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 between Q2 FY2026 and Q2 FY2025.

Table 2: Reconciliation of Net Income—Quarter

Q2 FY2026 versus Q2 FY2025—Key Highlights

•Net interest income increased $7 million from Q2 FY2025, driven by an increase in the net interest yield of 3 basis points, or 4%, to 0.77% and an increase in average interest-earning assets of$2,109 million, or 6%.

•We experienced a shift from gains to losses on our derivatives portfolio of $128 million. We recorded derivative losses of $19 million for Q2 FY2026, primarily attributable to declines in the short-term and longer-term swap interest rates during Q2 FY2026. In comparison, we recorded derivative gains of $109 million for Q2 FY2025, attributable to increases in the medium- and longer-term swap interest rates during Q2 FY2025.

•We recorded a shift from gains to losses on our investment securities totaling$3 million, primarily driven by period-to-period market fluctuations in fair value and lower debt security balance due to maturities.

•Operating and other expenses increased by$2 million from Q2 FY2025, driven by higher expenses recorded for salaries and employee benefits.

•We recorded a provision for credit losses of $1 million for Q2 FY2026, a slight increase from Q2 FY2025, primarily driven by an increase in the collective allowance due to the growth in our loan portfolio.

•The decrease in TIER for Q2 FY2026 compared with Q2 FY2025 was driven by the lower net income and higher interest expense. The decline in net income was primarily attributable to our derivative portfolio forward value change as discussed above.

Table 3 below presents a reconciliation of net income (loss) between YTD FY2026 and YTD FY2025.

Table 3: Reconciliation of Net Income (Loss)—YTD

YTD FY2026 versus YTD FY2025—Key Highlights

•Net interest income increased $16 million from YTD FY2025, driven by an increase in the net interest yield of 5 basis points, or 7%, to 0.76% and an increase in average interest-earning assets of $2,166 million, or 6%.

•Losses on our derivatives portfolio decreased $38 million compared to YTD FY2025. We recorded derivative losses of $51 million for YTD FY2026 compared with $89 million for YTD FY2025, driven bydeclines in interest rates across the entire swap curve in both periods, with the rate declines in YTD FY2026 being less pronounced than in YTD FY2025.

•Gains on our investment securities decreased $6 million from YTD FY2025, primarily driven by period-to-period market fluctuations in fair value and lower debt security balance due to maturities.

•Operating and other expenses increased by $6 million from YTD FY2025, driven by higher expenses recorded for salaries and employee benefits and other general and administrative.

•We recorded a provision for credit losses of $3 million and $2 million for YTD FY2026 and YTD FY2025, respectively, primarily driven by increases in the collective allowance due to the growth in our loan portfolio for both the periods.

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

Debt-to-Equity Ratio

The debt-to-equity ratio was 11.58 and 11.20 as of November 30, 2025 and May 31, 2025, respectively. The increase in the debt-to-equity ratio during YTD 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 $24 million for YTD FY2026.

Non-GAAP Adjusted Results

Adjusted Net Income and Adjusted TIER

Table 4 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 4: Adjusted Net Income and Adjusted TIER

Table 5 below presents a reconciliation of adjusted net income between Q2 FY2026 and Q2 FY2025.

Table 5: Reconciliation of Adjusted Net Income—Quarter

Q2 FY2026 versus Q2 FY2025—Key Highlights

•Adjusted net interest income decreased by $2 million from Q2 FY2025, driven by a decrease in the adjusted net interest yield of 8 basis points, or 8%, to 0.95%, partially offset by an increase in average interest-earning assets of $2,109 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 Q2 FY2026 compared with Q2 FY2025 was driven by an increase in adjusted interest expense and a decrease in adjusted net income during Q2 FY2026.

Table 6 below presents a reconciliation of adjusted net income between YTD FY2026 and YTD FY2025.

Table 6: Reconciliation of Adjusted Net Income—YTD

YTD FY2026 versus YTD FY2025—Key Highlights

•Adjusted net interest income decreased by $5 million from YTD FY2025, driven by a decrease in the adjusted net interest yield of 8 basis points, or 8%, to 0.96%, partially offset by an increase in average interest-earning assets of $2,166 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 YTD FY2026 compared with YTD FY2025 was driven by an increase in adjusted interest expense and a decrease in adjusted net income during YTD 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 7.59 and 7.39 as of November 30, 2025 and May 31, 2025, respectively. The increase in the adjusted debt-to-equity ratio during YTD FY2026 was primarily due to an increase in adjusted total debt outstanding resulting from additional borrowings to fund growth in our loan portfolio.

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 $37,842 million as of November 30, 2025, an increase of $762 million, or 2%, from May 31, 2025, reflecting net increases in long-term and line of credit loans of $582 million and $180 million, respectively. Our loan portfolio composition remained largely unchanged from May 31, 2025 with 78% of loans outstanding to CFC distribution borrowers, 16% to CFC power supply borrowers,3%to NCSC electric borrowers, 2% to NCSC telecom borrowers, and 1% to CFC statewide and associate borrowers as of November 30, 2025.

