Federal Agricultural Mortgage Corporation (NYSE:AGM) Q1 2024 Earnings Call Transcript

Federal Agricultural Mortgage Corporation (NYSE:AGM) Q1 2024 Earnings Call Transcript May 6, 2024

Federal Agricultural Mortgage Corporation beats earnings expectations. Reported EPS is $4.28, expectations were $3.94. AGM isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, ladies and gentlemen, and welcome to the Farmer Mac First Quarter 2024 Earnings Conference Call. At this time all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Monday, May 6th, 2024. I would now like to turn the conference over to Ms. Jalpa Nazareth, Senior Director of Investor Relations and Finance Strategy. Please go ahead, ma’am.

Jalpa Nazareth: Good morning and thank you for joining us for our First Quarter 2024 Earnings Conference Call. I’m Jalpa Nazareth, Senior Director of Investor Relations and Finance Strategy here at Farmer Mac. As we begin, please note that the information provided during this call may contain forward-looking statements about the company’s business, strategies, and prospects, which are based on management’s current expectations and assumptions. These statements are not a guarantee of future performance and are subject to the risks and uncertainties that could cause our actual results to differ materially from those projected. Please refer to Farmer Mac’s 2023 Annual Report and subsequent SEC filings for a full discussion of the company’s risk factors.

On today’s call, we will also be discussing certain non-GAAP financial measures. Disclosures and reconciliations of these non-GAAP measures can be found in our most recent Form 10-Q and earnings release posted on our website, farmermac.com, under the Financial Information portion of the Investors section. Joining us from management this morning is our President and Chief Executive Officer, Brad Nordholm, who will discuss first quarter 2024 business and financial highlights and strategic objectives; and Chief Financial Officer, Aparna Ramesh, who will provide greater detail on our financial performance. Select members of our management team will also be joining us for the question-and-answer period. At this time, I’ll turn the call over to President and CEO, Brad Nordholm.

Brad?

Bradford Nordholm: Thank you, Jalpa. Good morning, everyone, and thank you for joining us. Our team has once again delivered excellent results, demonstrating our unwavering commitment to grow Farmer Mac profitably, while fulfilling our mission to rule America and generating strong shareholder returns across changing market cycles. The year is off to a strong start as we recorded core earnings of $43.4 million, reflecting a 12% increase over the same period last year. We provided $1.4 billion in liquidity and lending capacity to lenders serving rural America while maintaining our strong capital base, disciplined asset liability management and uninterrupted access to the capital markets. The overall earnings story continues to be consistent.

The diversification and resiliency of our business model supports our long-term strategic growth objectives, while also providing a buffer against market volatility and changing credit markets. I’d like to highlight two noteworthy transactions that we’ve recently completed. First, the successful execution of our fourth FARM series securitization transaction. Farmer Mac remains committed to developing a vibrant and liquid agriculture mortgage-backed securities market that is central to our core mission to improve credit accessibility in rural America. This initiative is our opportunity to transform the agriculture mortgage market industry with new efficiencies, helping to lower the cost for the end borrowers. We are very pleased by the tremendous support we have seen from our customers and investors for this program and remain committed to being a regular issuer in the market with a set of securitization products, that align our borrower and investor interests.

The second transaction worth noting is the acquisition of a $57 million pool of farm and ranch loans from a single agricultural lender. This acquisition underscores Farmer Mac’s track record of providing agricultural lenders solutions for their capital planning, especially as there is uncertainty about how capital regulation will evolve over the next few years. We have consistently presented our product offerings as a capital efficiency and liquidity tool for our customers in both the agriculture finance and rural infrastructure lines of business. We believe that this is because the relative value Farmer Mac brings to our banking and financial services partners and ultimately the agricultural and rural borrowers is even greater when credit is a bit tighter.

Our funding advantage and our disciplined approach to asset liability management allow us to further deliver upon our mission to build a trusted secondary market for credit to rural America. We believe pool purchases within the agriculture finance and rural infrastructure lines of business can serve as important opportunities for volume generation over the next few years, as financial institutions continue to manage their capital efficiency, loan and deposit growth and liquidity needs. That coupled with our securitization capability enhances our ability to offer low cost liquidity at scale to the rural utilities we serve. It’s worth noting, I think, that the internal operational expertise and ability to execute for securitization overlaps with pool purchases and is really a new competency developed at Farmer Mac within the last few years.

