Earnings Call Transcript - AGM Q1 2021

Operator, Operator

Good day, everyone, and welcome to the Farmer Mac First Quarter 2021 Earnings Results. At this time, I am pleased to hand it over to your host, Brad Nordholm. The floor is yours.

Bradford Nordholm, CEO

Good afternoon. I'm Brad Nordholm, and I'm very pleased to welcome you to our 2021 First Quarter Investor Conference Call. We have a great report and a number of positive developments to discuss today, but before I begin, I'd like to ask Steve Mullery, our General Counsel, to comment on forward-looking statements that we may make today as well as Farmer Mac's use of non-GAAP financial measures.

Stephen P. Mullery, General Counsel

Thank you, Brad. Some of the statements made on this conference call may be forward-looking statements under the securities laws. We make these statements based on our current expectations and assumptions about future events and business performance. And we may not be obligated to update these statements after this call. We caution you that forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from the results expressed or implied by the forward-looking statements. In evaluating Farmer Mac, you should consider these risks and uncertainties as well as those described in our 2020 annual report on Form 10-K filed with the SEC in February and in our quarterly report on Form 10-Q filed with the SEC earlier today. In analyzing its financial information, Farmer Mac sometimes uses measures of financial performance that are not presented in accordance with generally accepted accounting principles in the United States, also known as non-GAAP measures. Disclosures and reconciliations of Farmer Mac's non-GAAP measures can be found in the most recent Form 10-Q and earnings release posted to Farmer Mac's website, farmermac.com, under the Financial Information portion of the Investors section. A recording of this call will be available on our website for 2 weeks starting later today.

Bradford Nordholm, CEO

Well, thank you, Steve. And good afternoon, everyone, and thank you for joining us. Today, I would like to provide you with a high-level overview of our first quarter results. Then I'm going to turn the call over to Zack Carpenter, our Chief Business Officer, who is going to discuss customer and market developments. Jackson Takach, our Chief Economist, will provide an update on the current agricultural environment. And Aparna Ramesh, our Chief Financial Officer, will conclude with a more detailed review of our financial results. Our consistent performance in the first quarter of 2021 demonstrates the strength and stability of our business model, and that's a full year into the pandemic. We reported core earnings of $25.9 million, a 29% increase over the first quarter 2020 results and a net effective spread of 97 basis points, which compares with 89 basis points in the same period last year. While the overall size of our portfolio was little changed in the quarter compared to year-end, we continue to benefit from excellent funding, maintain our disciplined asset liability management and continue to see a shift in the composition of our portfolio towards higher spread loan purchase products. As a result, our net effective spread has remained above 90 basis points, plus or minus 5 basis points, the guidance we have previously provided. We do, however, expect our funding levels to revert to historic levels as the economy recovers and our business mix adjusts. The overall condition of the agricultural real estate market remains positive. We've provided $1.5 billion in new credit to rural America in the first quarter, furthering our mission of finding innovative ways to increase access to capital and reduce the cost of credit. Farmer Mac remains well capitalized with solid liquidity, a strong balance sheet and high standards of credit quality. While there is widespread optimism for our economy due to the fiscal stimulus and vaccine distribution, we are continuing to closely monitor the impact of COVID-19 on our portfolio. As of March 31, 2021, we have approximately $51 million of unpaid principal balance still in deferments that we approved. That compares with the peak of about $430 million. So it's now less than 12% of the peak and less than 0.6% of the Farm & Ranch line of business. Although we've not seen any significant effect on our financial results or on the ag and rural infrastructure portfolios, we are continuing to monitor the ongoing effects of the extreme cold weather event that occurred during February in Texas, in the ERCOT power region. Our Rural Utilities portfolio exposure in Texas is approximately $416 million as of March 31, 2021. And that $416 million is split between electric distribution and generating and transmission electric cooperatives. We believe that the electric cooperatives in our portfolio that are located in ERCOT entered into this period of stress in a strong financial position able to absorb cost increases. And many of these electric cooperatives have fuel or power pass-through cost provisions in their ratemaking and cooperative farmer business governance systems, which provide flexibility to recoup market price fluctuations. It is unknown at this time what magnitude of cost pass-throughs will be required to pay for these additional energy costs. That will largely depend on the period of time over which these costs are recouped or amortized. We believe that the current internal risk ratings that we have at Farmer Mac and that are applied to our Rural Infrastructure portfolio are appropriate for the risk as we assess it today. Throughout this recovery and beyond, we will remain steadfast in our commitment to maintain the availability and flow of credit to rural communities. We will continue to focus on initiatives designed to achieve our growth, enhance our technology and strengthen our core profitability objectives so that we can deliver long-term value to our shareholders while maintaining our underwriting standards. And to that end, our new Chief Credit Officer, Marc Crady, joined us in March after spending more than a decade at Fifth Third Bank in its food and ag business and leveraged finance groups. Marc will play an integral role in developing and continuing the development of our prudent underwriting standards for our new areas of growth. He brings strengths that are particularly complementary to those we already have with Farmer Mac, particularly as it relates to large and complex transactions. We are thrilled to have Marc join our executive team and his support for our efforts to grow our business. With that, I'd like to turn the call to Zack Carpenter, our Chief Business Officer, to give you an update on our customer and market developments. Zack?

