NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/

Total assets decreased $136 million, or less than 1%, to $39,569 million as of August 31, 2026, compared with May 31, 2026, primarily due to a decline in our loan portfolio. Total liabilities decreased by $209 million, or 1%, to $36,183 million as of August 31, 2026 compared with May 31, 2026, largely reflecting lower debt balances resulting from the reduced funding needs for our loan portfolio. Total equity increased $73 million to $3,385 million as of August 31, 2026, attributable to our reported net income of $135 million for Q1 FY2027, partially offset by the CFC Board of Directors’ authorized patronage capital retirement of $62 million in July 2026.

Below is a discussion of changes in the major components of our assets and liabilities during Q1 FY2027. Period-end balance sheet amounts may vary from average balance sheet amounts due to liquidity and balance sheet management activities that are intended to manage our liquidity requirements and market risk exposure in accordance with our risk appetite framework.

Loan Portfolio

We segregate our loan portfolio into segments, by legal entity, based on the borrower member class, which consists of CFC distribution, CFC power supply, CFC statewide and associate, NCSC electric and NCSC telecom. We offer both long-term and line of credit loans to our borrowers. Under our long-term loan facilities, a borrower may select a fixed interest rate or a variable interest rate at the time of each loan advance. Line of credit loans are revolving loan facilities and generally have a variable interest rate. We describe and provide additional information on our member classes under “Item 1. Business—Members” and information about our loan programs and loan product types under “Item 1. Business—Loan and Guarantee Programs” in our 2026 Form 10-K.

Loans Outstanding

Loans to members totaled $38,337 million and $38,422 million as of August 31, 2026 and May 31, 2026, respectively. Loans to CFC distribution and power supply borrowers accounted for 95% of total loans to members as of both August 31, 2026 and May 31, 2026. The decrease in loans to members of $85 million, or less than 1%, from May 31, 2026, was attributable to a netdecrease in line of credit loans of $320 million, partially offset by a netincrease in long-term loans of $235 million. We experienced a decrease in CFC power supply loans of$274 million, partially offset by increases in CFC distribution loans, CFC statewide and associate loans, NCSC electric and NCSC telecom loans of $142 million, $5 million, $38 million and $3 million, respectively, during Q1 FY2027. Our aggregate loans outstanding to CFC electric distribution cooperative members relating to broadband projects, increased by $38 million to an estimated $3,494 million asof August 31, 2026 from May 31, 2026.

Long-term loan advances totaled $1,013 million during Q1 FY2027, of which approximately 100% was provided to members for capital expenditures. In comparison, long-term loan advances totaled $702 million during Q1 FY2026, of which approximately 96% was provided to members for capital expenditures, 3% was provided for bridge financing and 1% was provided for other purposes.

Of the $1,013 million total long-term loans advanced during Q1 FY2027, $795 million were fixed-rate loan advances with a weighted-average fixed-rate term of six years. In comparison, of the $702 million total long-term loans advanced during Q1 FY2026, $523 million were fixed-rate loan advances with a weighted-average fixed-rate term of six years. The weighted-average rate term selected by our members on the long-term fixed-rate loans remained shorter than historical levels due to the elevated interest rate environment. Long-term fixed-rate loans that repriced during Q1 FY2027 totaled approximately $334 million, including $245 million that repriced at fixed interest rates with a weighted-average rate term of six years and $89 million that repriced at variable interest rates. In comparison, long-term fixed-rate loans that repriced during Q1 FY2026 totaled approximately$201 million, including$183 million that repriced at fixed interest rates with a weighted-average rate term of three years and $18 million that repriced at variable interest rates. As a result of these shorter rate term selections, the amount of long-term fixed-rate loans coming up for repricing has increased, and we expect this amount to increase further over the next 12 months.

We provide information on the credit performance and risk profile of our loan portfolio below under the section “Credit Risk—Loan Portfolio Credit Risk” in this Report. Also refer to“Note 4—Loans” in this Report for additional information on our loans to members.

Debt

We utilize both secured and unsecured short-term borrowings and long-term debt as part of our funding strategy and asset/liability interest rate risk management. We seek to maintain diversified funding sources, including our members, affiliates, the capital markets and other private funding sources. Our funding strategy consists of various products and programs across markets to manage funding concentrations and reduce our liquidity or debt rollover risk.

Debt Outstanding

Table 11 displays the composition, by product type, of our outstanding debt as of August 31, 2026 and May 31, 2026. Table 11 also displays the composition of our debt based on several additional selected attributes.

Table 11: Debt—Total Debt Outstanding

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

(2)Amount includes medium-term notes issued to both institutional and retail investors in the capital markets.

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

(4)Amount includes subordinated deferrable debt issued to institutional and retail investors through public offerings transactions. Amount also includes subordinated deferrable debt issued to investors through private placement transactions.

(5)Includes variable-rate debt that has been swapped to a fixed rate, net of any fixed-rate debt that has been swapped to a variable rate.

(6)Includes fixed-rate debt that has been swapped to a variable rate, net of any variable-rate debt that has been swapped to a fixed rate. Also includes commercial paper notes, which generally have maturities of less than 90 days. The interest rate on commercial paper notes does not change once the note has been issued; however, the interest rate for new commercial paper issuances changes daily.

(7)Borrowings with an original contractual maturity of one year or less are classified as short-term borrowings. Borrowings with an original contractual maturity of greater than one year are classified as long-term debt.

