NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/

Reported Results

Net Income and TIER

Table 1 below shows our net income 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 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 Q1 FY2027 and Q1 FY2026.

Table 2: Reconciliation of Net Income

Q1 FY2027 versus Q1 FY2026—Key Highlights

•We experienced a favorable shift of $129 million from derivative losses in Q1 FY2026 to derivative gains in Q1 FY2027. The derivative gains of $97 million for Q1 FY2027 were driven by increases in interest rates across the entire swap curve, while the derivative losses of $32 million for Q1 FY2026 were driven by declines in interest rates across the swap curve, with the exception of the 30-year swap rate, which increased slightly during Q1 FY2026.

•Net interest income increased $5 million from Q1 FY2026, driven by an increase in the net interest yield of 3 basis points, or 4%, to 0.78% and an increase in average interest-earning assets of $1,011 million, or 3%.

•Operating and other expenses increased by $2 million from Q1 FY2026, driven by higher operating expense for salaries and employee benefits and general and administrative, and tax expenses.

•We recorded a provision for credit losses of $4 million and $2 million for Q1 FY2027 and Q1 FY2026, respectively, attributable to an increase in the collective allowance for both periods.

•The increase in TIER for Q1 FY2027 compared with Q1 FY2026 was driven by the higher net income, primarily attributable to our derivative portfolio forward value change as discussed above.

Debt-to-Equity Ratio

The debt-to-equity ratio was 10.54 and 10.85 as of August 31, 2026 and May 31, 2026, respectively. The decrease in the debt-to-equity ratio during Q1 FY2027 was attributable to the combined impact of a decline in total debt outstanding, reflecting reduced funding needs for our loan portfolio, and an increase in total equity. The increase in total equity was primarily driven by 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.

Non-GAAP Adjusted Results

Adjusted Net Income and Adjusted TIER

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

Table 3: Adjusted Net Income and Adjusted TIER

Table 4 below presents a reconciliation of adjusted net income between Q1 FY2027 and Q1 FY2026.

Table 4: Reconciliation of Adjusted Net Income

Q1 FY2027 versus Q1 FY2026—Key Highlights

•Adjusted net interest income decreased $1 million from Q1 FY2026, driven by a decrease in the adjusted net interest yield of 3 basis points, or 3%, to 0.93%, partially offset by an increase in average interest-earning assets of $1,011 million, or 3%.

•We discuss the variances in the other components above under the section “Reported Results—Net Income and TIER— Q1 FY2027 versus Q1 FY2026—Key Highlights.”

•The decrease in adjusted TIER for Q1 FY2027 compared with Q1 FY2026 was driven by an increase in adjusted interest expense and a decrease in adjusted net income during Q1 FY2027, as discussed above.

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 improved modestly to 7.42 as of August 31, 2026 from 7.46 as of May 31, 2026, as the decline in adjusted total debt outweighed the decrease in adjusted total equity. The decline in the adjusted total debt outstanding reflected reduced funding needs for our loan portfolio during Q1 FY2027. The decrease in adjusted total equity was primarily attributable to the CFC Board of Directors’ authorized patronage capital retirement of $62 million in July 2026, partially offset by adjusted net income of $53 million for Q1 FY2027.

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 $38,337 million as of August 31, 2026, a decrease of $85 million, or less than 1%, from May 31, 2026, reflecting a net decrease in line of credit loans of $320 million, partially offset by a net increase in long-term loans of $235 million. Of the decrease in line of credit loans, 38% was attributable to repayments of emergency line of credit loans as certain members received reimbursements from the Federal Emergency Management Agency (“FEMA”) for storm damage restoration costs, reducing outstanding loan amounts associated with those restoration activities. The remaining decrease was primarily due to the repayments of line of credit loans by members using proceeds from term-debt borrowings, including long-term loans from CFC. Our loan portfolio composition remained largely unchanged from May 31, 2026, with 79% of loans outstanding to CFC distribution borrowers, 16% to CFC power supply borrowers, 3% to NCSC electric borrowers, and 2% to NCSC telecom borrowers as of August 31, 2026.

The overall credit quality of our loan portfolio remained strong as of August 31, 2026. We had no charge-offs during Q1 FY2027 and Q1 FY2026. We had one loan that was on nonaccrual status of $5 million as of August 31, 2026, down from$8 million as of May 31, 2026, due to a loan repayment. In September 2026, we received an additional $2 million payment on the loan, which further reduced its outstanding balance to $3 million.

