NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/

Reported Results

Net Income (Loss) and TIER

Table 1 below shows our net income (loss) and TIER for the periods presented and the variance between these periods. We provide a more detailed discussion of our reported results under the section “Consolidated Results of Operations.”

Table 1: Net Income (Loss) and TIER

(1)Calculated based on net income (loss) plus interest expense for the period divided by interest expense for the period.

Table 2 below presents a reconciliation of net income (loss) between Q1 FY2026 and Q1 FY2025.

Table 2: Reconciliation of Net Income (Loss)

Q1 FY2026 versus Q1 FY2025—Key Highlights

•Losses recorded on our derivatives portfolio decreased $166 million from Q1 FY2025. We recorded derivative losses of $32 million for Q1 FY2026, primarily attributable to declines in interest rates across the swap curve, with the exception of the 30-year swap rate, which increased slightly during Q1 FY2026. In comparison, we recorded derivative losses of$198 million for Q1 FY2025, attributable tomore pronounced declines in interest rates across the entire swap curve during Q1 FY2025.

•Net interest income increased $9 million from Q1 FY2025 driven by an increase in the net interest yield of 6 basis points, or 9%, to 0.75% and an increase in average interest-earning assets of $2,223 million, or 6%.

•Operating and other expenses increased by $5 million from Q1 FY2025 primarily driven by higher expenses recorded for salaries and employee benefits and general and administrative.

•Gains recorded on our investment securities decreased $3 million from Q1 FY2025 primarily driven by period-to-period market fluctuations in fair value and a reduction in our debt security balance due to maturities.

•We recorded a provision for credit losses of $2 million and $1 million for Q1 FY2026 and Q1 FY2025, respectively, primarily driven by an increase in the collective allowance due to the growth in our loan portfolio.

•The increase in TIER for Q1 FY2026 compared with Q1 FY2025 was driven by the net income recorded for Q1 FY2026 compared with the net loss recorded for Q1 FY2025, which wasprimarily attributable to our derivative portfolio forward value change as discussed above, partially offset by an increase in interest expense during Q1 FY2026.

Debt-to-Equity Ratio

The debt-to-equity ratio was 11.55 and 11.20 as of August 31, 2025 and May 31, 2025, respectively. The increase in the debt-to-equity ratio during Q1 FY2026 was due to the combined impact of an increase in debt to fund loan growth and a decrease in total equity. The decrease in total equity was primarily driven by the CFC Board of Directors’ authorized patronage capital retirement of $53 million in July 2025, partially offset by our reported net income of $5 million for Q1 FY2026.

Non-GAAP Adjusted Results

Adjusted Net Income and Adjusted TIER

Table 3 below shows our adjusted net income and adjusted TIER for the periods presented and the variance between these periods. Our financial goals focus on earning an annual minimum adjusted TIER of 1.10. We provide a more detailed discussion of our non-GAAP adjusted results under the section “Consolidated Results of Operations.”

Table 3: Adjusted Net Income and Adjusted TIER

Table 4 below presents a reconciliation of adjusted net income between Q1 FY2026 and Q1 FY2025.

Table 4: Reconciliation of Adjusted Net Income

Q1 FY2026 versus Q1 FY2025—Key Highlights

•Adjusted net interest income decreased by $2 million from Q1 FY2025 driven by a decrease in the adjusted net interest yield of 9 basis points, or 9%, to 0.96%, partially offset by an increase in average interest-earning assets of $2,223 million, or 6%.

•We discuss the variances in the other components above under our net income (loss) key highlights.

•The decrease in adjusted TIER for Q1 FY2026 compared with Q1 FY2025 was primarily driven by an increase in adjusted interest expense during Q1 FY2026.

