NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/
For the period ended May 31, 2026. Filed Jul 31, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed Jul 31, 2026
NRUC$19.91+0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2025-05-31; filed 2025-08-05.
0000070502-25-000211
IntroductionNon-GAAP Financial MeasuresExecutive SummaryConsolidated Results of OperationsConsolidated Balance Sheet AnalysisEnterprise Risk ManagementCredit RiskLiquidity RiskMarket RiskOperational RiskCritical Accounting EstimatesRecent Accounting Changes and Other DevelopmentsNon-GAAP Financial Measures and ReconciliationsCurrent report: 10-K
Period ended 2026-05-31; filed 2026-07-31.
0000070502-26-000511
IntroductionNon-GAAP Financial MeasuresExecutive SummaryConsolidated Results of OperationsConsolidated Balance Sheet AnalysisEnterprise Risk ManagementCredit RiskLiquidity RiskMarket RiskOperational RiskCritical Accounting EstimatesRecent Accounting Changes and Other DevelopmentsNon-GAAP Financial Measures and ReconciliationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 474 previous paragraphs and 469 current paragraphs.
268 unchanged; 155 reworded; 37 added; 46 removed; 5 previous and 9 current paragraphs rearranged.
Tables are not compared: 36 previous and 35 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (37)
Current report
•We recorded a benefit for credit losses of $10 million and $8 million for FY2026 and FY2025, respectively, primarily driven by decreases in the asset-specific allowance for a nonaccrual CFC power supply loan due to higher-than-expected payments on this loan during both periods.
Current report
•The increase in TIER for FY2026 compared with FY2025 was primarily driven by higher net income, reflecting changes in the forward value of our derivative portfolio and increased net interest income.
Current report
•Adjusted net interest income increased by $6 million for FY2026 compared with FY2025, driven by an increase in average interest-earning assets of $1,960 million, or 5%, partially offset by a decrease in the adjusted net interest yield of 4 basis points, or 4%, to 0.96%.
Current report
We had one loan that was on nonaccrual status totaling $8 million as of May 31, 2026, which decreased from $26 million as of May 31, 2025, primarily due to loan repayments. Subsequent to FY2026, we received a $3 million payment on this loan, which reduced its outstanding balance to $5 million.
Current report
Our allowance for credit losses and allowance coverage ratio decreased to $30 million and 0.08%, respectively, as of May 31, 2026, from $41 million and 0.11%, respectively, as of May 31, 2025, primarily due to a reduction in the asset-specific allowance. We provide additional information on our allowance for credit losses below under section “Credit Risk—Allowance for Credit Losses” and “Note 5—Allowance for Credit Losses” in this Report.
Current report
•Issued approximately $4,425 million of long-termu nsecured dealer medium-term notes to institutional investors, $600 million of long-term unsecured subordinated notes in a private placement transaction, and $250 million of secured long-term notes under the Farmer Mac revolving note purchase agreement. Additionally, subsequent to FY2026, we issued $300 million of dealer medium-term notes;
Current report
•Redeemed $650 million of high-cost subordinated deferrable debt and recognized $6 million of losses on early extinguishment of debt related to unamortized debt issuance costs in our consolidated statements of operations for FY2026; and
Current report
•Expanded committed liquidity by increasing our bank revolving line of credit agreements by $200 million to$3,500 million while also extending maturities by one year and adding a new$450 million committed loan facility with the U.S. Treasury Department’s Federal Financing Bank (“FFB”) under the USDA Guaranteed Underwriter Program (“Guaranteed Underwriter Program”), bringing available capacity under the Guaranteed Underwriter Program to $1,800 million.
Current report
As of May 31, 2026, available liquidity totaled $8,161 million. While this was $1,601 million less than our $9,762 million of scheduled debt obligations over the next 12 months, 29% of those obligations, or $2,821 million, represented member short-term investments, which historically remained stable and are expected to be reinvested with CFC. Excluding member short-term investments, available liquidity exceeded by $1,220 million, or 1.2 times, our scheduled 12-month debt obligations. We also expect to receive $2,184 million of scheduled long-term loan principal payments over the next 12 months. We provide additional information on our available liquidity and financing activities under “Liquidity Risk” in this Report.
Current report
Emerging developments and trends in the electric cooperative sector continue to present both opportunities and challenges for our electric cooperative members and influence the demand for capital and credit products we provide. Key trends include the changing federal regulatory and financing landscape, increased electricity demand and large-load development, significant generation and transmission capital investment, supply chain and equipment constraints, and continued focus on grid reliability and resiliency.
Current report
Geopolitical tensions, including the ongoing conflict with Iran, have contributed to uncertainty in the broader macroeconomic environment, including volatility in energy markets and continued concerns regarding inflation and interest rates. Although CFC has not identified a material direct impact of these developments on its financial condition, results of operations or liquidity as of the date of this report, a prolonged period of geopolitical instability could contribute to higher borrowing costs, increased operating and capital costs for CFC’s members, and broader market volatility. CFC continues to monitor these developments and the potential effects on the interest rate environment, capital markets and member operating conditions.
Current report
Following its meeting held in June 2026, the Federal Open Market Committee of the Federal Reserve held the federal funds rate range unchanged at 3.50% to 3.75% and reaffirmed its commitment to maintaining an ample-reserves operating regime. The Committee characterized economic activity as expanding at a solid pace, although uncertainty remained elevated. Job gains have kept pace with labor force growth, and the unemployment rate has changed little. Inflation remained elevated, reflecting, in part, supply shocks in certain sectors, including energy. The Committee also cited developments in the Middle East as contributing to elevated uncertainty regarding the economic outlook.
Current report
The Federal Reserve’s June 2026 median projection for real gross domestic product (“GDP”) growth in 2026 is 2.2%, down from 2.4% in its March 2026 projection. The median projection for Personal Consumption Expenditures inflation in 2026 increased to 3.6% from 2.7% in its March 2026 projection. The U.S. unemployment rate in 2026 is projected to average 4.3%, down slightly from 4.4% in its March 2026 projection. The median projection for the federal funds rate at the end of 2026 is 3.8%.
Current report
In June 2026, fed funds futures no longer implied an easing path and instead market pricing implied a roughly flat to modestly higher rate trajectory. Therefore, futures contracts implied the likelihood of a 25-basis-point increase in the federal funds rate over the following 12 months. Overall, implied market forecasts point to an increase in short-term interest rates, while consensus forecasts indicate a slight decline in long-term interest rates through the first half of calendar year 2027.
Current report
•An increase in our adjusted net interest income and a slight decline in the adjusted net interest yield over the next 12 months relative to the 12-month period ended May 31, 2026. The projected increase in adjusted net interest income is primarily driven by an increase in interest-earning assets due to projected loan growth. The projected slight decline in adjusted net interest yield is primarily due to the higher projected adjusted average cost of funding, attributable to changes in funding mix and the refinancing of maturing lower-cost long-term debt at forecasted higher interest rates, as well as lower expected interest rate swaps derivative cash settlement interest income. See “Market Risk—Interest Rate Risk Assessment” in this Report for an additional discussion.
