(Reuters) — CoBank, the largest co-operative bank within the U.S. government-backed Farm Credit System, on Tuesday reported first-quarter net income that was flat compared with a year ago but said loan demand had risen five percent.
Denver-based CoBank said net income for the quarter ended March 31 was US$232.2 million, compared with $231.3 million in the year-ago quarter. Quarterly net interest income rose two percent to $315.3 million, reflecting higher average loan volume.
The bank said its fundamentals remained strong but noted “market dynamics” remained volatile and should continue to affect earnings and financial performance this year.
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“A strengthened dollar, continuing low interest rates and intense competition in the banking industry create a challenging earnings environment for CoBank,” chief executive officer Robert Engel said in a statement.
The national Farm Credit System, a century-old government-sponsored enterprise, last week reported a one percent decline in quarterly net income to $1.132 billion. FCS does not take deposits but issues securities and lends those funds to promote rural development centered on the agriculture sector.
The FCS income decline last quarter included a provision for loan losses of $27 million. Low grain prices and a modest deterioration of credit quality in certain sectors of the loan portfolio contributed to the provision for loan losses.
CoBank’s average loan volume for the quarter rose five percent to $80.6 billion, reflecting increased borrowing from rural electric cooperatives, rural communications service providers, affiliated Farm Credit associations and food and agribusiness companies.
At quarter-end, 1.76 percent of CoBank’s loans were classified as adverse assets, compared with 1.84 percent at Dec. 31, 2014.
