NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/

Total assets increased by $2,147 million, or 6%, in FY2025 to $38,325 million as of May 31, 2025, primarily due to growth in our loan portfolio. We experienced an increase in total liabilities of $2,056 million, or 6%, to $35,222 million as of May 31, 2025, largely due to issuances of debt to fund the growth in our loan portfolio. Total equity increased by $91 million to $3,103 million as of May 31, 2025, primarily attributable to our reported net income of $140 million for FY2025, partially offset by the CFC Board of Directors’ authorized patronage capital retirement of $47 million during FY2025.

Below is a discussion of changes in the major components of our assets and liabilities during 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. 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 this Report.

Loans Outstanding

Table 11 presents loans outstanding by legal entity, member class and loan product type as of May 31, 2025 and 2024.

Table 11: Loans—Outstanding Amount by Member Class and Loan Type

(1)Represents the unpaid principal balance, net of discounts, charge-offs and recoveries, of loans as of the end of each period.

(2)Deferred loan origination costs are recorded at CFC segment.

The increase in loans to members of $2,538 million, or 7%, from May 31, 2024, was primarily attributable to net increases in long-term and line of credit loans of $1,405 million and $1,130 million, respectively. Of the increase in line of credit loans, 78% was attributable to borrowings under emergency line of credit loans by our members primarily for Hurricane Helene recovery costs. The remaining 22% was primarily attributable to funding provided for member working capital and NCSC renewable project financing.

Long-term loan advances totaled $3,109 million during FY2025, of which approximately 90% was provided to members for capital expenditures, 7% was provided for bridge financing, 2%was providedfor the refinancing of loans made by other lenders and 1% was provided for other purposes. In comparison, long-term loan advances totaled $3,371 million during FY2024, of which approximately 93% was provided to members for capital expenditures, 1% was providedfor the refinancing of loans made by other lenders and 6% was provided for other purposes, primarily business acquisitions. Of the$3,109 million total long-term loans advanced during FY2025, $2,635 million were fixed-rate loan advances with a weighted average fixed-rate term of eight years. In comparison, of the$3,371 million total long-term loans advanced during FY2024, $3,155 million were fixed-rate loan advances with a weighted average fixed-rate term of 11 years. The weighted average term selected by our members on the long-term fixed-rate loans has continued to decline due to the elevated interest rate environment.

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 “Item 1. Business—Loan and Guarantee Programs” and “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 Product Types

We offer various short- and long-term unsecured debt securities to our members and their affiliates, including commercial paper, select notes, daily liquidity fund notes, medium-term notes and subordinated certificates. We also issue commercial paper, medium-term notes and collateral trust bonds in the capital markets. Additionally, we have access to funds under borrowing arrangements with banks, other noncapital markets and U.S. government agencies. Table 12 displays our primary funding sources and their selected key attributes.

Table 12: Debt—Debt Product Types

(1)Collateral trust bonds are secured by the pledge of permitted investments and eligible mortgage notes from distribution system borrowers in an amount at least equal to the outstanding principal amount of collateral trust bonds. Collateral trust bonds also include those issued in a private placement transaction.

(2)Represents notes payable under the Guaranteed Underwriter Program, which supports the Rural Economic Development Loan and Grant program. The Federal Financing Bank provides the financing for these notes, and Rural Utilities Service (“RUS”) provides a guarantee of repayment. We are required to pledge eligible mortgage notes from distribution and power supply system borrowers in an amount at least equal to the outstanding principal amount of the notes payable.

(3)We are required to pledge eligible mortgage notes from distribution and power supply system borrowers in an amount at least equal to the outstanding principal amount under the note purchase agreement with Farmer Mac.

(4)Subordinated deferrable debt is subordinate and junior to senior debt and debt obligations we guarantee, but senior to subordinated certificates. We have the right at any time, and from time to time, during the term of the subordinated deferrable debt to suspend interest payments for a certain number of consecutive interest payment periods, as defined in the respective prospectus supplements. To date, we have not exercised our option to suspend interest payments. We also have the right to call the subordinated deferrable debt, in whole or in part, at par, either at certain intervals or any time five or 10 years after the issuance. The specific terms are detailed in each respective subordinated deferrable debt’s prospectus supplement.

(5)Members’ subordinated certificates consist of membership subordinated certificates, loan and guarantee certificates and member capital securities, and are subordinated and junior to senior debt, subordinated debt and debt obligations we guarantee. Membership subordinated certificates generally mature 100 years subsequent to issuance. Loan and guarantee subordinated certificates have the same maturity as the related long-term loan. Some certificates also may amortize annually based on the outstanding loan balance. Member capital securities mature 30 years subsequent to issuance. Member capital securities are callable at par beginning either five or 10 years subsequent to the issuance and anytime thereafter.

Debt Outstanding

Table 13 displays the composition, by product type, of our outstanding debt and the weighted average interest rate as of May 31, 2025 and 2024. Table 13 also displays the composition of our debt based on several additional selected attributes.

Table 13: Debt—Total Debt Outstanding and Weighted-Average Interest Rates

(1)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.