Current report
(6)Other includes the average balance of lease liabilities and the interest expense for our finance leases.
Current report
(7)Subordinated deferrable debt represents unsecured obligation issued to investors in the capital markets, including those issued through both public offerings and private placement transactions.
Current report
Reported net interest income of $302 million for FY2026 increased by $41 million, or 16%, from FY2025, driven by a combined impact of an increase in average interest-earning assets of $1,960 million, or 5%, and an increase in the net interest yield of 7 basis points, or 10%, to 0.79%.
Current report
Table 7 presents the components of non-interest income (loss) recorded in our consolidated statements of operations.
Current report
(1)During FY2026, in connection with the redemption of our subordinated deferrable debt due 2043 (the “2043 Notes”), we terminated $300 million in notional amount of our pay-fixed interest rate swaps hedging the 2043 Notes. The termination resulted in an immaterial amount of settlement gains recorded in derivative gains (losses) in our consolidated statements of operations. See “Note 8—Subordinated Deferrable Debt” for details on the redemption of the 2043 Notes.
Current report
The increase in loans to members of $1,342 million, or 4%, from May 31, 2025, was primarily attributable to the growth in long-term loans, which increased $1,310 million during FY2026.
Current report
(1)Amount is presented net of unamortized discounts, premiums and issuance costs as applicable.
Current report
(2)Amount includes medium-term notes issued to both institutional and retail investors in the capital markets.
Current report
Total equity increased $209 million to $3,312 million as of May 31, 2026, compared with May 31, 2025, attributable to our reported net income of $263 million for FY2026, partially offset by the CFC Board of Directors’ authorized patronage capital retirements of $53 million during FY2026.
Current report
We had one loan to a CFC electric power supply borrower of $8 million and $26 million that was on nonaccrual status, which represented 0.02% and 0.07% of total loans outstanding as of May 31, 2026 and 2025, respectively. The decrease in this outstanding loan balance primarily reflected $18 million of payments received during FY2026. Subsequent to FY2026, we received a$3 million payment on this loan, which reduced its outstanding balance to $5 million. We discuss our policy for when a loan is placed on nonaccrual status under “Note 1—Summary of Significant Accounting Policies.”
Current report
We recorded an immaterial charge-off of $0.3 million related to a CFC electric power supply loan during FY2026. We had no charge-offs in FY2025. Over the past five years, we had three borrower defaults resulting in $14 million of charge-offs. Our electric utility loan portfolio has historically experienced low levels of credit losses, as discussed below.
Current report
As presented in Table 20 and 21 above, our available liquidity increased by $549 million, or 7%, compared with May 31, 2025. The increase was driven by a $450 million increase in Guaranteed Underwriter Program committed facilities, a $200 million increase resulting from amendments to our committed bank revolving line of credit agreements, a $31 million net increase in cash and investment debt securities balances, partially offset by a $132 million decrease in available amount under the Farmer Mac revolving note purchase agreement. However, the increase in available liquidity was outweighed by a larger increase in debt scheduled to mature within the next 12 months, resulting in a decline in our liquidity coverage ratio from 0.87 as of May 31, 2025 to 0.84 as of May 31, 2026.
Current report
During FY2026, we redeemed $650 million in aggregate principal amount of our subordinated deferrable debt, including $300 million of notes due 2043 and $350 million of notes due 2046. The notes were redeemed at par plus accrued interest. As a result, we recognized $6 million of losses on early extinguishment of debt related to unamortized debt issuance costs for these notes in our consolidated statements of operations for FY2026.
Current report
(3)Amount includes medium-term notes issued to both institutional and retail investors in the capital markets.
Current report
(4)Amount includes the subordinated deferrable debt issued to investors through both public offerings and private placement transactions.
Current report
•A slight decline in the adjusted net interest yield over the next 12 months relative to the 12-month period ended May 31, 2026, primarily due to the higher projected adjusted average cost of funding, attributable to changes in funding mix and the refinancing of maturing lower-cost long-term debt at forecasted higher interest rates, as well as lower expected interest rate swaps derivative cash settlement interest income.
Current report
•exclude from total debt outstanding, and add to total equity, 100% of members’ subordinated certificates;
Current report
•exclude from total debt outstanding, and add to total equity, 50% of subordinated deferrable debt; and
Removed paragraphs (46)
Previous report
•We recorded a benefit for credit losses of $8 million for FY2025, resulting primarily from a decrease in the asset-specific allowance for a nonperforming loan attributable to higher actual than expected payments received on this loan during FY2025. In comparison, we recorded a benefit for credit losses of $5 million for FY2024, resulting primarily from a decrease in the asset-specific allowance, partially offset by an increase in the collective allowance due to loan portfolio growth.
Previous report
•The decrease in TIER for FY2025 compared with FY2024 was driven by the combined impact of a decrease in net income primarily attributable to our derivative portfolio forward value change as discussed above and an increase in interest expense during FY2025.
Previous report
•Adjusted net interest income decreased by $21 million for FY2025 compared with FY2024, driven by a decrease in the adjusted net interest yield of 11 basis points, or 10%, to 1.00%, partially offset by an increase in average interest-earning assets of $1,772 million, or 5%.
Previous report
We had one loan totaling $26 million and $49 million classified as nonperforming as of May 31, 2025 and 2024, respectively. The reduction in the nonperforming loan was due to payments received on this loan during FY2025.
Previous report
•Unsecured long-term dealer medium-term notes totaling approximately $2,400 million, of which $1,800 million was at a weighted average fixed interest rate of 4.65% with an average term of four years, and $600 million was at floating interest rates with an average term of two years; and
Previous report
•Secured long-term debt totaling $1,450 million at a weighted average fixed interest rate of 4.94% with an average term of 16 years.
Previous report
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 Guaranteed Underwriter Program of the United
Previous report
States Department of Agriculture (“USDA”) (the “Guaranteed Underwriter Program”), and a revolving note purchase agreement with Federal Agricultural Mortgage Corporation (“Farmer Mac”). As of May 31, 2025, our available liquidity totaled $7,612 million andwas $1,158 million less than our total scheduled debt obligations over the next 12 months of $8,770 million. In addition to our existing available liquidity, we expect to receive $1,668 million from scheduled long-term loan principal payments over the next 12 months.
Previous report
Emerging developments and trends in the electric cooperative sector continue to present opportunities as well as challenges for our electric cooperative members. These trends include (i) changing federal government programs and policies for electric utilities; (ii) increased electricity demand; (iii) grid reliability risk; and (iv) expanded investments by many electric cooperatives to deploy broadband services.
