NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/

We define liquidity as the ability to convert assets into cash quickly and efficiently, maintain access to available funding and roll-over or issue new debt under normal operating conditions and periods of CFC-specific and/or market stress, to ensure that we can meet borrower loan requests, pay current and future obligations and fund our operations in a cost-effective manner. We provide additional information on our liquidity risk-management framework under “Item 7. MD&A—Liquidity Risk—Liquidity Risk Management” in our 2025 Form 10-K.

In addition to cash on hand and investment securities, our primary sources of funds include member loan principal and interest payments, committed bank revolving lines of credit, committed loan facilities under the Guaranteed Underwriter Program, a revolving note purchase agreement with Farmer Mac and proceeds from debt issuances to members and in the public capital markets. Our primary uses of funds include loan advances to members, principal and interest payments on borrowings, periodic interest settlement payments related to our derivative contracts and operating expenses.

Available Liquidity

As part of our strategy in managing liquidity risk and meeting our liquidity objectives, we seek to maintain various committed sources of funding that are available to meet our near-term liquidity needs. Table 17 presents a comparison between our available liquidity, which consists of cash and cash equivalents, our debt securities investment portfolio and amounts under committed credit facilities, as of August 31, 2025 and May 31, 2025.

Table 17: Available Liquidity

(1)Represents the aggregate fair value of our portfolio of debt securities as of period end. Our portfolio of equity securities consists of Farmer Mac Class A common stock, which we exclude from our available liquidity.

(2)The committed bank revolving line of credit agreements consist of a three-year and a four-year revolving line of credit agreement. The accessed amount of $7 million as of both August 31, 2025 and May 31, 2025 relates to letters of credit issued pursuant to the four-year revolving line of credit agreement.

(3)The committed facilities under the Guaranteed Underwriter Program are not revolving.

(4)Availability subject to market conditions.

Although as a nonbank financial institution we are not subject to regulatory liquidity requirements, our liquidity management framework includes monitoring our liquidity and funding positions on an ongoing basis and assessing our ability to meet our scheduled debt obligations and other cash flow requirements based on point-in-time metrics as well as forward-looking projections. Our liquidity and funding assessment takes into consideration amounts available under existing liquidity sources, the expected rollover of member short-term investments and scheduled loan principal payment amounts, as well as our continued ability to access the capital markets and other non-capital market related funding sources.

Liquidity Risk Assessment

We utilize several measures to assess our liquidity risk and ensure we have adequate coverage to meet our liquidity needs. Our primary liquidity measures indicate the extent to which we have sufficient liquidity to cover the payment of scheduled debt obligations over the next 12 months. We calculate our liquidity coverage ratios under several scenarios that take into consideration various assumptions about our near-term sources and uses of liquidity, including the assumption that maturities of member short-term investments will not have a significant impact on our anticipated cash outflows. Our members have historically maintained a relatively stable level of short-term investments in CFC in the form of daily liquidity fund notes, commercial paper, select notes and medium-term notes. As such, we expect that our members will continue to reinvest their excess cash in short-term investment products offered by CFC.

Table 18 presents our primary liquidity coverage ratios as of August 31, 2025 and May 31, 2025 and displays the calculation of each ratio as of these respective dates based on the assumptions discussed above.

Table 18: Liquidity Coverage Ratios

(1)Calculated based on available liquidity at period end divided by total debt scheduled to mature over the next 12 months at period end.

(2)Total available liquidity is presented above in Table 17.

(3)The short-term borrowings scheduled maturity amount consists of member investments of $3,139 million and dealer commercial paper of $1,698 million as of August 31, 2025.

(4)The long-term and subordinated scheduled debt obligations over the next 12 months consist of debt maturities and scheduled debt payment amounts, of which, $180 million was from member investments as of August 31, 2025.

(5)Calculated based on available liquidity at period end divided by debt, excluding member short-term investments, scheduled to mature over the next 12 months.