Our allowance for credit losses and allowance coverage ratio increased to $34 million and 0.09%, respectively, as of August 31, 2026, compared with $30 million and 0.08%, respectively, as of May 31, 2026, attributable to anincreasein the collective allowance. We provide additional information on our allowance for credit losses under “Credit Risk” in this Report.

Financing and Liquidity

Total debt outstanding decreased by $256 million, or 1%, to $35,688 million as of August 31, 2026, compared with May 31, 2026, primarily due to lower funding needs, as our loans outstanding decreased during the period. During Q1 FY2027, we issued dealer medium-term notes to institutional investors totaling $800 million, of which $500 million was at a fixed interest rate of 5.00% with a term of five years and $300 million was at a floating interest rate with a term of 18 months.

On September 8, 2026, we executed a commitment letter for the guarantee by RUS of an additional$455 million loan facility with the U.S. Treasury Department’s Federal Financing Bank (“FFB”) under the USDA Guaranteed Underwriter Program (“Guaranteed Underwriter Program”). On September 21, 2026, we advanced$300 million under an existing facility within the Guaranteed Underwriter Program.

On September 8, 2026, notice was provided to investors that we would redeem at par, plus accrued interest, all $400 million in principal amount of our 5.60% medium-term notes due 2026 (the “2026 Notes”) on October 13, 2026.

On August 19, 2026, Fitch Ratings (“Fitch”) affirmed CFC’s credit ratings and stable outlook.

As of August 31, 2026, available liquidity totaled$8,158 million. While this was$1,718 million less than our$9,876 millionof scheduled debt obligations over the next 12 months,31% of those obligations, or$3,094 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$1,376 million, or 1.2 times, our scheduled 12-month debt obligations. In addition, we expect to receive $2,123 million of scheduled long-term loan principal payments over the next 12 months, which is not included in our available liquidity above. We provide additional information on our available liquidity and financing activities under “Liquidity Risk” in this Report.

Outlook

Macroeconomic Outlook

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, member loan demand, and operating conditions.

Following its meeting held in September 2026, the Federal Open Market Committee (“FOMC”) of the Federal Reserve raised the target range for the federal funds rate by 25 basis points to 3.75% to 4.00%. This marked the first increase in the federal funds rate since July 2023. The committee noted that the economy is expanding at a solid pace and that consumer spending remains resilient despite elevated uncertainty due to geopolitical developments. The committee also stated that inflation remains elevated and noted that the rate increase was intended to support a timelier return to its two-percent inflation goal.

The Federal Reserve’s September 2026 median projection for the annual growth rate of real gross domestic product (“GDP”) in 2026 is 2.3%, up from 2.2% in its June 2026 projection. The median projection for Personal Consumption Expenditures inflation in 2026 increased to 3.7% from 3.6% in its June 2026 projection. The U.S. unemployment rate in 2026 is projected to average 4.1%, down slightly from 4.3% in its June 2026 projection. The median projection for the federal funds rate at the end of 2026 is 4.1%.

In September 2026, fed funds futures imply a rising path, with markets pricing in another rate hike by the end of 2026 and two more in early 2027. Overall, implied market forecasts point to an increase in short-term interest rates. Consensus forecasts indicate that long-term interest rates will remain stable through the end of 2026, though 10-year treasury forward contracts are implying that long-term rates will gradually rise during 2027 as market participants continue to evaluate inflationary pressures and the outlook for monetary policy.

Projected Reported Results

Based on our current forecast assumptions, including the interest rates forecast noted above, we project a slight decrease in both our reported net interest income and net interest yield over the next 12 months compared with the 12-month period ended August 31, 2026. See “Market Risk—Interest Rate Risk Assessment” in this Report for an additional discussion.

Projected Non-GAAP Adjusted Results

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

•Increases in our adjusted net interest income and adjusted net interest yield over the next 12 months relative to the 12-month period ended August 31, 2026, primarily driven by an increase in interest-earning assets due to projected loan growth, higher expected interest rate swap derivative cash settlement interest income, and a greater contribution from equity funding, which reduces the average cost of funding. 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 driven by projected higher operating expenses and provision for credit losses, and lower fee income, partially offset by higher adjusted net interest income.

•A slight decrease in adjusted TIER over the next 12 months, primarily attributable to the forecasted decrease in our adjusted net income as discussed above.

•An increase in our adjusted debt-to-equity ratio, primarily due to a 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 15 years as of August 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.

Projected Loan Portfolio

Based on our current forecast assumptions, we anticipate net loan growth of$1,863 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.