Adjusted Debt-to-Equity Ratio

Our financial goals focus on maintaining an adjusted debt-to-equity ratio at approximately 8.5-to-1 or below. The adjusted debt-to-equity ratio was 7.50 and 7.39 as of August 31, 2025 and May 31, 2025, respectively. The increase in the adjusted debt-to-equity ratio during Q1 FY2026 was due to an increase in adjusted total debt outstanding resulting from additional borrowings to fund growth in our loan portfolio, partially offset by an increase in adjusted total equity. The increase in adjusted total equity was primarily due to our adjusted net income of $57 million for Q1 FY2026, partially offset by a decrease in equity of $53 million attributable to the CFC Board of Directors’ authorized patronage capital retirement in July 2025.

We provide a more detailed discussion of the methodology for calculating the adjusted debt-to-equity ratio and a reconciliation of our non-GAAP adjusted measures to the most directly comparable U.S. GAAP measures under the section “Non-GAAP Financial Measures and Reconciliations” in this Report.

Lending and Credit Quality

We segregate our loan portfolio into segments based on the borrower member class, which consists of CFC distribution, CFC power supply, CFC statewide and associate, NCSC electric and NCSC telecom.

Loans to members totaled $37,570 million as of August 31, 2025, an increase of $490 million, or 1%, from May 31, 2025, reflecting net increases in long-term and line of credit loans of $262 million and $228 million, respectively. Our loan portfolio composition remained largely unchanged from May 31, 2025 with 79% of loans outstanding to CFC distribution borrowers, 16% to CFC power supply borrowers,3%to NCSC electric borrowers, and 2% to NCSC telecom borrowers as of August 31, 2025.

The overall credit quality of our loan portfolio remained strong as of August 31, 2025. We had no loan charge-offs during Q1 FY2026 and Q1 FY2025. We had one loan totaling $24 million and$26 million classified as nonperforming as of August 31, 2025 and May 31, 2025, respectively. The reduction in the nonperforming loan outstanding was due to a payment received from the borrower during Q1 FY2026.

Our allowance for credit losses was $42 million as of August 31, 2025, compared with $41 million as of May 31, 2025. The increase in the allowance for credit losses was attributable to an increase in the collective allowance primarily driven by the growth in our loan portfolio. Our allowance coverage ratio remained steady at 0.11% as of both August 31, 2025 and May 31, 2025.

Financing and Liquidity

Total debt outstanding increased $512 million, or 1%, to $35,281 million as of August 31, 2025, primarily due to borrowings to fund the increase in loans to our members. During Q1 FY2026, we issued unsecured long-term dealer medium-term notes totaling $1,225 million, of which $700 million was at a fixed interest rate of 4.15% with a term of three years and $525 million was at a floating interest rate with a term of 18 months. On September 23, 2025, notice was provided to investors that we will redeem $50 million in principal amount of our $300 million fixed-to-floating rate subordinated deferrable debt due 2043 (the “2043 Notes”) on October 23, 2025.

On June 2, 2025, at our request, S&P withdrew its “A-2” short-term issue ratings on CFC’s commercial paper program. The “A-” long-term issuer credit rating, the stable outlook and the other long-term debt ratings are unchanged as of the date of this Report. On August 25, 2025, Fitch Ratings (“Fitch”) affirmed CFC’s credit ratings and stable outlook.

Our available liquidity consists of cash and cash equivalents, investments in debt securities, availability under committed bank revolving line of credit agreements, committed loan facilities under the USDA Guaranteed Underwriter Program (“Guaranteed Underwriter Program”), and a revolving note purchase agreement with the Federal Agricultural Mortgage Corporation (“Farmer Mac”). As of August 31, 2025, our available liquidity totaled $7,738 million and was $1,035 million less than our total scheduled debt obligations over the next 12 months of $8,773 million, of which $3,139 million, or 36%, represented member short-term investments. In addition to our existing available liquidity, we expect to receive $1,763 million from scheduled long-term loan principal payments over the next 12 months. In September 2025, we executed a commitment letter for the guarantee by RUS of an additional $450 million loan facility from the U.S. Treasury Department’s Federal Financing Bank (“FFB”) under the Guaranteed Underwriter Program.