(6)Member short-term investments include commercial paper sold directly to members, select notes, daily liquidity fund notes and short-term medium-term notes sold to members. See Table 20: Short-Term Borrowings—Funding Sources below for additional information.

As presented in Tables 17 and 18 above, our available liquidity increased by $126 million, or 2% as of August 31, 2025 compared with May 31, 2025. Our liquidity coverage ratio increased slightly from 0.87 as of May 31, 2025 to 0.88 as of August 31, 2025. The increase in our available liquidity amount was due to an increase of $83 million in cash and investment debt securities and an increase of $43 million in available amount from Farmer Mac revolving note purchase agreement.

We believe we can continue to roll over our member short-term investments of $3,139 million as of August 31, 2025, based on our expectation that our members will continue to reinvest their excess cash in short-term investment products offered by CFC. As mentioned above, 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. In addition, we expect to receive $1,763 million from scheduled long-term loan principal payments over the next 12 months.

We expect to continue accessing the dealer commercial paper market as a cost-effective means of satisfying our incremental short-term liquidity needs. Tomitigate commercial paper rollover risk, we expect to continue to maintain our committed bank revolving line of credit agreements and be in compliance with the covenants of these agreements so we can draw on these facilities, if necessary, to repay commercial paper that cannot be refinanced with similar debt. Under master repurchase agreements we have with our bank counter parties, we can obtain short-term funding in secured borrowing transactions by selling investment-grade corporate debt securities from our investment securities portfolio subject to an obligation to repurchase the same or similar securities at an agreed-upon price and date.

The issuance of long-term debt, which represents the most significant component of our funding, allows us to reduce our reliance on short-term borrowings, as well as effectively manage our refinancing and interest rate risk. We expect to continue to issue long-term debt in the public capital markets and under our other non-capital market debt arrangements to meet our funding needs and believe that we have sufficient sources of liquidity to meet our debt obligations and support our operations over the next 12 months.

Investment Securities Portfolio

We have an investment portfolio of debt securities classified as trading and equity securities, both of which are reported on our consolidated balance sheets at fair value. This portfolio was initially intended to provide an additional source of liquidity. Our debt securities investment portfolio totaled $75 million and $114 million as of August 31, 2025 and May 31, 2025, respectively, reflecting the continued wind-down of this portfolio as we reduce our holdings over time. In September 2025, we sold $13 million of debt securities and recorded an immaterial gain on the sale. Under master repurchase agreements that we have with counterparties, we can obtain short-term funding by selling investment-grade corporate debt securities from our investment portfolio subject to an obligation to repurchase the same or similar securities at an agreed-upon price and date. Because we retain effective control over the transferred securities, transactions under these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a component of our short-term borrowings on our consolidated balance sheets. The aggregate fair value of debt securities underlying repurchase transactions is parenthetically disclosed on our consolidated balance sheets. We had no borrowings under repurchase agreements outstanding as of both August 31, 2025 and May 31, 2025; therefore, we had no debt securities in our investment portfolio pledged as collateral as of each respective date.

Our investment portfolio also included equity securities with a fair value of $12 million and $11 million as of August 31, 2025 and May 31, 2025, respectively, consisting of Farmer Mac Class A common stock, which we exclude from our available liquidity.

We provide additional information on our investment securities portfolio in “Note 3—Investment Securities” of this Report.

Borrowing Capacity Under Various Credit Facilities

The aggregate borrowing capacity under our committed bank revolving line of credit agreements, committed loan facilities under the Guaranteed Underwriter Program and revolving note purchase agreement with Farmer Mac totaled $20,173 million as of both August 31, 2025 and May 31, 2025, and the aggregate amount available for access totaled $7,406 million and $7,363 million as of each respective date. The following is a discussion of our borrowing capacity and key terms and conditions under each of these credit facilities.