Previous report
Following the 2024 election, the new Administration and Congress are changing policies related to the electric utility industry. Congress previously created various funding opportunities that electric cooperatives may take advantage of when deploying renewable energy and other clean energy technologies through the 2022 Inflation Reduction Act (“IRA”), Congress recently passed the One Big Beautiful Bill Act, which significantly reduces federal incentives for renewable energy development. These changes are expected to make it more challenging for electric cooperatives to affordably expand renewable energy generation within their portfolios. In contrast, incentives for technologies such as battery storage and carbon capture remain largely unchanged. Congress is also attempting to pass permitting reform, which will streamline the permitting process and reduce costs of grid infrastructure improvements.
Previous report
The federal government is undergoing a deregulatory push that seeks to reduce the amount of federal review and other requirements for grid investments. For example, the Environmental Protection Agency (“EPA”) is in the process of revising greenhouse gas emission requirements for new and existing coal and natural gas power plants. This may impact coal plant retirement schedules and provide certainty surrounding building new natural gas plants to meet growing electricity demand. The Administration is assessing the Federal Emergency Management Agency (“FEMA”), including how to improve efficiencies and the appropriate role of federal and state governments in the allocation and distribution of disaster relief. Finally, the Administration is in the process of introducing tariffs on imported goods in order to improve the trade deficit and boost domestic manufacturing. Certain utility assets, such as transformers, solar panels and batteries, are highly sensitive to global supply chain changes. While tariffs may increase short-term costs and lead times for key assets, they may also catalyze long-term supply chain resilience and encourage domestic manufacturing of utility assets. CFC and electric cooperative partners are monitoring the potential impact to cooperatives of these evolving changes in federal policy.
Previous report
According to S&P Global Inc., electricity demand is forecasted to grow substantially in all U.S. regions through 2040. Demand growth is driven primarily by new data centers and new manufacturing facilities in the coming decade followed by electric vehicle growth and beneficial electrification trends. The rapid expansion of artificial intelligence and cloud computing technologies is the primary driver of new data center construction, further accelerating electricity demand.
Previous report
Rural electric cooperatives have become increasingly supportive of beneficial electrification, which refers to the replacement of fossil fuel-powered systems with electrical ones, such as electric vehicles and heat pumps, in a way that reduces overall emissions, while providing benefits to the environment and to households. The increased support among electric cooperatives reflects an expectation that beneficial electrification will result in increased sales, while also saving money for members and reducing carbon emissions.
Previous report
Certain areas of the country will experience more growth than others, but we can expect significant investments in new power supply, transmission and other related infrastructure in order to meet this expected demand.
Previous report
The 2024 Long-Term Reliability Assessment by the North American Electric Reliability Corporation (“NERC”) highlights the key risks to grid reliability. The report emphasizes challenges such as increased electricity demand and retirements of baseload power plants. It also highlights the risk of the transition to renewable energy sources, which presents reliability concerns due to their intermittent nature during a period of increased electricity demand.
Previous report
Other grid reliability risks include extreme weather events, including hurricanes, winter storms and heat waves, which can strain grid infrastructure and cause widespread outages. We have observed an increase in capital investments by electric cooperatives to proactively strengthen existing electric systems as well as replace systems in the aftermath of damage from weather-related incidents. The adverse impact on electric systems from weather-related incidents has resulted in a heightened awareness by electric cooperatives of the need to focus attention on making infrastructure upgrades to improve both the resiliency and reliability of electric systems. Cybersecurity threats also loom large, with increasing sophistication in attacks targeting critical infrastructure. Electric cooperatives are investing in operational resilience, including workforce training, cybersecurity preparedness and enhanced situational awareness tools.
Previous report
We believe the above trends and current investment priorities of our electric cooperative members will require funding and may result in an increased demand for capital from CFC.
Previous report
Following its meeting held in June 2025, the Federal Open Market Committee (“FOMC”) of the Federal Reserve kept its target for the federal funds rate unchanged at a range of 4.25%–4.50%. The FOMC reiterated that (i) the U.S. economy continues to expand at a solid pace, (ii) the unemployment rate remains low and (iii) inflation remains somewhat elevated. The Federal Reserve’s June 2025 median projection for gross domestic product (“GDP”) annual growth rate in 2025 is 1.4%, down from 1.7% in March 2025. Its median projection for Personal Consumption Expenditures (“PCE”) inflation in 2025 is at 3.0%, up from 2.7% in March 2025, and for U.S. unemployment in 2025 is 4.5%, up from 4.4% in March 2025. As of June 2025, federal funds futures markets anticipated three 25 basis point rate cuts: one in the fourth quarter of 2025, another in the first quarter of 2026 and a final one in the second quarter of 2026. This would bring the target rate range to 3.50%–3.75% by mid-2026. Overall, the market expects interest rates to decline, with a steepening yield curve ahead.
Previous report
•A slight decrease in adjusted net interest yield over the next 12 months, primarily due to the current shape of the yield curve, 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 debt maturing in the near term will need to be refinanced at a forecasted higher interest rate. See “Market Risk—Interest Rate Risk Assessment” in this Report for an additional discussion.
Previous report
Adjusted net interest income of $360 million for FY2025 decreased by$21 million, or 6%, from FY2024, driven by a decrease in the adjusted net interest yield of 11 basis points, or 10%, to 1.00%, partially offset by an increase in average interest-earning assets of $1,772 million, or 5%.
Previous report
Table 7 presents the components of non-interest income recorded in our consolidated statements of operations.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
We classify loans as nonperforming at the earlier of the date when we determine: (i) interest or principal payments on the loan are past due 90 days or more; (ii) as a result of court proceedings, the collection of interest or principal payments based on the original contractual terms is not expected; or (iii) the full and timely collection of interest or principal is otherwise uncertain. Once a loan is classified as nonperforming, we generally place the loan on nonaccrual status. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed against earnings.
Previous report
We had a loan to one CFC electric power supply borrower of $26 million and $49 million classified as nonperforming, which represented 0.07% and 0.14% of total loans outstanding as of May 31, 2025 and 2024, respectively. The reduction in the nonperforming loan was due to payments received on this nonperforming loan during FY2025.
Previous report
We had no charge-offs during FY2025 and FY2024. We recorded $1 million in net loan recoveries to previously charged-off loan amounts related to two CFC electric power supply loans during FY2024. Prior to the two CFC electric power supply loan defaults in fiscal years 2021 and 2022, we had not experienced any defaults or charge-offs in our electric utility and telecommunications loan portfolios since fiscal years 2013 and 2017, respectively.
Previous report
We believe we can continue to roll over our member short-term investments of $2,885 million as of May 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 aver aged $3,363 million over the last 12 fiscal quarter-end reporting periods. Our avai lable liquidity as of May 31, 2025 was $1,727 million in excess of, or 1.3 times over, our total $5,885 million scheduled debt obligations over the next 12 months, excluding member short-term investments. In addition, we expect to receive $1,668 million from scheduled long-term loan principal payments over the next 12 months. While our available liquidity increased by $917 million, or 14% as of May 31, 2025 compared to the prior year, the decline in the liquidity coverage ratio was primarily driven by an increase in debt scheduled to mature over the next 12 months. This was largely due to increased dealer commercial paper issuances to support substantial growth in line of credit loans activity, as well as higher volume of upcoming long-term debt maturities over the next 12 months.
