A plan to merge CoBank and U.S. AgBank has received preliminary approval from the Farm Credit Administration (FCA). Now CoBank and U.S. AgBank may submit merger proposals to their stockholders for a vote later this summer.
The FCA is an independent regulator for the Farm Credit System. Its three-member board voted unanimously to grant preliminary approval for the merger, subject to certain conditions.
"This is a critical milestone in the merger approval process," said John Eisenhut, chairman of the U.S. AgBank board of directors.
The FCA reviews merger proposals involving Farm Credit entities. The agency's conditions for the CoBank-U.S. AgBank merger involve governance and reporting issues. All of the conditions will be provided to stockholders in connection with the merger vote.
"The FCA has thoughtfully evaluated our merger proposal with a long-term view of Farm Credit's mission and the important role the System plays in America's rural economy," said Everett Dobrinski, chairman of the CoBank board. "Today's action by our regulator reaffirms our belief that the merger will create a stronger, more durable bank that is better able to fulfill its mission and serve its customers for generations to come. We believe the conditions articulated by the FCA can be accommodated by the combined bank without significant financial or operational impacts."
In December 2010, CoBank and U.S. AgBank executed a letter of intent to merge. The merged bank will continue to do business under the CoBank name and be headquartered in Colorado but will maintain U.S. AgBank's existing presence and operations in Wichita, KS, and Sacramento, CA. It will also 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. Robert B. Engel, CoBank's president & chief executive officer, will remain as the chief executive of the combined entity. Darryl Rhodes, president & chief executive officer of U.S. AgBank, will retire in connection with the merger.
Engel noted that the boards of the two banks also have approved a merger effective date of
January 1, 2012. The banks plan to distribute disclosure and voting materials to stockholders in the first half of July, with completed merger ballots due to be returned by September 7, 2011.