
quarter that brought total provisions for loan losses to $70
million in 2012.
Full-year results include a one-time benefit of $44.6
million for a Farm Credit Insurance Fund refund received in the
second quarter of the year, partially offset by losses of $28.5
million in the fourth quarter related to the extinguishment of a
portion of the bank's subordinated debt.
(Reporting By Carey Gillam; editing by Andrew Hay)