Guarantees

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Farmer Mac offers two credit enhancement alternatives to direct loan purchases that allow approved lenders the ability to retain the cash flow benefits of their loans and increase their liquidity and lending capacity: (1) Farmer Mac Guaranteed Securities, which are available through each of the Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit lines of business, and (2) LTSPCs, which are available through the Farm & Ranch or the Rural Utilities lines of business.

The contractual terms of Farmer Mac's off-balance sheet guarantees and LTSPCs range from less than 1 year to 30 years. However, the actual term of each guarantee or LTSPC may be significantly less than the contractual term based on the prepayment characteristics of the related loans. Farmer Mac's maximum potential exposure under these off-balance sheet guarantees and LTSPCs is comprised of the unpaid principal balance of the underlying loans. Guarantees issued or modified on or after January 1, 2003 are recorded in the consolidated balance sheets. Farmer Mac's maximum potential exposure was $3.5 billion and $4.0 billion as of December 31, 2019 and 2018, respectively. Farmer Mac's maximum potential exposure for guarantees issued before January 1, 2003, which are not recorded on the consolidated balance sheets, was $15.5 million and $23.8 million as of December 31, 2019 and 2018, respectively. The

maximum exposure from these guarantees and LTSPCs is not representative of the actual loss Farmer Mac is likely to incur, based on historical loss experience. In the event Farmer Mac was required to make payments under its guarantees or LTSPCs, Farmer Mac would have the right to enforce the terms of the loans, and in the event of default, would have access to the underlying collateral. For information on Farmer Mac's methodology for determining the reserve for losses for its financial guarantees, see Note 2(g) and Note 8. The following table presents changes in Farmer Mac's guarantee and commitment obligations in the consolidated balance sheets for the years ended December 31, 2019, 2018, and 2017:

Table 12.1


	For the Years Ended December 31,
	2019		2018		2017
	(in thousands)
Beginning balance, January 1	$	38,683	$	38,400	$	37,282
Additions to the guarantee and commitment obligation⁽¹⁾	4,398		6,202		7,683
Amortization of the guarantee and commitment obligation	(6,381)		(5,919)		(6,565)
Ending balance, December 31	$	36,700	$	38,683	$	38,400

⁽¹⁾Represents the fair value of the guarantee and commitment obligation at inception.

Off-Balance Sheet Farmer Mac Guaranteed Securities

The following table presents the maximum principal amount of potential undiscounted future payments that Farmer Mac could be required to make under all off-balance sheet Farmer Mac Guaranteed Securities as of December 31, 2019 and 2018, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans:

Table 12.2


Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities
	As of December 31, 2019		As of December 31, 2018
	(in thousands)
Farm & Ranch:
Guaranteed Securities	$	107,322	$	135,862
USDA Guarantees:
Farmer Mac Guaranteed USDA Securities	389,216		367,684
Institutional Credit:
AgVantage Securities	7,567		9,898
Revolving floating rate AgVantage facility⁽¹⁾	—		300,000
Total off-balance sheet Farmer Mac Guaranteed Securities	$	504,105	$	813,444

⁽¹⁾Relates to a revolving floating rate AgVantage facility subject to specified contractual terms. Farmer Mac receives a fixed fee based on the full dollar amount of the facility. This facility was terminated during fourth quarter 2019.

Eligible loans and other eligible assets may be placed into trusts that are used as vehicles for the securitization of the transferred assets and the Farmer Mac-guaranteed beneficial interests in the trusts are sold to investors. The following table summarizes the significant cash flows received from and paid to trusts used for Farmer Mac securitizations:

Table 12.3


	For the Years Ended December 31,
	2019		2018		2017
	(in thousands)
Proceeds from new securitizations	$	321,414	$	382,929	$	519,219
Guarantee fees received	1,413		1,920		2,610

Farmer Mac presents a liability for its obligation to stand ready under its guarantee in "Guarantee and commitment obligation" on the consolidated balance sheets. The following table presents the liability and the weighted-average remaining maturity of all loans underlying off-balance sheet Farmer Mac Guaranteed Securities:

Table 12.4

As of December 31,

2019

2018

(dollars in thousands)

Guarantee and commitment obligation

2,230

2,804

Weighted average remaining maturity:

Farmer Mac Guaranteed Securities

9.8 years

10.3 years

AgVantage Securities

5.0 years

Long-Term Standby Purchase Commitments

Farmer Mac has recorded a liability for its obligation to stand ready under the guarantee in the guarantee and commitment obligation on the consolidated balance sheets. The following table presents the liability, the maximum principal amount of potential undiscounted future payments that Farmer Mac could be requested to make under all LTSPCs, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans, as well as the weighted-average remaining maturity of all loans underlying LTSPCs:

Table 12.5


	As of December 31,
	2019		2018
	(dollars in thousands)
Guarantee and commitment obligation⁽¹⁾	$	34,470	$	35,880
Maximum principal amount	3,002,349		3,163,059
Weighted-average remaining maturity	15.2 years		15.3 years

⁽¹⁾Relates to LTSPCs issued or modified on or after January 1, 2003.

Commitments

Farmer Mac enters into mandatory and optional delivery commitments to purchase loans. Most loan purchase commitments entered into by Farmer Mac are mandatory commitments, in which Farmer Mac

charges a fee to extend or cancel the commitment. As of December 31, 2019 and 2018, commitments to purchase Farm & Ranch loans and USDA Guarantees totaled $65.1 million and $37.1 million, respectively, all of which were mandatory commitments. As of December 31, 2019, there were no commitments to purchase Rural Utilities loans. Any optional loan purchase commitments are sold forward under optional commitments to deliver Farmer Mac Guaranteed Securities that may be canceled by Farmer Mac without penalty.

Rental expense for Farmer Mac's office space for each of the years ended December 31, 2019, 2018, and 2017 was $2.0 million, $2.0 million, and $1.6 million, respectively. The future minimum lease payments under Farmer Mac's non-cancellable leases for its office space and other contractual obligations as of December 31, 2019 are as follows:

Table 12.6


	Future Minimum Lease Payments		Other Contractual Obligations
	(in thousands)
2020	$	1,978	$	3,223
2021	1,982		1,751
2022	2,021		1,097
2023	1,995		1,090
2024	1,311		611
Thereafter	—		—
Total	$	9,287	$	7,772

Other contractual obligations in the table above include minimum amounts due under non-cancellable agreements to purchase goods or services that are enforceable and legally binding and specify all significant terms. These agreements include, among others, agreements for the provision of consulting services, information technology support, equipment maintenance, and financial analysis software and services. The amounts actually paid under these agreements will likely be higher due to the variable components of some of these agreements under which the ultimate obligation owed is determined by reference to actual usage or hours worked.