The rural infrastructure finance segments show strong business volume growth in the first quarter 2024 primarily driven by increased investment activity and additional financing for renewable energy projects in response to continued strong demand for renewable electric power generation and storage. The pipeline remains strong in the near future and we have plans to invest additional resources to explore new opportunities. Our agricultural finance line of business grew during the first quarter despite the seasonally large number of payments related to loans that are on the annual payment cycle. The rise in market interest rates that has persisted has had a direct impact on the farm and ranch product interest rate. There generally exists an inverse correlation between farm and ranch new loan purchase volumes and changes in the farm and ranch product interest rates, with higher product interest rates slowing portfolio loan pre-payments.

The net effect of these forces contributed to positive farm and ranch loan purchase portfolio growth in the first quarter of 2024 as new farm and ranch loan purchases outpaced loan pre-payments. We believe our pipeline will continue to grow for the remainder of the year as tightening bank liquidity and the forecasted decline in farm income, relative to prior years is expected to drive more loan volume, including pool purchases. While uncertainty persists about future changes in monetary policy, borrowers are adjusting to higher interest rates and we are offering products that are more tailored to the current rate environment. Our wholesale finance product within the agricultural finance line of business presents strong relative value to our counter parties relative to market interest rates.

We expect the continued diversification of our products versus the broader market to drive continued growth in this area. As we look forward, we’re encouraged by the momentum we’ve seen since the start of the year. We believe that we’re well-positioned to make continuous progress on our long-term strategic growth initiatives to further our mission efficiently and innovatively as we navigate this backdrop of broader market uncertainty. Our website and investor and marketing materials are beginning to reflect our efforts to use branding, deepen our connection with stakeholders in a compelling and uniform way for the expansion of our mission driven work that helps build a strong and vital rural America. The initiative is intended to highlight our distinctive position as the secondary market partner that fosters greater connections between Wall Street and Main Street America as well as across the entire value chain to fuel growth, innovation and prosperity in America’s rural and agricultural communities.

In no small part, the fuel for that growth also comes from our active creation of more investment opportunities for the capital markets and strong access to capital. So at this time, I’d like to turn the call over to Aparna Ramesh, our Chief Financial Officer. Aparna, can you discuss our financial results in more detail?

Aparna Ramesh: Thank you, Brad. Good morning, everyone. Our first quarter 2024 results highlight our balanced, well-measured approach, continued strong credit quality and resiliency across market cycles. We achieved $1.4 billion of gross new business volume this quarter and this was primarily driven by loan purchases in renewable energy, the previously discussed farm and ranch pool purchase and new advantage securities in our farm and ranch and corporate ag finance segments. After repayments and maturities, we grew about $400 million during the first quarter in our outstanding business volume and this speaks to the benefit of the strategic decisions that Brad enumerated that we’ve undertaken over the last few years to diversify our portfolio and create opportunities in all interest rate environments.

Core earnings were $43.4 million or $3.96 per share in the first quarter of 2024, and this reflects a $1.5 million decrease sequentially and a $4.5 million year-over-year increase. The sequential change in core earnings was primarily due to lower net effective spread and this was driven by some seasonality related to non-accrual loans that were recorded in the first quarter. We often see an increase in non-accrual loans in the first and third quarters of every year and this is related to the annual and semi-annual payment schedule for the majority of our farm and ranch loans. It does tend to reverse with payment flow that occurs in subsequent quarters. We also encountered a modest increase in our floating rate funding costs during the first quarter and this was driven by certain dynamics in the SOFR credit markets that spilled into the fourth quarter of 2023.

The year-over-year increase in core earnings was driven by $4.6 million after tax increase in net effective spread and a $2.1 million after tax decrease in our provision for credit losses, and this was partly offset by higher operating expenses from increased headcount, increased stock compensation expense, and investments in technology projects. In percentage terms, our net effective spread in the first quarter of 2024 was 114 basis points compared to 119 basis points in the fourth quarter of 2023 and consistent with 115 basis points in the same period last year. Over the course of 2023, we achieved record levels of net effective spread as we benefited from the rapid rise in short-term rates and the reinvesting of our excess capital, which generated additional returns with the upward repricing of our short-term investment portfolio.

The capital that we raised opportunistically when rates were at historical lows in 2020 and 2021 positioned us extremely well throughout the rising rate environment and ongoing market uncertainty. As we look ahead, our treasury desk will be opportunistic in taking advantage of favorable market conditions for GSE paper and pre-fund new issuances while refunding maturing debt without taking excess risk. We did just that in the first quarter as we saw a reversal of the unfavorable credit widening that occurred in the fourth quarter of 2023 and we took advantage of tightened levels by pre-funding. We continue to hold approximately $800 million in cash and other short-term instruments in our liquidity portfolio. Not only does this help us weather potential market disruptions, our excess and highly liquid capital generates immediate returns in a high nominal rate environment.

