There’s very few opportunity to provide wholesale financing on agricultural loans and in a market where bond, our yields and rates are volatile on a daily basis and we have a secured product that very strong relative value to these counterparties. So, I think it’s a combination of how we’ve built the team, how we’re out there communicating with these counterparties, and how we’re up relative value to other potential opportunities that are out there. And I think upon I mentioned it earlier and Brad mentioned it now from the pricing, we believe in this market we are a strong relative value and these bonds that are put in place are generally medium to long-term not pre-payable loans. So, it really is sticky revenue for us. And if the market shifts, which it did a couple of years ago, we are very thoughtful in terms of putting additional capital out there that might not be appropriate from a revenue or return perspective.
So, we’re excited about the opportunities, we’re strong relative value in this market and we think 2024 will be hopefully positive for us.
Unidentified Analyst: Aparna also mentioned that the core capital ratio is 16%. Where is that sort of in the normal range? Or where you feel comfortable? How should we think about that 16% number?
Aparna Ramesh: Yes. I mean I think 16 is probably a great place to be for a couple of reasons. One, we well, actually I’ll point to three reasons. And it gives us a ton of flexibility. And one of the reasons is that we just raised a lot of low cost capital that we have no intention of calling because it’s sub 5.5 preferred. That perpetual capital is incredibly is accretive for us. So that will probably stick around. The second driver has to do with our securitization program that affords us the ability to get a lot of Tier 1 capital release and having done three transactions so far. That’s been a huge driver of that. But I think the third factor that I think we’re the most proud of has to do with just the organic growth in our capital base that comes from strong retained earnings while maintaining our credit profile.
And it’s all of those reasons that which you just heard, Gary, from Brad and from Zack, just around our revenue accretion and that’s really driving a big component of why we’re at 15%. So that’s certainly outpaced what we had anticipated, but it’s a really good problem to have. And as we look out ahead, just linking this with some of the other questions, it gives us a lot of degrees of freedom, one, to fulfill our mission but two, to really grow and expand into these new lines of business that tend to be very capital consumptive. And we can do that without really having to force ourselves to go out into the market and raise expensive capital. I wouldn’t want to be in the market now raising capital. So, I don’t think we have a targeted band, but as we see expensive sources of say, preferred coming due, we might make some decisions relative to that, our retained earnings and securitization, but we just have a few levers right now that we can play with, and it’s a really great place to be.
Operator: The next question comes from DeForest Hinman, Retail Investor. Please go ahead.
Unidentified Analyst: It’s good to see seeing a new sell-side firm on the call, 35% earnings growth, very impressive, spreads higher, pretty unique results given the current environment, so very strong results. Question on hiring activity, open positions, you’re looking to hire and how many people have we hired so far this year?
Brad Nordholm: Our current headcount is somewhere in the 183, 184 range, something like that. I think we started the year at 159, 160, something like that. So, simple math ’24 160 maybe about 14%, 15% on net increase in headcount, the base salary increase would not be 14%, 15% because you don’t have to have two CEOs, at least not yet, and or two CFOs and these tend to be positions, that are filling gaps, throughout the organization as we expand. It’s something we keep a very close eye on, and it comes back to the efficiency ratio. We do view our compensation expense. It is a very large portion of the expense. Obviously, there’s some variability to it that adjusts with performance in our short-term incentive plan and our long-term incentive plan results.
But we view, base salaries and people expenses is really a fixed expense here. So, we’re very cautious about adding new people, but we do add with them when they can drive additional revenue. So for example, we’ve recently added, some positions, and some leadership, frankly, around our renewable energy, business development. Underwriting, we expanded our servicing portfolio midyear. We added a couple positions associated with that. So we’re being mindful of the overall expense but also the profile of the people we’re adding and making sure that we’re adding people who are revenue generators as well as those who are administering other important parts of the organization.
Unidentified Analyst: And I did want to ask about the energy portfolio as well. We did see a little bit — it’s a multipart question a little bit of slowdown in sequential growth in that business, we’ve been seeing a lot of headlines in the news about, offshore projects getting stalled or looking for changes in tax subsidies and other things. Are you seeing that within the land based projects, the rural projects, whether they be solar or wind? Any color you could provide there would be, helpful.
Brad Nordholm: But keep in mind our focus is our, land based projects. The massive offshore wind projects are many years out, if at all. We’re looking at the more immediate opportunity, solar wind in rural areas. Also convergence of energy and agriculture, anaerobic digesters, methane gas capture systems, which are quite interesting. But Zack, I would describe it right now as we’re more building the infrastructure to accelerate the growth rather than having the infrastructure in place and feel seeing a turndown. Zack, do you have some color there?
Zack Carpenter: Yes. Good question. I would highlight is that our pipeline in the renewable energy space remains very strong. I think to your prior question in terms of headcount, we wanted to get more infrastructures in there to meet the demand that we see in the market. So that that does impact getting the loans through the process underwritten and closed. That being such just in this space, these loans take a long time to work through the process. A lot of loan documentation, legal documentation that needs to get done for these loans to finally close and then start construction and/or get to a point where construction is complete and they’re operating. So, they take a lot longer time to move through that process than some of our other lines of business.
So frankly, what we saw in this quarter was working through that process and we have, like I said, a very strong pipeline and we feel that as those get to the point of ready to close and fund that, we’ll be providing, helpful financing to support our counterparties in the mission.
Unidentified Analyst: And then just on some of the mechanics of the growth, I think on the last call, we talked about some of the larger syndicates that we’re lending in the energy space, European banks and Japanese banks. Have we come to some agreements with getting put in those syndicates? So, we could be seeing additional growth fourth quarter heading into 2024 or is that more of a 2024, 2025 goal or milestone?