(2)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.

(3)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.

(4)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. Debt outstanding totaled $34,769 million as of May 31, 2025, which increased by $2,051 million, or 6%, from May 31, 2024, due to borrowings to fund the increase in loans to members. We provide additional information on our financing activities for 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 14 displays member debt outstanding, by product type, as of May 31, 2025 and 2024.

Table 14: 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 investm ents accounted for 13% and 15% of total debt outstanding as of May 31, 2025 and 2024, respectively. The decrease in member investments of $395 million as of May 31, 2025 compared with the prior year, was primarily due to a reduction in member commercial paper investments as our members used funds from these investments to finance capital expenditure programs and operating needs. Over the last three fiscal years, our member investments, including both short-term and long-term investments, have averaged $4,920 million, calc ulated 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 $5,091 million as of May 31, 2025, from $4,333 million as of May 31, 2024, primarily driven by an increase in outstanding dealer commercial paper of $1,702 million, partially offset by a repayment of $500 million in short-term notes payable under the Farmer Mac revolving note purchase agreement and a decrease in short-term member investments of $444 million during FY2025. Short-term borrowings accounted for 15% and 13% of total debt outstanding as of May 31, 2025 and 2024, respectively. 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 $29,678 million as of May 31, 2025, from $28,386 million as of May 31, 2024, primarily due to net increases of $724 million in dealer and member medium-term notes, $417 million in notes payable under the Farmer Mac revolving note purchase agreement, $156 million in collateral trust bonds,$43 million in subordinated deferrable debt, partially offset by decreases of $35 million in notes payable under the Guaranteed Underwriter Program and$13 million in members’ subordinated certificates during FY2025. Long-term and subordinated debt accounted for 85% and 87% of total debt outstanding as of May 31, 2025 and 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 15 presents the components of total CFC equity and total equity as of May 31, 2025 and 2024.

Table 15: 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 36 in the “Non-GAAP Financial Measures and Reconciliations” section below. Also, see “Note 16—Business Segments” in this Report for the statements of operations for CFC.

The increase in total equity of $91 million to $3,103 million as of May 31, 2025 compared with May 31, 2024 was attributable to our reported net income of $140 million for FY2025, partially offset by the CFC Board of Directors’ authorized patronage capital retirements of $47 million during FY2025.

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. District of Columbia cooperative law requires cooperatives to allocate net earnings to patrons, to a general reserve in an amount sufficient to maintain a balance of at least 50% of paid-up capital and to a cooperative educational fund. In addition, the District of Columbia cooperative law permits additional allocations to board-approved reserves. District of Columbia cooperative law also requires that a cooperative’s net earnings be allocated to all patrons in proportion to their individual patronage and each patron’s allocation be distributed to the patron unless the patron agrees that the cooperative may retain its share as additional capital. Pursuant to these provisions, the CFC Board of Directors is required to make annual allocations of net earnings, if any. CFC’s net earnings for determining allocations are 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 2025, the CFC Board of Directors authorized the allocation of $1 million of net earnings for FY2025 to the cooperative educational fund. In July 2025, the CFC Board of Directors authorized the allocation of FY2025 adjusted net income as follows: $67 million to members in the form of patronage capital and $176 million to the members’ capital reserve. In July 2025, the CFC Board of Directors also authorized the retirement of patronage capital totaling $53 million, of which $34 million represented 50% of the patronage capital allocation for FY2025 and $19 million represented the portion of the allocation from fiscal year 2000 net earnings that had been held for 25 years pursuant to the CFC Board of Directors’ policy. We expect to return the authorized patronage capital retirement amount of $53 million to members in cash in thesecond quarter of fiscal year 2026. The remaining portion of the patronage capital allocation for FY2025 will be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC Board of Directors in June 2009.

In May 2024, the CFC Board of Directors authorized the allocation of $1 million of net earnings for FY2024 to the cooperative educational fund. In July 2024 the CFC Board of Directors authorized the allocation of FY2024 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 FY2024 and $17 million represented the portion of the allocation from fiscal year 1999 net earnings that had 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 FY2024 will be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC Board of Directors in June 2009.

In connection with the RTFC sale transaction, the CFC Board of Directors approved the early retirement of $66 million of allocated but unretired CFC patronage capital to RTFC at a discounted amount of$41 million, which was paid from CFC to RTFC in December 2023, and the remaining$25 million was allocated to the CFC members’ capital reserve during FY2024.

The CFC Board of Directors is required to make annual allocations of adjusted net income, if any. CFC has made annual retirements of allocated net earnings in 45 of the last 46 fiscal years; however, future retirements of allocated amounts are determined based on CFC’s financial condition. The CFC Board of Directors has the authority to change the current practice for allocating and retiring net earnings at any time, subject to applicable laws. During FY2024, the CFC Board of Directors approved a change in the allocation of net earnings that would allow us to retain additional earnings and help in effectively managing our adjusted debt-to-equity ratio. As a result of this change, we retained 79% of adjusted net income for FY2024 in members’ capital reserve, compared with 56% for FY2023.