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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPNRUC财报

NYSE · 金融 · 其他商业信贷机构

The National Rural Utilities Cooperative Finance Corporation (CFC) is a member-owned nonprofit cooperative that provides financial products to America's rural electric cooperative network. CFC was established in 1969 to raise funds from the capital markets to supplement the loan programs for electric cooperatives offered by the U.S. Department of Agriculture’s (USDA) Rural Utilities Service (RUS), previously Rural Electrification Administration (REA).

What changed in NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP's 10-K — 2024 vs 2025

Top changes in NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP's 2025 10-K

492 paragraphs added · 483 removed · 393 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

50 edited+5 added−9 removed107 unchanged
More than 190 electric cooperatives, many of which are already offering or building out projects, were awarded approximately $1.6 billion though the FCC’s Rural Development Opportunity Fund (“RDOF”) in 2021. Those funds also will be distributed over a 10-year period.
The awarded funds are being distributed over a 10-year period. More than 190 electric cooperatives, many of which are already offering or building out projects, were awarded approximately $1.6 billion though the FCC’s Rural Development Opportunity Fund (“RDOF”) in 2021. Those funds also will be distributed over a 10-year period.
We attempt to minimize the effect of competition by offering a variety of loan options and value-added services and by leveraging the working relationships developed with the majority of our members over the past 55 years. In addition to leveraging these working relationships, we differentiate ourselves from other financial institutions by focusing on customer service and product flexibility.
We attempt to minimize the effect of competition by offering a variety of loan options and value-added services and by leveraging the working relationships developed with the majority of our members over the past 56 years. In addition to leveraging these working relationships, we differentiate ourselves from other financial institutions by focusing on customer service and product flexibility.
As a value-based, financial services cooperative, CFC is engaged in sustaining our environment across multiple fronts—from our Leadership in Energy and Environmental Design (“LEED”) Gold-certified building and 42-acre ecofriendly campus that serves as CFC’s headquarters, to the renewable energy projects we’ve helped finance for the electric cooperative network.
As a values-based financial services cooperative, CFC is engaged in sustaining our environment across multiple fronts—from our Leadership in Energy and Environmental Design (“LEED”) Gold-certified building and 42-acre ecofriendly campus that serves as CFC’s headquarters, to the renewable energy projects we’ve helped finance for the electric cooperative network.
Over the past 20 years, CFC has c ontributed an estimate d $243 million to the REDL&G program. CFC and electric cooperatives operate under seven cooperative principles: open and voluntary membership; democratic member control; members’ economic participation; autonomy and independence; education, training and information; cooperation among cooperatives; and concern for community.
Over the past 20 years, CFC has c ontributed an estimate d $262 million to the REDL&G program. CFC and electric cooperatives operate under seven cooperative principles: open and voluntary membership; democratic member control; members’ economic participation; autonomy and independence; education, training and information; cooperation among cooperatives; and concern for community.
Other guarantees are generally unsecured with guarantee fees payable to us. We provide additional information on our guarantee programs and outstanding guarantee amounts as of May 31, 2024 and 2023 in “Note 13—Guarantees.” 7 Table of Contents INVESTMENT POLICY We invest funds in accordance with policies adopted by our board of directors.
Other guarantees are generally unsecured with guarantee fees payable to us. We provide additional information on our guarantee programs and outstanding guarantee amounts as of May 31, 2025 and 2024 in “Note 13—Guarantees.” 7 Table of Contents INVESTMENT POLICY We invest funds in accordance with policies adopted by our board of directors.
CFC Member Member Type Class May 31, 2024 Distribution systems A 842 Power supply systems B 68 Statewide and regional associations, including NCSC C 62 National association of cooperatives (1) D 1 Total CFC members 973 Associates 43 Total CFC members and associates 1,016 ____________________________ (1) National Rural Electric Cooperative Association is our sole class D member.
CFC Member Member Type Class May 31, 2025 Distribution systems A 842 Power supply systems B 68 Statewide and regional associations, including NCSC C 62 National association of cooperatives (1) D 1 Total CFC members 973 Associates 43 Total CFC members and associates 1,016 ____________________________ (1) National Rural Electric Cooperative Association is our sole class D member.
