CHICAGO May 5 CoBank, the largest of the U.S.
Farm Credit System's cooperative banks, said on Monday its first
quarter net income rose 11 percent, reflecting higher interest
income as rates ticked higher and higher loan demand from food
and agribusiness companies as well as rural power providers.
Denver-based CoBank said net income for the quarter ended
March 31 was $231.3 million, up from $208.8 million the first
quarter of 2013.
"Demand for credit strengthened in some areas of the rural
economy, and we continued to benefit from strong credit quality
in our loan portfolio," Robert B. Engel, CoBank's chief
executive officer, said in a statement. "Some of the market
conditions we experienced last year, including extremely low
grain volumes at country elevators, have improved."
As interest rates edged up, net interest income for the
quarter grew by 2 percent to $309.0 million, from $302.4 million
a year ago. Additionally, the average loan volume rose 4 percent
to $76.4 billion.
"The increase resulted from higher levels of borrowing in a
number of customer segments, including affiliated Farm Credit
associations, rural power providers and food and agribusiness
companies, partially offset by lower seasonal borrowing by grain
and farm supply cooperatives," CoBank said.
No provision for loan losses was taken in the first quarter
of 2014, whereas the bank had recorded a $15 million provision
in the same period last year.
Noninterest income increased to $38.3 million in the first
quarter of 2014 compared to $25.8 million in the same period
last year, due to a decrease in losses on early extinguishments
of debt, net of prepayment income, and gains on the sale of
At quarter's end, 0.71 percent of the bank's loans were
classified as adverse assets, unchanged from Dec. 31, 2013.
The Farm Credit System, a government-sponsored entity that
is the largest single lender to U.S. agriculture, last week
reported system-wide first-quarter income at $1.145 billion,
versus $1.142 billion for the same period a year ago. FCS, which
competes with private banks and other lenders, is a bellwether
for the U.S. agricultural economy.
In a report issued on Monday, Fitch Ratings said the FCS
remains in good shape despite last year's drop in grain prices
and some softening over the winter in farmland values, which are
the main collateral for most farmer loans.
"Credit quality measures have continued to improve for the
Federal Farm Credit System and associated banks even as the U.S.
farm economy slows down in 2014," Fitch said. "System-wide
non-accrual loans declined to 0.86 percent of gross loans as of
Dec. 31, 2013, from their peak of 2.04 percent at Dec. 31,
Fitch said there could be "some adverse impact" to credit
quality should land values "start correcting." But the agency
praised FCS banks for "reasonable steps to mitigate a
correction, namely lower loan to value limits and debt caps per
Fitch said it expects U.S. agriculture to have a solid year
in 2014, with grain farmers buoyed by the strengthened balance
sheets and reduced debt of recent boom years and livestock
farmers welcoming lower feed costs.
(Reporting by Christine Stebbins; Editing by Cynthia Osterman)