Zachary Carpenter, Chief Business Officer

Thanks, Brad. Total outstanding business volume was $21.9 billion as of March 31, 2021, a modest decrease of $61.6 million from December 31, 2020, primarily due to a $206.8 million decrease in certain fee-based products such as pass-through securitization or loans held in trust and other off-balance sheet products, specifically long-term standby purchase commitments. This net decrease was partially offset by exceptional growth in our Farm & Ranch purchase business, which I will review in a moment. The Institutional Credit line of business decreased $97.7 million, primarily reflecting the continuation of trends we saw in the second half of 2020 as one large counterparty moderately reduced its amount of outstanding credit by letting $175 million of AgVantage securities mature. However, we did successfully refinance $225 million of AgVantage securities with one counterparty and added new volume of $125 million with another, which reflects our ability to execute transactions while tactically managing the impact to our net effective spread. As we continue into 2021, we do remain cautious about prospects for incremental Institutional Credit business given the favorable capital markets environment and strong access to alternative funding by many of our AgVantage counterparties. And we could see a continued decrease in our Institutional Credit portfolio as long as the market maintains elevated levels of liquidity. Turning to our Farm & Ranch line of business, the $48.2 million of net growth is attributable to a $239.0 million net increase in loan purchase volume, which more than offset the decrease in other fee-based and off-balance sheet products. The 5% quarter-over-quarter growth in our Farm & Ranch loan purchase portfolio continues to reflect the success of our customer acquisition and retention initiatives, our ability to provide competitive interest rates across our product set and our efficient and effective execution in the loan approval and purchase process. Our results also reflect our ability to once again overcome a seasonally heavy prepayment quarter primarily related to the January 1 payment date associated with the majority of our loan portfolio. Our Farm & Ranch loan purchase portfolio has increased over 34% from the first quarter of 2020, resulting in over $1.3 billion in net loan purchase volume. In addition, included in this quarter's net Farm & Ranch loan purchase growth is a growing proportion of exposures to agribusiness and agribusinesses that support agricultural production, food and fiber processing and other supply chain production. This continues to reflect a new area of growth for Farmer Mac. And we are excited about its growth potential given the favorable market spreads and added diversification those loans bring. Our pipeline across all Farm & Ranch portfolios remains at healthy levels as we continue to broaden and deepen relationships that will provide Farmer Mac with borrower and sector diversity and accretive yields. As previously discussed, partially offsetting the strong growth in our Farm & Ranch loan purchase business were net decreases of $112.5 million loans held in trust and $78.4 million in our long-term standby purchase commitment product. These decreases primarily reflect the continued favorable lending environment resulting in increased levels of loan refinancing activity as well as strong capital positions of our customers, reducing the need for utilizing these risk mitigation products. However, these products generate lower revenue due to the fee-based structure and thus do not impact our net effective spread and generally do not affect core earnings to the same degree as our purchased loan product. Overall, our Farm & Ranch growth continues to outpace the broader agricultural credit markets. Our agricultural mortgage loan portfolio or net loan purchases in our Farm & Ranch line of business, including loans held in trusts, grew 17.6% over the last 12 months compared to the year-over-year growth rate of the total agricultural mortgage loan market of approximately 6% through December 2020. Excluding loans held in trusts, our loan purchase portfolio increased approximately 34% over the last 12 months. This consistent and large growth rate we have seen in our Farm & Ranch loan purchase over the last 12 months continues to reflect our customer relationship and retention strategies as well as our growing share of larger, more complex agribusiness loans. Our Rural Utilities line of business decreased $12.4 million during the quarter, which primarily reflects scheduled payments and maturities. The results this quarter compared to the net loan growth achieved during the first quarter of 2020 primarily reflects the higher interest rate environment in 2021, coupled with the impacts of the Texas Arctic freeze that Brad spoke about earlier. Both events slowed customers looking to execute and close on transactions during the quarter. However, looking ahead, the prospects for loan growth within the Rural Utilities line of business overall appear to be positive given the ongoing investments in capital expenditures for generation, transmission and distribution assets as well as with the Federal Communications Commission's Rural Digital Opportunity Fund auction, which awarded $9.2 billion in broadband-related operating cost subsidies to winning bidders in December 2020. This may provide a catalyst for capital demand from rural electric cooperatives who seek to develop and deploy broadband service. We have approximately $140 million in loans made to electric distribution cooperatives, where portions of the loan proceeds were utilized to develop broadband infrastructure for rural America. We expect this to be a growing area of focus for Farmer Mac over the next few years. As of March 31, 2021, the total outstanding loan purchase balance of our renewable energy portfolio was $82.9 million, and during the quarter, we closed an additional $22.0 million renewable energy commitment. The pipeline in renewable energy remains strong as we continue to build relationships and enhance our infrastructure to build our reputation as a key player in the renewable energy market. Our ongoing conversations with customers reflect optimism about further economic recovery and growth. We are focused on continuing to execute a straightforward customer-oriented strategy, which we believe will enable long-term growth and create value for all of our stakeholders. And with that, I'll turn it back to you, Brad.

