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Guarantees

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

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 September 30, 2020 and December 31, 2019, not including offsets provided by any recourse provisions, recoveries from third parties, or collateral for the underlying loans:

Table 6.1


Outstanding Balance of Off-Balance Sheet Farmer Mac Guaranteed Securities
	As of September 30, 2020		As of December 31, 2019
	(in thousands)
Farm & Ranch:
Farmer Mac Guaranteed Securities	$	85,767	$	107,322
USDA Guarantees:
Farmer Mac Guaranteed USDA Securities	310,682		389,216
Institutional Credit:
AgVantage Securities	6,068		7,567
Total off-balance sheet Farmer Mac Guaranteed Securities	$	402,517	$	504,105

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 6.2


	For the Nine Months Ended
	September 30, 2020		September 30, 2019
	(in thousands)
Proceeds from new securitizations	$	64,612	$	199,396
Guarantee fees received	1,136		1,122

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 6.3


	As of September 30, 2020		As of December 31, 2019
	(dollars in thousands)
Guarantee and commitment obligation	$	1,780	$	2,230
Weighted average remaining maturity:
Farmer Mac Guaranteed Securities	9.5 years		9.8 years
AgVantage Securities	4.2 years		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 6.4


	As of September 30, 2020		As of December 31, 2019
	(dollars in thousands)
Guarantee and commitment obligation(1)	$	33,360	$	34,470
Maximum principal amount	2,882,212		3,002,349
Weighted-average remaining maturity	15.1 years		15.2 years

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

Reserve for Losses

The following table is a summary, by asset type, of the reserve for losses as of September 30, 2020 and December 31, 2019:

Table 6.5


	September 30, 2020(1)		December 31, 2019(2)
	Reserve for Losses		Reserve for Losses
	(in thousands)
Farm & Ranch:
LTSPCs and Farmer Mac Guaranteed Securities	$	2,278	$	2,164
Rural Utilities
LTSPCs	1,290		—
Total	$	3,568	$	2,164

(1)Reserve for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020.

(2)Prior to the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020, Farmer Mac maintained a reserve for losses to cover estimated probable incurred losses on loans underlying LTSPCs and off-balance sheet Farm & Ranch Farmer Mac Guaranteed Securities.

The following is a summary of the changes in the reserve for losses for the three and nine month period ended September 30, 2020 and 2019:

Table 6.6


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2020(1)		September 30, 2019(2)		September 30, 2020(1)		September 30, 2019(2)
	Reserve for Losses		Reserve for Losses		Reserve for Losses		Reserve for Losses
	(in thousands)
Farm & Ranch:
Beginning Balance	$	1,650	$	1,880	$	2,164	$	2,167
Cumulative effect adjustment from adoption of current expected credit loss standard	—		—		(148)		—
Adjusted Beginning Balance	1,650		1,880		2,016		2,167
Provision for/(release of) losses	$	628	$	(137)	$	262	$	(424)


Ending Balance	$	2,278	$	1,743	$	2,278	$	1,743

Rural Utilities:
Beginning Balance	$	1,370	$	—	$	—	$	—
Cumulative effect adjustment from adoption of current expected credit loss standard	—		—		1,011		—
Adjusted Beginning Balance	1,370		—		1,011		—
(Release of)/provision for losses	$	(80)	$	—	$	279	$	—


Ending Balance	$	1,290	$	—	$	1,290	$	—

(1)Reserve for losses reflects the adoption of ASU 2016-13, "Financial Instruments - Credit Losses," in first quarter 2020.

The provision to the reserve for losses recorded during the three and nine months ended September 30, 2020 was primarily due to credit downgrades in the LTSPC portfolio.

The release from the reserve for losses recorded during third quarter 2019 was primarily attributable to a net volume decrease in off-balance sheet Farm & Ranch LTSPCs and slight improvements in off-balance sheet portfolio credit quality.

The following table presents the unpaid principal balances by delinquency status of Farm & Ranch loans underlying LTSPCs. Farm & Ranch Farmer Mac Guaranteed Securities, Rural Utilities loans underlying LTSPCs, and non-performing assets as of September 30, 2020:

Table 6.7


	As of September 30, 2020
	Current(2)		30-59 Days		60-89 Days		90 Days and Greater(1)		Total Past Due		Total Loans
	(in thousands)
Farm and Ranch:
LTSPCs and Farmer Mac Guaranteed Securities	$	2,352,454	$	2,934	$	22,690	$	13,947	$	39,571	$	2,392,025
Rural Utilities:
LTSPCs	$	575,954	$	—	$	—	$	—	$	—	$	575,954

(1)Includes loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days of more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

(2)Includes $185.4 million of unpaid principal balance related to Farm & Ranch LTSPCs for which the lender has notified Farmer Mac of an executed COVID-19 payment deferment.

