Q1 2021 Federal Agricultural Mortgage Corp Earnings Call
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Ladies and gentlemen, thank you for your patience. Please remain on the line your webcast will begin momentarily. Thank you.
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Good day, ladies and gentlemen, and welcome to the farmer Mac first quarter 'twenty 'twenty. One earnings result, all lines have been placed on a listen only mode and the floor will be opened for questions and comments fall on the presentation.
If you should require assistance throughout the conference. Please press star zero on your telephone keypad to reach a live operator at this time. It is my pleasure to turn the floor over to your host Brad nor home Sir the floor is yours.
Good afternoon, I'm, Brad Nord home and I'm very pleased to welcome you to our 2021 first quarter Investor Conference call.
Have a great report and a number of positive developments to discuss today, but before I begin I'd like to ask Steve <unk>, Our general counsel to comment on forward looking statements that we may make today.
As well as farmer Mac's use of non-GAAP financial measures.
Thank you Brad.
Some other statements made on this conference call may be forward looking statements under the securities laws.
We make these statements based on our current expectations and assumptions about future events and business performance.
And we may not be obligated to update these statements. After this call.
We caution you that forward looking statements are subject to risks and uncertainties.
Actual results may differ materially from the results expressed or implied by the forward looking statements.
In evaluating farmer Mac, you should consider these risks and uncertainties.
As well as those described in our 2020 annual report on form 10-K.
File with the SEC in February.
And then on a quarterly report on form 10-Q.
Filed with the SEC earlier today.
In analyzing its financial information farmer Mac, sometimes uses measures of financial performance.
That are not presented in accordance with generally accepted accounting principles in the United States.
Also known as non-GAAP measures.
Disclosures and reconciliations on farmer Mac's non-GAAP measures.
Can be found in the most recent form 10-Q and earnings release posted to farmer Mac's website farmer Mac Dot com.
Under the financial information portion of the investors section.
A recording of this call will be available on our website for two weeks starting later today.
Well, thank you, Steve and good afternoon, everyone and thank you for joining us.
Today, I would like to provide you with a high level overview of our first quarter results.
Then I'm going to turn the call over to Zack Carpenter, our chief business officer, who is going to discuss customer and market developments.
Jackson <unk> chip card.
<unk> will provide an update on the current agricultural environment.
And a part of Ramesh our Chief Financial Officer will conclude with a more detailed review of our financial results.
Our consistent performance in the first quarter of 2021 demonstrates the strength and stability of our business model.
That's a full year into the pandemic.
We reported core earnings of $25 $9 million or 29% increase over the first quarter 2020 results in a net effective spread of 97 basis points, which compares with 89 basis points in the same period last year.
While the overall size of our portfolio was little changed in the quarter compared to year end, we continue to benefit from excellent funding.
We maintain our disciplined asset liability management.
And continue to see a shift in the composition of our portfolio.
Where it's higher spread loan purchase products.
As a result, our net effective spread has remained above 90 basis points, plus or minus five basis points. The guidance. We have previously provided.
We do however, expect our funding levels to revert to historic levels as the economy recovers and our business mix by Jos.
The overall condition of the agricultural real estate market remains positive.
We've provided $1 $5 billion and new credit to Rural America in the first quarter furthering our mission of finding innovative ways to increase access to capital and reduce the cost of credit.
Farmer, Mac remains well capitalized with solid liquidity a.
Our strong balance sheet and high standards of credit quality.
While there is widespread optimism for our economy due to the fiscal stimulus and vaccine distribution.
We are continuing to closely monitor the impact of COVID-19 on our portfolio.
As of March 31, 2021, we have approximately $51 million of unpaid principal balance still in deferments that we approved.
That compares with a peak of about $430 million. So it's now less than 12% of the peak and less than a 0.6 per cent of the farm <unk> Ranch line of business.
Although we've not seen any significant effect on our financial results were on the AG and rural infrastructure portfolios.
We are continuing to monitor the ongoing effects of the extreme cold weather event that occurred during February and Texas.
ERCOT power region.
Our rural utilities portfolio exposure in Texas is approximately $416 million as of March 31, 2021.