Committed Bank Revolving Line of Credit Agreements—Unsecured

Our committed bank revolving lines of credit may be used for general corporate purposes; however, we generally rely on them as a backup source of liquidity for our commercial paper. As of August 31, 2025, the total commitment amount under the three-year facility and the four-year facility was $1,595 million and $1,705 million, respectively, resulting in a combined total commitment amount under the two facilities of $3,300 million. Under our current committed bank revolving line of credit agreements, we have the ability to request up to $300 million of letters of credit, which would result in a reduction in the remaining available amount under the facilities.

Table 19 presents the total commitment amount under our committed bank revolving line of credit agreements, outstanding letters of credit and the amount available for access as of August 31, 2025.

Table 19: Committed Bank Revolving Line of Credit Agreements

(1)Facility fee based on CFC’s senior unsecured credit ratings in accordance with the established pricing schedules at the inception of the related agreement.

We did not have any outstanding borrowings under our committed bank revolving line of credit agreements as of August 31, 2025; however, we had letters of credit outstanding of $7 million under thefour-year committed bank revolving agreement as of this date.

Although our committed bank revolving line of credit agreements do not contain a material adverse change clause or rating triggers that would limit the banks’ obligations to provide funding under the terms of the agreements, we must be in compliance with the covenants to draw on the facilities. We have been and expect to continue to be in compliance with the covenants under our committed bank revolving line of credit agreements. As such, we could draw on these facilities to repay commercial paper that cannot be rolled over.

Guaranteed Underwriter Program Committed Facilities—Secured

Under the Guaranteed Underwriter Program, we can borrow from the FFB and use the proceeds to extend new loans to our members and refinance existing member debt. As part of the program, we pay fees, based on our outstanding borrowings, that are intended to help fund the USDA Rural Economic Development Loan and Grant program and thereby support additional investment in rural economic development projects. The borrowings under this program are guaranteed by RUS. Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the advance.

As displayed in Table 17, we had accessed $9,023 million under the Guaranteed Underwriter Program and up to $1,350 million was available for borrowing as of August 31, 2025. Of the $1,350 million available borrowing amount, $450 million is available for advance through July 15, 2027, $450 million is available for advance through July 15, 2028 and $450 million is available for advance through July 15, 2029. We are required to pledge eligible distribution system loans or power supply system loans as collateral in an amount at least equal to our total outstanding borrowings under the Guaranteed Underwriter Program committed loan facilities, which totaled $6,402 million as of August 31, 2025. In September 2025, we executed a commitment letter for the guarantee by RUS of an additional $450 million loan facility from the FFB under the Guaranteed Underwriter Program.

Farmer Mac Revolving Note Purchase Agreement—Secured

We have a revolving note purchase agreement with Farmer Mac under which we can borrow up to $6,500 million from Farmer Mac at any time, subject to market conditions, through January 14, 2030. The agreement has successive one-year renewals upon sixty days’ notice by CFC, subject to approval by Farmer Mac and Farmer Mac Mortgage Securities Corporation. Pursuant to this revolving note purchase agreement, we can borrow, repay and re-borrow funds at any time through maturity, as market conditions permit, provided the outstanding principal does not exceed the total available under the agreement. Under this agreement, we had outstanding secured notes payable totaling $3,737 million and $3,780 million as of August 31, 2025 and May 31, 2025, respectively. We repaid$43 millionin long-term notes payable under this note purchase agreement with Farmer Mac during Q1 FY2026. As displayed in Table 17, the amount available for borrowing under this agreement was $2,763 million as of August 31, 2025. We are required to pledge eligible electric distribution system or electric power supply system loans as collateral in an amount at least equal to the total principal amount of notes outstanding under this agreement.

We provide additional information on pledged collateral below under “Pledged Collateral” in this section and in “Note 3—Investment Securities” and “Note 4—Loans.”

Short-Term Borrowings

Our short-term borrowings, which we rely on to meet our daily, near-term funding needs, consist of commercial paper, which we offer to members and dealers, select notes and daily liquidity fund notes offered to members, medium-term notes offered to members and dealers and funds from repurchase secured borrowing transactions.

