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Guarantees and Commitments

12 Months Ended

Dec. 31, 2021

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 and (2) LTSPCs, both of which are available through each of the Agricultural Finance and Rural Infrastructure Finance 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 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 $3.8 billion and $3.3 billion as of December 31, 2021 and 2020, respectively. Farmer Mac's maximum potential exposure for guarantees issued before January 1, 2003, which are not recorded on the consolidated balance sheets, was $7.8 million and $10.8 million as of December 31, 2021 and 2020, 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(h). The following table presents changes in Farmer Mac's guarantee and commitment obligations in the consolidated balance sheets for the years ended December 31, 2021, 2020, and 2019:

Table 12.1


	For the Years Ended December 31,
	2021		2020		2019
	(in thousands)
Beginning balance, January 1	$	35,535	$	36,700	$	38,683
Additions to the guarantee and commitment obligation(1)	15,648		5,210		4,398
Amortization of the guarantee and commitment obligation	(7,257)		(6,375)		(6,381)
Ending balance, December 31	$	43,926	$	35,535	$	36,700

(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, 2021 and December 31, 2020, 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, 2021		As of December 31, 2020
	(in thousands)
Agricultural Finance
Farmer Mac Guaranteed Securities	$	578,358	$	378,610
Rural Infrastructure Finance
Farmer Mac Guaranteed Securities	2,755		4,412
Total off-balance sheet Farmer Mac Guaranteed Securities	$	581,113	$	383,022

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,
	2021		2020		2019
	(in thousands)
Proceeds from new securitizations	$	404,568	$	165,054	$	321,414
Guarantee fees received	1,029		1,365		1,413
Servicing fees received	199		—		—
Interest-only Farmer Mac Guaranteed Securities income	47		—		—

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, 2021		As of December 31, 2020
	(dollars in thousands)
Guarantee and commitment obligation	$	7,355	$	1,625
Weighted average remaining maturity:
Farmer Mac Guaranteed Securities	21.7 years		9.5 years
AgVantage Securities	3.0 years		4.0 years

Long-Term Standby Purchase Commitments

Farmer Mac has recorded a liability for its obligation to stand ready under the commitment 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 as of December 31, 2021 and 2020:

Table 12.5


	As of December 31, 2021		As of December 31, 2020
	(dollars in thousands)
Guarantee and commitment obligation(1)	$	36,571	$	33,909
Maximum principal amount	3,191,061		2,881,856
Weighted-average remaining maturity	15.5 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, 2021 and 2020, commitments to purchase Farm & Ranch loans and USDA Guarantees totaled $78.4 million and $125.8 million, respectively, all of which were mandatory commitments. As of December 31, 2021, 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.

Reserve for Losses

The following table is a summary, by asset type, of the reserve for losses as of December 31, 2021 and December 31, 2020:

Table 12.6


	December 31, 2021		December 31, 2020
	Reserve for Losses		Reserve for Losses
	(in thousands)
Agricultural Finance:
LTSPCs and Farmer Mac Guaranteed Securities	$	1,068	$	2,097
Rural Infrastructure Finance
LTSPCs	882		1,180
Total	$	1,950	$	3,277

The following is a summary of the changes in the reserve for losses for each year in the three-year period ended December 31, 2021:

Table 12.7


	Agricultural Finance		Rural Infrastructure Finance
	Reserve for Losses		Reserve for Losses
	(in thousands)
Balance as of December 31, 2018(1)	$	2,167	$	—
Release of losses	(3)		—
Balance as of December 31, 2019(1)	$	2,164	$	—
Cumulative effect adjustment from adoption of current expected credit loss standard	(148)		1,011
Adjusted Beginning Balance	$	2,016	$	1,011
Provision for losses	81		169

Balance as of December 31, 2020(2)	$	2,097	$	1,180
Release of losses	(1,029)		(298)

Balance as of December 31, 2021(2)	$	1,068	$	882

(1)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 Agricultural Finance Farmer Mac Guaranteed Securities.

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

The release from the reserve for losses in both the Agricultural Finance and Rural Infrastructure Finance LTSPC and Farmer Mac Guaranteed portfolios recorded during the year ended December 31, 2021 was primarily due to improving economic factor forecasts and ratings upgrades.