The net $416 million of split between electric distribution and generation and transmission and electric cooperatives.
We believe that the electric cooperatives in our portfolio that are located ERCOT.
We entered into this period of stress in a strong financial position able to absorb cost increases.
And many of these electric cooperatives have fuel or power pass through cost provisions and the ratemaking and cooperative pharma business governance systems, which provide flexibility to recoup market price fluctuations.
It is unknown at this time, what magnitude of cost pass throughs won't be required to pay for these additional energy costs.
That will largely depend on the period of time over which these costs are recouped or amortized.
We believe that the current internal risk ratings that we have at farmer Mac and that are applied to our rural infrastructure portfolio.
Appropriate for the risks as we assess that today.
Throughout this recovery and beyond we will remain steadfast in our commitment.
To maintain the availability and flow of credit to rural communities.
We will continue to focus on initiatives designed to achieve our growth.
Enhance our technology and strengthened our core profitability objectives. So that we can deliver long term value to our shareholders.
Maintaining our underwriting standards.
And to that end, our new Chief Credit Officer, Mark Brady joined US in March after spending more than a decade at fifth third bank in its food and agribusiness and leveraged finance groups.
Mark will play an integral role on developing and continuing the development of our prudent underwriting standards for new areas of growth.
He brings strength there, particularly on the complementary to those we already have with farmer Mac, particularly as it relates to large and complex transactions.
We are thrilled to have mark join our executive team and our support for our efforts to grow our business.
With that I'd like to turn the call to Zack Carpenter, our chief business Officer.
Give you an update on customer and market developments.
Jack.
Yeah.
Thanks, Brad.
Total outstanding business volume was $21 9 billion as of March 31, 2021, a modest decrease of $61 6 million from December 31, 2020, primarily due to a $206 $8 million decrease in certain fee based products such as pass through securitization.
Our loans held on truck and other off balance sheet product, specifically long term standby purchase commitments.
This net decrease was partially offset by exceptional growth in our farm <unk> ranch on purchase business, which I'll review in a moment.
The infusion of a credit line of business decreased to $97 7 million, primarily reflecting the continuation of trends. We saw on the second half of 2020 as one large counterparty moderately reduced its amount of outstanding credit card lending of $175 million a bag banner securities mature.
However, we did successfully refinanced $225 million on <unk> securities with one counterparty and added new volume on $125 million with another.
Which reflects our ability to execute transaction, while tactically managing the impact toward net effective spread.
As we continue into 2021, we do remain cautious about prospect for incremental institutional credit business, given the favorable capital markets environment and strong access to alternative funding by many of our AG vantage Counterparties.
And we could see a continued decrease in our interest is no credit portfolio as long as the market maintains elevated levels of liquidity.
Yeah.
Turning to our farm <unk> Ranch line of business of $48 2 million of net growth is attributable to a 239.0 million net increase in loan purchase volume, which more than offset the decrease in other fee based on off balance sheet products.
The 5% quarter over quarter growth in our farm <unk> Ranch loan purchase portfolio continues to reflect the success of our customer acquisition and retention initiatives, our ability to provide competitive interest rate across our product set and our efficient and effective execution in the loan approval and purchase process.
Our results also reflect our ability to once again overcome a seasonally heavy prepayment quarter, primarily related to the January one payment date associated with the majority of our loan portfolio.
Our farm <unk> Ranch loan purchase portfolio has increased over 34% from the first quarter of 2020, resulting in over one $3 billion in net loan purchase volume.
In addition included in this quarter's net farm <unk> ranch loan purchase grow as a growing proportion of exposures to agri producers and agribusinesses that support agricultural production.
Food and fiber processing and other supply chain production. This continues to reflect a new area of growth from farmer Mac and we are excited about its growth potential given the favorable market spreads and added diversification those loans spring.
Our pipeline across all farm <unk> ranch portfolios remains at healthy levels as we continue to broaden and deepen relationships that will provide farmer Mac with borrower and sector diversity and accretive yields.
As previously discussed partially offsetting the strong growth in our farm <unk> ranch loan purchase business, where net decreases of $112 5 million.
Loans held in trust on $78 4 million and a long term standby purchase commitment product.
