But preferreds are very much an option for us, and it’ll continue to be an option for us, but we look at it in terms of an expensive option versus something that’s really opportunistic. So in this particular case, you’re right, it is redeemable and it does convert to floating. So it’s probably something that we’ll take a very close look at as we approach the redemption date to consider whether we want to let that go and if we want to issue something possibly when the markets are favorable to us in the fixed rate environment.
Bradford T. Nordholm: Yeah, I’d just like — I’d just like to add, I mean Aparna has talked about the optionality that we have and you know, whether we choose to redeem that in July or not will depend on factors that we’re not looking at today. They will depend on factors that we’re looking at in the second quarter. We’ll be revisiting growth, we’ll be revisiting Basel, we’ll be revisiting farm bill, and taking into consideration all the things that you would expect management to be looking at before coming up with a position on that. But I would add to the other part of your question was, how do we stand with the regulators? Simply put, our levels of capitalization by every measure have never been stronger, and we far exceed all regulatory requirements.
We do regular stress testing with regulators. We do well under that stress testing with our capital. Farmer Mac has never been stronger. And when you consider the financial results return on equity of 19%, almost 19%, you consider the growth in earnings, you consider dividends, you consider the growth in the overall volume of Farmer Mac that we have done that while also increasing capital makes it even more remarkable. Because oftentimes there’s a trade-off. For us there’s not been a trade-off. So that gives us just a lot of flexibility, a lot of options to run this business to even greater success in the future. We’re not constrained by capital.
Aparna Ramesh: And I’ll just add that securitization is another level, which is another capital efficient tool that we will throw into the mix as we think about retained earnings, preferred, and now securitization in terms of thinking about our leverage ratios and our Tier 1 ratio. So that’s just another thing that we throw into the mix.
DeForest Hinman: Yes, Brad, I agree. You’ve done a phenomenal job. I like the slide too with dividend CAGR. I mean, I think we talked about this in the past. I don’t know if there’s any company that’s had a faster dividend growth than yours in the financial space. It’s astounding and the spreads continue to hold up. And you continue to see most financial companies be dealing with spread compression. And, you haven’t really had had very much you had, like you said, 19% ROE that’s incredibly attractive, especially from a consistency perspective. And, we’ve talked about this before, the stock’s still probably undervalued, but continuing to increase the dividend hopefully, gets more people to look at the stock. Final question is and I’ve asked this many times before, just hiring, we added quite a few people in 2023.
So can you update us on who do we need to hire in 2024, where does that stand in terms of getting those people in place? And then can you give us an update on any of the IT initiatives that we’ve been putting in place, are they partially done, are they completed or is there more work to be done? And that’s it. Thank you.
Bradford T. Nordholm: Sure, sure. Of course. Yeah, we have expanded our employee base. I think we ended up 2023 with a 184 to 196 employees, something like that. And, we have over the last couple years, it’s been a balance of funding and ALM related, business development related, core control and risk management related across the organization compliance. You think about an organization with aggregate volume approaching $30 billion that has only 184 employees. We have to have a full suite of very, very talented people, doing a lot of functions that banks our size do with literally thousands of employees. So we feel very good about the additional depth we’ve built in our organization. As we go into 2024 and kind of through our budgeting process, it’s pretty simple.
A little bit of emphasis on our branding and communications in terms of headcount, of just a bit on IT. And, the rest really is business development. We feel that we have built very, very strong origination, credit approval, credit administration, credit policy, funding platforms here at Farmer Mac, and now let’s work to put more volume through them. So that’s kind of reflected in our choice of how we’re allocating increases in headcount. The increases in headcount in 2024 will be slower than they have been over the last couple years, we believe. As it relates to IT initiatives, there’s a tremendous amount going on. Sean Datcher joined us as CIO in the second quarter of 2023. It feels like he’s been here for over a year. He has got a tremendous amount done.