We project a limited downside to earnings if rates decline in the future due to our proactive equity capital allocation strategy where we are laddering and layering duration to minimize volatility. Specifically, we expect to retain some of this benefit over the medium-term even if rates decline, as we started extending maturities in our investment portfolio. These are all practices that are consistent with our disciplined approach designed to help minimize earnings volatility. Despite some macro headwinds, we continue to see strong access to debt capital markets and a flight to quality investments, which allows us to be very well-positioned to fund new asset opportunities as they arise. As Brad highlighted in his comments, we are very pleased with the execution of our fourth FARM series transaction in April.

We received more than three times the demand for this latest offering and this is really a testament to Farmer Mac’s reputation with institutional investors as well as the overall market appetite for the underlying agricultural asset class. Not only was demand strong, but we were successfully able to expand our investor base and also introduced new classes of senior notes to address the cash flow demands of capital markets in this interest rate environment. The consistent FARM series issuances every year for the last four years have not only built a strong foundation of future market liquidity, but also led to improved execution economics and greater efficiencies in servicing for the agricultural mortgage backed securities market. Securitization has many beneficial aspects for Farmer Mac.

It allows us to diversify our funding, enhance and optimize the balance sheet by efficient deployment of capital and also enables our growth strategy by targeting new asset opportunities into our conduit. Turning to liquidity and capital, both remain extremely well in excess of all regulatory requirements and our projections show minimal change in our profitability coupled with limited exposure to movement in interest rates, whether the market rates go up or down. As of March 31st, 2024, Farmer Mac had 295 days of liquidity, and this is another important data point that validates our resiliency against short and medium-term market disruptions. Operating expenses increased by 8% sequentially and 15% year-over-year, and this is primarily due to the expenditures that are associated with headcount and increased stock compensation expenses as well as investments in technology projects.

Expenditures associated with a multi-year technology investment in our treasury and cash management systems to enhance our trading, hedging, and reporting platforms partly contributed to the year-over-year increase in expenses. This modernization effort is expected to position us to more effectively defend against cyber and fraud threats, but also allow us to scale our portfolio and continually diversify our product offerings, such that they’re in alignment with the growth strategy and our business and funding opportunities. We also plan to continue to make investments in strategic focus areas such as renewable energy and continue to modernize our infrastructure, including our servicing and loan platforms to support our growth and strategic objectives.

All of this has resulted in an operating efficiency ratio that is at 30% for the first quarter of 2024 and I’ll note that it’s well in line with our long-term strategic plan target. We’ll continue to closely monitor our efficiency ratio and manage it as we’ve done such that we expect to remain at or below a long run average of 30%. As noted, some of the increase in efficiency ratio this quarter was related to stock incentive compensation which is seasonal with most awards granted during the first quarter of each year. As we make investments in our loan infrastructure and funding platforms and innovate our loan processes to accelerate growth, we may see some temporary increases that would result in the efficiency ratio rising above the 30% level.

Our credit profile and our performance there remain stable, highlighted by continued strength across our agricultural and rural infrastructure portfolios. We posted another quarter without any charge-off and benefited from a $1.9 million release from our total allowance and this was largely a result of one rural infrastructure loan that improved its outlook during the first quarter. 90-day delinquencies as of March 31st, 2024, reflect 27 basis points across our entire portfolio and this is in line with the same period last year. We generally observe higher delinquency levels at the end of the first quarter and third quarter due to the annual and semi-annual payment terms, for most of our farm and ranch loans, and the impact that I noted previously from the non-accrual loans are associated with an annual payment cycle.

Let me now turn to capital. Farmer Mac’s $1.5 billion of core capital as of March 31st, 2024, exceeded our statutory requirement by $612 million or 70%. Core capital increased sequentially and this was primarily due to an increase in retained earnings. Our Tier 1 capital ratio as of March 31st, 2024 improved to 15.5% from 15.4% at year-end, largely due to higher retained earnings as I mentioned previously. Maintaining credit standards that reflect our risk profile, coupled with these strong levels of capital is a fundamental part of our long-term strategy for growth. We expect our long-term capital position and our strong capital position to allow us to be resilient and continue to be a source of low cost liquidity for our customers and borrowers, even as they evidenced difficult times.

