February 21, 2014 / 12:50 AM / in 4 years

U.S. agricultural lender CoBank earnings rise 48 pct in Q4

CHICAGO, Feb 20 (Reuters) - CoBank, the largest of the U.S.-government sponsored Farm Credit System cooperative banks, said on Thursday its quarterly earnings rose 48 percent, reflecting the strength of the U.S. agricultural economy and record farm income.

Denver-based CoBank said net income rose to $227.6 million during October to December of 2013, from $153.4 million the same period in 2012, a historic drought year.

Annual earnings were grew by less than 1 percent to $856.5 million, up from $853.9 million in 2012.

“The bank recorded its 14th consecutive year of growth in profitability,” Robert B. Engel, CoBank’s chief executive, said in a statement.

CoBank, which provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communication providers, saw average loan volume increase 2 percent in 2013 to $71.9 billion.

But Engle said that despite the recent improvement in U.S. economic conditions, the earnings environment is likely to remain challenging for CoBank in 2014 given tepid demand for credit and continued low interest rates.

Yearly earnings reflected no provision for loan losses in 2013, compared to $70 million in provisions the prior year.

Net interest income in 2013 decreased 6 percent, to $1.2 billion, primarily due to the affect lower interest rates had on the bank’s returns on invested capital, its balance sheet positioning and its portfolio of investment securities.

During the quarter, the bank reversed $20 million in loan loss provisions recorded earlier in the year, compared to a $50 million provision in the fourth quarter of 2012. Net interest income fell 8 percent to $288 million. Average loan volume for the quarter was basically unchanged at $72.2 billion.

CoBank said its capital and liquidity levels bank remain well above regulatory minimums. As of Dec. 31, 2013, shareholders’ equity totaled $6.7 billion, and the bank’s permanent capital ratio was 16.7 percent, compared with the 7.0 percent minimum established by the Farm Credit Administration, the bank’s regulator.

At year end, the bank held some $23 billion in cash and investments. The bank had 181 days of liquidity at the end of 2013, compared with the 90-day FCA minimum.

The Farm Credit System, of which CoBank is a member, reported a 12.7 percent rise in annual earnings to $4.640 billion on Wednesday. FCS is a government-sponsored enterprise and the single largest lender to U.S. agriculture.

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