Our objectives are (i) to attract, develop and retain a highly qualified workforce with diverse backgrounds and experience in multiple areas whose skills and strengths are consistent with CFC’s mission, and (ii) to create an engaged, inclusive and collaborative work culture, which we believe are critical to deliver exceptional service to our members. 11 Table of Contents Governance of Human Capital CFC’s executive leadership team and board of directors work together to provide oversight on most human capital matters.
Our objectives are (i) to attract, develop and retain a highly qualified workforce with backgrounds and experience in multiple areas whose skills and strengths are consistent with CFC’s mission, and (ii) to create an engaged and collaborative work culture, which we believe is critical to deliver exceptional service to our members. 11 Table of Contents Governance of Human Capital CFC’s executive leadership team and board of directors work together to provide oversight on most human capital matters.
Based on financial data submitted to us by our electric utility members, we present the long-term debt outstanding to CFC by member class, RUS and other lenders in the electric cooperative industry as of December 31, 2023 and 2022 in the table below.
Based on financial data submitted to us by our electric utility members, we present the long-term debt outstanding to CFC by member class, RUS and other lenders in the electric cooperative industry as of December 31, 2024 and 2023 in the table below.
Focus on Electric Lending As a member-owned, nonprofit finance cooperative, our primary objective is to provide our members with the credit products they need to fund their operations. As such, we primarily focus on lending to electric systems and securing access to capital through diverse funding sources at rates that allow us to offer cost-based credit products to our members.
Focus on Electric Lending As a member-owned, nonprofit finance cooperative association, our primary objective is to provide our members with the credit products they need to fund their operations. As such, we primarily focus on lending to electric systems and securing access to capital through diverse funding sources that allow us to offer cost-based credit products to our members.
CFC may make long-term loans to power supply systems, on a case-by-case basis, that may include other requirements, such as maintenance of a minimum equity level. 4 Table of Contents Line of Credit Loans Line of credit loans are designed primarily to assist borrowers with liquidity and cash management and are generally advanced at variable interest rates.
CFC may make long-term loans to power supply systems, on a case-by-case basis, that may include other requirements, such as maintenance of a minimum equity level. Line of Credit Loans Line of credit loans are designed primarily to assist borrowers with liquidity and cash management and are generally advanced at variable interest rates.
We also have access to funds through bank revolving line of credit arrangements, government-guaranteed programs such as funding from the Federal Financing Bank that is guaranteed by RUS through the Guaranteed Underwriter Program of the USDA (the “Guaranteed Underwriter Program”), as well as a note purchase agreement with the Federal Agricultural Mortgage Corporation (“Farmer Mac”).
We also have access to funds through bank revolving line of credit arrangements, government- 2 Table of Contents guaranteed programs such as funding from the Federal Financing Bank that is guaranteed by RUS through the Guaranteed Underwriter Program of the USDA (the “Guaranteed Underwriter Program”), as well as a note purchase agreement with the Federal Agricultural Mortgage Corporation (“Farmer Mac”).
Our average employee tenure was 7.6 years with more than a quarter of our workforce having 10 or more years of service with CFC. Given the ongoing challenges of the professional talent market, we feel that CFC’s employee pool represents a balanced mix of long-term and new staff to serve our members.
Our average employee tenure was eight years with more than a quarter of our workforce having 10 or more years of service with CFC. Given the ongoing challenges of the professional talent market, we feel that CFC’s employee pool represents a balanced mix of long-term and new staff to serve our members.
One of our talent and culture strategic initiatives in fiscal year 2024 focused on assessing and updating our employment branding to ensure it remains relevant and engaging to potential candidates for employment.
One of our talent and culture strategic initiatives in fiscal year 2025 focused on assessing and updating our employment branding to ensure it remains relevant and engaging to potential candidates for employment.
Maintain Diversified Funding Sources We strive to maintain diversified funding sources beyond capital market offerings of debt securities. We offer various short- and long-term unsecured investment products to our members and their affiliates, including commercial paper, select notes, 2 Table of Contents daily liquidity fund notes, medium-term notes and subordinated certificates.
Maintain Diversified Funding Sources We strive to maintain diversified funding sources beyond capital market offerings of debt securities. We offer various short- and long-term unsecured investment products to our members and their affiliates, including commercial paper, select notes, daily liquidity fund notes, medium-term notes and subordinated certificates.
Line of credit loans are typically revolving facilities. Certain line of credit loans require the borrower to pay off the principal balance for at least five consecutive business days at least once during each 12-month period. Line of credit loans are generally unsecured and may be conditional or unconditional facilities.