These decreases primarily reflect the continued favorable lending environment, resulting in increased levels of loan refinancing activity as well as strong capital position of our customers, reducing the need for utilizing these risk mitigation products.
However, these products generate lower revenue due to the fee based structure on das do not impact on net effective spread and generally do not affect core earning the same degree as our purchased loan product.
Overall, our farm <unk> ranch growth continues to outpace the broader agricultural credit market.
Our agricultural mortgage loan portfolio, our net loan purchases in our farm <unk> Ranch line of business, including loans held in trust grew 17, 6% over the last 12 months compared to the year over year growth rate of the total agricultural mortgage loan market of approximately 6% through December of 2020.
Excluding loans held in trust our loan purchase portfolio increased approximately 34% over the last 12 months.
This consistent and large growth rate, we have seen on our farm <unk> ranch loan purchase over the last 12 months continues to reflect our customer relationship and retention strategies as well as our growing share of larger more complex aggregate producer in agribusiness loans.
Our rural utilities line of business decreased to $12 $4 million during the quarter, which primarily reflects scheduled payments and maturities.
The results this quarter compared to the net loan growth achieved during the first quarter of 2020, primarily reflects the higher interest rate environment in 2021, coupled with the impact from the Texas Arctic freeze that Brad spoke about earlier, both events slowed customers looking to execute and close on transactions during the quarter.
However, looking ahead the prospects for loan growth within the rural utilities line of business overall appear to be positive given the ongoing investments in capital expenditures for generation transmission and distribution assets as well as the federal Communications Commission's Rural digital opportunity fund auction.
Which awarded $9 $2 billion in broadband related operating cost subsidies to winning bidder in December 2020.
This may provide a catalyst for capital demand from rural electric cooperatives, who seek to develop and deploy broadband sir.
We have approximately $140 million on loans made to electric distribution cooperatives, where portions of the loan proceeds were utilized to develop broadband infrastructure for rural America.
We expect we expect this to be a growing area of focus from farmer Mac over the next few years.
As of March 31, 2021, the total outstanding loan purchase balance of our renewable energy portfolio was $82 9 million.
And during the quarter, we closed an additional 22.0 million renewable energy commitment.
The pipeline and are on renewable energy remains strong as we are continuing to build relationships and enhance our infrastructure to build our reputation as a key player in the renewable energy market.
Our ongoing conversations with customers reflect optimism about further economic recovery and growth.
We are focused on continuing to execute a straightforward customer oriented strategy, which we believe will enable long term growth and create value for all of our stakeholders.
And with that I'll turn it back to you Brad.
Thanks, very much Zack.
Now I'd like to turn the call to Jackson, our Chief economist to give you an update on current economic and credit conditions Jackson.
Thank you Brad.
By most measures condition from the agricultural and general economy showed marked improvements in the first quarter of 2021 higher commodity prices in the fourth quarter of 2020, and the first quarter of 2021 as well as record levels of government support payments lifted farm incomes in 2020.
In March 2021, USDA released the details of another round of support for America's food fuel and fiber sectors with more than $12 billion dedicated for direct payments and market support demonstrating the strong political commitment to a healthy and vital agricultural economy. These conditions combined to support land values during the quarter with limited supplies and <unk>.
<unk> demand, particularly in the western markets.
The general economy is also showing signs of a resiliency after a challenging 2020 consumer spending manufacturing indices and unemployment rates continue to improve in the first quarter of 2021 and rural economies have experienced above average performance in several of these metrics asset values declined in the first quarter of 2021.
With housing values rising approximately 12% annually. According to the February 2021 data from the Federal housing Finance authority and S&P Corelogic.
Efforts continue to increase rural community connectivity and opportunity through access to high speed broadband Internet and investment in energy projects continued at a strong pace to start the year.
The overall level of interest rates rose during the quarter, but credit spreads tightened showing the strength in the financial markets and improving outlook for business conditions.
While the bulk of the news in the AG food and rural connectivity sectors was positive there remains some risks to the economic outlook for these industries COVID-19.
COVID-19 continues to cast a shadow on the global economic recovery and some agricultural and food products like tree nuts, and fruits are more reliant on export markets for demand. Furthermore, the U S. Economic recovery is not yet complete and consumer mobility, while increasing its not consistently back to pre pandemic levels.
