CoBank, a cooperative bank serving agribusinesses, rural infrastructure providers and Farm Credit associations throughout the United States, announced fourth-quarter and full-year financial results for 2013.
CoBank reported net income of $856.5 million for the year, up slightly from $853.9 million in 2012. The increase was driven primarily by improvements in credit quality and the fact that no provision for loan losses was recorded in 2013, compared to $70.0 million in provisions in the prior year. Net interest income decreased 6 percent, to $1.2 billion, primarily due to the impact lower interest rates had on the bank's returns on invested capital, its balance sheet positioning and its portfolio of investment securities. Average loan volume increased 2 percent to $71.9 billion.
For the fourth quarter, net income increased to $227.6 million, from $153.4 million in the same period of the prior year. During the quarter, the bank reversed $20.0 million in loan loss provisions recorded earlier in the year, compared to a $50.0 million provision in the fourth quarter of 2012. Net interest income declined 8 percent during the quarter, to $288.0 million. Average loan volume for the quarter was essentially unchanged from the fourth quarter of 2012, at $72.2 billion.
During the year, the bank saw increased loan demand from affiliated Farm Credit associations and rural electric cooperatives. Combined, that more than offset a significant decline in seasonal agribusiness lending, which was driven by lower inventories, lower commodity prices and strong cash positions at grain elevators around the country.
In March, the bank will distribute $414.5 million in total patronage, including $338.0 million in cash and $76.5 million in common stock. For most customers, that will represent 100 basis points of average qualifying loan volume during the past year, effectively lowering their overall net cost of debt capital from CoBank.
At year-end, 0.71 percent of the bank's loans were classified as adverse assets, compared to 1.01 percent at December 31, 2012. Nonaccrual loans totaled $147.8 million at December 31, 2013, or 0.20 percent of total loans, compared to $170.2 million and 0.24 percent of total loans at year-end 2012. The bank's allowance for credit losses totaled $614.7 million at year-end, or 1.85 percent of non-guaranteed loans when loans to Farm Credit associations are excluded.
Capital and liquidity levels at the bank remain well in excess of regulatory minimums. As of December 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 (FCA), the bank's independent regulator. At year end, the bank held approximately $23.0 billion in cash and investments. The bank had 181 days of liquidity at the end of 2013, compared with the 90-day FCA minimum.
CoBank will provide more information about its 2013 financial results at its upcoming series of regional customer meetings, which will take place in nine cities around the country between February and May of 2014. Managers and directors of any CoBank borrower are invited to attend these meetings, as are representatives of all Farm Credit institutions. For complete details about the meeting program, please visit the bank's meetings page at www.cobank.com/meetings.