NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/

Total assets increased $524 million, or 1%, to $38,849 million as of August 31, 2025 compared with May 31, 2025, primarily due to growth in our loan portfolio. We experienced an increase in total liabilities of $572 million, or 2%, to $35,794 million as of August 31, 2025 compared with May 31, 2025, largely due to the issuances of debt to fund the growth in our loan portfolio. Total equity decreased $49 million to $3,055 million as of August 31, 2025, primarily attributable to the CFC Board of Directors’ authorized patronage capital retirementof$53 million in Q1 FY2026, partially offset by our reported net income of $5 million for the period.

Below is a discussion of changes in the major components of our assets and liabilities during Q1 FY2026. 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 2025 Form 10-K.

Loans Outstanding

Loans to members totaled $37,570 million and $37,080 million as of August 31, 2025 and May 31, 2025, respectively. Loans to CFC distribution and power supply borrowers accounted for 95% of total loans to members as of both August 31, 2025 and May 31, 2025. The increase in loans to members of $490 million, or 1%, from May 31, 2025, was primarily attributable to net increases in long-term and line of credit loans of $262 million and $228 million, respectively. We experienced increases in CFC distribution loans, CFC power supply loans, CFC statewide and associate loans, NCSC electric and NCSC telecom loans of $349 million, $116 million, $4 million, $14 million and $7 million, respectively during Q1 FY2026.

Long-term loan advances totaled $702 million during Q1 FY2026, of which approximately 96% was provided to members for capital expenditures, 3% was provided for bridge financing and 1% was provided for other purposes. In comparison, long-term loan advances totaled $848 million during Q1 FY2025, of which approximately 97% was provided to members for capital expenditures, 2% was provided for the refinancing of loans made by other lenders and 1% was provided for other purposes. Of the $702 million total long-term loans advanced during Q1 FY2026, $523 million were fixed-rate loan advances with a weighted average fixed-rate term of six years. In comparison, of the $848 million total long-term loans advanced during Q1 FY2025, $774 million were fixed-rate loan advances with a weighted average fixed-rate term of eight 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 $3,459 million as of August 31, 2025, from approximately $3,441 million as of May 31, 2025. Although we expect our member electric cooperatives to continue in their efforts to expand broadband access to unserved and underserved communities, their investment in broadband projects has slowed down in the recent years and is expected to increase at a slower rate.

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 11 displays the composition, by product type, of our outstanding debt as of August 31, 2025 and May 31, 2025. Table 11 also displays the composition of our debt based on several additional selected attributes.

Table 11: Debt—Total Debt Outstanding

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

(2)Amount includes collateral trust bonds issued to investors through both public offerings and private placement transactions.

(3)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.

(4)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.

(5)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.

(6)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 $512 million, or 1%, to $35,281 million as of August 31, 2025 compared with May 31, 2025, due to borrowings to fund the increase in loans to members. We provide additional information on our financing activities during Q1 FY2026 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 12 displays member debt outstanding, by product type, as of August 31, 2025 and May 31, 2025.

Table 12: 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 13% of total debt outstanding as of both August 31, 2025 and May 31, 2025. Over the last twelve fiscal quarters, our member investments, including both short-term and long-term investments, have averaged $4,855 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 decreased to $4,837 million as of August 31, 2025, from $5,091 million as of May 31, 2025, primarily driven by a decrease in outstanding dealer commercial paper of $508 million, partially offset byan increase in short-term member investments of $254 million during Q1 FY2026. Short-term borrowings accounted for 14% and 15% of total debt outstanding as of August 31, 2025 and May 31, 2025, 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 $30,445 million as of August 31, 2025, compared with $29,678 million as of May 31, 2025. The increase primarily reflects the issuances of $1,233 million in dealer medium-term notes, partially offset by $338 million in repayments. Additionally, the balance was further reduced by total repayments to secured debt of $101 million during Q1 FY2026, related to notes payable under the Guaranteed Underwriter Program, notes payable under the Farmer Mac revolving purchase agreement and collateral trust bonds. Long-term and subordinated debt accounted for 86% and 85% of total debt outstanding as of August 31, 2025 and May 31, 2025, 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 13 presents the components of total CFC equity and total equity as of August 31, 2025 and May 31, 2025.

Table 13: 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 30 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 $49 million to $3,055 million as of August 31, 2025 compared with May 31, 2025 was attributable primarily to the CFC Board of Directors’ authorized patronage capital retirementof$53 million in Q1 FY2026, partially offset by our reported net income of $5 million for 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 2025 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 2025, the CFC Board of Directors authorized the allocation of $1 million of net earnings for fiscal year 2025 to the cooperative educational fund. In July 2025, the CFC Board of Directors authorized the allocation of fiscal year 2025 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 fiscal year 2025, and $19 million represented the portion of the allocation from fiscal year 2000 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 2025. The remaining portion of the patronage capital allocation for fiscal year 2025 will be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC Board of Directors in June 2009.