Previous report
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. Our debt securities investment portfolio totaled $114 million and $281 million as of May 31, 2025 and 2024, respectively, and is intended to serve as an additional source of liquidity. 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 May 31, 2025 and 2024; therefore, we had no debt securities in our investment portfolio pledged as collateral as of each respective date.
Previous report
(1)Advanced under the revolving note purchase agreement with Farmer Mac dated March 24, 2011. See “Note 7—Long-Term Debt” in this Report for additional information on this revolving note purchase agreement with Farmer Mac.
Previous report
Member investments have historically been our primary source of short-term borrowings. The decrease in short-term member investments of $443 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. Dealer commercial paper outstanding increased to $2,206 million as of May 31, 2025 from $505 million as of May 31, 2024, due to issuances to fund our loan portfolio growth. See “Note 6—Short-Term Borrowings” in this Report for additional information on our short-term borrowings.
Previous report
On November 1, 2024, we entered into an agency agreement with InspereX LLC, Citigroup Global Markets Inc., RBC Capital Markets, LLC and Wells Fargo Clearing Services, LLC, as agents, to launch a program through which we may offer and sell, from time to time, an unlimited aggregate principal amount of our subordinated deferrable interest notes. On November 1, 2024, we filed a prospectus supplement with the U.S. Securities and Exchange Commission (“SEC”) related to these subordinated notes, which are issued under our effective shelf registration statement filed with the SEC in October 2023.
Previous report
These subordinated notes are unsecured and rank subordinate in right of payment to all of our current and future senior indebtedness. The subordinated notes are senior to our members’ subordinated certificates and rank equal in right of payment and upon liquidation to our outstanding subordinated deferrable debt and any other equally ranked subordinated notes we may issue. During FY2025, we issued an aggregate principal amount of $44 million in subordinated notes that mature in 30 years under this new program.
Previous report
(2)In December 2024, our committed bank revolving line of credit agreements were amended to exclude collateral pledged under the collateral trust bonds 1994 indenture from the maximum coverage ratio required under the agreements. The required maximum coverage ratio was 150% prior to the amendments.
Showing the first 40 of 46 passages. Open the source sections for the rest.
Reworded paragraphs (155)
Previous wording
Our financial statements include the consolidated accounts of CFC and NCSC. Our principal operations are currently organized for management reporting purposes into two business segments, which are based on the accounts of each of the legal entities included in our consolidated financial statements: CFC and NCSC. We provide information on the business structure, mission, principal purpose and core business activities of each of these entities under “Item 1. Business.” Unless stated otherwise, references to “we,” “our” or “us” relate to CFC and its consolidated entities.
Current wording
We provide information on the business structure, mission, principal purpose and core business activities of each of these entities under “Item 1. Business.”
Previous wording
Our reported financial results are determined in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) and are subject to period-to-period volatility due to changes in market conditions and differences in the way our financial assets and liabilities are accounted for under U.S. GAAP. Our financial assets and liabilities expose us to interest-rate risk, therefore we use derivatives, primarily interest rate swaps, to economically hedge and manage the interest-rate sensitivity mismatch between our financial assets and liabilities. We are required under U.S. GAAP to carry derivatives at fair value on our consolidated balance sheets; however, the financial assets and liabilities for which we use derivatives to economically hedge are carried at amortized cost. Changes in interest rates and the shape of the swap curve result in periodic fluctuations in the fair value of our derivatives, which may cause volatility in our earnings because we do not apply hedge accounting for our interest rate swaps. As a result, the mark-to-market changes in our interest rate swaps are recorded in earnings. The majority of our derivative portfolio consists of pay-fixed swaps with longer maturities, leading to derivative losses when interest rates decline and derivative gains when interest rates rise. This earnings volatility generally is not indicative of the underlying economics of our business, as the derivative forward fair value gains or losses recorded each period may or may not be realized over time, depending on the terms of our derivative instruments and future changes in market conditions that impact the periodic cash settlement amounts of our interest rate swaps.
Current wording
Our reported financial results are determined in conformity with U.S. GAAP and are subject to period-to-period volatility due to changes in market conditions and differences in the way our financial assets and liabilities are accounted for under U.S. GAAP. Our financial assets and liabilities expose us to interest-rate risk, therefore we use derivatives, primarily interest rate swaps, to economically hedge and manage the interest-rate sensitivity mismatch between our financial assets and liabilities. We are required under U.S. GAAP to carry derivatives at fair value on our consolidated balance sheets; however, the financial assets and liabilities for which we use derivatives to economically hedge are carried at amortized cost. Changes in interest rates and the shape of the swap curve result in periodic fluctuations in the fair value of our derivatives, which may cause volatility in our earnings because we do not apply hedge accounting for our interest rate swaps. As a result, the mark-to-market changes in our interest rate swaps are recorded in earnings. The majority of our derivative portfolio consists of pay-fixed swaps with longer maturities, leading to derivative losses when interest rates decline and derivative gains when interest rates rise. This earnings volatility generally is not indicative of the underlying economics of our business, as the derivative forward fair value gains or losses recorded each period may or may not be realized over time, depending on the terms of our derivative instruments and future changes in market conditions that impact the periodic cash settlement amounts of our interest rate swaps.
Previous wording
U.S. GAAP financial measures are net income, net interest income, interest expense, net interest yield, TIER, debt-to-equity ratio and CFC equity, respectively. The primary adjustments we make to calculate these non-GAAP financial measures consist of (i) adjusting interest expense and net interest income to include the impact of net periodic derivative cash settlements income (expense) amounts; (ii) adjusting net income and total equity to exclude the non-cash impact of the accounting for derivative financial instruments; (iii) adjusting total debt outstanding to exclude members’ subordinated certificates and 50% of the subordinated deferrable debt; (iv) adjusting total equity to include members’ subordinated certificates and 50% of the subordinated deferrable debt, and exclude cumulative derivative forward value gains (losses) and the amounts of accumulated other comprehensive income (loss) (“AOCI”); and (v) adjusting CFC equity to exclude derivative forward value gains (losses) and AOCI.
