CoBank Equity Management
Tom Houser
November 4, 2011
CoBank Capital Plan
Base
Capital Plan (for Cooperatives)
Target
*
Stock Level = Range of 7 – 13 Percent
[ Present (and intended continued) Specific Level is 8 Percent ]
Stock
Level Based on 10-year Average Loan
Volumes*
* [ CoBank Held Portion ]
$-0-
Borrowing = 11 Year Retirement
Confidential and Proprietary
2
7/1/2016
CoBank Patronage
Typically
approx. 50% of earnings are
patronage (vs. substantial non-patronage from Farm
Credit Leasing, International, etc.)
Allocate
a total of100 basis points based on
annual average CoBank-held loan balance
outstanding
65
percent (65 bps) paid in cash
35
percent (35 bps) accumulated as equity
Confidential and Proprietary
3
7/1/2016
Non-Qualified Allocations
Use
Non-Quals based on regulatory
requirements, in particular for “Core Surplus”
Non-Quals
represent a claim to the remaining
patronage earnings
No
intent to retire; CoBank pays the tax
Preferred
to “default” claim for members /
patrons that exist in the event of liquidation
Subordinate
capital ratios
Confidential and Proprietary
Debt also “counts” for certain
4
7/1/2016
CoBank Equity Management
CoBank Balance Sheet – Stock vs. Retained
5,000
4,406
4,500
4,058
4,000
3,595
3,500
3,040
2,781 2,862 2,902
3,000
3,233
2,269
2,197 2,293
2,101 2,220 2,137
1,838
1,791
2,000
1,721 1,728 1,718 1,742 1,791
1,442 1,494
1,344 1,334
1,298
1,500
1,061 1,134 1,184
1,031
959
853
1,000 760
2,500
500
1st Preferred Stock
1st Sub-Debt
0
2000
2001
2002
2003
Total Common + Preferred
2004
2005
2006
Total Retained Earnings
5
2007
2008
Total Equity
2009
2010
Sub-Debt
CoBank Equity Management
CoBank Balance Sheet – Equity Categories
1,800
1,520 1,569
1,600
1,401
1,400
1,291
1,221 1,228 1,218 1,242
1,277
1,200
1,089
1,031 1,044 1,034
1,000
854
800
600
400
303
440
366
521
600
666
960
745
1st Sub-Debt
200
1st
Preferred Stock
0
2000
2001
Common Stock
2002
2003
Preferred
2004
2005
Non-qualified
6
2006
2007
2008
Unallocated/Non-Pat/OCI
2009
2010
Sub-Debt
CoBank Balance Sheet
1995
Unallocated/NonPatronage/OCI
23%
Non-Qualifieds
10%
Preferred Stock
0%
Common Stock
67%
7
CoBank Balance Sheet
2001
Unallocated/NonPatronage/OCI
22%
Common Stock
47%
Non-Qualifieds
17%
Preferred Stock
14%
8
CoBank Balance Sheet
2010
Unallocated/NonPatronage/OCI
20%
Common Stock
35%
Non-Qualifieds
29%
Preferred Stock
16%
9
CoBank vs. Co-ops use of Non-Quals
CoBank’s
use of Non-Quals with no intent to
retire is driven by regulatory considerations
Seeing
increased use of Non-Quals by
cooperatives in the Midwest
Tax
benefits to members/customers
Means
to change from by age to by
allocation-year revolvement
Often
combined with changes to Qualified
Allocations – annual cash dividends paid
Confidential and Proprietary
10
7/1/2016