Line of credit loans are typically revolving facilities. Certain line of credit loans require 4 Table of Contents the borrower to pay off the principal balance for at least five consecutive business days at least once during each 12-month period. Line of credit loans are generally unsecured and may be conditional or unconditional facilities.
Associates are not eligible to vote on matters put to a vote of the membership. CFC’s members, by member class, and associates were as follows as of May 31, 2024.
Associates are not eligible to vote on matters put to a vote of the membership. CFC’s members, by member class, and associates were as follows as of May 31, 2025.
Rural electric cooperatives are an integral part of the U.S. electric utility industry, a sub-sector of the energy sector. According to a report published in April 2024 by the National Rural Electric Cooperative Association (“NRECA”), electric cooperatives serve as power providers for approximately 42 million people, including over 22 million businesses, homes, schools and farms across 48 states.
Rural electric cooperatives are an integral part of the U.S. electric utility industry, a sub-sector of the energy sector. According to a report published in June 2025 by the National Rural Electric Cooperative Association (“NRECA”), electric cooperatives serve as power providers for approximately 42 million people, including over 22 million businesses, homes, schools and farms across 48 states.
Electric cooperatives provide power to approximate ly 56% of the nation’s land mass . Based on the latest annual data reported by the U.S. Energy Information Administration, a statistical and analytical agency within the U.S. Department of Energy, the electric utility industry had revenue of approximately $485 billion in 2022.
Electric cooperatives provide power to approximate ly 56% of the nation’s land mass . Based on the latest annual data reported by the U.S. Energy Information Administration, a statistical and analytical agency within the U.S. Department of Energy, the electric utility industry had revenue of approximately $491 billion in 2023.
We continue to issue debt securities, such as secured collateral trust bonds, unsecured medium-term notes and dealer commercial paper, in the capital markets.
We continue to issue debt securities, such as secured collateral trust bonds, unsecured medium-term notes, subordinated deferrable interest notes and dealer commercial paper, in the capital markets.
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 and are discussed below.
Our principal operations are currently organized for management reporting purposes into two business segments, which are based on the accounts of the CFC and NCSC entities included in our consolidated financial statements and are discussed below.
Because many of our business operations involve significant member-facing interaction with a relatively stable base of long-standing member-borrowers, we place a priority on the retention of high-performing employees who have extensive, in-depth experience serving the needs of our members. Our turnover rate for fiscal year 2024 was 11.1%.
Because many of our business operations involve significant member-facing interaction with a relatively stable base of long-standing member-borrowers, we place a priority on the retention of high-performing employees who have extensive, in-depth experience serving the needs of our members. Our turnover rate for fiscal year 2025 was 9.5%.
Loans to electric utility organizations accounted for approximately 98% and 99% of our total loans outstanding as of May 31, 2024 and 2023, respectively. Substantially all of our electric cooperative borrowers continued to demonstrate stable operating performance and strong financial ratios as of May 31, 2024.
Loans to electric utility organizations accounted for approximately 98% of our total loans outstanding as of both May 31, 2025 and 2024. Substantially all of our electric cooperative borrowers continued to demonstrate stable operating performance and strong financial ratios as of May 31, 2025.
MD&A—Liquidity Risk.” MEMBERS Our consolidated membership, after taking into consideration entities that are members of both CFC and NCSC and eliminating overlapping members between CFC and NCSC, totaled 1,167 members and 512 associates as of May 31, 2024, compared with 1,426 members and 270 associates as of May 31, 2023.
MD&A—Liquidity Risk.” MEMBERS Our consolidated membership, after taking into consideration entities that are members of both CFC and NCSC and eliminating overlapping members between CFC and NCSC, totaled 1,176 members and 540 associates as of May 31, 2025, compared with 1,167 members and 512 associates as of May 31, 2024.
OUR BUSINESS CFC was established by and for the rural electric cooperative network to provide affordable financing alternatives to electric cooperatives.
OUR BUSINESS CFC was established by and for the rural electric cooperative network to provide financing solutions to electric cooperatives.
We welcomed 44 new hires this fiscal year and employed 289 staff members as of May 31, 2024, all of which are located in the U.S. The majority of our workforce is headquartered in Dulles, Virginia.
We welcomed 59 new hires this fiscal year and employed 317 staff members as of May 31, 2025, all of which are located in the U.S. The majority of our workforce is headquartered in Dulles, Virginia.
