CoBank keeps pace with co-ops’ changing needs
en years ago, none of the
2,500 U.S. cooperatives
and other rural businesses
that make up
CoBank’s membership
connected electronically with the
Denver-based bank.
Today, nearly 1,000 of CoBank’s
customers manage their loan accounts
and company funds through the bank’s
online delivery platform, CoLink®,
with a growing number of them using
a more robust line of cash-management
services: CoBank Cash Manager.
Online banking and cash management
is just one way CoBank has
responded to its customers’ changing
business needs in recent years. Faced
with increasing consumer demands,
along with pressing regulatory, political,
environmental and trade policy
issues, CoBank’s customers have
required greater resources and capabilities
to compete in the marketplace. As
a major provider of financial products
and services to rural America, CoBank
has actively focused on anticipating its
customers’ changing needs and delivering
the competitive advantages they
require to succeed in their businesses.
“We are continually looking for ways
to deliver more value and adapt to our
customers’ needs and to the marketplace,”
says Douglas D. Sims, CoBank’s
CEO. “Adaptability has been key to our
customers’ success and to CoBank’s.”
For example, CoBank, a federally
chartered bank in the Farm Credit
System (FCS), is part of a broad coalition
of cooperatives and agricultural
associations that support legislation to
allow CoBank to finance a new generation
of farmer-owned cooperatives.
Increasingly, CoBank’s cooperative customers
are adjusting their corporate
structures so they can access new
sources of nonmember equity capital.
Some of these new structures create eligibility
issues for organizations which
want to do business with CoBank.
“We believe these new cooperative
structures can be especially useful for
value-added farmer-owned cooperatives
in certain situations,” Sims says.
“This legislation will continue to allow
the flow of capital to rural America.
Access to capital is key to any growing
and changing business. CoBank must
have the same ability to adapt as its
customers if the bank is going to succeed
in today’s business environment.”
In an increasingly competitive environment
that has produced fewer, but
larger, cooperatives, building CoBank’s
financial capacity remains an ongoing
priority. In November 2003, CoBank
strengthened its capital position by
issuing $200 million in perpetual preferred
stock under favorable market
conditions. This outside infusion of
capital CoBank’s second in three
years further positions the bank to
meet the growing needs of its customer
owners.
Building capacity extends beyond
financial transactions, such as preferred
stock issuance, to business expertise
and people. To help the bank continue
to fulfill all aspects of its mission of
serving U.S. agriculture and rural
America, CoBank has established complementary
strategic partnerships and
alliances that broaden CoBank’s access
to capital, products and services. Some
of these partners are Farm Credit
System banks and associations; others
are well-known commercial banks or
international correspondent banks
around the globe. This network helps
CoBank bring billions of dollars in
loan capital to CoBank’s customers,
deliver cash management services to
rural America, and finance $200 million
in ag exports sales monthly.
In addition, in early 2004, CoBank
increased its ownership stake in Farm
Credit Leasing Services Corporation
(FCL) from 82 percent to 100 percent.
As a wholly owned subsidiary,
FCL strengthens the bank’s ability to
deliver on its value proposition of
bringing market-competitive leasing
services to rural America. To reach
such a wide market, FCL will partner
with Farm Credit associations to
ensure that the leasing needs of their
customers are met.
In a post-Enron age shaped by the
Sarbanes-Oxley Act, CoBank has furthered
its long-standing commitment to
good governance and transparent disclosure
practices. A special restructuring
committee of the bank’s board of directors
is developing recommendations to
enhance CoBank’s governance. One
result is likely to be a reduction in size
of CoBank’s board, which now numbers
26 directors. The committee is also
considering the need for additional outside
or independent directors, and for
increased attention to the qualifications
of future board candidates.
For the past five years, CoBank
shareholders have received an average
of $125 million per year in cash
patronage as a result of their investment
in the bank. ”
“It’s balancing the right combination
of so many things,” Sims emphasizes.
“It’s serving your customers’ needs better
than anyone else, employing prudent
risk management practices, controlling
expenses, improving business
processes, strengthening your financial
capacity, and maintaining the right
strategic partnerships.”
With $31 billion in assets and $2.8
billion in capital, CoBank has built a
strong cooperative bank for rural
America. But as CoBank’s CEO notes,
“The job is never done.”
Contact information:
website: www.cobank.com, phone
1-800-547-8072; address: 5500 S.
Quebec St., Greenwood Village, Colo.
80111. CEO: Douglas D. Sims;
President and COO: Robert B. Engel;
Board Chairman: J. Roy Orton,
President, Orton Farms, Ripley, N.Y.