We believe we can continue to roll over our member short-term investments based on our expectation that our members will continue to reinvest their excess cash primarily in short-term investment products offered by CFC. Our members historically have maintained a relatively stable level of short-term investments in CFC. Member short-term investments in CFC have averaged $3,292 million over the last 12 fiscal quarter-end reporting periods. Our available liquidity as of August 31, 2025 was $2,104 million in excess of, or 1.4 times over, our total$5,634 million scheduled debt obligations over the next 12 months, excluding member short-term investments.

Outlook

Macroeconomic Outlook

Following its meeting held in September 2025, the Federal Open Market Committee (“FOMC”) of the Federal Reserve cut its target range for the federal funds rate by 25 basis points to 4.00%–4.25%. The FOMC noted that recent economic indicators suggest (i) the growth of economic activity moderated in the first half of the year, (ii) job gains have slowed, (iii) the unemployment rate has edged up but remains low, and (iv) inflation has moved up and remains somewhat elevated. The Federal Reserve’s September 2025 median projection for the annual growth rate of real gross domestic product (“GDP”) in 2025 is 1.6%, up from 1.4% in its June 2025 projection. The median projection for Personal Consumption Expenditures (“PCE”) inflation in 2025 remains unchanged at 3.0%, and the U.S. unemployment rate in 2025 is projected to be 4.5%, also unchanged from June 2025. As of September 18, 2025, federal funds futures markets anticipated up to four additional 25 basis point rate cuts over the next 12 months: two in the fourth quarter of calendar year 2025, one in the first quarter of calendar year 2026, and one in the second quarter of calendar year 2026. If these rate cuts occur as expected, the federal funds target rate would decline to a range of 3.00%–3.25% by mid-2026. Overall, the market expects interest rates to decline, with a steepening yield curve ahead.

Projected Reported Results

Based on our current forecast assumptions, including the yield curve forecast noted above, we project increases in our reported net interest income and net interest yield over the next 12 months compared with the 12-month period ended August 31, 2025. See “Market Risk—Interest Rate Risk Assessment” in this Report for additional information.

Projected Non-GAAP Adjusted Results

Based on our current forecast assumptions, including the yield curve forecast noted above, we project:

•An increase in our adjusted net interest income over the next 12 months relative to the 12-month period ended August 31, 2025, primarily driven by an increase in interest-earning assets due to projected loan growth.

•A slight decrease in adjusted net interest yield over the next 12 months, primarily due to our baseline interest rates forecast and that our interest-earning assets, primarily lines of credit, are repricing faster than our interest-bearing liabilities. Additionally, lower-cost long-term debt maturing in the near term will need to be refinanced at a forecasted higher interest rate and the expected decrease in the variable rate debt cost will be offset by the lower average yield earned on our interest rate swaps derivative cash settlements. See “Market Risk—Interest Rate Risk Assessment” in this Report for additional information.

•A decrease in our adjusted net income over the next 12 months, primarily due to an increase in projected operating expenses.

•A decrease in adjusted TIER over the next 12 months, primarily attributable to increases in projected adjusted interest expense and operating expenses.

•An increase in our adjusted debt-to-equity ratio, primarily due to the projected increase in total debt outstanding to fund anticipated growth in our loan portfolio.

As stated above, we exclude the impact of unrealized derivative forward fair value gains (losses) from our non-GAAP financial measures. As the majority of our swaps are long-term with an average remaining life of approximately 13 years as of August 31, 2025, the unrealized periodic derivative forward value gains (losses) are largely based on future expected changes in longer-term interest rates, which we are unable to accurately predict for each reporting period over the next 12 months. Due to the difficulty in predicting these unrealized amounts, we are unable to provide without unreasonable effort a reconciliation of our forward-looking adjusted financial measures to the most directly comparable GAAP financial measures.

Projected Loan Portfolio

Based on our current forecast assumptions, we anticipate net loan growth of$2,180 million over the next 12 months. Historically, line of credit loans activity has been fairly unpredictable due to the short-term and dynamic usage patterns of these facilities. Our baseline forecast scenario takes into account known likely near-term activity as well as historical analysis.