Recruiting and Retaining Talent As a financial services organization, our recruitment goal is to attract and retain a highly skilled workforce in a highly competitive talent market. We strive to provide both external candidates and internal employees who are seeking a different role with challenging and stimulating career opportunities ranging from entry-level to management and executive positions.
Recruiting and Retaining Talent As a financial services organization, our recruitment goal is to attract and retain a highly skilled workforce in a highly competitive talent market. We strive to provide both external candidates and internal employees with meaningful career opportunities ranging from entry-level to expert-level professional, management and executive positions.
Our aggregate loans outstanding to CFC electric distribution cooperative members relating to broadband projects, which we started tracking in October 2017, increased to approximately $3,103 million as of May 31, 2024, from approximately $2,355 million as of May 31, 2023. LENDING COMPETITION Overview RUS is the largest lender to electric cooperatives, providing them with long-term secured loans.
Our aggregate loans outstanding to CFC electric distribution cooperative members relating to broadband projects, which we started tracking in October 2017, was approxi mately $3,441 million and $3,103 million as of May 31, 2025 and 2024, respectively. LENDING COMPETITION Overview RUS is the largest lender to electric cooperatives, providing them with long-term secured loans.
Today, CFC is proud to support electric cooperatives by providing approxi mately $3,103 million in out standing loans to support broadband expansion. These efforts have opened new opportunities in many rural communities by providing first-ever access to affordable high-speed internet services.
Today, CFC is proud to support electric cooperatives by providing ap proximately $3,441 million in outstand ing loans to support broadband expansion. These efforts have opened new opportunities in many rural communities by providing first-ever access to affordable high-speed internet services.
December 31, 2023 2022 (Dollars in thousands) Debt Outstanding % of Total Debt Outstanding % of Total Total long-term debt reported by members: (1) Distribution $ 64,946,249 $ 60,438,522 Power supply 52,533,144 52,088,762 Less: Long-term debt funded by RUS (50,834,010) (44,352,405) Members’ non-RUS long-term debt $ 66,645,383 $ 68,174,879 Funding sources of members’ long-term debt: Long-term debt funded by CFC by member class: Distribution $ 24,145,067 36 % $ 22,819,506 34 % Power supply 5,259,127 8 4,892,268 7 Long-term debt funded by CFC 29,404,194 44 27,711,774 41 Long-term debt funded by other lenders 37,241,189 56 40,463,105 59 Members’ non-RUS long-term debt $ 66,645,383 100 % $ 68,174,879 100 % ____________________________ (1) Reported amounts are based on member-provided financial information, which may not have been subject to audit by an independent accounting firm. 10 Table of Contents While we believe our estimates of the overall size of the rural electric lending market serve as a useful tool in gauging the size of this lending sector, they should be viewed as estimates rather than precise measures as there are certain limitations in our estimation methodology, including, but not limited to, the following: • Although certain underlying data included in the financial and statistical reports provided to us by members may have been audited by an independent accounting firm, our accumulation of the data from these reports has not been subject to a review for accuracy by an independent accounting firm. • The data presented are not necessarily inclusive of all members because in some cases our receipt of annual member financial and statistical reports may be delayed and not received in a timely manner to incorporate into our market estimates. • The financial and statistical reports submitted by members include information on indebtedness to RUS, but the reports do not include comprehensive data on indebtedness to other lenders and are not on a consolidated basis.
December 31, 2024 2023 (Dollars in thousands) Debt Outstanding % of Total Debt Outstanding % of Total Total long-term debt reported by members: (1) Distribution $ 70,171,733 $ 64,946,249 Power supply 54,140,111 52,533,144 Less: Long-term debt funded by RUS (54,346,548) (50,834,010) Members’ non-RUS long-term debt $ 69,965,296 $ 66,645,383 Funding sources of members’ long-term debt: Long-term debt funded by CFC by member class: Distribution $ 25,487,966 37 % $ 24,145,067 36 % Power supply 5,091,415 7 5,259,127 8 Long-term debt funded by CFC 30,579,381 44 29,404,194 44 Long-term debt funded by other lenders 39,385,915 56 37,241,189 56 Members’ non-RUS long-term debt $ 69,965,296 100 % $ 66,645,383 100 % ____________________________ (1) Reported amounts are based on member-provided financial information, which may not have been subject to audit by an independent accounting firm. 10 Table of Contents While we believe our estimates of the overall size of the rural electric lending market serve as a useful tool in gauging the size of this lending sector, they should be viewed as estimates rather than precise measures as there are certain limitations in our estimation methodology, including, but not limited to, the following: • Although certain underlying data included in the financial and statistical reports provided to us by members may have been audited by an independent accounting firm, our accumulation of the data from these reports has not been subject to a review for accuracy by an independent accounting firm. • The data presented are not necessarily inclusive of all members because in some cases our receipt of annual member financial and statistical reports may be delayed and not received in a timely manner to incorporate into our market estimates. • The financial and statistical reports submitted by members include information on indebtedness to RUS, but the reports do not include comprehensive data on indebtedness to other lenders and are not on a consolidated basis.