In conclusion, our entire team delivered strong quarterly results, maintaining the key metrics that we highlight on each call while staying within our credit framework. Notably, we delivered 17% return on equity this quarter and stayed well in line with our efficiency target of 30%. We believe that our balance sheet is well-positioned for uncertainty and we’re more optimistic than ever to deliver on our long-term strategic plan objectives. And with that, Brad, let me turn it back to you.

Bradford Nordholm: Thank you very much, Aparna. Before we turn to questions-and-answers, I want to let everyone know that we will be hosting our first ever Investor Day event on Thursday, May 16th, beginning at 10:00 A.M. Eastern time. Our results and consistent performance through our market cycles have resulted in a very strong momentum in the markets and we want to use this event as an opportunity to further educate the broader investment community on our organization, our core mission to increase the accessibility of financing for American agriculture and rural infrastructure. We will provide a link to access the live webcast and it will be available at our website. But if you’re interested in participating in person, it will be a New York City based event and please reach out to our Investor Relations team as we still have some space available. And now, operator, I’d like to see if we have any questions from anyone on the line today.

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Q&A Session

Operator: Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Bose George from KBW. Go ahead please.

Bose George: Hey, everyone. Good morning. I wanted to start just on the spread. Aparna, you noted the seasonality of the non-accrual loans impacting the yield side and then that SOFR issue on the funding side. As both of these normalized into the second quarter, should we see spreads go back to the 4Q ’23 levels as long as interest rates remain fairly stable?

Bradford Nordholm: Yeah. Hey, Bose, nice to hear from you. There are those factors at work we talked about the impact of the reversal of the interest accrual. And another point I’d like to make related to NES, which is at the heart of your calculation, is that a good part of our volume growth came on late in the quarter. So we had a numerator or denominator rather that grew at the end of the quarter as the numerator had been accruing through the quarter. So those are all factors. Now as it relates to reverting or snapping back to 118 basis points, I think we would caution, that it would snap back to exactly that level. I think on prior calls, we have explained that over time we expect that 118 basis points to 120 basis points to slip.

I was asked on the last call, we’ll go back to the 100s and I indicated probably to the 100 teens — low 100 teens. So we do expect some erosion over time. But based on the first quarter results, some reversion towards that higher level should be expected.

Aparna Ramesh: And Bose, I’ll just add one thing with respect to the widening that we saw in credit markets. This was a dynamic that persisted in Q4. You probably heard the FOMC transcripts last year with the Fed easing up on some of the tapering activities that they’re planning to undertake that should flow favorably into the market. And in fact, we started to see quite a few signs of that in Q1 of this year. And we very opportunistically pre-funded. So just to give you a sense, there was a widening to the tune of about 15 basis points relative to SOFR spreads in the fourth quarter of last year. We’ve seen that actually come inwards to be less than five basis points. So we pre-funded at those levels. We got a little bit of negative carry in Q1 that also resulted in some erosion in our net effective spread.

Couple that with the non-accruals and the volume dynamic that Brad just mentioned, optimistically, we should trend higher. But all things notwithstanding, I think that high water mark of 118 basis points or 119 basis points is a little unrealistic to sustain.

Bose George: Oka. Great. Thanks. That’s very helpful. And then actually switching to the securitization that you guys did, can you just talk about the spread impact of securitizations versus on balance sheet? And then when you look at the spread and include sort of the risk-based capital benefit, what’s sort of the overall ROE impact of using securitization?

Aparna Ramesh: Bose, thank you. As I mentioned, we saw some really favorable market dynamics in Q1 and we timed our securitization transaction extremely well. And so when you look at just the long term impact of the coupon that we received relative to the yield that was received in the market, we were extremely favorable when you compare that to the transaction that we did just about a year ago. In terms of just the capital benefit, we can come back to you on a lot of the specifics with respect to just how accretive this transaction was, but I’ll just say that just one data point. As we look out over 18-year horizon, we actually took a chunk of our cash flows and we’ve locked in a fairly attractive spread over a very long duration.

So all-in, we expect to see our hurdle rate for any transaction that we do is about 30%. Securitization transactions come in, I want to say at least double that, if not, then some. And then we also get list based capital relief. That really starts to enable our continued growth strategy into these higher NES products like telecom and renewable energy.

Bose George: Okay, great. Thanks very much.

Operator: Thank you. Our next question comes from the line of Bill Ryan from Seaport Research Partners. Go ahead please.

