NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/

Total assets increased $935 million, or 3%, to $37,112 million as of November 30, 2024 compared with May 31, 2024, primarily due to growth in our loan portfolio. We experienced an increase in total liabilities of $1,002 million, or 3%, to $34,167 million as of November 30, 2024, largely due to the issuances of debt to fund the growth in our loan portfolio. Total equity decreased $67 million to $2,945 million as of November 30, 2024, attributable to our reported net loss of $20 million for YTD FY2025 and the CFC Board of Directors’ authorized patronage capital retirementof$47 million during the period.

Below is a discussion of changes in the major components of our assets and liabilities during YTD FY2025. Period-end balance sheet amounts may vary from average balance sheet amounts due to liquidity and balance sheet management activities that are intended to manage our liquidity requirements and market risk exposure in accordance with our risk appetite framework.

Loan Portfolio

We segregate our loan portfolio into segments, by legal entity, based on the borrower member class, which consists of CFC distribution, CFC power supply, CFC statewide and associate, NCSC electric and NCSC telecom. We offer both long-term and line of credit loans to our borrowers. Under our long-term loan facilities, a borrower may select a fixed interest rate or a variable interest rate at the time of each loan advance. Line of credit loans are revolving loan facilities and generally have a variable interest rate. We describe and provide additional information on our member classes under “Item 1. Business—Members” and information about our loan programs and loan product types under “Item 1. Business—Loan and Guarantee Programs” in our 2024 Form 10-K.

Loans Outstanding

Loans to members totaled $35,614 million and $34,542 million as of November 30, 2024 and May 31, 2024, respectively. Loans to CFC distribution, power supply, and statewide and associate borrowers accounted for 95% of total loans to members as of both November 30, 2024 and May 31, 2024. The increase in loans to members of $1,072 million, or 3%, from May 31, 2024, was primarily attributable to net increases in long-term and line of credit loans of $559 million and $513 million, respectively. Of the increase in line of credit loans, 43% was attributable to borrowings under emergency line of credit loans by our members primarily for Hurricane Helene recovery costs and the remaining 57% was primarily attributable to funding provided for higher member working capital and capital expenditures requirements. We experienced increases in CFC distribution loans, CFC statewide and associate loans, NCSC electric and NCSC telecom loans of $1,011 million, $32 million, $35 million and $9 million, respectively, and a decrease in CFC power supply loansof $16 million during YTD FY2025.

Long-term loan advances totaled $1,281 million during YTD FY2025, of which approximately 95% was provided to members for capital expenditures, 4% was provided for the refinancing of loans made by other lenders and 1% was provided for other purposes. In comparison, long-term loan advances totaled $1,608 million during YTD FY2024, of which approximately 94% was provided to members for capital expenditures and approximately 6% was provided for other purposes, primarily business acquisitions. Of the $1,281 million total long-term loans advanced during the YTD FY2025, $1,162 million were fixed-rate loan advances with a weighted average fixed-rate term of eight years. In comparison, of the $1,608 million total long-term loans advanced during YTD FY2024, $1,532 million were fixed-rate loan advances with a weighted average fixed-rate term of 12 years.

Our aggregate loans outstanding to CFC electric distribution cooperative members relating to broadband projects, which we started tracking in October 2017, increased to an estimated $3,315 million as of November 30, 2024, from approximately $3,103 million as of May 31, 2024.

We provide information on the credit performance and risk profile of our loan portfolio below under the section “Credit Risk—Loan Portfolio Credit Risk” in this Report. Also refer to“Note 4—Loans” in this Report for addition information on our loans to members.

Debt

We utilize both secured and unsecured short-term borrowings and long-term debt as part of our funding strategy and asset/liability interest rate risk management. We seek to maintain diversified funding sources, including our members, affiliates, the capital markets and other private funding sources. Our funding strategy consists of various products and programs across markets to manage funding concentrations and reduce our liquidity or debt rollover risk.

Debt Outstanding

Table 9 displays the composition, by product type, of our outstanding debt as of November 30, 2024 and May 31, 2024. Table 9 also displays the composition of our debt based on several additional selected attributes.

Table 9: Debt—Total Debt Outstanding

(1)Amount is presented net of unamortized discounts, premium and issuance costs as applicable.

(2)Includes variable-rate debt that has been swapped to a fixed rate, net of any fixed-rate debt that has been swapped to a variable rate.

(3)Includes fixed-rate debt that has been swapped to a variable rate, net of any variable-rate debt that has been swapped to a fixed rate. Also includes commercial paper notes, which generally have maturities of less than 90 days. The interest rate on commercial paper notes does not change once the note has been issued; however, the interest rate for new commercial paper issuances changes daily.

(4)Borrowings with an original contractual maturity of one year or less are classified as short-term borrowings. Borrowings with an original contractual maturity of greater than one year are classified as long-term debt.

(5)Consists of long-term debt, subordinated deferrable debt and total members’ subordinated debt reported on our consolidated balance sheets. Maturity classification is based on the original contractual maturity as of the date of issuance of the debt.