The data presented as of December 31, 2023, were based on information reported by 807 distribution systems and 52 power supply systems. The data presented as of December 31, 2022, were based on information reported by 809 distribution systems and 53 power supply systems.
The data presented as of December 31, 2024 and 2023 were based on information reported by 807 distribution systems and 52 power supply systems for both periods.
We strive to ensure that our employment value proposition presented to candidates accurately reflects the features of working for a mission-driven cooperative like CFC so that we can attract individuals who are highly engaged with our vision to be our members’ most trusted financial resource.
We strive to ensure that CFC’s employment value proposition reflects a mission-driven cooperative so that we can attract individuals who are highly engaged with our vision to be our members’ most trusted financial resource.
CFC Member Member Type Class May 31, 2024 Class E Distribution systems A 453 Power supply systems B 3 Statewide associations C 6 Class T 195 Associates 469 Total NCSC members and associates 1,126 LOAN AND GUARANTEE PROGRAMS CFC lends to its members and associates and also provides credit enhancements in the form of letters of credit and guarantees of debt obligations.
NCSC’s members and associates were as follows as of May 31, 2025. 3 Table of Contents CFC Member Member Type Class May 31, 2025 Class E Distribution systems A 456 Power supply systems B 3 Statewide associations C 6 Class T 204 Associates 497 Total NCSC members and associates 1,166 LOAN AND GUARANTEE PROGRAMS CFC lends to its members and associates and also provides credit enhancements in the form of letters of credit and guarantees of debt obligations.
Since there are only 11 states in which some or all electric cooperatives are subject to state regulatory oversight of their rates and tariffs, in most cases any associated costs of compliance can be passed on to cooperative consumers without additional regulatory approval.
Since there are only 11 states in which some or all electric cooperatives are subject to state regulatory oversight of their rates and tariffs, in most cases any associated costs of compliance can be passed on to cooperative consumers without additional regulatory approval. On April 25, 2024, the EPA announced carbon pollution standards for coal and gas-fired power plants.
Employee Engagement and Development CFC launched several talent and culture initiatives in our fiscal year 2024-2026 strategic plan with a focus on instilling a positive organizational culture characterized by high levels of employee satisfaction and engagement. We conducted an employee engagement survey requesting feedback on drivers of employee satisfaction and contribution; 97% of our staff participated in the survey.
Employee Engagement and Development In fiscal year 2025, CFC continued talent and culture initiatives with a focus on instilling a positive organizational culture characterized by high levels of employee satisfaction and engagement. We also conducted an employee engagement survey soliciting feedback on drivers of employee satisfaction and leadership contribution; 83% of our staff participated in the survey.
Membership in CFC is limited to cooperative or not-for-profit rural electric systems that are eligible to borrow from RUS under its Electric Loan Program and affiliates of those entities.
CFC CFC lends to its members and associates and also provides credit enhancements in the form of letters of credit and guarantees of debt obligations. Membership in CFC is limited to cooperative or not-for-profit rural electric systems that are eligible to borrow from RUS under its Electric Loan Program and affiliates of those entities.
Class T 3 Table of Contents associates include organizations that provide non-telephone or non-telecommunications companies and holding companies, subsidiaries and other organizations that are owned, controlled or operated by Class T members. NCSC’s members and associates were as follows as of May 31, 2024.
Class T associates include organizations that provide non-telephone or non-telecommunications companies and holding companies, subsidiaries and other organizations that are owned, controlled or operated by Class T members.
Most of these rural telecommunications companies have diversified their operations and also provide broadband services. Long-Term Loans NCSC’s telecom long-term loans have characteristics similar to CFC’s long-term loans as described herein, with the exception that senior secured long-term loans have terms up to 10 years.