Bradford Nordholm, CEO

Thanks very much, Zack. Now I'd like to turn the call to Jackson, our Chief Economist, to give you an update on current economic and credit conditions. Jackson?

Jackson Takach, Chief Economist

Thank you, Brad. By most measures, conditions in the agricultural and general economy showed marked improvements in the first quarter of 2021. Higher commodity prices in the fourth quarter of 2020 and the first quarter of 2021 as well as record levels of government support payments lifted farm incomes in 2020. In March 2021, the USDA released the details of another round of support for America's food, fuel and fiber sectors, with more than $12 billion dedicated for direct payments and market support, demonstrating the strong political commitment to a healthy and vital agricultural economy. These conditions combined to support land values during the quarter with limited supplies and strong demand, particularly in the Western markets. The general economy is also showing signs of resiliency after a challenging 2020. Consumer spending, manufacturing indices and unemployment rates continue to improve in the first quarter of 2021, and rural economies have experienced above-average performance in several of these metrics. Asset values climbed in the first quarter of 2021, with housing values rising approximately 12% annually, according to the February 2021 data from the Federal Housing Finance Authority and S&P CoreLogic. Efforts continue to increase rural community connectivity and opportunity through access to high-speed broadband Internet, and investment in energy projects continued at a strong pace to start the year. The overall level of interest rates rose during the quarter, but credit spreads tightened, showing the strength in the financial markets and improving outlook for business conditions. While the bulk of the news in the ag, food and rural connectivity sectors was positive, there remain some risks to the economic outlook for these industries. COVID-19 continues to cast a shadow on the global economic recovery, and some agricultural and food products like tree nuts and fruits are more reliant on export markets for demand. Furthermore, the U.S. economic recovery is not yet complete, and consumer mobility, while increasing, is not consistently back to pre-pandemic levels. The impact of the pandemic on food, fuel and fiber producers were also not evenly distributed. And thus, there are still farmers and ranchers experiencing financial stress from the 2020 recession. Finally, weather risks remain a source of volatility to the ag and rural energy markets. The February polar vortex event in Texas, which Brad described earlier, is a prime example of this risk. Electricity providers, regulators, and lawmakers are continuing to work together to solve the immediate financial burden of the Texas Arctic freeze but also put forward improvements to the regional electric rating market. Despite these few headwinds, the overall economic narrative had a net positive effect on the credit quality and performance of Farmer Mac's portfolio. Portfolios of standard rates and default rates were elevated for much of 2020. But these rates fell back to or at or below historical levels as conditions improved. Loans rated substandard represented 1.5% of the total portfolio, with risk rating downgrades in permanent plantings and crop loans driving a slight uptick in substandard loans from the fourth quarter. However, 39% of the loans past due 90 days or more in the fourth quarter of 2020 cured or paid off by March 31, 2021. The overall delinquency rate rose from 0.21% of the total portfolio as of December 31, 2020, to 0.33% of the total portfolio by March 31, 2021. That increase is in line with the seasonal rise consistently observed during the first quarter of each year related to that first January payment date on those loans. There remains a concentration in seriously delinquent loans as the top 10 borrower exposures represent more than half of the 90-day delinquencies as of March 31, 2021. There were no loan charge-offs during the first quarter, which is further evidence of the strong performance and credit quality of Farmer Mac's growing portfolio. While 2020 has taught us that economic conditions and cycles can change quickly, the food, agricultural and rural energy sectors have experienced a healthy first quarter, and Farmer Mac is well positioned to help the sectors build on that momentum. And now I'll turn it back to you, Brad.

Bradford Nordholm, CEO

Thanks very much, Jackson. And now I'd like to turn to Aparna to discuss our financial results in more detail. Aparna?

