Annual Report - CoBank

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Senior Officers (Continued)CoBank, ACBLori L. O’Flaherty,Chief Credit OfficerMs. O’Flaherty was appointed chief credit officereffective August 9, 2010. Ms. O’Flaherty is responsible forcredit approval functions, as well as credit support andanalysis, credit guidelines and training, loan compliance andmonitoring and special assets. Prior to her current position,Ms. O’Flaherty was executive vice president of creditapproval and administration, and, prior to that, she managedCoBank’s Corporate Finance Division. Before joining CoBankin 1997, Ms. O’Flaherty was vice president of WellsFargo/First Interstate Bank, N.A. Ms. O’Flaherty has 30 yearsof experience in commercial banking. She serves as treasureron the Board of Directors of Big Brothers Big Sisters ofColorado, Inc.John Svisco,Chief Administrative OfficerMr. Svisco was appointed chief administrative officereffective September 7, 2010. Mr. Svisco is responsible fordirecting the Bank’s information technology, operations, andcorporate communications areas. Prior to his current position,Mr. Svisco was senior vice president of human resources andadministrative services divisions. Mr. Svisco joined CoBankin August 2002 and managed lease and loan operations duringhis first seven years at the Bank. Prior to joining CoBank, Mr.Svisco spent 20 years with HSBC Bank USA, where his lastposition was senior vice president of operations services. Heserves on the Board of Directors of AgVantis, Inc.Gregory J. Buehne,General CounselMr. Buehne was appointed general counsel effectiveJune 16, 2011. Mr. Buehne is responsible for providing legalcounsel to all areas of the Bank’s business operations. Prior tojoining CoBank, Mr. Buehne served as senior vice presidentfor legal and legislative services at U.S. AgBank, withresponsibility for the bank’s legal, government affairs andstrategic planning functions. With more than 27 years ofexperience in the Farm Credit System, Mr. Buehne has servedin executive legal roles at AgAmerica, FCB, Western FarmCredit Bank and the Farm Credit Bank of Spokane. He serveson the Board of Governors of the Farm Credit SystemAssociation Captive Insurance Company.CoBank 2011 Annual Report127
Senior Officers Compensation Discussion and AnalysisCoBank, ACBOverviewThis section describes the compensation program for CoBank’s President and Chief Executive Officer (President and CEO) andother senior officers, as defined by FCA regulations (collectively, senior officers), and presents the compensation earned by ourPresident and CEO, as well as aggregate compensation earned by our other senior officers, for the years ended December 31, 2011,2010 and 2009. We did not make any changes to the design of our compensation programs in 2011, which we believe were structuredto be aligned with our shareholders’ long-term interests and best practices in governance of executive compensation. For 2012,CoBank is changing the mix of fixed and variable compensation, including a reduction in the maximum opportunity award payableunder the short-term incentive plan. CoBank has monitored trends in compensation and is making these changes to ensure CoBankincentive programs have the appropriate balance of risk management and performance orientation while providing competitive totalcompensation.The Board of Directors, through its Compensation Committee (Committee), has adopted a total compensation philosophy for theBank. Our total compensation philosophy is intended to align the interests of our senior officers with those of our shareholders and ismore fully described below. We accomplish this by providing incentive compensation that rewards performance in relation to thebusiness plan established by our Board of Directors.As described in the ‘Overview’ section of Management’s Discussion and Analysis on page 32 of this Annual Report, in 2011CoBank reported record financial performance. As a result of our performance, our short-term incentive plan for 2011 was fundedbetween the target and maximum award levels. In addition, based on strong performance in the 2009 to 2011 period, our long-termincentive plan was also funded between the target and maximum award levels. These and other elements of our senior officers’compensation are explained below.Compensation Philosophy and ObjectivesThe Bank’s total compensation philosophy is designed to maintain a compensation program that will:Attract, retain and reward associates with the skills required to accomplish the Bank’s strategic business objectives;Provide accountability and incentives for achievement of those objectives;Link compensation to Bank performance and increased shareholder value;Properly balance the risk profile of the Bank with both short- and long-term incentives;Be designed within a consistent philosophy and framework;Create a culture of adherence to core values and strong ethical behavior; andBe integrated with the Bank’s business processes, including business planning, performance management and successionplanning.The total compensation philosophy seeks to achieve the appropriate balance among market-based salaries, variable incentivecompensation and benefits designed to incent and reward both the current and long-term achievement of our strategic businessobjectives and business and financial plans. It also seeks to incent prudent risk taking within Board-established parameters with theproper balance and accountabilities between short- and long-term business performance. For senior officers, CoBank strives to delivera significant portion of total target compensation through performance-based pay, with the actual proportion of total compensationprovided through both short- and long-term incentives varying with actual financial performance, the achievement of Board-approvedstrategic business objectives and each senior officer’s individual performance. We believe this philosophy fosters a performanceoriented,results-based culture wherein compensation varies on the basis of results achieved and is properly aligned with an acceptablerisk profile and shareholder returns.Process for Compensation DecisionsThe Board of Directors has established the Committee to oversee the design, implementation and administration of compensationand benefits programs for CoBank. The Committee meets regularly to execute the responsibilities of its Charter. The Committeereviews the performance of the Bank’s President and CEO semi-annually, and the Board of Directors annually approves thecompensation level of the President and CEO, including salary and short- and long-term incentive compensation. The President andCEO is responsible for setting the compensation levels of the senior officers directly reporting to him, with the Committee reviewingthe compensation of the most senior of those officers who, in turn, are responsible for the compensation of all other employees.CoBank 2011 Annual Report128
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Everett DobrinskiChairmanRobert B.