The impacts of the pandemic on food fuel and fiber producers were also not evenly distributed and that's there are still farmers and ranchers experiencing financial stress from the 2020 recession.
Finally weather risks remain a source of volatility to the AG and rural energy markets. The February polar vortex events in Texas with Brad described earlier is a Prime example of this risk.
Electricity providers regulators and lawmakers are continuing to work together to solve the immediate financial burden of the Texas Arctic trees, but also put forward improvements to the regional electric rate on market.
Despite these few headwinds the overall economic Meredith had a net positive effect on the credit quality and performance of farmer Macs portfolio.
Portfolio substandard rates and default rates were elevated for much of 2020.
But these rates fell back to or at or below historical levels as conditions improved.
Loans rated substandard represented one 5% of the total portfolio with risk rating downgrades and permanent plantings and crop loans driving a slight uptick in substandard loans from the fourth quarter.
However, at 39% of the loans past due 90 days or more in the fourth quarter of 2020 cured or paid off by March 31 2021.
The overall delinquency rate rose from 0.21% of the total portfolio as of December 31, 2022, 0.33% on the total portfolio by March 31, 2021 net increases in line with the seasonal rise consistently observed during the first quarter of each year related to that first January payment date on those loans.
There remains a concentration on seriously delinquent loans as the top 10 borrower exposures represent more than half of our 90 day delinquencies as of March 31 2021.
There were no loan charge offs during the first quarter, which is further evidence of the strong performance and credit quality of farmer Mac's growing portfolio.
While 2020 has taught us that economic conditions in cycles can change quickly the feed agricultural and rural energy sectors have experienced a healthy first quarter and farmer Mac is well positioned to help us build on that momentum and now I'll turn it back to you Brad.
Thanks, very much Jackson and now I'd like to turn to apart on to discuss our financial results in more detail at Parnell.
Thank you Brad Farmer Mac's first quarter 2021 earnings reflects the strength of our underlying business model and our ability to adapt to the changing market environment, earning for strong and driven by growth and highest spread business volume and substantially lower funding costs, given our continued strong access to debt capital markets.
Our access to the capital markets as I mentioned strong issued debt daily and we continue to maintain our disciplined asset liability management practices.
As of March 31st 2021, the other.
<unk> balance of interest, earning assets was $22 2 billion.
And thats comprised of about $4 $8 billion in cash and investments and $17 $4 billion worth of loans and securities.
On the Max net effective spread for first quarter of 2021 with $53 9 million.
This represents a 22% increase from.
$44 2 million in first quarter 2020.
In percentage terms net effective spread improved to 97 basis points compared to 89 basis points in the same period last year. This reflects the overall compositional shift to farm and ranch and agribusiness loan purchase products that we've mentioned that from.
The $9 $7 million year over year increase in F. <unk>.
Primarily due to an increase of $6 1 million from new business volume and a $3 $5 million decrease in non-GAAP funding costs.
It resulted from us continuing to effectively use our callable debt instruments to mitigate prepayment risk as a result of the low interest rate environment.
On the yield curve Steepens, while also successfully extending on liabilities in preparation for the driving season alignment on what.
The scene, our pricing levels that are very attractive, but are also actively analyzing our duration and convexity matches to ensure that the minimized our interest rate risk as rates rise.
Core earnings for first quarter 2021.
29% to $25 9 million.
$2 from 39 cents per diluted common share compared to $20 1 million.
$1 87 per day.
Weighted common share for first quarter 2020.
The year over year increase on core earnings was primarily due to a $7 7 million after tax increase in any assets and a $3 1 million.
After tax decrease in the total provision for credit losses. This increase was partially offset by a $2 1 million after tax increase in operating expenses and a $1 8 million increase in preferred stock dividends.
<unk> expenses increased by 16% year over year and this was primarily due to increased head count and higher spending on software licenses and information technology consultants to support both core and strategic initiatives. These income.
Since were offset by lower levels of expenses related to consulting fees travel and conferences.
However, these decreases on likely temporary unexpected to non life post pandemic once normal travel and other activities from steel.