Current wording
Therefore, management uses non-GAAP financial measures, which we refer to as “adjusted” measures, to evaluate financial performance. Our key non-GAAP financial measures are adjusted net income, adjusted net interest income, adjusted interest expense, adjusted net interest yield, adjusted TIER, adjusted debt-to-equity ratio and members’ equity. The most comparable U.S. GAAP financial measures are net income, net interest income, interest expense, net interest yield, TIER, debt-to-equity ratio and CFC equity, respectively. The primary adjustments we make to calculate these non-GAAP financial measures consist of (i) adjusting interest expense and net interest income to include the impact of net periodic derivative cash settlements income (expense) amounts; (ii) adjusting net income and total equity to exclude the non-cash impact of the accounting for derivative financial instruments; (iii) adjusting total debt outstanding to exclude members’ subordinated certificates and 50% of the subordinated deferrable debt; (iv) adjusting total equity to include members’ subordinated certificates and 50% of the subordinated deferrable debt, and exclude cumulative derivative forward value gains (losses), historical foreign currency translation adjustments, and the amounts of accumulated other comprehensive income (loss) (“AOCI”); and (v) adjusting CFC equity to exclude derivative forward value gains (losses), historical foreign currency
Previous wording
•A shift to losses from gains was recorded on our derivatives portfolio of $398 million, as we recorded derivative losses of $6 million for FY2025, primarily attributable to decreases in interest rates across the swap curve, with the exception of the 30-year swap rate, which increased slightly during FY2025. In comparison, we recorded derivative gains of $392 million for FY2024, primarily due to increases in the medium- and longer-term swap interest rates during FY2024.
Current wording
•A shift to gains from losses was recorded on our derivatives portfolio of $88 million, as we recorded derivative gains of $82 million for FY2026, primarily attributable to increases in the medium- and longer-term swap interest rates during FY2026. In comparison, we recorded derivative losses of $6 million for FY2025, attributable to decreases in interest rates across the swap curve, with the exception of the 30-year swap rate, which increased slightly during FY2025.
Previous wording
•Net interest income increased by $7 million, attributable to an increase in average interest-earning assets of $1,772 million, or 5%, partially offset by a decrease in the net interest yield of 2 basis points, or 3%, to 0.72%.
Current wording
•Net interest income increased by $41 million, attributable to an increase in average interest-earning assets of $1,960 million, or 5%, and an increase in the net interest yield of 7 basis points, or 10%, to 0.79%.
Previous wording
•Operating and other expenses increased by $21 million for FY2025 compared with FY2024, primarily driven by higher expenses recorded for salaries and employee benefits, general and administrative, and an impairment loss of $8 million on an equity investment.
Current wording
•Operating and other expenses increased by $9 million for FY2026 compared with FY2025, prima rily driven by higher expenses recorded for salaries and employee benefits, general and administrative, and losses on early extinguishment of debt, partially offset by lower impairment loss, as FY2025 included an $8 million impairment loss on an equity investment.
Previous wording
•Gains recorded on our investment securities decreased by $5 million, primarily due to period-to-period market fluctuations in fair value.
Current wording
•Gains recorded on our investment securities decreased by $5 million, primarily due to period-to-period market fluctuations in fair value, including both realized and unrealized gains (losses), and lower balances of debt securities resulting from maturities.
Previous wording
Our debt-to-equity ratio under the revised methodology was 11.20 and 10.86 as of May 31, 2025 and 2024, respectively. The increase in the debt-to-equity ratio during FY2025 was due to an increase in debt to fund loan growth, partially offset by an increase in total equity. The increase in total equity was primarily due 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 in July 2024.
Current wording
The debt-to-equity ratio was 10.85 and 11.20 as of May 31, 2026 and 2025, respectively. The decrease in the debt-to-equity ratio during FY2026 was due to an increase in total equity, partially offset by an increase in debt to fund loan growth. The increase in total equity was primarily due to our reported net income of $263 million for FY2026, partially offset by the CFC Board of Directors’ authorized patronage capital retirement of $53 million in July 2025.
Previous wording
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.” See “Item 7. MD&A—Consolidated Results of Operations” in our 2024 Form 10-K for a comparative discussion of our consolidated results of operations between FY2024 and FY2023.
Current wording
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.” See “Item 7. MD&A
Previous wording
•We discuss the variances in the other components above under our net income key highlights.
Current wording
•We discuss the variances in the other components above under the section “Reported Results—Net Income and TIER—FY2026 versus FY2025—Key Highlights.”
Previous wording
•The decrease in adjusted TIER for FY2025 compared with FY2024 was primarily driven by the increased adjusted interest expense and operating and other expenses during FY2025.
Current wording
•The slight decrease in adjusted TIER for FY2026 compared with FY2025 was primarily driven by the slight decrease in adjusted net income during FY2026 driven by higher operating expense.
Previous wording
During FY2025, we refined our methodology for calculating the adjusted debt-to-equity ratio. Consequently, we revised our internally established adjusted debt-to-equity threshold from 6-to-1 to 8.5-to-1. The adjusted debt-to-equity ratio under the revised methodology was 7.39 and 7.27 as of May 31, 2025 and 2024, respectively. The increase in the adjusted debt-to-equity ratio during FY2025 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 a combined impact of our adjusted net income of $245 million for FY2025 and issuances of subordinated deferrable debt during FY2025, partially offset by a decrease in equity of $47 million attributable to the CFC Board of Directors’ authorized patronage capital retirement in July 2024, as discussed above.
Current wording
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 7.46 and 7.39 as of May 31, 2026 and 2025, respectively. The increase in the adjusted debt-to-equity ratio during 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 driven by our adjusted net income of $245 million for FY2026, partially offset by net decreases in members’ subordinated certificates and subordinated deferrable debt, as well as a $53 million reduction in equity resulting from the CFC Board of Directors’ authorized patronage capital retirements in July 2025.
Previous wording
We provide a more detailed discussion of the revised 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.
Current wording
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.
Previous wording
Loans to members totaled $37,080 million as of May 31, 2025, an increase of $2,538 million, or 7%, from May 31, 2024, reflecting 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 recovery costs for Hurricane Helene, which impacted the Southeastern United States in September 2024. The remaining 22% was primarily attributable to funding provided for member working capitaland NCSC renewable project financing. Our loan portfolio composition remained largely unchanged from May 31, 2024 with 79% of loans outstanding to CFC distrib ution borrowers,16% to CFC power supply borrowers,3%to NCSC electric borrowers and 2% to NCSC telecom borrowers as of May 31, 2025.
Current wording
Loans to members totaled $38,422 million as of May 31, 2026, an increase of $1,342 million, or 4%, from May 31, 2025, driven primarily by growth in long-term loans, which increased $1,310 million during FY2026. Our loan portfolio composition remained largely unchanged from May 31, 2025 with 78% of loans outstanding to CFC distribution borrowers, 17% to CFC power supply borrowers, 3% to NCSC electric borrowers and 2% to NCSC telecom borrowers as of May 31, 2026.
Previous wording
The overall credit quality of our loan portfolio remained strong as of May 31, 2025. We had no loan charge-offs during FY2025 and FY2024. We recorded $1 million in net loan recoveries to previously charged-off loan amounts during FY2024.
Current wording
The overall credit quality of our loan portfolio remained strong as of May 31, 2026. We recorded an immaterial charge-off of $0.3 million related to a CFC electric power supply loan during FY2026. We had no loan charge-offs during FY2025.
