CoBank and AgBank Propose Merger

CoBank and AgBank Propose Merger

Merger would substantially shrink Farm Credit System.

If regulators and shareholders approve a proposed merger of Denver-based CoBank and U.S. AgBank of Wichita, Kansas, the Farm Credit System will be shrunk to four regional and national banks. The other three wholesale banks are based in St. Paul, Minn., Columbia, S.C., and Austin, Texas. As of today there are only 92 lending associations across the nation.  That compares to more than 1,000 that dotted the country-side during the late 1980s.

The merged bank would continue to do business under the CoBank name and be headquartered outside of Denver, Colo., but it would maintain U.S. AgBank's existing presence and operations in Wichita, Kan., and Sacramento, Calif. Robert Engel, CoBank's president & chief executive officer, would be the chief executive of the merged entity.

"The merged bank will enjoy substantial diversification benefits through the combination of two highly complementary loan portfolios, enhancing its ability to withstand risk," Engel said. "Its varied and diversified income streams will protect customer-owners in volatile market conditions, and the bank will have a robust capacity to generate earnings, build capital and deliver patronage to its customer-owners for generations to come."

The combined bank would serve as a wholesale provider of financing to Farm Credit associations that provide credit and financial services to tens of thousands of farmers, ranchers and other rural borrowers in 23 states. It would also serve as a direct lender to agricultural cooperatives and rural electric, water and communications service providers throughout the country.

"Over the course of the past year, the U.S. AgBank board has engaged in a strategic review of our business to determine the course that would best serve our associations and the farmers and ranchers in our territory for the long term," said John Eisenhut, chairman of U.S. AgBank. "Throughout that very deliberate process, we have followed the guiding principle that we will pursue the solution that best positions our customers to continue receiving reliable credit at a reasonable and competitive cost. The AgBank board has determined that a merger with CoBank best achieves that principle, and we look forward to working closely with CoBank as we move to the next steps in the merger review and approval process."

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