We plan to continue investments for the foreseeable future and this is primarily to modernize on infrastructure and handset technology platform to support our revenue strategy and also to add relevant talent across the organization, while we expected to incur.
<unk> over the next 12 to 18 months as we innovate and grow that business. We also expect to see a tapering off in expense growth.
We've also instituted a disciplined approach to controlling personnel and non personnel costs.
Mostly monitoring our operating efficiency ratio until a rigorous review of our results each quarter on.
Efficiency ratio ended first quarter 2021, and 31%. This is one percentage point higher than on targeted 30% level and this was mainly as a result of the seasonal nature of expenses that occurred in the first quarter, which we expect to see some moving out as we complete upgrade swap platforms and investments over a multiyear period as we make these.
Allergy commitments that will ultimately improve customer service and our competitive position, we do expect that on efficiency ratios will stabilize at historical levels and ultimately reflect to under 30%.
As of March 31st 2021, the total allowance for loan losses was $17 5 million.
This reflects a modest relief from $31000 from December 31st 2020.
During the quarter, we recorded a net $1 million provision to the allowance utility loan losses due to the impact of rating downgrades on multiple utilities that were negatively impacted by the polar vortex that's truck, Texas on February Thank you to anyone.
Discussed by broad and.
<unk> detailed a little bit earlier.
Include the single cooperative downgraded to special mention during the quarter with a total exposure of approximately $24 million.
The increase in provision to the rural utilities portfolio was offset by a $1 million release and debt.
Farm <unk> ranch portfolio due to ratings upgrades and we also updated on lots of default assumptions. All of this was partially offset of course by net Corp.
Portfolio.
As I've mentioned on prior calls.
Highly specialized nature of power generation and transmission utilities results in significant losses, given default estimates that drive our seafood model assumptions, even though the actual probability of default is available. It's definitely important to note that as of March 31st 2021, farmer Mac's $2 $8 billion in Outstandings will get Timothy loan purchase.
And long term standby purchase commitments have no historic or current delinquencies.
Let me now turn to capital.
I've mentioned earlier, we remain a well capitalized financial institution with strong liquidity and a robust balance sheet farmer Mac's $1 billion of core capital as of March 31, 2021 exceeded our statutory requirement by $348 million or 51% of tier one capital ratio was 14% as of March 31st 2000.
21, and this was a modest decline from 14, 1% as of year end.
Italy due to growth in risk weighted assets that outpaced our capital growth during the quarter.
Our liquidity also remains strong as evidenced by quarter end position of $1 billion far exceeding our regulatory requirement. We expect to continue to maintain a higher than required level of cash and liquidity as we've done through 2020 going into 2021. So that we can weather any unexpected cash flow shocks given the continuing economic uncertainty.
But they also will retain the flexibility to maintain look but ample levels of liquidity as market conditions change overall, we're very pleased with the consistency in our results this quarter and this is.
The floor is now open for questions. If you do have a question. Please crestar one on your telephone keypad at this time questions will be taken in the order. They were received anytime. Your question has been answered you can remove yourself from the queue by pressing one again, ladies and gentlemen, if you do have a question. Please press star one on your telephone keypad at this time.
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Okay.
Our first question comes from Greg Tendie with pseudo cheaply state your question.
Hi, guys. Thanks for taking my questions. Just two questions. One can you just describe give them the the rural utility exposure in Texas and the adoption of sea. So how we should potentially be thinking about it because I know historically, you haven't had losses, there, but under C. So you've been.
Taking losses sohio shall you'd be thinking about this exposure and if there are losses incurred here would that change how you would be accounting for it on a go forward basis.
Yeah, Hey, Greg, It's it's Brad <unk>, Great day here from your appreciate the question very much.
But keep in mind that <unk>.
Provides very sophisticated method for estimating future potential losses. So it really establishes a reserve against estimated future losses, they're not realized losses at all.
So the way the models work on the impact of the Texas praise was that we had we'll electric cooperative and more specifically generation and transmission electric cooperative borrowers.
<unk>, who or and that's not great weighted by S. M P and other waiting agencies.