Previous wording
Total debt outstanding increased by $2,051 million, or 6%, to $34,769 million as of May 31, 2025, compared with May 31, 2024, primarily due to borrowings to fund the increase in loans to our members. During FY2025, we issued:
Current wording
Total debt outstanding increased by $1,175 million, or 3%, to $35,944 million as of May 31, 2026, compared with May 31, 2025, primarily due to borrowings to fund the increase in loans to our members. During FY2026, substantially all of our new long-term debt issuances were unsecured as we continued to access diverse funding sources and strengthen our liquidity position, including:
Previous wording
During FY2025, Moody’s Investors Service (“Moody’s”), Fitch Ratings (“Fitch”) and S&P Global Inc.(“S&P”) affirmed CFC’s credit ratings and stable outlook. 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 long-term issue ratings are unchanged as of the date of this Report.
Current wording
During FY2026, Moody’s, Fitch and S&P each affirmed CFC’s credit ratings and stable outlook.
Previous wording
Electric Cooperative Industry Trends and Developments
Current wording
These trends may affect the timing, size and type of financing our members require. Federal financing programs, including traditional RUS electric loan programs and the New ERA and PACE programs, remain important sources of capital for electric cooperatives; however, timing gaps between award, approval and disbursement are expected to continue to generate demand for interim and bridge financing from CFC. In addition, continued investment in generation, transmission, system hardening and grid modernization may increase demand for capital from CFC. Management does not believe data center-related development has, to date, materially contributed to recent loan growth, although successful large-load project development could drive significant future infrastructure investment and corresponding demand for capital from CFC. For a more detailed discussion of these industry trends, see“Item 1. Business—Industry—Electric Cooperative Industry Trends and Developments.”
Previous wording
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 May 31, 2025. See “Market Risk—Interest Rate Risk Assessment” for an additional discussion.
Current wording
Based on our current forecast assumptions, including the interest rates 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 May 31, 2026. See “Market Risk—Interest Rate Risk Assessment” for an additional discussion.
Previous wording
•A decrease in our adjusted net income over the next 12 months, primarily due to an increase in projected operating expenses.
Current wording
•A decrease in our adjusted net income over the next 12 months, primarily driven by higher projected operating expenses.
Previous wording
•A decrease in adjusted TIER over the next 12 months, primarily attributable to increases in projected adjusted interest expense and operating expenses.
Current wording
•A decrease in adjusted TIER over the next 12 months, primarily attributable to projected higher operating expenses.
Previous wording
•An increase in our adjusted debt-to-equity, primarily due to the projected increase in total debt outstanding to fund anticipated growth in our loan portfolio.
Current wording
•Adjusted debt-to-equity to remain near current levels, as the projected increase in total debt outstanding to fund anticipated growth in our loan portfolio is offset by the projected increase in adjusted equity attributable to the forecasted adjusted net income over the next 12 months.
Previous wording
As stated above, we exclude the impact of unrealized derivative forward fair value gains and 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 May 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.
Current wording
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 15 years as of May 31, 2026, 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.
Previous wording
Based on our current forecast assumptions, we anticipate net loan growth of $2,059 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.
Current wording
Based on our current forecast assumptions, we anticipate net loan growthof $1,253 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.
Previous wording
This section provides a comparative discussion of our consolidated results of operations between FY2025 and FY2024. Following this section, we provide a discussion and analysis of material changes in amounts reported on our consolidated balance sheet as of May 31, 2025 and 2024. You should read these sections together with our “Executive Summary—Outlook” where we discuss trends and other factors that we expect will affect our future results of operations. See “Item 7. MD&A—Consolidated Results of Operations” in our 2024 Form 10-K for a comparative discussion of our consolidated results of operations between FY2024 and FY2023.
Current wording
This section provides a comparative discussion of our consolidated results of operations between FY2026 and FY2025. Following this section, we provide a discussion and analysis of material changes between amounts reported on our consolidated balance sheet as of May 31, 2026 and 2025. You should read these sections together with our “Executive Summary—Outlook” where we discuss trends and other factors that we expect will affect our future results of operations. See “Item 7. MD&A—Consolidated Results of Operations” in our 2025 Form 10-K for a comparative discussion of our consolidated results of operations between FY2025 and FY2024.
Previous wording
Net interest income, which is our largest source of revenue, represents the difference between the interest income earned on our interest-earning assets and the interest expense on our interest-bearing liabilities. Our net interest yield represents the difference between the yield on our interest-earning assets and the cost of our interest-bearing liabilities plus the impact of non-interest-bearing funding. We expect net interest income and our net interest yield to fluctuate based on changes in interest rates and changes in the amount and composition of our interest-earning assets and interest-bearing liabilities. We do not fund each individual loan with specific debt. Rather, we attempt to minimize costs and maximize efficiency by proportionately funding large aggregated amounts of loans.
Current wording
Net interest income, which is our largest source of revenue, represents the difference between the interest income earned on our interest-earning assets and the interest expense on our interest-bearing liabilities. Our net interest yield represents the difference between the yield on our interest-earning assets and the cost of our interest-bearing liabilities plus the impact of non-interest-bearing funding. We expect net interest income and our net interest yield to fluctuate based on changes in interest rates and changes in the amount and composition of our interest-earning assets and interest-bearing liabilities, and term structures our members select on their loans. We do not fund each individual loan with specific debt. Rather, we attempt to minimize costs and maximize efficiency by proportionately funding large aggregated amounts of loans.
Previous wording
Table 5 presents average balances for FY2025, FY2024 and FY2023, and for each major category of our interest-earning assets and interest-bearing liabilities, the interest income earned or interest expense incurred, and the average yield or cost. Table 5 also presents non-GAAP adjusted interest expense, adjusted net interest income and adjusted net interest yield, which reflect the inclusion of net accrued periodic derivative cash settlements expense in interest expense. We provide reconciliations of our non-GAAP financial measures to the most comparable U.S. GAAP financial measures under “Non-GAAP Financial Measures and Reconciliations.”
Current wording
Table 5 presents average balances for FY2026, FY2025 and FY2024, and for each major category of our interest-earning assets and interest-bearing liabilities, the interest income earned or interest expense incurred, and the average yield or cost. Table 5 also presents non-GAAP adjusted interest expense, adjusted net interest income and adjusted net interest yield, which reflect the inclusion of net accrued periodic derivative cash settlements income (expense) in interest expense. We provide reconciliations of our non-GAAP financial measures to the most comparable U.S. GAAP financial measures under the section “Non-GAAP Financial Measures and Reconciliations.”