Short-term borrowings decreased to $4,837 million as of August 31, 2025, from $5,091 million as of May 31, 2025, and accounted for 14% and 15%of total debt outstanding as of each respective period.

Table 20 displays the composition, by funding source, of our short-term borrowings as of August 31, 2025 and May 31, 2025. As indicated in Table 20, members’ investments represented 65% and 57% of our outstanding short-term borrowings as of August 31, 2025 and May 31, 2025, respectively.

Table 20: Short-Term Borrowings—Funding Sources

Member investments have historically been our primary source of short-term borrowings. While our short-term member investments increased by $254 million during Q1 FY2026, the outstanding dealer commercial paper decreased by $508 million due to paydowns using the net proceeds from the issuance oflong-term dealer medium-term notes during the period. See “Note 6—Short-Term Borrowings” in this Report for additional information on our short-term borrowings.

Long-Term and Subordinated Debt

Long-term and subordinated debt, which represents the most significant source of our funding, totaled $30,445 million and $29,678 million as of August 31, 2025 and May 31, 2025, respectively, and accounted for 86% and 85% of total debt outstanding as of each respective date. See Table 21 below for a summary of our long-term and subordinated debt issuances and repayments during Q1 FY2026.

The issuance of long-term debt allows us to reduce our reliance on short-term borrowings and effectively manage our refinancing and interest rate risk, due in part to the multi-year contractual maturity structure of long-term debt. Pursuant to Rule 405 of the Securities Act, we are classified as a “well-known seasoned issuer.” Under our effective shelf registration statements filed with the SEC, we may offer and issue the following debt securities:

•an unlimited amount of collateral trust bonds and senior and subordinated debt securities, including medium-term notes, member capital securities and subordinated deferrable debt, until October 2026; and

•daily liquidity fund notes up to $20,000 million in the aggregate—with a $3,000 million limit on the aggregate principal amount outstanding at any time—until March 2028.

Although we register member capital securities and the daily liquidity fund notes with the SEC, these securities are not available for sale to the general public. Medium-term notes are available for sale to both the general public and members. Notwithstanding the foregoing, we have contractual limitations with respect to the amount of senior indebtedness we may incur.

In addition to issuances of unlimited debt in the public capital markets under our shelf registrations discussed above, we also have access to private debt facilities. We had an outstanding balance of $294 million and $298 million of collateral trust bonds issued in a private placement transaction as of August 31, 2025 and May 31, 2025, respectively, which was an unregistered debt offering.

Long-Term Debt and Subordinated Debt—Issuances and Repayments

Table 21 summarizes long-term and subordinated debt issuances and repayments during Q1 FY2026.

Table 21: Long-Term and Subordinated Debt— Issuances and Repayments

(1)Repayments include principal maturities, scheduled amortization payments, repurchases and redemptions.

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

Long-Term and Subordinated Debt—Principal Maturity and Amortization

Table 22 summarizes scheduled principal maturity and amortization of our long-term debt, subordinated deferrable debt and members’ subordinated certificates outstanding as of August 31, 2025, in each fiscal year during the five-year period ending May 31, 2030, and thereafter.

Table 22: Long-Term and Subordinated Debt—Scheduled Principal Maturities and Amortization(1)

(1)Amounts presented are based on the face amount of debt outstanding as of August 31, 2025, and therefore does not include related debt issuance costs and premiums (discounts).

(2)In addition, member loan subordinated certificates totaling $123 million amortize annually based on the unpaid principal balance of the related loan.

Additionally, on September 23, 2025, notice was provided to investors that we will redeem $50 million in principal amount of our $300 million 2043 Notes on October 23, 2025. The 2043 Notes will be redeemed at par plus accrued interest.

We provide additional information on our financing activities under the above section “Consolidated Balance Sheet Analysis—Debt” and in “Note 7—Long-Term Debt” and “Note 8—Subordinated Deferrable Debt” of this Report.

