Annual Report - CoBank

Management’s Discussion and AnalysisCoBank, ACBCompany IntroductionCoBank, ACB (CoBank or the Bank) is one of the banksof the Farm Credit System (System) and provides loans, leasesand other financial services to vital industries across ruralAmerica. At December 31, 2011, there were five Systembanks; however, U.S. AgBank, FCB merged with and intoCoBank effective January 1, 2012, reducing the number ofSystem banks to four.The System is a federally chartered network of borrowerownedlending institutions composed of cooperatives andrelated service organizations. Cooperatives are organizationsthat are owned and governed by their members who use thecooperative’s products or services. The System wasestablished in 1916 by the United States Congress, and is aGovernment Sponsored Enterprise (GSE).The following chart depicts the overall structure and ownership of the System.Congressional OversightCongressional Agriculture CommitteesInsurance / Regulation /AdvocacyFarm Credit System InsuranceCorporationFarm Credit Administration(Regulator)The Farm Credit CouncilAgent for BanksFederal Farm Credit Banks Funding Corporation(Funding Corporation)System BanksCoBank,ACBAgFirst,FCBAgriBank,FCBFCB ofTexasU.S. AgBank,FCB (1)Borrower-OwnersCooperatives and OtherEligible BorrowersFarm CreditAssociations(1)Effective January 1, 2012, U.S. AgBank, FCB merged with and into CoBankFarmers, Ranchers, Rural Infrastructure Businesses, Rural Homeowners andOther Eligible BorrowersCoBank is federally chartered under the Farm Credit Actof 1971, as amended (the Farm Credit Act), and is subject tosupervision, examination, and safety and soundness regulationby an independent federal agency, the Farm CreditAdministration (FCA). We are a mission-based lender withauthority to make loans and provide related financial servicesto eligible borrowers in the agribusiness and rural utilityindustries, and to certain related entities, as defined by theFarm Credit Act. We are not legally authorized to acceptdeposits. We raise funds for our operations primarily byissuing debt securities through the System’s agent, the FederalFarm Credit Banks Funding Corporation (FundingCorporation). Such securities are the joint and severalobligations of the System banks.We are cooperatively owned by our U.S. customers. Ourcustomers consist of agricultural cooperatives, rural energy,communications and water companies, farmer-ownedfinancial institutions including Agricultural CreditAssociations (Associations) and other businesses that serverural America. We are the primary funding source for certainAssociations serving specified geographic regions in theUnited States (which are regulated financial institutions andmembers of the System). We collectively refer to these entitiesas our affiliated Associations.We provide a broad range of loans and other financialservices to vital industries through three operating segments:Agribusiness, Strategic Relationships and Rural Infrastructure.CoBank 2011 Annual Report31