The provision to the reserve for losses recorded during the year ended December 31, 2020 was primarily

due to credit downgrades in the LTSPC portfolio.

The following table presents the unpaid principal balances by delinquency status of Agricultural Finance and Rural Utilities loans underlying LTSPCs and Farmer Mac Guaranteed Securities as of December 31, 2021 and December 31, 2020:

Table 12.8


	As of December 31, 2021
	Current		30-59 Days		60-89 Days		90 Days and Greater(1)		Total Past Due		Total Loans
	(in thousands)
Agricultural Finance:
LTSPCs and Farmer Mac Guaranteed Securities	$	2,953,091	$	8,068	$	—	$	3,597	$	11,665	$	2,964,756
Rural Infrastructure:
LTSPCs	$	556,837	$	—	$	—	$	—	$	—	$	556,837

(1)Includes loans underlying off-balance sheet Agricultural Finance 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.


	As of December 31, 2020
	Current		30-59 Days		60-89 Days		90 Days and Greater(1)		Total Past Due		Total Loans
	(in thousands)
Agricultural Finance:
LTSPCs and Farmer Mac Guaranteed Securities	$	2,389,777	$	2,189	$	1,344	$	11,433	$	14,966	$	2,404,743
Rural Infrastructure:
LTSPCs	$	556,425	$	—	$	—	$	—	$	—	$	556,425

Credit Quality Indicators

The following tables present credit quality indicators related to Agricultural Finance and Rural Utilities loans underlying LTSPCs and Farmer Mac Guaranteed Securities as of December 31, 2021 and December 31, 2020, by year of origination:

Table 12.9


	As of December 31, 2021
	Year of Origination:
	2021		2020		2019		2018		2017		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Agricultural Finance LTSPCs and Farmer Mac Guaranteed Securities:
Internally Assigned Risk Rating:
Acceptable	$	376,027	$	537,521	$	244,365	$	188,452	$	235,865	$	1,013,937	$	252,039	$	2,848,206
Special mention(1)	—		5,270		—		6,808		3,154		38,042		2,354		55,628
Substandard(2)	—		1,307		724		5,038		12,793		37,326		3,734		60,922
Total	$	376,027	$	544,098	$	245,089	$	200,298	$	251,812	$	1,089,305	$	258,127	$	2,964,756

For the Year Ended:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Agricultural Finance 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 December 31, 2021
	Year of Origination:
	2021		2020		20	2019		2018		2017		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Rural Infrastructure Finance LTSPCs:
Internally Assigned Risk Rating:
Acceptable	$	—	$	—		$	—	$	—	$	—	$	499,594	$	57,243	$	556,837
Special mention(1)	—		—			—		—		—		—		—		—
Substandard(2)	—		—			—		—		—		—		—		—
Total	$	—	$	—		$	—	$	—	$	—	$	499,594	$	57,243	$	556,837

For the Year Ended:
Current period charge-offs	$	—	$	—		$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—			—		—		—		—		—		—
Current period Rural Infrastructure 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 December 31, 2020
	Year of Origination:
	2020		2019		2018		2017		2016		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Agricultural Finance LTSPCs and Farmer Mac Guaranteed Securities:
Internally Assigned Risk Rating:
Acceptable	$	178,213	$	213,620	$	183,948	$	237,042	$	207,296	$	969,860	$	211,620	$	2,201,599
Special mention(1)	3,920		1,742		1,502		5,603		19,644		50,004		10,058		92,473
Substandard(2)	264		10,250		12,611		14,578		7,841		60,602		4,525		110,671
Total	$	182,397	$	225,612	$	198,061	$	257,223	$	234,781	$	1,080,466	$	226,203	$	2,404,743

For the Year Ended:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Agricultural Finance 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 December 31, 2020
	Year of Origination:
	2020		2019		2018		2017		2016		Prior		Revolving Loans - Amortized Cost Basis		Total
	(in thousands)
Rural Infrastructure Finance LTSPCs:
Internally Assigned Risk Rating:
Acceptable	$	—	$	—	$	—	$	—	$	—	$	549,405	$	7,020	$	556,425
Special mention(1)	—		—		—		—		—		—		—		—
Substandard(2)	—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	549,405	$	7,020	$	556,425

For the Year Ended:
Current period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Current period recoveries	—		—		—		—		—		—		—		—
Current period Rural Infrastructure 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.