Aparna Ramesh, CFO

Thank you, Brad. Farmer Mac's first quarter 2021 earnings reflects the strength of our underlying business model and our ability to adapt to the changing market environment. Earnings were strong and driven by growth in higher spread business volume and substantially lower funding costs given our continued strong access to debt capital markets. Our access to the capital markets, as I mentioned, remains strong. We've issued debt daily, and we continue to maintain our disciplined asset liability management practices. As of March 31, 2021, the average balance of interest-earning assets was $22.2 billion, and that's comprised of about $4.8 billion in cash and investments and $17.4 billion worth of loans and securities. Farmer Mac's net effective spread for the first quarter of 2021 was $53.9 million. This represents a 22% increase from $44.2 million in first quarter 2020. In percentage terms, net effective spread improved to 97 basis points compared to 89 basis points in the same period last year. This reflects the overall compositional shift to Farm & Ranch and agribusiness loan purchase products that was mentioned by Brad. The $9.7 million year-over-year increase in NES in dollars was primarily due to an increase of $6.1 million from new business volume and a $3.5 million decrease in non-GAAP funding costs. And this resulted from our continuing to effectively use our callable debt instruments to mitigate prepayment risks as a result of the low interest rate environment. As the yield curve steepens, we're also successfully extending our liabilities in preparation for this rising rate environment. And what we're seeing are pricing levels that are very attractive. We're also actively analyzing our duration and our convexity matches to ensure that we minimize our interest rate risks as rates rise. Core earnings for first quarter 2021 grew 29% to $25.9 million or $2.39 per diluted common share compared to $20.1 million or $1.87 per diluted common share for first quarter 2020. The year-over-year increase in core earnings was primarily due to a $7.7 million after-tax increase in NES and a $3.1 million after-tax decrease in the total provision for credit losses. This increase was partially offset by a $2.1 million after-tax increase in operating expenses and a $1.8 million increase in preferred stock dividends. Operating expenses increased by 16% year-over-year, and this was primarily due to increased headcount and higher spending on software licenses and information technology consultants to support both core and strategic initiatives. These increases were offset by lower levels of expenses related to consulting fees, travel and conferences. However, these decreases are likely temporary and expected to normalize post pandemic once normal travel and other activities resume. We plan to continue investments for the foreseeable future, and this is primarily to modernize our infrastructure, enhance the technology platforms to support our revenue strategies and also to add relevant talent across the organization. While we expect these efforts to increase over the next 12 to 18 months as we innovate and grow our business, we also expect to see a tapering off in expense growth. We've also instituted a disciplined approach to controlling personnel and non-personnel costs by closely monitoring our operating efficiency ratio and through a rigorous review of our results each quarter. Our efficiency ratio ended first quarter 2021 at 31%. This is 1 percentage point higher than our targeted 30% level. And this was mainly as a result of the seasonal nature of expenses that occur in the first quarter, which we expect to see smoothening out. As we complete upgrades to our platforms and investments over a multiyear period as we make these technology commitments that will ultimately improve