The overall credit quality of our loan portfolio remained strong as of November 30, 2025. We had no loan charge-offs during YTD FY2026 and YTD FY2025. We had one loan totaling $24 million and$26 million classified as nonperforming as of November 30, 2025 and May 31, 2025, respectively. The reduction in the nonperforming loan outstanding was due to a payment received from the borrower during YTD FY2026. Subsequent to the quarter ended November 30, 2025, we received an $11 million payment on this nonperforming loan which reduced its outstanding balance to $13 million.

Our allowance for credit losses was $43 million as of November 30, 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 November 30, 2025 and May 31, 2025.

Financing and Liquidity

Total debt outstanding increased $827 million, or 2%, to $35,596 million as of November 30, 2025, primarily due to borrowings to fund the increase in loans to our members. During YTD FY2026, we issued unsecured long-term dealer medium-term notes totaling $1,725 million, of which $700 million was at a fixed interest rate of 4.15% with a term of three years and $1,025 million was at floating interest rates with an average term of 15 months. In November 2025, we priced a $600 million private placement of fixed-to-fixed reset rate subordinated notes due 2056, consisting of two tranches: $150 million notes that are noncallable for five years and $450 million notes that are noncallable for ten years. We intend to fund $150 million in the third quarter and the remaining $450 million in the fourth quarter of our fiscal year ended May 31, 2026. Subsequent to the quarter ended November 30, 2025, we issued an aggregate principal amount of dealer medium-term notes totaling $1,050 million at an average fixed interest rate of 4.08% with an average term of three years and borrowed $250 million in long-term notes payable under our revolving note purchase agreement with the Federal Agricultural Mortgage Corporation (“Farmer Mac”).

On June 2, 2025, at our request, S&P withdrew its “A-2” short-term issue ratings on CFC’s commercial paper program. During YTD FY2026, Fitch Ratings (“Fitch”) and S&P Global Inc. (“S&P”) affirmed CFC’s credit ratings and stable outlook.

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.

In October 2025, we redeemed $50 million in principal amount of our $300 million subordinated deferrable debt due 2043 (the “2043 Notes”), at par plus accrued interest. In December 2025, weredeemedthe remaining $250 million of the 2043 Notes at par plus accrued interest.

On November 12, 2025, we amended our three-year and four-year committed bank revolving line of credit agreements to

extend the maturity date of each facility by one year and to increase the total commitments by $200 million, resulting in a total commitment amount under the two facilities of$3,500 million.

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 Farmer Mac. As of November 30, 2025, our available liquidity totaled $7,975 million and was $2,515 million less than our total scheduled debt obligations over the next 12 months of $10,490 million, of which $3,358 million, or 32%, represented member short-term investments. In addition to our existing available liquidity, we expect to receive $1,849 million from scheduled long-term loan principal payments over the next 12 months.

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 $3,250 million over the last 12 fiscal quarter-end reporting periods. Our available liquidity as of November 30, 2025 was $843 million in excess of, or 1.1 times over, our total$7,132 million scheduled debt obligations over the next 12 months, excluding member short-term investments.

Outlook

Macroeconomic Outlook

Following its meeting held in December 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 3.50%–3.75%. The FOMC reaffirmed its strong commitment to supporting maximum employment and returning inflation to the 2 percent level. It also noted that reserve balances have declined to ample levels and indicated that it will initiate purchases of shorter-term U.S. Treasury securities as necessary to maintain an adequate supply of reserves on an ongoing basis.

The Federal Reserve’s December 2025 median projection for the annual growth rate of real gross domestic product (“GDP”) in 2026 is 2.3%, up from 1.8% in its September 2025 projection. The median projection for Personal Consumption Expenditures (“PCE”) inflation in 2026 has declined to 2.4% from 2.6% previously. The U.S. unemployment rate in 2026 is projected to average 4.4%, unchanged from its September projection.

Federal funds futures markets anticipate two additional 25 basis point rate cuts in calendar year 2026: one in the second quarter and another in the third quarter. If these rate cuts occur as expected, the federal funds target rate would decline to a range of 3.00%–3.25% by the end of 2026. Overall the market expects short-term 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 November 30, 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 and a slight increase in our adjusted net interest yield over the next 12 months relative to the 12-month period ended November 30, 2025, primarily driven by an increase in interest-earning assets due to projected loan growth and by projected lower adjusted average cost of funding. The projected lower adjusted average cost of funding is driven by the expected decrease in the variable rate debt cost, partially offset by lower expected average yield earned on our interest rate swaps derivative cash settlements and by lower-cost long-term debt maturing in the near term that will need to be refinanced at a forecasted higher interest rate. 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 slight 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 14 years as of November 30, 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$2,095 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.