William Ryan: Good morning and thanks for taking my questions. One, a bit on the micro side and then one macro. But on the micro following up on the NES, thinking about the treasury segment. You talked about there was some pre-funding. I assume that’s obviously where that took place. You had a little bit of compression. But you’ve also historically talked about increasing the duration of the portfolio. To what extent did that have an impact on the treasury NES?

Aparna Ramesh: The duration extension, I would say maybe ticked our NES down by 0.5 basis point or 1 basis point. We do expect to see some erosion, and it’s very hard to predict, Bill, what the Fed is going to do. But if you look at just where things are trending today relative to where the market predicted six months ago, and you take a look at the forward curve, I think markets were predicting seven rate cuts this year. And based on what we’ve heard more recently from the Fed, they’re going to stay higher for longer. So what does that mean, possibly two rate cuts in the back half of this year. Something that we’ve continued to emphasize is that, when we actually manage our ALM or asset liability management, we try to mitigate volatility first.

And so we did that, and we extended duration, but we had a benefit of almost $1 billion of cash that we raised back in 2020. We’ve been layering in maybe a third overtime and extending our duration on our investment portfolio. Will we see a little bit of negative carry as the Fed stays higher for longer, it’s the opportunity cost of not reinvesting back relative to a year ago? Yes, we will, but as I mentioned, that’s probably likely to be anywhere in the tune of about 1 basis point or under on an NES percentage basis. We’ll really start to see a pickup in that strategy over a year as we start to see the yield curve steepen and we start to see more rate cuts come into play. But again this is something that we do not to maximize short-term profits, but we do it to minimize our volatility, which is laid out very well.

William Ryan: Okay. Thanks for the detailed response on that. And second question, again, kind of a little bit more bigger picture, but could you provide an update on the Farm Bill? What is being proposed in there that could benefit Farmer Mac? I believe a couple of things mentioned in the past have been like increasing the acreage that you can finance, being able to work around co-ops in the utilities business, but maybe you can give us a little bit of color on that?

Bradford Nordholm: I’d be very pleased to. You’re going to start seeing more headlines, I think, about the Farm Bill. Of course, it was — it’s scheduled to be revisited and repassed every five years. And that expiration, that maturity was in 2023. So it’s already operating under an extension. Just in the last week and a half, GT Thompson, Congressman from Pennsylvania who Chairs the House Agricultural Committee, has announced his intention to release the House Ag Committee’s draft of the Farm Bill before Memorial Day weekend. And with that, we’re seeing a lot of conversations. We’re in active discussions, conversations, with the staff, and really appreciate the fact that the Farm Bill is, by all indications, beginning to move forward.

Now, this is important for farmers and ranchers and agribusinesses across the United States as well as those who benefit from other programs that are delivered under the Farm Bill. We weren’t sure what would happen on the Senate side. Certainly, there’s been a huge amount of work done, but Senator Savannah has announced that she too is going to move forward the Senate Ag Committee’s version, and we’ve been closely monitoring the details of both. It’s premature for us to project exactly what this means for Farmer Mac. Obviously, when bills are negotiated, where the reconciliation taking place, a lot can happen. So we just can’t project exactly what happened. But the things that we’re interested in, you mentioned enhanced ability to originate renewable energy project finance loans, not changing the eligibility of the borrower, but just who originates them, broadening that, to be able to do more types of USDA loans that are consistent with the mission, possibly getting some relief from the 2000 acre limitation, which actually by our regulator was recommended to be dropped and with some substitute for a capital requirement, which we believe would be favorable to Farmer Mac.

These are things that we have consistently talked about now for a number of years, and where our key stakeholders and even our detractors are well aware of what we want and more importantly, exactly why we think it would be beneficial to rural America, to agriculture, to rural infrastructure, and why it’s absolutely consistent with our overall mission. So stay tuned. We hope a lot happens in the next couple of months on the Farm Bill.

William Ryan: Okay. Thanks, Brad.

Operator: Thank you. [Operator Instructions] We have our next question coming from the line of Brendan McCarthy from Sidoti. Please go ahead.

Brendan McCarthy: Hey, good morning, everybody. Thanks for taking my questions. I just wanted to start off, taking a look at volume. I think you mentioned a potential softening in farm net income, maybe driving increased borrowing in farm and ranch side — on the farm and ranch side. Can you talk about how you look at that from an underwriting perspective and any changes in underwriting there?

Bradford Nordholm: Yeah. I’m going to turn over to Zach Carpenter who is with us today to talk about both underwriting and the impact that changes in that farm income may have in volume and maybe how that breaks down by sector. So, Zach?