customer service and our competitive position, we do expect that our efficiency ratios will stabilize at historical levels and ultimately revert to under 30%. As of March 31, 2021, the total allowance for loan losses were $17.5 million, and this reflects a modest release of $31,000 from December 31, 2020. During the quarter, we recorded a net $1 million provision to the allowance for Rural Utility loan losses due to the impact of rating downgrades on multiple rural utilities that were negatively impacted by the polar vortex that struck Texas in February 2021. This was discussed by Brad in detail a little bit earlier. This includes a single cooperative downgraded to special mention during the quarter with a total exposure of approximately $24 million. The increase in provision to the Rural Utilities portfolio was offset by a $1 million release in the Farm & Ranch portfolio due to ratings upgrades, and we also updated our loss default assumptions. All of this was partially offset, of course, by net growth in our loan portfolio. As I mentioned on prior calls, the highly specialized nature of power generation and transmission utilities results in significant losses given default estimates that drive our CECL model assumptions, even though the actual probability of default is very low. It's therefore important to note that as of March 31, 2021, Farmer Mac's $2.8 billion in outstanding Rural Utilities loan purchases and long-term standby purchase commitments have no historic or current delinquencies. Let me now turn to capital. As Brad mentioned earlier, we remain a well-capitalized financial institution with strong liquidity and a robust balance sheet. Farmer Mac's $1 billion of core capital as of March 31, 2021, exceeded our statutory requirement by $348 million or 51%. Our Tier 1 capital ratio was 14% as of March 31, 2021. And this was a modest decline from 14.1% as of year-end. And this is primarily due to growth in risk-weighted assets that outpaced our capital growth during the quarter. Our liquidity also remained strong as evidenced by our quarter end position of $1 billion, far exceeding our regulatory requirements. We expect to continue to maintain a higher-than-required level of cash and liquidity as we've done through 2020 going into 2021 so that we can weather any unexpected cash flow shocks given the continuing economic uncertainties, but we also will retain the flexibility to maintain lower but ample levels of liquidity as market conditions change. Overall, we're very pleased with the consistency in our results this quarter, and this is reflected in our credit quality, profitability, and capital adequacy. More complete information about Farmer Mac's first quarter 2021 performance is in our 10-Q that we filed today with the SEC.

Bradford Nordholm, CEO

Good, Aparna. Thank you very much. Well, certainly, the pandemic abruptly changed the way we work, the way we communicate and also the way we serve our customers. Our results over the last year, I think, have reflected our success at really adjusting to those changes and providing uninterrupted support for agricultural and rural communities. That's our mission after all. We experienced a strong start to 2021, and we commend the drive and determination of, really, all the team members at Farmer Mac who continue to work remotely. We'll be announcing plans for a partial reopening of our office in the next couple of months and probably a fuller reopen later this year. We are executing well on all of our initiatives, and we believe we are well positioned to deliver strong financial performance and consistent returns to our shareholders over the rest of 2021. And with that, operator, I'd like to see if there are any questions from anyone on the line today.

Operator, Operator

Our first question comes from Greg Pendy with Sidoti.

