So when we do adjust for a return on capital those numbers look actually pretty good.
Unidentified Analyst : Okay, good. Second question is on, so the implications of this large dividend increase, by the way, thank you very much. So you’ve talked about a 35% payout over the long run so a 560 dividend implies $16 in earnings. Now you’re not getting to 65 — $16 in earnings with your traditional target for your spread, which is about 95 basis points. Is it safe to assume that what you would consider your normal or let’s say for the foreseeable future spread that it’s reasonable to talk about a materially higher number?
Bradford T. Nordholm: Yeah, I mean, we’re not going to provide guidance on that, but a couple of comments. One is that that 95 basis point NES is a part that Zach highlighted in talking about pricing pressures and asset liability management strategy over the next one to two-year horizon. We don’t think we’re going to see that 95 basis points at all. We may see a single digit softening, but certainly not 95 basis points. The second thing that I would mention about that is that during the call I talked about regulatory uncertainty, talked about legislative uncertainty. We’re going into a year 2024 when we are extremely well positioned, but we have a farm bill that should have been done at the end of last year that was not, hopefully it’ll get done this year.
That brings a bit of uncertainty to some of the underlying fundamentals of American agriculture. We want to see it passed. We also have new BASEL regulatory environment, which may have some implications for capital. And so while we are very, very excited about the opportunities that we see, the business opportunities and extremely pleased with the soundness of Farmer Mac that uncertain those uncertainties, just inject a little bit of a note of caution into our decision making process as it relates to dividend. So we landed on a place that we thought really reflected our future growth potential, that uncertainty that I just discussed as well as something that rewards our shareholders for sticking with us in a very, very handsome way. And as you know, it’s a balancing act.
Aparna Ramesh: Brad, if I might just add an additional point, and that has to do with what we’ve mentioned around the quality as well as the quantity of capital. Gary, where we want to head is really to have our capital stack skew more heavily towards retained earnings that comes from organic growth and maintaining our credit quality. It reduces the need for us to go into the preferred markets as we have done. It’s proven very, very beneficial to us. But we do have a scenario where we have some expensive preferreds that could be repricing. And by really making sure that we’re maintaining our capital base such that we’re skewing more towards quality of capital with retained earnings, it gives us more degrees of freedom in terms of letting some of those expensive preferreds go and not have to really worry about going into the market at a time that might not be accretive for us.
So it’s really just a balancing act for us in terms of managing our capital stack as well as fueling our balance sheet for additional growth.
Unidentified Analyst : Okay. Thank you very much.
Operator: Your next question comes from Brendan McCarthy with Sidoti. Please go ahead.
Brendan McCarthy: Hey, good morning everybody, and thanks for taking my questions. Just wanted to start off looking at the wholesale financing business. I understand the value proposition has really increased for institutional counterparties in the elevated interest rate environment. But just wondering if you can expand on where the benefits have flowed through on the segment level?
Bradford T. Nordholm: Yeah, and I’ll ask Zach to give you some specific color on that. But just generally speaking as you noted the higher interest rate environment and frankly, the absence of Federal Reserve Bank support of liquidity facilities for financial institutions has created more of a comparative competitive advantage for us as we noted in our comments. And that’s driving new opportunity. Some of that opportunities with customers we had in the past and we let go because we didn’t like the pricing. But some of it is new opportunity as well. But Zach, you might just kind of explain where this is all coming from.
Zachary N. Carpenter: Yeah, happy to. Not to reiterate a lot of what Brad said, but I think one of the key drivers is clearly the volatility in the market and a lot of these large corporate institutional counterparties are looking to just diversify all the different funding sources they have. If you’re in the public bond market, you see significant increase in gap and added credit spreads, which we did last year. Farmer Mac and our secured AgVantage facility is a relatively comparative and better advantage to those counterparties. To your question on where you see these benefits in our segment reporting, you’re predominantly going to see them in AgVantage within the Farm & Ranch segment as well as in the rural utility segment.
So those are our two large corporate institutional counterparty line items. You can see the significant growth year-over-year, especially in rural utilities as well as in Farm & Ranch. And so that’s generally where we saw at least in 2023, the growth opportunity and the increase in net effective spread that rolls up into those segments. And then heading into 2024, we anticipate a broader discussion with numerous other counterparties in terms of the benefits we could provide given the aforementioned comments.
