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Guarantees

The following table summarizes total guarantees by type of guarantee and member class:

(Dollars in thousands)	February 28, 2014		May 31, 2013
Total by type:
Long-term tax-exempt bonds	$	519,185	$	547,970
Letters of credit		472,008		447,683
Other guarantees		115,018		117,118
Total	$	1,106,211	$	1,112,771

Total by member class:
CFC:
Distribution	$	209,336	$	245,265
Power supply		801,785		810,900
Statewide and associate		5,488		6,948
CFC total		1,016,609		1,063,113
RTFC		2,304		3,711
NCSC		87,298		45,947
Total	$	1,106,211	$	1,112,771

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. At February 28, 2014, our maximum potential exposure for the $73 million of fixed-rate tax-exempt bonds is $120 million, representing principal and interest. Of the amounts shown in the table above for long-term tax-exempt bonds, $446 million and $473 million as of February 28, 2014 and May 31, 2013, 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 a mortgage lien on all of the member system’s assets and future revenue. If the 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 $131 million is secured at February 28, 2014. 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, under master letter of credit facilities in place at February 28, 2014, we may be required to issue up to an additional $168 million in letters of credit to third parties for the benefit of our members. As of February 28, 2014, all of our master letter of credit facilities were subject to material adverse change clauses at the time of issuance. Also, at February 28, 2014 we had hybrid letter of credit facilities totaling $1,615 million that represent commitments that may be used for the issuance of letters of credit or line of credit loan advances, at the option of a borrower, and are included in unadvanced loan commitments for line of credit loans reported in Note 3, Loans and Commitments. Hybrid letter of credit facilities subject to material adverse change clauses at the time of issuance totaled $353 million at February 28, 2014. 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 remaining commitment under hybrid letter of credit facilities of $1,262 million may be used for the issuance of letters of credit as long as the borrower is in compliance with the terms and conditions of the facility.

The maturities for other guarantees listed in the table run through calendar year 2025. The maximum potential exposure for these other guarantees is $116 million, all of which is unsecured.

At February 28, 2014 and May 31, 2013, we had $456 million and $410 million of guarantees, respectively, representing 41 percent of total guarantees at the end of each period, under which our right of recovery from our members was not secured.

At February 28, 2014, we were the liquidity provider for a total of $571 million of variable-rate tax-exempt bonds issued for our member cooperatives. As liquidity provider on these $571 million of tax-exempt bonds, we are required to purchase bonds that are tendered or put by investors. Investors provide notice to the remarketing agent that they will tender or put a certain amount of bonds at the next interest rate reset date. If the remarketing agent is unable to sell such bonds to other investors by the next interest rate reset date, we have unconditionally agreed to purchase such bonds. On a total of $446 million of the bonds for which we are liquidity provider, we also provide a guarantee of all principal and interest, which is shown in the chart above as a tax-exempt bond guarantee. On a total of $125 million of tax-exempt bonds, our obligation as liquidity provider is in the form of a letter of credit which is reflected in our letters of credit. During the nine months ended February 28, 2014, we were not required to perform as liquidity provider pursuant to these obligations.

Guarantee Liability

At February 28, 2014 and May 31, 2013, we recorded a guarantee liability of $23 million and $25 million, respectively, which represents the contingent and non-contingent exposures related to guarantees and liquidity obligations associated with our members’ debt. The contingent guarantee liability at February 28, 2014 and May 31, 2013 was $2 million based on management’s estimate of exposure to losses within the guarantee portfolio. The remaining balance of the total guarantee liability of $21 million and $23 million, respectively, at February 28, 2014 and May 31, 2013 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.

Activity in the guarantee liability account is summarized below:

(Dollars in thousands)	Nine Months Ended February 28, 2014
Beginning balance as of May 31, 2013	$	24,742
Net change in non-contingent liability		(1,729)
Provision for contingent guarantee liability		159
Ending balance as of February 28, 2014	$	23,172

Liability as a percentage of total guarantees		2.09	%