Gregory Pendy, Analyst

Just 2 questions. One, can you just describe, given the rural utility exposure in Texas and the adoption of CECL, how we should potentially be thinking about it? Because I know, historically, you haven't had losses there, but under CECL, you've been taking losses. So how should we be thinking about this exposure? And if there are losses incurred here, would that change how you would be accounting for it on a go-forward basis?

Bradford Nordholm, CEO

Yes, it's Brad. I appreciate your questions. First, it's important to note that CECL offers a sophisticated way to estimate potential future losses, establishing reserves for those anticipated losses rather than realized ones. Regarding the Texas freeze, we had rural electric cooperative borrowers, rated investment-grade by S&P and other agencies, whose ratings were downgraded due to liquidity issues from high electricity costs. The generation and transmission electric cooperatives remain investment-grade. Consequently, this situation affects our CECL model, leading to a higher reserve. Given the strong quality of these customers, we don't expect to incur losses; we believe they will recover and be upgraded in time. So, based on the information available to us, we do not foresee losses on those credits. However, the CECL model mandates that downgrades automatically increase our reserve. In our recent comments, we mentioned that additional reserves related to some credits in that portfolio were largely balanced out by lower reserves in other areas due to favorable economic conditions. To clarify, we have not observed any signs from the Texas portfolio credits indicating that we are facing realized losses or that such losses are imminent or likely.

Gregory Pendy, Analyst

Great. Can you discuss the lower funding costs? I believe this is the second consecutive quarter where you've reported lower funding costs. What in the environment might bring those more towards normalized levels? Your spreads have been strong, but you've mentioned lower funding for two quarters now. Could you provide some insights on this?

Bradford Nordholm, CEO

Absolutely. And I'm going to turn to Aparna. When you see that show up in part in NES, I mean, the improvement in NES is attributable in a small part to that and also in part to a shift in the composition of the portfolio to higher-margin assets. I think we've discussed it in the past, but given how we price virtually every loan we make to the current cost of funding that based on current debt market spreads, we can manage that with considerable precision and we're being opportunistic when we expanded out a bit. But having said that, the debt capital markets have been very favorable. Our credit spreads to widely followed indices such as U.S. Treasuries have been at record levels. And let me just turn to Aparna to provide you some color on how dramatic that change has been and what could cause it to reverse.

Aparna Ramesh, CFO

Yes, absolutely. Thank you for the question. And just giving you the overview on how we think about this. I'll just point out a couple of things. One, there has been some market volatility more recently, very consistent last year. And as you noted rightfully so, we were able to very successfully call our debt in response to prepayments. But as the market conditions continue to come volatile and the yield curve steepens, what we're seeing is that some of those callable issuances have actually moved up a bit. But what's been working really in our favor and especially in the more recent past is that there's been an overall low level of debt supply in the market, and that's kept our non-callable issuance spreads near extremely tight levels versus benchmark treasury. So just to give you a sense of our approach here, as the yield curves steepen, what we're really trying to do is we're trying to really extend our liability duration. So our liability duration and our issuances have actually gone up relative to where we were in 2019 and 2018. And we believe that, that will help us because as our assets have a shorter duration and repriced to the higher interest rate environment will still be very favorable in terms of keeping our funding costs low, and that will, in addition to the other factors that Brad noted in terms of compositional shifts, help us maintain those higher NES spreads. So let me just stop there, and hopefully, that gives you a little bit of a better sense of what we mean when we say.

Bradford Nordholm, CEO

Greg, I know Aparna was cutting out there just a little bit. Did you get all of her comments?

Gregory Pendy, Analyst

Yes, I think so. I mean, so essentially, if I heard it correctly, as the yield curve steepens, you're looking to lengthen out your liabilities in order to...

Aparna Ramesh, CFO

That's correct.

Gregory Pendy, Analyst

Okay. I understand that most of your spread is influenced by the business mix, but I wanted to get some clarity on the funding aspect as well.

Aparna Ramesh, CFO

Yes, absolutely. If you look at one additional point, our average medium-term issuance terms are about 3.2 years compared to 2.4 years in 2019. Considering this in relation to shortening duration on the asset side, we should start to see more of that benefit really come through.

