NOTE 10—GUARANTEES

The following table summarizes total guarantees by type of guarantee and member class as of February 29, 2016 and May 31, 2015.



(Dollars in thousands)	February 29, 2016		May 31, 2015
Total by type:
Long-term tax-exempt bonds	$	476,860	$	489,520
Letters of credit	324,710		382,233
Other guarantees	113,789		114,747
Total	$	915,359	$	986,500

Total by member class:
CFC:
Distribution	$	132,391	$	172,104
Power supply	745,640		763,746
Statewide and associate	17,085		17,025
CFC total	895,116		952,875
RTFC	1,574		1,574
NCSC	18,669		32,051
Total	$	915,359	$	986,500

The maturities for the long-term tax-exempt bonds and the related guarantees run through calendar year 2042. Amounts in the table represent the outstanding principal amount of the guaranteed bonds. As of February 29, 2016, our maximum potential exposure for the $70 million of fixed-rate tax-exempt bonds is $99 million, representing principal and interest. Of the amounts shown in the table above for long-term tax-exempt bonds, $407 million and $418 million as of February 29, 2016 and May 31, 2015, respectively, are adjustable or floating-rate bonds that may be converted to a fixed rate as specified in the applicable indenture for each bond offering. We are unable to determine the maximum amount of interest that we could be required to pay related to the remaining adjustable and floating-rate bonds. Many of these bonds have a call provision that in the event of a default allow us to trigger the call provision. This would limit our exposure to future interest payments on these bonds. Our maximum potential exposure is secured by mortgage liens on all of the systems' assets and future revenue. If a system's debt is accelerated because of a determination that the interest thereon is not tax-exempt, the system’s obligation to reimburse us for any guarantee payments will be treated as a long-term loan.

The maturities for letters of credit run through calendar year 2024. The amounts shown in the table above represent our maximum potential exposure, of which $119 million is secured as of February 29, 2016. As of February 29, 2016 and May 31, 2015, the letters of credit include $76 million to provide the standby liquidity for adjustable and floating-rate tax-exempt bonds issued for the benefit of our members, respectively. Security provisions include a mortgage lien on substantially all of the system’s assets, future revenue and the system’s investment in our commercial paper.

In addition to the letters of credit listed in the table above, under master letter of credit facilities in place as of February 29, 2016, we may be required to issue up to an additional $85 million in letters of credit to third parties for the benefit of our members. As of February 29, 2016, all of our master letter of credit facilities were subject to material adverse change clauses at the time of issuance. Prior to issuing a letter of credit, we would confirm that there has been no material adverse change in the business or condition, financial or otherwise, of the borrower since the time the loan was approved and confirm that the borrower is currently in compliance with the letter of credit terms and conditions.

The maturities for other guarantees listed in the table run through calendar year 2025. The maximum potential exposure for these other guarantees is $115 million, all of which is unsecured.

As of February 29, 2016 and May 31, 2015, we had $320 million and $434 million of guarantees, respectively, representing 35% and 44%, respectively, of total guarantees, under which our right of recovery from our members was not secured.

In addition to the guarantees described above, as of February 29, 2016, we were the liquidity provider for a total of $483 million of variable-rate tax-exempt bonds issued for our member cooperatives. While the bonds are in variable-rate mode, in return for a fee, we have unconditionally agreed to purchase bonds tendered or put for redemption if the remarketing agents are unable to sell such bonds to other investors. During the nine months ended February 29, 2016, we were not required to perform as liquidity provider pursuant to these obligations.

Guarantee Liability

As of February 29, 2016 and May 31, 2015, we recorded a guarantee liability of $18 million and $20 million respectively, which represents the contingent and non-contingent exposures related to guarantees and liquidity obligations. The contingent guarantee liability as of February 29, 2016 and May 31, 2015 was $1 million based on management’s estimate of exposure to losses within the guarantee portfolio. The remaining balance of the total guarantee liability of $17 million and $19 million as of February 29, 2016 and May 31, 2015, respectively, relates to our non-contingent obligation to stand ready to perform over the term of our guarantees and liquidity obligations that we have entered into or modified since January 1, 2003.