CoBank and U.S. AgBank Seek Merger Approval
April 6, 2011 U.S. AgBank and CoBank, two of the five banks in the U.S. Farm Credit System, have submitted a merger application to the Farm Credit Administration (FCA), the system’s independent regulator. Following unanimous votes by the boards of the two banks, the application was submitted at the FCA’s headquarters in McLean, Virginia.
U.S. AgBank, based in Wichita, Kansas, provides wholesale loan funds and financial services to Farm Credit associations in the states of Arizona, California, Colorado, Hawaii, Kansas, Nevada, New Mexico, Oklahoma and Utah, as well as parts of Idaho and Wyoming. It had approximately $25 billion in total assets at December 31, 2010.
CoBank, headquartered in Denver, Colorado, provides wholesale funds to Farm Credit associations serving Alaska, Connecticut, Idaho, Maine, Massachusetts, Montana, New Hampshire, New Jersey, New York, Oregon, Rhode Island, Vermont and Washington. The bank also provides direct loans, leases, export financing and other financial services to agribusinesses and rural infrastructure providers in all 50 states. CoBank had approximately $66 billion in total assets at December 31, 2010.
The merged bank would continue to do business under the CoBank name and be headquartered in Colorado, but it would maintain U.S. AgBank’s existing presence and operations in Wichita and Sacramento, California. Robert B. Engel, CoBank’s president and chief executive officer, would be the chief executive of the combined entity.
Under statute and applicable regulations, the FCA reviews merger proposals involving Farm Credit entities to ensure they don’t pose safety and soundness issues, and also to ensure that disclosure materials prepared for stockholders adequately cover all key aspects of a given transaction.
After receiving a completed merger application, the FCA has 60 days to act on the merger request. An issuance of preliminary approval by the FCA would enable CoBank and U.S. AgBank to conduct stockholder votes on the merger this summer. Assuming the merger is approved, the banks plan to close the transaction on October 1, 2011.
“We’re extremely pleased to have reached this important step in the merger process,” said John Eisenhut, chairman of the U.S. AgBank board of directors. “We believe our application fully satisfies all regulatory requirements governing mergers of Farm Credit System banks, and we look forward to working with the FCA staff over the next 60 days to address any questions they may have about the transaction so that we can bring the merger proposal to our shareholders later this year.”
“Our two boards remain unanimous in their support for the merger, which will bring together two financially sound, profitable, cooperative banks to create an even stronger, more durable institution,” said Everett Dobrinski, chairman of the CoBank board. “We believe the merger is the right long-term decision for the farmers, ranchers, cooperatives and other borrowers we serve across rural America. The combined bank will be uniquely well positioned to fulfill its mission and meet the financial needs of its customers, both today and for future generations.”
The merged bank would continue to be organized and operate as a cooperative, with eligible borrowers earning cash and equity patronage based on the amount of business they do with the organization. On the effective date of the merger, the CoBank and U.S. AgBank boards would be temporarily combined. Following a transition period, the merged bank’s board would have directors elected from six regions across the country, with half elected via one-member-one-vote and half elected on a modified equity basis. The board would also have a number of outside and appointed directors.
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