Pledged Collateral

Under our secured borrowing agreements, we are required to pledge loans, investment debt securities or other collateral and maintain certain pledged collateral ratios. Of our total debt outstanding of $35,281 million as of August 31, 2025, $17,036 million, or 48%, was secured by pledged loans totaling $20,092 million. In comparison, of our total debt outstanding of $34,769 million as of May 31, 2025, $17,133 million, or 49%, was secured by pledged loans totaling $20,516 million. The following provides additional information on the collateral pledging requirements for our secured borrowing agreements.

Secured Borrowing Agreements—Pledged Loan Requirements

We are required to pledge loans or other collateral in transactions under our collateral trust bond indentures, bond agreements under the Guaranteed Underwriter Program and note purchase agreement with Farmer Mac. Total debt outstanding is presented on our consolidated balance sheets net of unamortized discounts and issuance costs. Our collateral pledging requirements are based, however, on the face amount of secured outstanding debt, which excludes net unamortized discounts and issuance costs. However, as discussed below, we typically maintain pledged collateral in excess of the required percentage. Under the provisions of our committed bank revolving line of credit agreements, the excess collateral that we are allowed to pledge cannot exceed 150% of the outstanding borrowings under our collateral trust bond 2007 indenture, the Guaranteed Underwriter Program or the Farmer Mac note purchase agreements as of August 31, 2025.

Table 23 displays the collateral coverage ratios pursuant to these secured borrowing agreements as of August 31, 2025 and May 31, 2025.

Table 23: Collateral Pledged

(1)Calculated based on the amount of collateral pledged divided by the face amount of outstanding secured debt.

Table 24 displays the unpaid principal balance of loans pledged for secured debt, the excess collateral pledged and unencumbered loans as of August 31, 2025 and May 31, 2025.

Table 24: Loans—Unencumbered Loans

(1)Represents the unpaid principal balance of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $17 million and $16 million as of August 31, 2025 and May 31, 2025, respectively.

(2)Reflects unpaid principal balance of pledged loans.

(3)If there is an event of default under most of our indentures, we can only withdraw the excess collateral if we substitute cash or permitted investments of equal value.

As displayed above in Table 24, we had excess loans pledged as collateral totaling $2,873 million and $3,196 million as of August 31, 2025 and May 31, 2025, respectively. To ensure that we do not fall below the minimum collateral coverage ratio requirement, we typically pledge loans in excess of the required amount for the following reasons: (i) our distribution and power supply loans are typically amortizing loans that require scheduled principal payments over the life of the loan, whereas the debt securities issued under secured indentures and agreements typically have bullet maturities; (ii) distribution and power supply borrowers have the option to prepay their loans; and (iii) individual loans may become ineligible for various reasons, some of which may be temporary.

We provide additional information on our borrowings, including the maturity profile, below in “Liquidity Risk” and additional information on pledged loans in “Note 4—Loans” in this Report. For additional detail on each of our debt product types, refer to “Note 6—Short-Term Borrowings,” “Note 7—Long-Term Debt,” “Note 8—Subordinated Deferrable Debt” and “Note 9—Members’ Subordinated Certificates” in our 2025 Form 10-K.

Off-Balance Sheet Arrangements

In the ordinary course of business, we engage in financial transactions that are not presented on our consolidated balance sheets or may be recorded on our consolidated balance sheets in amounts that are different from the full contract or notional amount of the transaction. Our off-balance sheet arrangements consist primarily of unadvanced loan commitments intended to meet the financial needs of our members and guarantees of member obligations, which may affect our liquidity and funding requirements based on the likelihood that borrowers will advance funds under the loan commitments or we will be required to perform under the guarantee obligations. We provide information on our unadvanced loan commitments in “Note 4—Loans” and information on our guarantee obligations in “Note 11—Guarantees.”