He has brought a lot of organization to that team, and they’re currently focused on many tactical projects, but two huge strategic projects, and I’ll let Aparna comment on them. The first is what we call stars which we expect to finish this year, maybe even halfway through the year. And the other is an update to a hugely important and huge legacy platform here at Farmer Mac called ag power. But Aparna you want to provide an update on that and why it’s so important. And then, Zach, you too.
Aparna Ramesh: Yeah, sure. Let me give you a bit of a sense about this treasury platform that we’re embarking on. It is the most significant overhaul I would say of platforms at Farmer Mac. It impacts about two thirds of the balance sheet, both on the asset side as well as the liability side. Something that most people don’t know is that we have a significant amount of payments that really course through loan payments as well as debt holders. So we actually transact anywhere between half a trillion to three quarters of a trillion in terms of just payments in addition to different securities. We have hedging and reporting, etcetera. As well as what we do with our wholesale financing. All of that really goes through these platforms.
These have been platforms that have been in existence and really commend the team at Farmer Mac are the founding team that has really layered on and built these functions. But today we have options and we have commercial products that are out there. So we’ve been working with a consultant who’s helped us through this journey over the last two years. And we’ve really selected two key vendors who are going to really provision platforms for both our front end, our middle office, as well as our cash management systems. And this is going to create a lot of dependencies internally in terms of overhauling, how our data flows through, as well as how our different capabilities with respect to hedging and reporting really connect in. So it’s a massive effort with lots of people, touches a lot.
And this is an initiative that, I’ll just say is anywhere between, we foresee somewhere between 16 million to 20 million in cash expenses. Obviously, it gets capitalized and there’s a P&L impact that we continually recalibrate towards. But as, as Brad mentioned, it’s going very well as any large scale initiative might. And we expect to see this come to fruition optimistically in the middle of this year. But certainly no later through I would say the third quarter or so, but tremendous partnership across the organization. And I echo Brad, Sean has been a tremendous addition to the Executive Team and a tremendous partner as well on this initiative. And then the second initiative is really the loan origination platform. So I’ll just turn to Zach, he can give you a little bit more color on how we’re really innovating around some of those technologies that drive our business lines.
Zachary N. Carpenter: Yeah, DeForest, I’ll be quick, but Brad mentioned Ag Power. That’s our infrastructure that our community banks and our sellers use to interact and transact with Farmer Mac. Our goal is to dramatically change that infrastructure to be cheaper, more customer friendly, more effective, and drive down the time of us purchasing a loan from our sellers as quickly as possible. So that’s better technology, that’s more efficiencies, that’s leveraging collateral enhancements and really providing a state-of-the-art infrastructure platform that all of our sellers can use that can transact as easily as possible with Farmer Mac. And, on the positive side, I think, Sean and I feel buy into 2024. We’ll be rolling something out. And I think we’re very excited and we’re receiving a lot of positive reinforcement from our customers. So again, this just be a state-of-the-art infrastructure, loan origination platform for our sellers.
DeForest Hinman: Okay. Great. And then just a final comment, the idea of adding equity compensation across the entire employee base. I think you said that, that’s a very good idea and should probably help with retention and your mission based focus. That’s very helpful. So thanks for taking all the questions.
Bradford T. Nordholm: Good. Yeah, we appreciate that sentiment very much. We do think it’s important. It resulted in about a doubling when we went to Equity for All. It was about a doubling in the number of employees who were eligible for awards. And it allows us to have conversations about stock, stock performance, the relation of that to overall financial performance, and the relation of that to overall service admission. So we think that it’s just one more thing that contributes to a really healthy and very passionate, mission focused culture at Farmer Mac.
Operator: There are no further questions at this time. I would now like to turn the call over to Brad Nordholm. Please go ahead.
Bradford T. Nordholm: Great. Well, thank you everyone for joining us today. We really appreciate your participation, your interest, and many great questions which we hope we’ve addressed to your satisfaction. If you have follow-ups, of course, get in touch with Jalpa. But otherwise we will be having our next regularly scheduled call in May to record our first quarter 2024 results. And we look forward to that very much. Hope you have a great day, and please stay in touch. Thank you.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