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“ We firmly believe the combined
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associations are partnering with Co
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2012 BOARD OF DIRECTORSOccupation:F
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“WE ARE COMMITTEDTO GOOD GOVERNAN
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U.S. AgBank CEO Darryl Rhodes (fron
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KansasNew MexicoUtahFC of Ness City
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CorporateCitizenshipAT COBANKSuppor
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StrategicRelationshipsFarm Credit o
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RegionalAgribusinessBANKING GROUPCe
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CorporateAgribusinessBANKING GROUPK
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ElectricDistributionBANKING DIVISIO
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Power SupplyBANKING DIVISIONTri-Sta
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IndustryPortfoliosCoBank ended 2011
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CoBank is a financially strong,depe
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30COBANK 2011ANNUAL REPORTbuilding
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The information and disclosures con
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Financial Condition andResults of O
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Provision for Loan Losses and Reser
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Purchased services expense decrease
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AgribusinessOverviewThe Agribusines
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Rural InfrastructureOverviewThe Rur
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Credit ApprovalThe most critical el
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Total nonaccrual loans were $134.9
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Basis RiskBasis risk arises due to
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Our net interest income is lower in
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The notional amount of our derivati
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Reputation Risk ManagementReputatio
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Investment Securities ($ in Million
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In accordance with the Farm Credit
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Critical Accounting EstimatesManage
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Business OutlookWe closed our merge
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Consolidated Income StatementsCoBan
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Consolidated Statements of Cash Flo
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Consolidated Statements of Changes
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LoansWe report loans, excluding lea
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If we determine that a derivative n
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Reserve for Credit ExposureThe foll
Page 81 and 82: The information in the tables under
Page 83 and 84: The following tables present inform
Page 85 and 86: At December 31, 2011, gross minimum
Page 87 and 88: For impaired investment securities,
Page 89 and 90: At December 31, 2011, the assets of
Page 91 and 92: Preferred StockThe following table
Page 93 and 94: The following table provides a summ
Page 95 and 96: AssumptionsWe measure plan obligati
Page 97 and 98: Incentive Compensation PlansWe have
Page 99 and 100: Note 11 - Derivative FinancialInstr
Page 101 and 102: A summary of the impact of derivati
Page 103 and 104: Due to the uncertainty of expected
Page 105 and 106: Assets and Liabilities Measured atF
Page 107 and 108: Note 14 - Segment Financial Informa
Page 109 and 110: Note 15 - Commitments and Contingen
Page 111 and 112: Note 18 - Subsequent Events (Unaudi
Page 113 and 114: Supplemental District Financial Inf
Page 115 and 116: Supplemental District Financial Inf
Page 117 and 118: Report of Independent AuditorsCoBan
Page 119 and 120: Management’s Report on Internal C
Page 121 and 122: Annual Report to Shareholders Discl
Page 123 and 124: Board of Directors Disclosure as of
Page 131: Senior OfficersCoBank, ACBRobert B.
Page 135 and 136: Senior Officers Compensation Discus
Page 145 and 146: Code of EthicsCoBank, ACBCoBank set
Page 147 and 148: CERTIFICATIONI, Robert B. Engel, Pr
Page 149 and 150: LeadershipCoBank, ACBRobert B. Enge
Page 151 and 152: OfficeLocationsCoBank National Offi
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Annual Report - CoBank

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