Previous wording
(4)Short-term borrowings reported on our consolidated balance sheets consist of borrowings with an original contractual maturity of one year or less. However, short-term borrowings presented in Table 5 consist of commercial paper, select notes and daily liquidity fund notes. Short-term borrowings presented on our consolidated balance sheets related to medium-term notes, Farmer Mac notes payable and other notes payable are reported in the respective category for presentation purposes in Table 5. The period-end amounts reported as short-term borrowings on our consolidated balances sheets, which are excluded from the calculation of average short-term borrowings presented in Table 5, totaled $451 million, $1,021 million and $367 million as of May 31, 2025, 2024 and 2023, respectively.
Current wording
(4)Short-term borrowings reported on our consolidated balance sheets consist of borrowings with an original contractual maturity of one year or less. However, short-term borrowings presented in Table 5 consist of commercial paper, select notes and daily liquidity fund notes. Short-term borrowings presented on our consolidated balance sheets related to medium-term notes, Farmer Mac notes payable and other notes payable are reported in the respective category for presentation purposes in Table 5. The period-end amounts reported as short-term borrowings on our consolidated balance sheets, which are excluded from the calculation of average short-term borrowings presented in Table 5, totaled $324 million, $451 million and $1,021 million as of May 31, 2026, 2025 and 2024, respectively.
Previous wording
(5)Collateral trust bonds represent secured obligations sold to investors in the capital markets including also those issued in a private placement transaction.
Current wording
(5)Collateral trust bonds represent secured obligations sold to investors in the capital markets, including those issued through both public offerings and private placement transactions.
Previous wording
(6)Net interest spread represents the difference between the average yield on total average interest-earning assets and the average cost of total average interest-bearing liabilities. Adjusted net interest spread represents the difference between the average yield on total average interest-earning assets and the adjusted average cost of total average interest-bearing liabilities.
Current wording
(8)Net interest spread represents the difference between the average yield on total average interest-earning assets and the average cost of total average interest-bearing liabilities. Adjusted net interest spread represents the difference between the average yield on total average interest-earning assets and the adjusted average cost of total average interest-bearing liabilities.
Previous wording
(7)Includes other liabilities and equity.
Current wording
(9)Includes other liabilities and equity.
Previous wording
(8)Net interest yield is calculated based on net interest income for the period divided by total average interest-earning assets for the period.
Current wording
(10)Net interest yield is calculated based on net interest income for the period divided by total average interest-earning assets for the period.
Previous wording
(9)Represents the impact of net periodic contractual interest amounts on our interest rate swaps during the period. This amount is added to interest expense to derive non-GAAP adjusted interest expense. The average (benefit)/cost associated with derivatives is calculated based on net periodic swap settlement interest amount during the period divided by the average outstanding notional amount of derivatives during the period. The average outstanding notional amount of interest rate swaps was $7,274 million, $7,597 million and $7,668 million for FY2025, FY2024 and FY2023, respectively.
Current wording
(11)Represents the impact of net periodic contractual interest amounts on our interest rate swaps during the period. This amount is added to interest expense to derive non-GAAP adjusted interest expense. The average (benefit)/cost associated with derivatives is calculated based on net periodic swap settlement interest amount during the period divided by the average outstanding notional amount of derivatives during the period. The average outstanding notional amount of interest rate swaps was $6,761 million, $7,274 million and $7,597 million for FY2026, FY2025 and FY2024, respectively.
Previous wording
(10)Adjusted interest expense consists of interest expense plus net periodic derivative cash settlements interest income (expense) during the period. Net periodic derivative cash settlements interest income (expense) is reported in our consolidated statements of operations as a component of derivative gains (losses). Adjusted average cost is calculated based on the adjusted interest expense for the period divided by total average interest-bearing liabilities during the period.
Current wording
(12)Adjusted interest expense consists of interest expense plus net periodic derivative cash settlements interest income (expense) during the period. Net periodic derivative cash settlements interest income (expense) is reported in our consolidated statements of operations as a component of derivative gains (losses). Adjusted average cost is calculated based on the adjusted interest expense for the period divided by total average interest-bearing liabilities during the period.
Previous wording
(11)Adjusted net interest yield is calculated based on adjusted net interest income for the period divided by total average interest-earning assets for the period.
Current wording
(13)Adjusted net interest yield is calculated based on adjusted net interest income for the period divided by total average interest-earning assets for the period.
Previous wording
•Average Interest-Earning Assets: The increase in average interest-earning assets of 5% during FY2025 was primarily attributable to growth in average total loans of $2,082 million, or 6%, partially offset by a decrease of $310 million in our average total investments, which include cash, time deposits and investment securities. The average loans increase was driven primarily by an increase in average long-term fixed-rate loans of $1,407 million and an increase in average line of credit loans of $624 million, as members continued to advance loans to fund capital expenditures and for working capital purposes. In addition, the increase in line of credit loans during FY2025 was also attributable to borrowings under emergency line of credit loans by our members primarily for Hurricane Helene recovery costs.
Current wording
•Average Interest-Earning Assets: The increase in average interest-earning assets of $1,960 million, or 5%, during FY2026 was primarily attributable to growth in average total loans of $2,111 million, or 6%, partially offset by a decrease of $150 million in our average total investments, which include cash and investment securities. The increase in average loans was driven by increases in average long‑term fixed‑rate loans, line of credit loans, and long-term variable-rate loans of $998 million, $743 million, and $370 million, respectively, as members continued to advance loans to fund capital expenditures and for working capital purposes. In addition, the increase in average line of credit loans was also attributable to higher average borrowings under emergency line of credit loans by our members in FY2026 compared with FY2025.
Previous wording
•Net Interest Yield: The decrease in the net interest yield of 2 basis points, or 3%, was primarily attributable to thecombined impact ofan increase in our average cost of borrowings of 11 basis points to 4.28%, which was partially offset by an increase in the average yield on interest-earning assets of 7 basis points to 4.71% and an increase in the benefit from non-interest-bearing funding of 2 basis point to 0.29%. The increase in average yields on long-term fixed-rate loans was the primary driver for the increase in the average yield on interest-earning assets, while the interest rates for variable-rate and line of credit loans decreased due to the federal funds rate cuts during FY2025. Meanwhile, our average cost of borrowings increased due to the long-term debt issued at higher interest rates after May 31, 2024.
Current wording
•Net Interest Yield: The increase in the net interest yield of 7 basis points, or 10%, was primarily attributable to a decrease in our average cost of borrowings of 6 basis points to 4.22% andan increase in the benefit from non-interest-bearing funding of 1 basis point to 0.30%. The decrease in our average cost of borrowings was driven by the lower average cost of short-term borrowings and variable-rate long-term debt due to the federal funds rate cuts during FY2026. The average yield on our interest-earning assets remained unchanged at 4.71%, as higher average yields on long‑term fixed‑rate loans were offset by lower interest rates on variable‑rate and line‑of‑credit loans, reflecting federal funds rate cuts during FY2026.
Previous wording
Reported net interest income of $261 million for FY2025 increased by $7 million, or 3%, from FY2024, driven by an increase in average interest-earning assets of $1,772 million, or 5%, partially offset by a decrease in the net interest yield of 2 basis points, or 3%, to 0.72%.
