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.
[music].
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 following 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.
We 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 of the 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 in our 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 of farmer Mac's non-GAAP measures.
Can be found in the most recent form 10-Q and earnings release posted to power of ex 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 package.
<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.
For its higher spread loans purchased products.
As a result, our net.
Effective spread has remained above 90 basis points, plus or minus five basis points for guidance. We have previously provided.
We do however, expect our funding levels to revert to historic levels.
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 for us.
During our mission of finding innovative ways to increase access to capital and reduce the cost of credit.
Farmer Mac remains well capitalized.
Our solid liquidity.
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 per cent 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 egg and rural infrastructure portfolios.
We are continuing to monitor the ongoing effects of <unk>.
Extreme cold weather event that occurred during February and Texas and the.
ERCOT power region.
Our rural utilities portfolio exposure in Texas is it.
Approximately $416 million as of March 31, 2021.
And that for $116 million of split between electric distribution and generation and transmission and electric cooperatives.
We believe that the electric walkers and our portfolio that are located ERCOT.
Towards the end of this period of stress in a strong financial position.
Well to absorb cost increases.
And many of these electric cooperatives have fuel for power pass through cost provisions and the ratemaking and cooperative farmer business governance systems, which provides 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 for rural infrastructure portfolio.
<unk> appropriate for the risks as we assess it today.
Throughout this recovery and beyond we will remain steadfast in our commitment to.
To maintain the availability and flow of credit to rural communities.
We will continue to focus on initiatives designed to achieve our growth.
Enhanced our technology and strengthened our core profitability objectives. So that we can deliver long term value to our shareholders.
Maintaining our underwriting standards.
And for that and 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 in developing and continuing the development of our prudent underwriting standards for new areas of growth.
He brings strength, there, particularly 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 our customer and market developments.
Jack.
Yeah.
Thanks, Brad.
Total outstanding business volume was $21 9 billion as.
As of March 30 for 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.
Loans held in trucks 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 non purchase business, which I'll review in a moment.
The FDA has no credit line of business decreased 97, $7 million, primarily reflecting the continuation of trends we saw in the second half of 2020 as one large counterparties moderately reduced its amount of outstanding credit by lending of $175 million per bag banner securities mature.
However, we did successfully refinanced $225 million of bagman ex securities with one counterparty and added new volume of $125 million with another one.
It reflects our ability to execute transaction, while tactically managing the impact to our 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.
And we could see a continued decrease in our institutional credit portfolio as long as the market maintained elevated levels of liquidity.
Yeah.
Turning to our farmer Ranch line of business for $48 2 million of net growth is attributable to a 239.0 million net increase in loan purchase volume.
For more than offset the decrease in other fee based and 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 rates across our product set and our efficient and effective execution in the loan approval and purchase price profit.
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% for my 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 growth is a growing proportion of exposures to agri producers and agribusinesses that support agricultural production food.
Food and fiber processing and other supply chain production. This continues to reflect a new area of growth for 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 and thus do not impact our net effective spread and generally do not affect core earnings for 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.
Paired 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 in our farmer 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 impacts of the Texas Arctic freeze that Brad spoke about earlier.
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 investment in capital expenditure for generation.
<unk> mission and distribution assets as well as with Federal Communications Commission's Rural digital opportunity fund auction.
Which awarded $9 $2 billion in broadband related operating costs subsidies.
For 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 in 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 for farmer Mac over the next few years.
As of March 31, 2021, the total outstanding loans purchased balanced 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 for 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 straight for 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 for 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 conditions in 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 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 for 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 for 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.
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 electric.
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 weighted market.
Despite these headwinds the overall economic Meredith had a net positive effect on the credit quality and performance of farmer Macs portfolio.
Portfolio sub standard rates and default rates were elevated for much of 2020.
These rates fell back to or at or below historical levels as conditions improved.
Loans rated sub standard represented one 5% of the total portfolio with risk rating downgrades and permanent plantings and crop loans driving a slight uptick in sub standard loans from the fourth quarter.
However, a 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% of 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 of seriously delinquent loans as the top 10 borrower exposures represent more than half of our 90 day delinquencies as of March 31, 2021 day.
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 for 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 <unk> to discuss our financial results in more detail 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.
Balance of interest, earning assets was $22 2 billion.
And that's comprised of about $4 $8 billion in cash and investments and $17 $4 billion worth of loans and securities for.
For the Max net effective spread for the first quarter of 2021 with $53 9 million.
This represents a 22% increase for.
$44 2 million for.
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 farmer ranch and agribusiness loan purchase product that we've mentioned.
For $9 $7 million year over year increase in F. <unk>.
Primarily due to an increase of $6 $1 million for new business volume and a $3 $5 million decrease in non-GAAP funding costs.
This resulted from us continuing to effectively use our callable debt instruments to mitigate prepayment risk as a result of the low interest rate environment.
As the yield curve Steepens, while also successfully extending our liabilities in preparation for this rising rate environment and what we're seeing our pricing levels that are very attractive for us.
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%.
$85 9 million.