We issue debt primarily to fund growth in our loan portfolio. As such, our debt outstanding generally increases and decreases in response to member loan demand. Total debt outstanding increased $976 million, or 3%, to $33,694 million as of November 30, 2024, due to borrowings to fund the increase in loans to members. Outstanding dealer commercial paper was $1,308 million as of November 30, 2024, which was within our quarter-end target range of $1,000 million to $1,500 million. We provide additional information on our financing activities during YTD FY2025 in the below section “Liquidity Risk” of this Report.

Member Investments

Debt securities issued to our members represent an important, stable source of funding. Table 10 displays member debt outstanding, by product type, as of November 30, 2024 and May 31, 2024.

Table 10: Debt—Member Investments

(1)Represents outstanding debt attributable to members for each debt product type as a percentage of the total outstanding debt for each debt product type.

Member investments accounted for 14% and 15% of total debt outstanding as of November 30, 2024 and May 31, 2024, respectively. Over the last twelve fiscal quarters, our member investments, including both short-term and long-term investments, have averaged $5,015 million, calculated based on outstanding member investments as of the end of each fiscal quarter during the period.

Short-Term Borrowings

Short-term borrowings consist of borrowings with an original contractual maturity of one year or less and do not include the current portion of long-term debt. Short-term borrowings increased to $4,492 million as of November 30, 2024, from $4,333 million as of May 31, 2024, primarily driven by an increase in outstanding dealer commercial paper of $804 million, partially offset by a repayment of$500 million inshort-term notes payable under the Farmer Mac revolving purchase agreement and a decrease in short-term member investments of $144 million during YTD FY2025. Short-term borrowings accounted for 13% of total debt outstanding as of both November 30, 2024 and May 31, 2024.

See “Liquidity Risk” below and “Note 6—Short-Term Borrowings” for information on the composition of our short-term borrowings.

Long-Term and Subordinated Debt

Long-term debt, defined as debt with an original contractual maturity term of greater than one year, primarily consists of medium-term notes, collateral trust bonds, notes payable under the Guaranteed Underwriter Program and notes payable under the Farmer Mac revolving note purchase agreement. Subordinated debt consists of subordinated deferrable debt and members’ subordinated certificates. Our subordinated deferrable debt and members’ subordinated certificates have original contractual maturity terms of greater than one year.

Long-term and subordinated debt increased to $29,202 million as of November 30, 2024, from $28,386 million as of May 31, 2024, primarily due to net increases of $526 million in dealer medium-term notes, $349 million in collateral trust bonds and $161 million in notes payable under the Farmer Mac revolving purchase agreement, partially offset by repayments of $229 million in notes payable under the Guaranteed Underwriter Program during YTD FY2025. Long-term and subordinated debt accounted for 87% of total debt outstanding as of both November 30, 2024 and May 31, 2024, respectively.

We provide additional information on our long-term debt below under the section “Liquidity Risk” and “Note 7—Long-Term Debt” and “Note 8—Subordinated Deferrable Debt” in this Report.

Equity

Table 11 presents the components of total CFC equity and total equity as of November 30, 2024 and May 31, 2024.

Table 11: Equity

(1)Represents derivative forward value gains (losses) for CFC only, as total CFC equity does not include the noncontrolling interests of the variable interest entities, which we are required to consolidate. We present the consolidated total derivative forward value gains (losses) in Table 29 in the “Non-GAAP Financial Measures and Reconciliations” section below. Also, see “Note 14—Business Segments” in this Report for the statements of operations for CFC.

The decrease in total equity of $67 million to $2,945 million as of November 30, 2024 compared to May 31, 2024 was attributable to our reported net loss of $20 million for YTD FY2025 and the CFC Board of Directors’ authorized patronage capital retirementof$47 million during the period.

Allocation and Retirement of Patronage Capital

We are subject to District of Columbia law governing cooperatives, under which CFC is required to make annual allocations of net earnings, if any, in accordance with the provisions of the District of Columbia statutes. We describe the allocation requirements under “Item 7. MD&A—Consolidated Balance Sheet Analysis—Equity—Allocation and Retirement of Patronage Capital” in our 2024 Form 10-K. The amount of patronage capital allocated each year by CFC’s Board of Directors is based on non-GAAP adjusted net income, which excludes the impact of derivative forward value gains (losses). We provide a reconciliation of our adjusted net income to our reported net income and an explanation of the adjustments below in “Non-GAAP Financial Measures and Reconciliations.”

In May 2024, the CFC Board of Directors authorized the allocation of $1 million of net earnings for fiscal year 2024 to the cooperative educational fund. In July 2024, the CFC Board of Directors authorized the allocation of fiscal year 2024 adjusted net income as follows: $61 million to members in the form of patronage capital and $228 million to the members’ capital reserve.

In July 2024, the CFC Board of Directors also authorized the retirement of patronage capital totaling $47 million, of which $30 million represented 50% of the patronage capital allocation for fiscal year 2024, and $17 million represented the portion of the allocation from fiscal year 1999 net earnings that has been held for 25 years pursuant to the CFC Board of Directors’ policy. This amount was returned to members in cash in September 2024. The remaining portion of the patronage capital allocation for fiscal year 2024 will be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC Board of Directors in June 2009.