(8)Consists of long-term debt, subordinated deferrable debt and total members’ subordinated certificates reported on our consolidated balance sheets. Maturity classification is based on the original contractual maturity as of the date of issuance of the debt.

We issue debt primarily to fund growth in our loan portfolio. As such, our debt outstanding generally increases and decreases in response to member loan demand. Total debt outstanding decreased $256 million, or 1%, to $35,688 million as of August 31, 2026, compared with May 31, 2026, reflecting lower funding needs for loans to members. We provide additional information on our financing activities during Q1 FY2027 in the below section “Liquidity Risk” of this Report.

Member Investments

Debt securities issued to our members represent an important, stable source of funding. Table 12 displays member debt outstanding, by product type, as of August 31, 2026 and May 31, 2026.

Table 12: Debt—Member Investments

(1)Represents outstanding debt attributable to members for each debt product type as a percentage of the total outstanding debt for each debt product type.

Member investments accounted for 13% and 12% of total debt outstanding as of August 31, 2026 and May 31, 2026, respectively. Over the last twelve fiscal quarters, our member investments, including both short-term and long-term investments, have averaged $4,702 million, calculated based on outstanding member investments as of the end of each fiscal quarter.

Short-Term Borrowings

Short-term borrowings consist of borrowings with an original contractual maturity of one year or less and do not include the current portion of long-term debt. Short-term borrowings decreased by $371 million to $4,789 million as of August 31, 2026, compared with May 31, 2026, primarily driven by a decrease indealer commercial paper of $643 million, partially offset byan increase inshort-term member investments of approximately $272 million during Q1 FY2027. Short-term borrowings accounted for 13% and 14% of total debt outstanding as of August 31, 2026 and May 31, 2026, respectively.

See “Liquidity Risk” below and “Note 6—Short-Term Borrowings” for information on the composition of our short-term borrowings.

Long-Term and Subordinated Debt

Long-term debt, defined as debt with an original contractual maturity term of greater than one year, primarily consists of medium-term notes, collateral trust bonds, notes payable under the Guaranteed Underwriter Program and notes payable under the Farmer Mac revolving note purchase agreement. Subordinated debt consists of subordinated deferrable debt and members’ subordinated certificates. Our subordinated deferrable debt and members’ subordinated certificates have original contractual maturity terms of greater than one year.

Long-term and subordinated debt increased to $30,899 million as of August 31, 2026, compared with $30,784 million as of May 31, 2026. The increase of $115 million primarily reflected net issuances of $180 million and $35 million in dealer and member medium-term notes, respectively, partially offset by repayments of $55 million of notes payable under the Guaranteed Underwriter Program and $46 million of long-term notes payable under the Farmer Mac revolving note purchase agreement. Long-term and subordinated debt accounted for 87% and 86% of total debt outstanding as of August 31, 2026 and May 31, 2026, respectively.

We provide additional information on our long-term debt below under the section “Liquidity Risk” and “Note 7—Long-Term Debt” and “Note 8—Subordinated Deferrable Debt” in this Report.

Equity

Table 13 presents the components of total CFC equity and total equity as of August 31, 2026 and May 31, 2026.

Table 13: Equity

(1)Represents derivative forward value gains (losses) for CFC only, as total CFC equity does not include the noncontrolling interests of the variable interest entities, which we are required to consolidate. The cumulative amounts also include CFC historical foreign currency translation adjustments recorded in net income. We present the consolidated total derivative forward value gains (losses) in Table 30 in the “Non-GAAP Financial Measures and Reconciliations” section below. Also, see “Note 14—Business Segments” in this Report for the statements of operations for CFC.

Total equity increased $73 million to $3,385 million as of August 31, 2026, compared with May 31, 2026, attributable primarily to our reported net income of $135 million for Q1 FY2027, partially offset by the CFC Board of Directors’ authorized patronage capital retirement of $62 million in July 2026, as discussed below.

Allocation and Retirement of Patronage Capital

We are subject to District of Columbia law governing cooperatives, under which CFC is required to make annual allocations of net earnings, if any, in accordance with the provisions of the District of Columbia statutes. We describe the allocation requirements under “Item 7. MD&A—Consolidated Balance Sheet Analysis—Equity—Allocation and Retirement of Patronage Capital” in our 2026 Form 10-K. The amount of patronage capital allocated each year by CFC’s Board of Directors is based on non-GAAP adjusted net income, which excludes the impact of derivative forward value gains (losses). We provide a reconciliation of our adjusted net income to our reported net income and an explanation of the adjustments below in “Non-GAAP Financial Measures and Reconciliations.”

In May 2026, the CFC Board of Directors authorized the allocation of $1 million of net earnings for fiscal year 2026 to the cooperative educational fund. In July 2026, the CFC Board of Directors authorized the allocation of fiscal year 2026 adjusted net income as follows: $72 million to members in the form of patronage capital and $172 million to the members’ capital reserve.

In July 2026, the CFC Board of Directors also authorized the retirement of patronage capital totaling $62 million, of which $36 million represented 50% of the patronage capital allocation for fiscal year 2026, and $26 million represented the portion of the allocation from fiscal year 2001 net earnings that had been held for 25 years pursuant to the CFC Board of Directors’ policy. This amount was returned to members in cash in September 2026. The remaining portion of the patronage capital allocation for fiscal year 2026 will be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC Board of Directors in June 2009.