And we are an organization with 17,000 borrowers each one of them with their own situation. But input prices are generally staying sticky and high while commodity prices for major, major crops have been softening. And so, we’re looking at projected net farm incomes for the sector again this next year that will be somewhere in the neighborhood of 20% less than it kind of was at the peak. The first thing that that will do is put a little, it will cause some draw down of liquidity. Farmers have been holding a lot of liquidity and it’ll cause some draw down of that. We think that it may especially if we have slightly lower interest rates later in the year, it’ll start stimulating some additional borrowing activity. As Zach has mentioned Farm & Ranch originations were slow at least through the first three month quarters of 2023, a little bit of pickup in fourth quarter, but that will cause some further pickup in the year.
In terms of other segments of the farm economy, it probably tips them to a bit more borrowing which could benefit us. We will be continuing to apply the very, very disciplined credit standards that we have for many years here at Farmer Mac, so we’re continuing to make prudent credit decisions. So you put it all together and it’s probably a slight positive for Farmer Mac, even if it is a source of concern for our key constituents in rural America.
Brendan McCarthy: Great. Thanks, Brad. That’s all from me. Thanks, everybody.
Operator: Your next question comes from DeForest Hinman with Bumbershoot Holdings. Please go ahead.
DeForest Hinman: Hey, thanks for squeezing me in. You are kind of beating around the bush on the loan growth outlook. There’s a lot of moving parts, but I mean, simplistically, Farm & Ranch loans, high singles growth in 2021, about 10% growth in 2022, 8% growth in 2023. Is it still in that ballpark or is it kind of a mid-single digit growth outlook for 2024 when we look at all these moving pieces? That’s the first question.
Bradford T. Nordholm: Yeah, I mean, we’re not going to provide a precise forecast, but Zach you want to try to give a little bit more color on that one?
Zachary N. Carpenter: Yeah, I mean, I think the confluence of factors in the market is leading to us being more optimistic in loan purchase activity in Farm & Ranch than we were in 2023. I mean, I noted earlier in a comment on the regional and community banking dynamic, managing capital, liquidity, deposits, that’s having a real impact on those institutions, which as their loan portfolio reprices, we think creates a great opportunity for Farmer Mac. The low prepayment speeds, again, solidifies the portfolio and so we’re able to take advantage of some of these dynamics. We’re not making up any refinancing loss on our portfolio. Limited supply of new land. And farm incomes, as Brad just mentioned in the prior to prior question it’s going to come down, there’s going to be stress in working capital, and I think there’s going to be interest in tapping into that equity.
So, compare year-over-year and stepping into 2024 as we made in our prepared comments, yeah, I think we’re more optimistic that there is a greater chance of enhanced growth in 2024 versus 2023. That being said lots of things can change, be it the farm bill, be it a political year, be it interest rates. So it’s hard to really pinpoint that, but I think we’re stepping into more optimism than we were stepping into 2023.
DeForest Hinman: Okay. That’s helpful. Renewable loan growth, very positive. You had 153% growth in 2022, a 100% growth in 2023. We talked about the outreach on the syndication side, adding some head count. I mean, I don’t think all those initiatives were in place and we grew that loan book to a 100% and it’s over 400 million. I think in the past we talked about the idea of that being $1 billion portfolio at some point. Can you just help us understand how that loan book looks going into 2024 and where could that end up and then maybe even where could that be in 2025, as some of these initiatives gain traction?
Bradford T. Nordholm: Yeah, Zach has done a lot of infrastructure building here with policies. Mark Crady with credit policies, Zach with key hires. So, we saw that pickup in 2023. It really accelerated in the back half of 2023 going into 2024. The pieces are all in place to continue that very strong momentum. So, $1 billion number, it’s very realistic that that could happen sometime in 2025. I think that gives you kind of a slope that you can work on.
DeForest Hinman: Okay. And then I hadn’t heard this from Aparna, but this comment on some of the higher cost preferred, you guys are in the market for a number of years, but I do see that I think the Series C are actually redeemable in 2024. I mean, is that a preferred we’d be looking to remove? And then I think on a bigger picture question, is there any benefit to leaving the preferreds in place as it relates to how the regulators calculate your capital ratios, are we pretty clearly saying, we’d like to remove those preferreds over time, and then as a result of that, it actually improves the dividend capacity to the common holders. So maybe just some more color there and should we be expecting those preferreds to be removed over time with those call provisions?
Aparna Ramesh: Yeah, so I think that’s an excellent question. It’s something that we really think about in entirety. We don’t really distinguish between our sources of capital, but we do make a slight distinction in our own minds as we think about the quality of capital and the quality of capital being organic and retained earnings, because that then allows us to have a base of capital that we can very efficiently deploy for growth, but also in terms of really awarding our shareholders on the here and now. So that’s really the big picture in terms of how we think about our capital. In terms of preferreds, preferreds are an excellent source of capital for us. We have access to the retail — the preferred market. The way we think about a preferred issuances DeForest is, we try to do that opportunistically.