For $2.39 per diluted common share compared to $20 1 million.
A $1 87 per diluted common share for first quarter 2020.
The year over year increase in core earnings was primarily due to a $7 7 million after tax increase in any S 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.
Operating 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 increases were offset by lower levels of expenses related to consulting fees travel and conferences.
These decreases are likely temporary unexpected for non life post pandemic once normal travel and other activities for steel.
We plan to continue investments for the foreseeable future and this is primarily to modernize our infrastructure and handset technology platform to support our revenue strategy and also to add relevant across the organization.
We expect these efforts to increase over the next 12 to 18 months as we innovate and grow our 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 by closely monitoring our operating efficiency ratio until a rigorous review of our results each quarter.
Patiency ratio ended first quarter 2021 and 31%.
This is one percentage point higher than our 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 technology commitments that will ultimately improve customer service and our competitive position.
We do expect that our efficiency ratios will stabilize at historical levels and ultimately reflect to under 30%.
As of March 31st 2021 for Todd.
Allowance for loan losses was $17 $5 million and this reflects a modest relief for $31000 from December 31st 2020.
During the quarter, we recorded a net $1 million provision to the allowance for you to look at loan losses due to the impact of rating downgrades with multiple utilities that were negatively impacted by the polar vortex that's truck, Texas in February Thank you for anyone.
Discussed by broad and.
<unk> detailed a little bit earlier.
Include the single cooperative downgraded to special mention during the quarter for the total exposure of approximately $24 million.
The increase in provision to the rural utilities portfolio was offset by a $1 million of lease and debt.
Farmer ranch portfolio due to ratings upgrades and we also updated unlocks default assumptions all of this was partially offset of course by net growth.
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 price our seafood model assumptions, even though the actual probability of default available. It's there for important to note that as of March 31st 2021, farmer Mac's $2 $8 billion in outstanding food utilities 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 $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 for 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 requirements. 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 shops, 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 for the consistency in our results. This quarter and this is reflected in our credit quality profitability and capital adequacy more complete information about farmer Mac first quarter 2021 performance is in our 10-Q that would be.
Today with the SEC and with that let me turn it back to you.
But a part of it thank you very much.
Certainly the pandemic abruptly changed the way we work the way we communicate.
And also the way we serve our customers our results over the last year I think up reflected our success.
It's really adjusting to those changes and providing uninterrupted support for agricultural and rural communities. That's our mission after all.
We experienced a strong start to 2021, and we commend the drive and determination.
With all the team members at farmer Mac will continue to work remotely.
We announcing plans for <unk>.
Partial reopening up our office in the next couple of months and probably a fully reopened later this year.
We are executing well on all of our initiatives and we believe we are well positioned to deliver strong financial performance and consistent returns to our shareholders over the rest of 2021.
And with that operator, I'd like to see if there are any questions from anyone on the line today.
Thank you the floor is now open for questions. If you do have a question. Please press star one on your telephone keypad at this time questions will be taken in the order they will ever see 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.
One on your telephone keypad at this time.
Okay.
Our first question comes from Greg <unk> with Sidoti. Please state your question.
And their ratings were cut they were lowered.
After.
The freeze because of their liquidity was strained.
By the high prices they were having to pay for purchased electricity.
In the case of debt generating transmission electric cooperative Theyre still investment grade.
So we.
The way that works for them through our model is that results in adjustments.
To the CSO model and the and pointing lastly provides for a new and higher reserve.
Given the high quality of these customers I think as we said 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 outlook for them.
And we absolutely do not expect at this point to based on any information we have today to actually take losses on those credits, but given how the CSO model works, it's formulaic those downgrades and their investment grade ratings.
Results in an automatic increase in the reserve and Thats what were dealing with.
So as you heard in our comments.
We had additional reserving associated with those some of those credits in that portfolio and that was largely offset by.
Less than a lower reserve.
In other parts of the portfolio attributable to very positive economic conditions.
What kind of it kind of net it out.
To be clear nothing that we have seen.
To date from the credits that we have in the Texas portfolio.
Cause us to think debt either we've had realized losses or that realized losses are eminent or even or even likely.
Great and then just one more just can you talk to us.
The lower funding costs I think this is the second quarter in a row that you've seen lower funding cost what in the environment.
Might get those more normalized.
Normalized levels because your spreads have been very good, but you've you've called out I guess lower funding.
For two quarters now so could you just walk us through debt.
Absolutely and I'm going to turn to a partner when you see that show up.
In part in any yes, I mean, the improvement in any day.
Is attributable in a small part for that and also in part two of <unk>.
Shifting the composition of the portfolio to higher margin assets.
I think we've discussed it in the past, but given how we.
Price virtually every loan we make to the current cost of funding that based on current.
Debt market spreads.
We can manage that with considerable per session and we're being up up opportunistic when we expanded out a bit but having said that the debt capital markets have been very favorable our credit spreads to widen.
Followed indices, such as the U S treasuries.
<unk> been at record low levels and let.
Let me just turn to a partner to provide you some color on you.
You know how dramatic that change has been and what could cause that to reverse.