Current wording
Adjusted net interest income of $366 million for FY2026 increased by$6 million, or 2%, from FY2025, driven by an increase in average interest-earning assets of $1,960 million, or 5%, partially offset by a decrease in the adjusted net interest yield of 4 basis points, or 4%, to 0.96%.
Previous wording
•Adjusted Net Interest Yield: The decrease in the adjusted net interest yield of 11 basis points, or 10%, was attributable to an increase in our adjusted average cost of borrowings of 22 basis points to 3.99%, which was partially offset by the combined impact of an increase in the average yield on interest-earning assets of 7 basis points to 4.71% and an increase in the benefit from non-interest-bearing funding of 4 basis points to 0.28%. The increase in adjusted average cost of borrowings was attributable to the long-term debt issued at higher interest rates after May 31, 2024, and a lower average yield earned on our interest rate swaps as discussed below under the “Derivatives Cash Settlements” section. We discussed above the primary drivers for the increases in the average yield on interest-earning assets.
Current wording
•Adjusted Net Interest Yield: The decrease in the adjusted net interest yield of 4 basis points, or 4%, was attributable to an increase in our adjusted average cost of borrowings of 5 basis points to 4.04%, partially offset by an increase in the benefit from non-interest-bearing funding of 1 basis point to 0.29%. The average yield on our interest-earning assets remained unchanged at 4.71%, as discussed above. Also, we discussed above the primary drivers for the decrease in the average cost of borrowings. However, the primary driver of the increase in adjusted average cost of borrowings in FY2026 compared with FY2025 was the lower average yield earned on our interest rate swaps derivative cash settlements in FY2026, as discussed below.
Previous wording
We include the net periodic derivative cash settlements interest income (expense) amounts on our interest rate swaps in the calculation of our adjusted average cost of borrowings, which, as a result, also impacts the calculation of adjusted net interest income and adjusted net interest yield. Because our derivative portfolio consists of a higher proportion of pay-fixed swaps than receive-fixed swaps, the net periodic derivative cash settlements interest income (expense) amounts generally change based on changes in the floating interest amount received each period. When floating rates increase during the period, the floating interest amounts received on our pay-fixed swaps increase and, conversely, when floating rates decrease, the floating interest amounts received on our pay-fixed swaps decrease. We recorded net periodic derivative cash settlements interest income of $99 million, $127 million and $34 million for FY2025, FY2024 and FY2023, respectively.
Current wording
We include the net periodic derivative cash settlements interest income (expense) amounts on our interest rate swaps in the calculation of our adjusted average cost of borrowings, which, as a result, also impacts the calculation of adjusted net interest income and adjusted net interest yield. Because our derivative portfolio consists of a higher proportion of pay-fixed swaps than receive-fixed swaps, the net periodic derivative cash settlements interest income (expense) amounts generally change based on changes in the floating interest rates, as the benchmark variable rate for the floating rate payments is based on the daily compounded Secured Overnight Financing Rate (“SOFR”). When floating rates increase during the period, the floating interest amounts received on our pay-fixed swaps increase and, conversely, when floating rates decrease, the floating interest amounts received on our pay-fixed swaps decrease.
Showing the first 40 of 155 pairs. Open the source sections for the rest.
Rearranged current paragraphs (9)
Current report — wording carried from elsewhere
—Consolidated Results of Operations” in our 2025 Form 10-K for a comparative discussion of our consolidated results of operations between FY2025 and FY2024.
Current report — wording carried from elsewhere
Instruments and Hedging Activities” in this Report for detailed information on our cash flow hedge activities during FY2026, FY2025 and FY2024.
Current report — wording carried from elsewhere
Long-term loan advances totaled $3,197 million during FY2026, of which approximately 87% was provided to members for capital expenditures, 5% was provided for business acquisitions, 1% was provided for bridge financing, 1%was providedfor the refinancing of loans made by other lenders and 6% was provided for other purposes, primarily for wholesale power supply contract buyout payments. In comparison, 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.
Current report — wording carried from elsewhere
(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, $109 million and $206 million was from member investments as of May 31, 2026 and 2025, respectively.
Current report — wording carried from elsewhere
On November 12, 2025, we amended our three-year and four-year committed bank revolving line of credit agreements to (i) extend the maturity dates to November 28, 2028 and November 28, 2029, respectively, (ii) remove the credit spread adjustment in Term SOFR tenors as described in each agreement and (iii) increase commitments by$150 million under the three-year revolving credit agreement and$50 million under the four-year revolving credit agreement. Under thethree-year revolving credit agreement, commitments of$50 million will continue to expire at the prior maturity date of November 28, 2027.
Current report — wording carried from elsewhere
As of May 31, 2026, the total commitment amount under the three-year facility and the four-year facility was $1,745 million and $1,755 million, respectively, resulting in a combined total commitment amount under the two facilities of $3,500 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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
•An increase in both our reported net interest income and net interest yield over the next 12 months compared with the 12-month period ended May 31, 2026;
Current report — wording carried from elsewhere
•exclude from total equity the noncash cumulative impact of changes in derivative forward value gains (losses), historical foreign currency translation adjustments, and the amounts of AOCI.
Rearranged previous paragraphs (5)
Previous report — wording carried elsewhere
Therefore, management uses non-GAAP financial measures, which we refer to as “adjusted” measures, to evaluate financial performance. Our key non-GAAP financial measures are adjusted net income, adjusted net interest income, adjusted interest expense, adjusted net interest yield, adjusted TIER, adjusted debt-to-equity ratio and members’ equity. The most comparable
Previous report — wording carried elsewhere
As of May 31, 2025 and 2024, our derivatives portfolio included interest rate swap agreements not designated for hedge accounting, composed of pay-fixed swaps and receive-fixed swaps, with a majority of the benchmark variable rate for the floating-rate payments based on daily compounded Secured Overnight Financing Rate (“SOFR”) as of May 31, 2025.
Previous report — wording carried elsewhere
2024, respectively, 50 were electric power supply borrowers as of both May 31, 2025 and 2024. Electric power supply borrowers generally require significantly more capital than electric distribution and telecommunications borrowers.
Previous report — wording carried elsewhere
The allowance for credit losses and allowance coverage ratio decreased to $41 million and 0.11%, respectively, as of May 31, 2025, from $49 million and 0.14%, respectively, as of May 31, 2024. The $8 million decrease in the allowance for credit losses was attributable to a reduction in the asset-specific allowance due to higher actual than expected payments received on a nonperforming loan during FY2025. Our collective allowance decreased slightly during FY2025, primarily due to an improved recovery rate on our power supply loan portfolio, partially offset by an increase attributable to loan portfolio growth.
Previous report — wording carried elsewhere
(1)Total debt outstanding includes our interest-bearing debt and excludes non-interest-bearing liabilities, such as derivative liabilities.