Long-Term Loans NCSC’s telecom long-term loans have characteristics similar to CFC’s long-term loans as described herein, with the exception that senior secured long-term loans have terms up to 10 years.
As part of our efforts to promote an engaged, inclusive and collaborative workplace culture, we encourage employees to expand their capabilities and enhance their career potential through employer-funded onsite training, external training, tuition assistance and professional events.
Results were analyzed and reported at the corporate and group levels to collaborate on ways to promote employee engagement throughout CFC. As part of our efforts to promote an engaged and collaborative workplace culture, we encourage employees to expand their capabilities and enhance their skills through employer-funded onsite training, external training, tuition assistance and professional events.
T he program’s aim was to incorporate leadership competencies, such as business acumen, strategic agility, critical thinking skills and more, across a variety of programs, courses and levels to support and grow our leadership bench strength.
We also continued our annual Leadership Development Program, designed for managers at all levels, by providing training opportunities aligned to CFC’s core leadership competencies. The program’s aim was to incorporate leadership competencies, such as business acumen, strategic agility, critical thinking skills and more, across a variety of programs, courses and levels to support and grow our leadership bench strength.
CFC’s members are moving forward with renewable energy adoption, and we continue to support them by funding renewable energy initiatives that will help build out greater renewable infrastructure in the United States. 13 Table of Contents CFC had project financing loans outstanding to developers of renewable energy projects of approximately $299 million and $268 million as of May 31, 2024 and 2023, respectively.
CFC’s members are moving forward with renewable energy adoption, and we continue to support them by funding renewable energy initiatives that will help build out greater renewable infrastructure in the United States.
E3 is an employee engagement and training program aligned with CFC’s Fiscal Year 2024 Corporate Scorecard goal to “Educate existing and/or new employees on CFC’s/NCSC’s full suite of products and services.” CFC also supports employee development through a company-sponsored Toastmasters chapter, guest speakers from cooperative partners and staff visits to local electric cooperatives to allow employees to learn first-hand how their efforts contribute to our members’ success.
CFC also supports employee development through a company-sponsored Toastmasters chapter, guest speakers from cooperative partners and staff visits to local electric cooperatives to allow employees to learn first-hand how their efforts contribute to our members’ success.
When appropriate, we engage with recruiting firms to ensure that we have surveyed a broad scope of active and passive candidates for certain critical positions.
We use a variety of methods to attract talent, including outreach to local universities, recruitment job boards, a referral bonus program and targeted industry-related job posting sites. When appropriate, we engage with recruiting firms to ensure that we have surveyed a broad scope of active and passive candidates for certain critical positions.
Over 30 electric cooperatives were awarded approximately $250 million in federal funding through the Connect America Fund Phase II auction (“CAF II”) process by the Federal Communications Commission (“FCC”) that was held in 2018. The awarded funds are being distributed over a 10-year period.
Some of these electric cooperatives are leveraging these fiber assets to offer broadband services, either directly or through partnering with local telecommunication companies and others. Over 30 electric cooperatives were awarded approximately $250 million in federal funding through the Connect America Fund Phase II auction (“CAF II”) process by the Federal Communications Commission (“FCC”) that was held in 2018.
Cooperative Securities offers institutional debt placement services, which may include advising, arranging and structuring private debt financing transactions, to rural electric cooperatives, including NCSC’s electric members and associates. 5 Table of Contents NCSC Telecommunications (“Telecom”) Loan Programs NCSC’s telecom portfolio consists primarily of long-term loans to rural local exchange carriers or holding companies of rural local exchange carriers for debt refinancing, construction or upgrades of infrastructure, acquisitions and other corporate purposes.
NCSC Telecommunications (“Telecom”) Loan Programs NCSC’s telecom portfolio consists primarily of long-term loans to rural local exchange carriers or holding companies of rural local exchange carriers for debt refinancing, construction or upgrades of infrastructure, acquisitions and other corporate purposes. Most of these rural telecommunications companies have diversified their operations and also provide broadband services.
Additionally, CFC offered a variety of training opportunities to all staff to enhance their professional and technical skills such as presentation skills, performance management, project management, collaboration skills and more.
Additionally, CFC offered a variety of training opportunities to all staff to enhance their professional and technical skills such as presentation skills, performance management, project management, collaboration skills and more. This is incorporated in custom-made programs like CFC Learning Bites, which allows staff to engage in knowledge-transfer sessions on various technical skills from CFC’s subject matter experts.