Operator, Operator

Our next question comes from Gary Gordon. If your spread is coming also from business mix, I just wanted to understand a little bit more about the funding side of it as well. Yes, absolutely. If you look at one additional point, our average medium-term issuance terms are about 3.2 years compared to 2.4 years in 2019. So when you consider that in relation to the shortening duration on the asset side, we should begin to see more of that benefit coming through.

Unknown Analyst, Analyst

Most of my questions have been answered, but I have a couple related to the institutional credits. Given the decline in volume observed in the first quarter, will this affect your loan growth outlook for the year compared to what you anticipated three months ago?

Bradford Nordholm, CEO

Yes. Thank you for participating in the call. We have been consistent for about nine months, particularly on the institutional side with some of our AgVantage credits. You noticed the impact on our standbys last quarter, as we are experiencing some runoff in that area. Some of this is business we are willing to let go due to very low spreads with certain customers. We have assessed whether not renewing or pursuing a rollover would harm the relationship, and we determined it would not. Looking ahead to 2021, the environment is certainly competitive, but we are seeing very strong numbers in our Farm & Ranch division. I will now turn it over to Zack to provide you with insights on the balance in the portfolio and the challenges and opportunities we see for the rest of the year.

Zachary Carpenter, Chief Business Officer

Thank you for the question. Over the past few quarters, we've discussed the Institutional Credit line of business. Looking back at 2020, we experienced some significant roll-offs primarily due to market liquidity. We were hopeful in the first quarter. Although our exposure was down by 100, we managed to roll some large securities and handle a major counterparty. We're exercising caution in this liquidity environment and avoiding unnecessary risks. However, where possible, we are collaborating with our counterparties to find mutually beneficial solutions and trying to maintain some of that business. I anticipate strong competition in this market. On the Farm & Ranch and agribusiness front, we witnessed robust growth in the first quarter, consistent with the last three quarters of 2020. The pipeline appears promising; the environment is competitive, and credit spreads are tight, yet we believe our business model and execution will enable substantial growth in the Farm & Ranch loan purchase market.

Unknown Analyst, Analyst

Okay. Good. And then along those same lines, it sounds like your new business mix will be even more Farm & Ranch, which is the higher spreads. So I'd assume that versus, again, maybe, let's say, 3, 6 months ago, the asset yield could be a little higher than you expect. You're saying that on the funding side, maybe it will be a little worse. So is there any reason that the current spread won't be maintained for the foreseeable future?

Bradford Nordholm, CEO

Yes. That will be an interesting mix. The good thing about the funding spreads is that we price off those. So it's not a situation where we put something on the books and then just automatically gets squeezed by that when it happens. It's considered when we price the new transaction. So that helps us defend from that spread narrowing risk that you mentioned. The actual mix, yes, Farm & Ranch is higher spread. To the extent we can continue to grow our renewable energy portfolio, that's higher spread. On what you referred to as institutional and AgVantage, should some of that business start coming back, that could be slightly dilutive. But I think, on balance, probably the best guidance that we can give you based on what we see today is that, as we noted during the call, we have been just above that 90 basis point, plus or minus 5. Specifically, we've been just above the 95 for 2 quarters now. And I think being at the top end of that range, the 90 basis point plus 5 basis point, is probably a pretty good estimate as we look out the next quarter or 2 of where we might land.

Operator, Operator

That was our final question. I'll turn it back over to Brad for closing remarks.

Bradford Nordholm, CEO

Thank you for joining us. I hope we have addressed your questions during the call. If not, feel free to reach out to us afterward; we are always willing to discuss further and answer any additional questions you may have. We remain optimistic about the agricultural economy and the progress we have made at Farmer Mac over the past couple of years, which is starting to enhance our profitability. Currently, we are in a favorable position, and while we can't predict how long it will last, we are appreciating this moment. We believe there is still potential for growth at Farmer Mac. Thank you for your participation, and with that, we will conclude our call.

Operator, Operator

Thank you. This concludes today's conference call. We thank you for your participation. You may disconnect your lines at this time, and have a great day.

Bradford Nordholm, CEO

Thank you.