And their ratings were cut they were lowered after the phrase because they're liquidity was strained by the high prices they were having to pay for purchase electricity.
In the case of the January transmission of electric clock with their stolen Bashment great.
So we the.
The way that works on to a model is that the results and adjustments to see some model and the and pointing lately provides for a new and higher for you Sir.
Given the high quality of these customers I think I'm just gonna set in our comments, we're actually not expecting losses, we expect them to work through this and recover and eventually be upgraded that is our current best outlet for them and we <unk>.
Do not expect at this 0.2 based on any information we have today to actually take losses on those credits, but given how the system model works, it's formulaic those downgrades and their investment grade ratings results on an automatic increase in the reserve.
And that's what we're dealing with.
So issue heard in our comments, we had additional reserving associated with those some of those credit so not portfolio and that was largely offset by lessen Ah Lola reserve in other parts of the portfolio a true.
<unk>, that's a very positive economic conditions.
So I've kind of it kind of net it out but just to be clear nothing that we have seen today from the credits that we have in the Texas portfolio cause.
Cause us to think that either we've had realized losses or is it realized losses are eminent or even or even likely.
Great and then just one more just can you talk to us.
No the lower funding Cos I think this is the second quarter in a row that you've seen lower funding cause what in the environment, you know might get those more to normalized.
Normalized levels, because you're supposed to have been very good, but you've you've called out I guess lower funding.
For two quarters now so could you just yet progress through <unk>.
Absolutely and I'm Gonna turn into a part on when you see that show up in part in any yes, I mean, <unk> and prevalent in N E. S is attributable and a small part of that and also in part to a shift in the competition on the portfolio to higher margin assets.
Give I think we've discussed it in the past, but given how we price virtually every lonely make to the current cost of funding that based on current debt markets spreads. We can manage that with considerable per session and we're being up up opportunistic whenever expand.
It out a bit, but having said that the debt capital markets has been very favorable or credit spreads too wide lately, followed indices such S. U S treasures have been at record low levels and let me just turn to a partner to provide you some color on.
You know how dramatic that change has been and what could cause it to reverse.
[noise] job just give me the overview on you know how we think about this.
You know I I, just find that a couple of things. One you know there has been from market that let them keep moved recently very consistent last year and you know as you noted rightfully. So you know we were even today successfully carlock debt in response to prepayments, but as the market conditions.
Conditions continued that comes up my little and do you go see.
What we're seeing is that some of those.
Really not fever, and especially in the in the movie. So fast is that there's been an overall.
Of debt supply in the market and that's kept on non-callable issue and spreads neither extremely tight level of fluency benchmark treasuries. So just to give you a sense of you know approach and.
I think you'll go steepens, what they're really trying to do is.
[noise] situation that I should I've actually gone up relative to where we were you know on.
2019 in 2018, and we believe that that will help us because as our assets have a shorter duration and reprice to the the higher interest rate environment.
Move to be very favorable in terms of keeping our funding costs slow and that's.
In addition to be other factors that dragged noted in terms of compositional shift that's.
That's maintained those those higher any other pets.
[noise], Greg Greg I know a part of was cutting out there just a little bit did you get all of her comments.
Yeah, I think so I mean, so essentially if I if I heard it correctly.
As the yield curve steepened, you, you're looking to like him out your your liabilities.
And they're ready to.
Okay, that's okay, but I I mean fully understanding that's the majority of your spread is coming on so from business mix I, just I wanted to understand a little bit of the funding side of it as well yeah, absolutely yeah, and if you. If you look at you know maybe I'll just give you one additional point you know on average a medium term issuance thumbs are about.
3.2 years relative to 2019 break with two point for you. So if you think about dot in relationship to Ah sharpening duration on the opposite side I think we should start to see more of that benefit really.
Come through.
Got it thanks, a lot that's very helpful.
Again, ladies and gentlemen, if you have a question please pressure on it.
On the phone keypad. Our next question comes from Gary Gordon. Please state your question.
Okay. Thank you. Thank you for your time.
Most of my questions have been answered by one on really or two questions related to the institutional credit.
One after what you've seen in the first quarter with the decline in volume there. This change your loan growth outlook from what you would expect for the year.
Four year for what you would have expected three months ago.