In 2020, CFC developed a Sustainability Bond Framework that aligned with the Sustainability Bond Guidelines (“SBG”), as administered by the International Capital Markets Association (“ICMA”).
CFC had loans outstanding for renewable energy projects of approximately $450 million and $299 million as of May 31, 2025 and 2024, respectively. 13 Table of Contents In 2020, CFC developed a Sustainability Bond Framework that aligned with the Sustainability Bond Guidelines (“SBG”), as administered by the International Capital Markets Association (“ICMA”).
CFC unconditionally guarantees full indemnification for any losses of NCSC in financing leased assets to its members pursuant to a guarantee agreement with NCSC. Private Placements NCSC’s wholly owned subsidiary, Cooperative Securities LLC (“Cooperative Securities”), is a broker-dealer registered with the U.S. Securities Exchange Commission (“SEC ”).
CFC unconditionally guarantees full indemnification for any losses of NCSC in financing leased assets to its members pursuant to a guarantee agreement with NCSC.
On April 25, 2024, the EPA announced the final carbon pollution standards for coal and gas-fired power plants. The final rules set carbon dioxide limits for new gas-fired combustion turbines and carbon dioxide emission guidelines for existing coal, oil and gas-fired steam generating units. On June 28, 2024, the U.S. Supreme Court issued a ruling in Loper Bright Enterprises v.
The rules set carbon dioxide limits for new gas-fired combustion turbines and carbon dioxide emission guidelines for existing coal, oil and gas-fired steam generating units. On June 11, 2025, the EPA issued a proposed rule that will eliminate existing limits on greenhouse gas emissions from coal and gas-fired power plants promulgated under Section 111 of the Clean Air Act.
We seek to create and tailor our training programs to meet our required skill sets and employee interests, while also addressing key risks and compliance matters. In fiscal year 2024, CFC launched a new Leadership Development Program designed to serve managers at all levels by providing training opportunities aligned to CFC’s core leadership competencies.
In fiscal year 2025, CFC employees participated in our corporate development programs and took advantage of external professional training opportunities, such as professional certifications, industry seminars and workshops. We seek to create and tailor our training programs to meet the skill needs and employee interests, while also addressing key risks and compliance matters.
Facilitation of Rural Broadband Expansion by Electric Cooperatives Many electric cooperatives are making investments in fiber to support core electric plant communications. Some of these electric cooperatives are leveraging these fiber assets to offer broadband services, either directly or through partnering with local telecommunication companies and others.
The proposed rule, which is in a comment period, will face scrutiny from legal advocates and environmental organizations. Facilitation of Rural Broadband Expansion by Electric Cooperatives Many electric cooperatives are making investments in fiber to support core electric plant communications.
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Rural electric cooperatives, most of which are not-for-profit entities, were established to provide electricity in rural areas historically deemed too costly to be served by investor-owned utilities. As such, our electric cooperative members experience limited competition because they generally operate in exclusive territories, the majority of which are not rate regulated.
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Project Finance NCSC participates with other lenders on a syndicated basis in the origination of financing focused on power generation and transmission projects, including solar, wind and battery projects sponsored by developers with extensive experience developing, financing, constructing and operating power projects. NCSC also purchases assignments in such projects.
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The changes in the number of consolidated members and associates were primarily due to the withdrawal of RTFC members following the RTFC sale transaction and the transfer of certain RTFC entities to associate status. CFC CFC lends to its members and associates and also provides credit enhancements in the form of letters of credit and guarantees of debt obligations.
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Generally, the construction and permanent financing is documented under a single financing agreement that includes a construction and term loan and a tax equity/credit bridge loan. The construction and term loan is secured by the project’s assets and/or the developer’s interest in the project. Any tax equity bridge loans are repaid with tax equity investment funds.
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Cooperative Securities is a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation.
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In some cases, the sponsors are required to provide guarantees as credit enhancement for the financings. Private Placements NCSC’s wholly owned subsidiary, Cooperative Securities LLC (“Cooperative Securities”), is a broker-dealer registered with the U.S. Securities and Exchange Commission (“SEC”). Cooperative Securities is a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation.
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Raimondo that ended the use of the Chevron doctrine when courts analyze federal regulation. The Chevron doctrine required courts to defer to the reasonable interpretation of agencies when deciding if a regulation reflected the intent of Congress.
