Exhibit 12: Housing Starts and Mortgage Rates

Despite domestic economic headwinds, total 2022 U.S. forest products exports were strong at ~$10.05B (above the 3‐year average of $8.95B). Canada and China continued to be the two largest export markets for the U.S. at $2.55B and $1.7B, respectively. 20

Despite domestic economic headwinds, total 2022 U.S. forest products exports were strong at ~$10.05B (above the 3-year average of $8.95B). Canada and China continued to be the two largest export markets for the U.S. at $2.55B and $1.7B, respectively. 20

There are many factors affecting the forest products industry across the Horizon Farm Credit footprint and nationally. Following is a description of some of the

There are many factors affecting the forest products industry across the Horizon Farm Credit footprint and nationally. The following is a description of some of the main areas influencing the industry.

The Northern Long-eared Bat (NLEB) was listed by the U.S. Fish and Wildlife Service (USFWS) as threatened in 2015. This federal listing was in response to the sharp decline of NLEB due to white-nose syndrome (WNS). Since WNS was discovered in a cave in New York in 2006, it has caused a 97% decline in affected populations. This massive decline has prompted the USFWS to list the bat as endangered, which will require further protection under the law. The final ruling took effect March 31, 2023. At the time of this writing, it is not fully understood what effects this ruling may have on the forest products industry and landowners. Conservation efforts may include the curtailment or modification of timber harvesting in certain locations or on certain governmentowned lands during the nesting season of NLEB.

The Northern Long‐eared Bat (NLEB) was listed by the U.S. and Wildlife Service (USFWS) as threatened in 2015. This listing was in response to the sharp decline of NLEB due white‐nose syndrome (WNS). Since WNS was discovered cave in New York in 2006, it has caused a 97% decline in populations. This massive decline has prompted the USFWS list the bat as endangered, which will require further protection under the law. The final ruling took effect March, 31 2023. At the time of this writing, it is not fully understood what effects this ruling may have on the forest products industry and landowners. Conservation efforts may include the

Carbon

17 30‐year fixed rate mortgage average in the US: https://fred.stlouisfed.org/series/MORTGAGE30US

18 Single family housing starts: https://fred.stlouisfed.org/series/HOUST1F

19 Existing home sales: https://fred.stlouisfed.org/series/EXHOSLUSM495S

20 US Forest Products Exports in 2022: https://www.fas.usda.gov/data/commodities/horticulture

Carbon sequestration and related carbon markets have been at the forefront of discussions on the topic of forestland and forest management for the past few years. As trees grow, they sequester (capture and store) carbon in the wood they produce. This carbon is stored for long periods in the living trees and also in the wood products produced from those trees that we use in our lives. As trees die and decay, this stored carbon is released back into the atmosphere. As trees are harvested, the products that are produced from those trees store carbon as long as that product is prevented from decay. Tops, limbs and stumps that are left in the woods from harvested trees, decay and release carbon, while at the same time, return important nutrients to the soil and provide a crucial role in the ecosystem.

Carbon markets seek to establish a monetary value on the carbon sequestered in growing trees through carbon credits. Companies that emit carbon in the manufacturing of their products then purchase these carbon credits to theoretically offset their carbon footprint on the earth. At first, these carbon markets were only available to larger landowners (30,000 + acres), but new carbon markets pool smaller landowners together. Many of these markets require a minimum of a 20-year commitment of none to very limited timber harvesting activity. This has the potential to have long-lasting impacts on the availability of fiber and wood products on which forest products companies depend.

Horizon Farm Credit supports the wise management and use of our forest resources to produce products needed by society. The elimination of silvicultural harvesting prescriptions for the sole purpose of carbon sequestration, could be detrimental to the long-term health of our forests and forest products industries. The wise management of our forests with the goal of growing high-quality timber, which will result in valuable forest products, should be a goal of any carbon sequestration theme. Eventually, when these higher quality trees are harvested, they will generate strong income for the landowner, provide jobs in the forest products industry and long-lasting forest products that store carbon, that we can use and enjoy.

In 2022, over 1 million acres of forest in Pennsylvania were reported with defoliation, of which 80% is attributed to the spongy (gypsy) moth. The heaviest damage was in the central and north-central oak forests. DCNR Bureau of Forestry plans to spray 290,000 acres and the PA Game Commission will spray an additional 110,000 acres in PA. Control efforts are also planned for Maryland, Delaware, Virginia, and West Virginia.

The hemlock wooly adelgid (HWA) has been found throughout Horizon Farm Credit’s territory. The adelgid can cause mortality of hemlocks within five years of infestation. The eastern hemlock is a foundational species that is vital to our ecosystems and crucial to preventing stream-water temperature increases. Hemlock not only provides essential evergreen cover for wildlife but is fundamental to the health of our brook-trout streams.

Within the mid-Atlantic and northeastern U.S., beech trees are being attacked by both Beech Leaf Disease and Beech Bark Disease. Beech is a climax species in our forest and is important for wildlife.

The emerald ash borer can be found throughout Horizon Farm Credit’s territory. Over the last ten years, it has caused the mortality of tens of millions of ash trees. Healthy ash in Pennsylvania has become a rarity.

Since its discovery in the U.S. in 2014, the spotted lanternfly has rapidly spread, covering most of Horizon Farm Credit’s territory, with the exception of northern Pennsylvania. It has not caused major forest damage to-date, but it can be a serious threat to fruit crops and its feeding causes stress to maples, walnut, birch and willow. This stress, in combination with other factors, can lead to reduced tree vigor and eventual mortality.

The above notes are just a few of the invasive pests that are affecting our hardwood forests in our region. For more information on invasive pests, contact USDA APHIS, the state Bureau of Forestry or Extension.

After strong hardwood prices during 2021 and three quarters in 2022, prices rapidly dropped in the last quarter of 2022 and through January of 2023. Prices stabilized in February to near their ten-year average for Appalachian hardwoods and slowly gained momentum in March and into April. Mills with stumpage purchased at prices in 2022 will need to work that higher priced inventory through their system before they will be able to return to profitability.

We expect hardwood prices to be stable to moderately increasing over the coming year, but with a caveat. Domestic hardwood lumber sales are closely related to new housing starts. Further tightening by the Federal Reserve could stall any increases in housing starts and existing home sales, thereby reducing domestic demand for hardwood products. The demand for softwood lumber is similarly expected to be highly dependent upon inflation-induced actions by the Fed and its consequences on the U.S. housing market. Softwood sawtimber stumpage prices in states such as Virginia, Tennessee and Florida have continued to be priced near historic norms thus far despite the recent decline in housing starts.

Some species prices, such as black cherry, are more closely related to economic conditions in China and Europe due to the high percentage of that species that is shipped overseas. Labor costs and shortages continue to weigh on most industries. Prices of individual hardwood species will be very reactive to over-production and supply/demand factors. In short, hardwood prices will be reactive to supply and economic stimuli that is hard to project at this time.