The following tables present the unpaid principal balances of Farm & Ranch loans underlying LTSPCs and off-balance sheet Farmer Mac Guaranteed Securities (excluding AgVantage securities) and the related reserve for losses by impairment method and commodity type as of December 31, 2019:

Table 6.8


	As of December 31, 2019
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Ending Balance:
Collectively evaluated for impairment:	$	1,151,983	$	511,991	$	581,377	$	167,395	$	66,106	$	2,760	$	2,481,612
Individually evaluated for impairment:	5,698		2,114		10,207		706		—		56		18,781
Total Farm & Ranch	$	1,157,681	$	514,105	$	591,584	$	168,101	$	66,106	$	2,816	$	2,500,393
Allowance for Losses:
Collectively evaluated for impairment:	$	599	$	96	$	308	$	50	$	767	$	1	$	1,821
Individually evaluated for impairment:	97		43		189		14		—		—		343
Total Farm & Ranch	$	696	$	139	$	497	$	64	$	767	$	1	$	2,164

Net credit losses and 90-day delinquencies as of and for the periods indicated for loans underlying off-balance sheet securities representing interests in pools of eligible Farm & Ranch LTSPCs are presented in the table below. As of December 31, 2019, there were no delinquencies and no probable losses inherent in Farmer Mac's Rural Utilities LTSPCs portfolio and Farmer Mac had not experienced credit losses on any Rural Utilities LTSPCs.

Table 6.9


	90-Day Delinquencies(1)		Net Credit Losses/(Recoveries)
	As of		For the Nine Months Ended
	December 31, 2019		September 30, 2019
	(in thousands)
Farm & Ranch LTSPCs and Farmer Mac Guaranteed Securities	$	3,235	$	—

(1)Includes loans underlying off-balance sheet Farm & Ranch Guaranteed Securities and LTSPCs that are 90 days or more past due, in foreclosure, or in bankruptcy with at least one missed payment, excluding loans performing under either their original loan terms or a court-approved bankruptcy plan.

Credit Quality Indicators

The following tables present credit quality indicators related to Farm & Ranch loans underlying LTSPCs, Farm & Ranch Farmer Mac Guaranteed Securities, and Rural Utilities loans underlying LTSPCs as of September 30, 2020, by year of origination:

Table 6.10


	As of September 30, 2020
	Year of Origination:
	2020		2019		2018		2017		2016		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Farm & Ranch LTSPCs and Farmer Mac Guaranteed Securities:
Internally Assigned Risk Rating:
Acceptable	$	118,116	$	207,202	$	184,421	$	245,490	$	216,983	$	1,021,400	$	173,617	$	2,167,229
Special mention(1)	—		1,742		1,509		23,200		14,628		47,948		10,040		99,067
Substandard(2)	264		10,821		12,676		15,614		14,401		67,338		4,615		125,729
Total	$	118,380	$	219,765	$	198,606	$	284,304	$	246,012	$	1,136,686	$	188,272	$	2,392,025

For the Three Months Ended:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

For the Nine Months Ended:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Farm & Ranch net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

(1)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

(2)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.


	As of September 30, 2020
	Year of Origination:
	2020		2019		2018		2017		2016		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Rural Utilities LTSPCs:
Internally Assigned Risk Rating:
Acceptable	$	—	$	—	$	—	$	—	$	—	$	569,324	$	6,630	$	575,954
Special mention(1)	—		—		—		—		—		—		—		—
Substandard(2)	—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	569,324	$	6,630	$	575,954

For the Three Months Ended
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Rural Utilities net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

For the Nine Months Ended:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Rural Utilities net charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

(1)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

(2)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

The following table presents credit quality indicators related to Farm & Ranch loans underlying LTSPCs and off-balance sheet Farm & Ranch Farmer Mac Guaranteed Securities as of December 31, 2019:

Table 6.11


	As of December 31, 2019
	Crops		Permanent Plantings		Livestock		Part-time Farm		Ag. Storage and Processing		Other		Total
	(in thousands)
Internally Assigned Risk Rating(1)
Acceptable	$	1,033,002	$	484,601	$	521,341	$	161,361	$	66,106	$	2,594	$	2,269,005
Special mention(2)	68,372		22,909		35,618		1,612		—		—		128,511
Substandard(3)	56,307		6,595		34,625		5,128		—		222		102,877
Total	$	1,157,681	$	514,105	$	591,584	$	168,101	$	66,106	$	2,816	$	2,500,393

Commodity analysis of past due loans(1)	$	1,493	$	196	$	1,066	$	480	$	—	$	—	$	3,235

(1)Amounts represent unpaid principal balance of risk-rated loans, which is the basis Farmer Mac uses to analyze its portfolio, and recorded investment of past due loans.

(2)Assets in the "Special mention" category generally have potential weaknesses due to performance issues but are currently considered to be adequately secured.

(3)Substandard assets have a well-defined weakness or weaknesses and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.