Yeah.
Thank you.
And.
John I'm, just giving you the overview.
How do we think about this.
I would just point out a couple of things one there has been for market volatility more recently, a very consistent last year and as you noted rightfully so.
We will even do they successfully conduct debt in response to prepayments, but as the market.
Conditions continue to become volatile and yoga Steepens, what we're seeing is that some of those.
Uh huh.
Thank you.
It really isn't a fever.
Especially in the in the more recent for US is that there's been an overall loans.
Supply in the market and that's kept our non callable issuance spreads you are extremely tight levels, what's the benchmark treasury. So just to give you a sense of.
Our approach here.
The yield curve steepens, what they're really trying to do is.
Yes.
You shouldn't assume could actually gone up relative to where we were in.
2019, and 2018, and we believe that that will help us because as our assets have a shorter duration and reprice to the higher interest rate environment.
Moving to be a very favorable in terms of keeping our funding cost flow and that.
In addition to the other factors that drive noted in terms of compositional shift that's.
Let's maintain those those higher spreads.
Okay.
Yeah.
Great Gregg I know a part of it 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 that correctly.
As the yield curve steepen youre looking to lengthen out your your liabilities.
And their attitude.
Okay, that's great.
But I I mean fully understanding that the majority of your spread is coming also from businessman because I just I wanted to understand a little bit on the funding side of it as well yeah, absolutely. Yeah. If you look at you know maybe I'll just give you one additional point.
Average medium term issuance dorms or about 3.2 years.
You know relative to 2019, where it was two point for you. So if you think about that in relationship to a shortening duration on the asset side I think we should start to see more of that benefit really start to come through.
Got it thanks, a lot that's very helpful.
Again, ladies and gentlemen, if you have a question. Please press star one.
Thank you Pat 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, but one on really were two questions related to the institutional credit.
One after what you've seen in the first quarter with a decline in volume there.
This change your loan growth outlook from what you would've expected for the year the full year for what you would have expected three months ago.
Yeah, Hey, Gary.
I appreciate your participation in the call very much.
You know I think we've been pretty consistent now for about nine months that.
Particularly.
In the institutional side of things with some of our advantaged credits and you saw it show up with our standby.
This last quarter debt.
We are seeing some run off in that some of that is a.
Business, we've been willing to let go because of the very low spreads a debt some of those customers have and we've evaluated whether or.
Uh huh.
Not renewing or rolling over or pursuing a rollover would be detrimental for the relationship and our conclusion is weighted it won't.
But I think for the outlook for 2021, its certainly competitive.
But we're seeing very very strong numbers and our farm and ranch and why don't I, just turn turn this to cause that to give you some color on kind of how he's saying the balance in the portfolio and both the challenges and opportunities for the remainder of the year.
Yeah. Thanks, Brian I appreciate the question Gary.
We did speak over the last couple of quarters on the institutional credit line of business I mean looking back in 2020, we did see a fairly sizeable roll off there and that was purely reflecting the liquidity in the market you know I must say, we we're optimistic in the first quarter.
It was down 100 as noted in our disclosures we did.
We didn't rule some large securities is both upside as one of our large counterparties. So.
Hum.
That's what we're being we're being cautious given the liquidity in the market and whatnot. She sees things to the bottom line as Brad noted, but where we can we're working with our counterparties to support them tactically finding a nice nice 10 minutes about worked for us and them and seeing if we can roll in and keep some of that business, but again.
I expect it to be competitive in the market.
Shifting to the farm and ranch in the agribusiness side, continuing to see very strong growth in the first quarter, which is very consistent with the last three quarters of 2020. So the.
The pipeline looks strong there it's competitive in the market and rates are.
The rates are pretty tight from a credit spread perspective, but we feel our business model and our execution can continue to see large growth alone for farm and ranch loan purchase space.
Okay. Good and then along those same lines.
It sounds like the new business mix will be even more our farm and ranch, which is for the higher spreads. So I'd assume that you know versus again, maybe lets say three six months ago.
At that range, Gary the 90 basis point, plus five basis points is probably you know.
Pretty good.
Estimate as we look out for next quarter or two of where we might land.
Thanks, a lot.
Okay.
That was our final question I'll turn it back over for Brad for closing remarks.
Good well. Thank you operator, and thank you all for joining I know there are 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 us after the call. We're always happy to to have offline discussions with you and.
Or questions that may come up come up later.
But we continue I hope you've heard a number of voices in our report today, we're continued to be very bullish.
Bullish about the overall agricultural economy.
We continue to be very bullish about farmer Mac and.
Some of the initiatives that we have made over the past year or two that are starting to show up in <unk>.
Improved profitability of 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 our institution and the overall agricultural economy in the United States. So you know it's no guarantee at last but.
Today, we're enjoying it I hope you do too and.
We think that they'll continue.
Continued room for par growth at farmer, Mac, so with that well.
Well. Thank you for your participation and operator this will conclude our call.
Thank you. This concludes today's conference call. We thank you for your participation you may disconnect. Your lines at this time and have a great day.
Thank you.
Yeah.
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