Zachary Carpenter: Yeah. Good morning, Brendan. First off, well, net farming kind of expected to decline from 2023 and the highs of 2022. It’s still above the historical average here. So, in context, right, we’ve seen a decline, but still doing well at the farm gate. Now, we are seeing some pressure on liquidity across certain sectors of the farm gate. So that is driving the need to potentially lever a little bit more on the farmland, where there’s plenty of equity, as we continue to see farmland appreciate, albeit at a slower rate. So, overall, we still feel very comfortable with the borrower and the types of transactions we’re seeing. So when we look from an underwriting perspective, clearly this component of leverage and cash flow, so we are seeing some tightness in cash flow, but as long as we feel comfortable, that there’s good liquidity at the borrower level and allowing them to tap some equity in the farmland also supports that liquidity.

We are comfortable. So we haven’t seen a significant deterioration. That being said, we have seen some stress at certain sectors across the farmland space. But overall, our underwriting standards remain very strong. Credit quality remains very strong and we see additional opportunities to support the farmer to kind of weather some of the declines in commodity prices and maybe a little bit more sticky on the input side.

Brendan McCarthy: Got it. Thank you. That’s helpful. And I believe you mentioned there was a $57 million pool of farm and ranch loans that you purchased that added to the business volume in the first quarter. Can you talk about that transaction? I guess was that any kind of stress scenario from the — on the lender side?

Zachary Carpenter: Yeah, happy to. No, it was a great opportunity for us to support one of our key originators. It did close in the back half of the quarter, so we’ll see some benefits of that heading into the second quarter. This is really kind of a theme that we’ve been talking about, right? When rates were low, we saw a lot of originators, lenders, kind of hold loans on balance sheet to take advantage of growth in deposits and capital. Now, as things revert with higher interest rates and potential issues with capital and changes in capital from a regulatory perspective, they’re kind of re-looking at their balance sheet to say, hey, what makes sense for us to keep on balance sheet, as well as potentially offload for liquidity purposes?

So this wasn’t a stressed scenario. This was pure capital and liquidity management for this organization. And a lot of these institutions are trying to grapple with servicing an overhead and in capital requirements, especially for, I’d say smaller farmland loans, right? A lot of these loans still take the same or require the same servicing and management as larger loans. So that’s a lot of overhead. That’s a lot of structure to put in place to manage that. And so when you get a portfolio of size in that nature, it kind of stresses that dynamic internally from a expense and capital perspective. So this is purely why Farmer Mac was created to help support these lenders in this specific area. And frankly, I think, could provide more opportunities for us in this dynamic to support more financial institutions as they continue to look at liquidity and capital.

Brendan McCarthy: Got it. That makes sense. One last question from me, just from a very broad perspective, what could really drive outperformance or underperformance relative to your expectations for the rest of the year? Obviously, assume the interest rate environment plays a big part of that. But just kind of curious as to your thoughts.

Bradford Nordholm: With the increasing diversification in our business and a relatively conservative approach to budgeting and forecasting at Farmer Mac, it’s hard to forecast what that event might be. It would really be some kind of black swan event. So could it happen on the credit side? I would never say never, but our credit metrics have been very consistent and I think speak for themselves. Could it be on the volume side when kind of quarter-in, quarter-out, we show single-digit growth for the quarter, aside from an occasional opportunity to do a large portfolio purchase, such as in 2019, when we purchased a portfolio of, well, infrastructure loans or some of the opportunities that maybe Zach is looking at in the back half of this year.

Aside from that, it’s pretty predictable. So I don’t really foresee anything that would be a major change on the upside or downside and the kind of growth and performance that you’ve seen from us very consistently now for a number of years.

Brendan McCarthy: Great. Thanks, everybody.

Operator: Thank you. There seems to be no further questions at this time. I’d now like to turn the call back over to Mr. Nordholm for final closing comments.

Bradford Nordholm: Good. Well, thank you all very much. We truly appreciate it when you participate in these calls. It gives us an opportunity to think in a disciplined way about how we are assessing our recent past performance and our prospects and also to hear from you what’s on your mind and maybe the gaps in what we’ve explained to you and how we can better respond. So thank you very much. We truly appreciate your participation. As I mentioned, if you’re interested, check in on the Investor Day presentations, both webcast as well as live. That will be coming up a week from this next Thursday. And if there are other questions as follow-up, please follow-up with Jalpa. And with that, we wish everyone a very good day. Thank you.

Operator: Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.