Projected Near-Term Sources and Uses of Funds

Table 25 below displays a projection of our primary long-term sources and uses of funds, by quarter, over each of thenext six fiscal quarters. Our projection is based on the following, which includes several assumptions: (i) the estimated issuance of long-term debt, including capital market and other non-capital market term debt, is based on our market-risk management goal of minimizing the mismatch between the cash flows from our financial assets and our financial liabilities; (ii) long-term loan scheduled amortization repayment amounts represent scheduled loan principal payments for long-term loans outstanding as of August 31, 2025 and estimated loan principal payments for long-term loan advances, plus estimated prepayment amounts on long-term loans; (iii) long-term and subordinated debt maturities consist of both scheduled principal maturity and amortization amounts and projected principal maturity and amortization amounts on term debt outstanding in each period presented; and (iv) long-term loan advances are based on our current projection of member demand for loans. In addition, amounts available under our committed bank revolving lines of credit, net increases in dealer commercial paper and short-term member investments are intended to serve as a backup source of liquidity.

Table 25: Projected Long-Term Sources and Uses of Funds(1)

(1)The dates presented represent the end of each quarterly period through the quarter ended February 28, 2027.

(2)Anticipated long-term loan repayments include scheduled long-term loan amortizations and anticipated cash repayments at repricing date.

(3)Long-term debt maturities also include expected early redemptions of debt and exclude long-term member medium-term notes maturing over the next 12 months totaling $120 million, as we expect we can continue to roll over our member medium-term notes investments based on our expectation that our members will continue to reinvest their excess cash with us.

As displayed in Table 25, we currently project long-term advances of $3,387 million over the next 12 months, which we project will exceed anticipated long-term loan repayments over the same period of $1,763 million, resulting in net long-term loan growth of approximately $1,624 million over the next 12 months.

The estimates presented above are developed at a particular point in time based on our expected future business growth and funding. Our actual results and future estimates may vary, perhaps significantly, from the current projections, as a result of changes in market conditions, management actions or other factors. In addition to the long-term sources of funds, we have access to short-term funding sources such as member and dealer commercial paper, select notes and daily liquidity fund notes offered to members, and medium-term notes offered to members and dealers, as discussed above.

Credit Ratings

Our funding and liquidity, borrowing capacity, ability to access capital markets and other sources of funds and the cost of these funds are partially dependent on our credit ratings.

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 affirmed CFC’s credit ratings and stable outlook. Table 26 displays our credit ratings as of August 31, 2025, which remain unchanged as of the date of this Report.

Table 26: Credit Ratings

(1)Based on our senior unsecured debt rating.

(2)Applies to our collateral trust bonds.

(3)Applies to our medium-term notes.

See “Credit Risk—Counterparty Credit Risk—Derivative Counterparty Credit Exposure” above for information on credit rating provisions related to our derivative contracts.

Financial Ratios

Our 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 wasprimarily 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.

Our 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 retirements in July 2025.

We provide a more detailed discussion of the debt-to-equity ratio and adjusted debt-to-equity ratio under the section “Non-GAAP Financial Measures and Reconciliations” in this Report.

Debt Covenants

As part of our short-term and long-term borrowing arrangements, we are subject to various financial and operational covenants. If we fail to maintain specified financial ratios, such failure could constitute a default by CFC of certain covenants under our committed bank revolving line of credit agreements and senior debt indentures. We were in compliance with all covenants and conditions under our committed bank revolving line of credit agreements and senior debt indentures as of August 31, 2025.

As discussed above in “Non-GAAP Financial Measures,” the financial covenants set forth in our committed bank revolving line of credit agreements and senior debt indentures are based on adju sted financial measures, including adjusted TIER. We provide a reconciliation of adjusted TIER and other non-GAAP financial measures disclosed in this Report to the most comparable U.S. GAAP financial measures below in “Non-GAAP Financial Measures and Reconciliations.” See “Item 7. MD&A—Non-GAAP Financial Measures and Reconciliations” in our 2025 Form 10-K for a discussion of each of our non-GAAP measures and an explanation of the adjustments to derive these measures.