Yeah, Hey, Hey, Gary I appreciate your participation on the call very much.
I think we've been pretty consistent now for about nine months that particularly and the institutional side of things with some of our <unk>.
Vantage credits and you saw show up with our standbys.
This last quarter debt.
We are seeing some run off on that some of that is business. We've been willing to let go because I'm very low spreads.
I'll get some of those customers have and.
Evaluated whether.
Not renewing or rolling over or pursuing a rollover would be detrimental and put that relationship on our conclusion is way it won't but I think for the outlook for 2021, it's certainly competitive.
But we are seeing very very strong numbers and our farm and ranch why don't I, just turn turn this too designer to give you some color on kind of how he's saying the balance on my portfolio.
And both the challenges and opportunities for the remainder of the year.
Yeah. Thanks, Brian appreciate the question Gary.
We did speak over the last couple of quarters on the institutional credit Lana business I mean looking back in 2020, we did see fairly sizeable rohloff their mouth purely reflect on the liquidity in the market.
I'll say, we were optimistic in the first quarter, while I was down on 100 Uhm as noted on our explosions, we did could enroll some large securities as well upside is one of our large counterparty. So.
We're being we're being cautious given that liquidity in the market and and we're not cheesy. Thanks to the the bottom was Brad noted by where we can we are working with their counterparts to support them tactically finding a nice nice 10 minutes that'll work for asking them and see if we can roll and keeps them about business, but again.
Okay, I expect it to be competitive in the market.
Shifting on the farm and ranch on the other business side, continuing to see very strong growth in the first quarter, which is very consistent with the last three quarter. He can can you 20th so the pipeline extract their it's competitive in the market and retire on retail pretty tired from the credit card spread perspective, but we feel our business model and our ex.
Q she can continue to see large growth alone.
And purchase space.
Okay. Good and then along those same lines.
Sounds like the your new business makes it will be even more farm and ranch witches with a higher spreads.
So I would assume that you know versus again, maybe let's say three six months ago.
Yes, it yields could be a little higher than you expect here as you were saying that on the funding side, maybe it'll be a little a little worse. So is there any reason at the you know the current spread won't be maintained for the foreseeable future.
Yeah that that'll be an interesting mix.
The good thing about the funding spreads is that we price off those so it's not a situation where we put something on the box and then just automatically get squeezed by that when it happens.
Oh, it's considered when we passed a new transaction so that helps us defend from that.
That spread narrowing rest that you that you mentioned.
The actual mix, yes, some time on ranch's higher spread on to the extent, we can continue to grow on renewable energy portfolio, that's higher spread.
On what you referred to as institutional and egg advantage should some of that business start coming back that could be slightly dilutive.
But I think you know on on balance probably the best guidance that we can give you based on what we see today.
Is that you know as we noted during the call. We have been just above that 90 basis point plus or minus five specifically we've been just above the 95 for two quarters now and I think you know being at the top end of that range Gary.
90 basis point pass five basis points.
A pretty good estimate as we look out the next quarter or two of where we might lamp.
Thanks, a lot.
That was our final question I'll turn it back over for breakfast Navy remark.
Good well, thank you operator, and thank you all for joining another on more on the line. So I hope that we have answered your questions. During the call of course, if we have not just get in touch with this after the call. We're always happy to to help offline discussions with you.
And answered questions, but maybe come up come up later on.
But we continue I hope you've heard a number of voices in a report today, where continued to be very bullish about the overall agricultural economy. We continue to be very bullish about five on Mac and some of the initiatives that we have made over the last year or two that.
Are starting to show up and improve.
Improve profitability with the organization.
And as of today, it's one of those nice situations nice times, when we can't identify any huge threats on the horizon coming out of the pandemic is creating a sense of optimism, but so is the overall condition of car institution.
And the overall agricultural economy in the United States. So you know it.
No guarantee it lasts but today, we're enjoying it I hope you do too and we think that there are some continued room for our growth at five on Mac, so with that.
Well. Thank you for your participation and operated this will conclude our call.
Thank you. This concludes today's conference call you. Thank you for your participation you may disconnect. The lines at this time and have a great day.
Thank you.
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