View From The Top
Brian O’Keane, Chief Financial Officer
Global Finance: How would your view of your bank’s safety change if AgriBank were not guaranteed by the state?
O’Keane: AgriBank is a member of the Farm Credit System (FCS), which was created nearly a century ago (1916) by Congress with the express goal of being a reliable provider of funding for rural America. Clearly the backing of the government helps with the ratings system. But agriculture in North America or Europe is a very volatile and cyclical business. At AgriBank we consider it our responsibility, beyond the government’s backing, to maintain a very strong financial profile in terms of our earnings generation capacity, capital base and commitment to being prudent stewards of credit underwriting.
One benefit of AgriBank is that we are primarily a wholesale lender. Our total assets are about $90 billion, around $73 billion of which are in loans. About 90% of our loans are to affiliated associations which have a direct retail exposure to the farmers. Another benefit is that by being a wholesale lender under the regulatory capital regime, many of the assets that we have on our balance sheet have a lower risk weighting than you would see in a commercial banking role. So when you look at AgriBank’s capital ratios on a risk-adjusted basis, our permanent capital ratio as of June 2014 was in excess of 21% to risk-adjusted assets. From a capitalization perspective, if you put AgriBank up against Citibank or Wells Fargo on a risk-adjusted basis, we compare very favorably. Likewise, from a liquidity perspective, AgriBank and the other banks within the FCS do have a regulatory minimum liquidity requirement of 90 days of maturing obligations.
GF: What keeps you up at night?
O’Keane: Probably policy in general. The last farm bill took a little longer to be put in place than anticipated. The debate about government’s supporting farming will continue to come under pressure as the financial picture of the United States continues to evolve. The concern is what impact that policy will have and how it will affect those we lend money to. What gives me some comfort and helps me sleep at night is that a good majority of the customers to whom we lend funds recognize that agriculture is a cyclical business. As such, they operate in a conservative way and are therefore able to withstand those changes in policy.