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Cooperative Securities offers institutional debt 5 Table of Contents placement services, which may include advising, arranging and structuring private debt financing transactions, to rural electric cooperatives, including NCSC’s electric members and associates.
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The end of Chevron is likely to make the EPA rule on carbon pollution standards, and other agency rules, more susceptible to legal challenges. Certain states and electric and other industry groups are challenging the standards in federal litigation.
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CFC also completed a corporate-wide training program called E3: Engage, Enlighten, Excel, which is aligned with CFC’s Fiscal Year 2025 Corporate Scorecard goal “Employee Engagement.” E3 ’ s purpose was to provide educational opportunities for employees to gain a greater overall understanding of CFC ’ s corporate governance, connect with the 12 Table of Contents purpose and importance of CFC ’ s member meetings, recognize developments and challenges in the cooperative industry, and be aware of the risks and potential opportunities in the use of artificial intelligence.
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We use a variety of methods to attract highly talented and engaged professionals, including outreach to local universities, recruitment job boards, including sites focusing on diversity, a referral bonus program and targeted industry-related job posting sites.
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Results were analyzed at all levels of the company with corporate, group and team meetings to collaborate on ways to promote employee engagement throughout CFC. Action items have been identified and we are moving forward with making updates and changes in response to input from staff.
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In fiscal year 2024, CFC employees completed more than 3,500 training hours through our internal corporate development programs and over 700 hours of external professional training opportunities, such as professional certifications, industry seminars and workshops.
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This is incorporated in custom-made programs like CFC Learning Bites, which allows staff to engage in knowledge-transfer sessions on various technical skills from CFC’s subject matter experts. 12 Table of Contents CFC recently completed a corporate-wide training program called CFC E3: Products & Services, which is a continuation of the initial launch of the E3 program in our 2023 fiscal year.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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We depend on access to the capital markets and other sources of financing, such as repurchase agreements, bank revolving credit agreements, investments from our members, private debt issuances through Farmer Mac and the Guaranteed Underwriter Program, to fund new loan advances, refinance our long- and short-term debt and, if necessary, to fulfill our obligations under our guarantee and repurchase agreements.
We depend on access to the capital markets and other sources of financing, such as bank revolving credit agreements, investments from our members, private debt issuances through Farmer Mac and the Guaranteed Underwriter Program, to fund new loan advances, refinance our long- and short-term debt and, if necessary, to fulfill our obligations under our guarantee and repurchase agreements.
CFC has been recognized by the Internal Revenue Service as an organization for which income is exempt from federal taxation under Section 501(c)(4) of the Internal Revenue Code (other than any net income from an unrelated trade or business).
CFC has been recognized by the Internal Revenue Service as an organization for which income is exempt from federal taxation under Section 501(c)(4) of the Internal Revenue Code (other than any income from an unrelated trade or business).
In order to maintain CFC’s tax-exempt status, it must continue to operate exclusively for the promotion of social welfare by operating on a cooperative basis for the benefit of its members by providing them cost-based financial products 20 Table of Contents and services consistent with sound financial management, and no part of CFC’s net earnings may inure to the benefit of any private shareholder or individual other than the allocation or return of net earnings or capital to its members in accordance with CFC’s bylaws and incorporating statute in effect in 1996.
In order to maintain CFC’s tax-exempt status, it must continue to operate exclusively for the promotion of social welfare by operating on a cooperative basis for the benefit of its members by providing them cost-based financial products and services consistent with sound financial management, and no part of CFC’s net earnings may inure to the benefit of any private shareholder or individual other than the allocation or return of net earnings or capital to its members in accordance with CFC’s bylaws and incorporating statute in effect in 1996.
Cybersecurity incidents may occur from a variety of sources, such as foreign governments, hacktivists or other well-financed entities, and may originate from less regulated and remote areas of the world. Employee errors, malfeasance, technology failures and other irregularities may also contribute to these events.
Cybersecurity incidents may occur from a variety of sources, such as foreign governments, hackers or other well-financed entities, and may originate from less regulated and remote areas of the world. Employee errors, malfeasance, technology failures and other irregularities may also contribute to these events.
Cybersecurity incidents pose a risk to the security of our members’ strategic business information and the confidentiality and integrity of our data, which include strategic and proprietary information. This risk continues to increase and attack methods continue to evolve in sophistication, velocity and frequency.
Cybersecurity incidents pose a risk to the security of our members’ strategic business information and the confidentiality and integrity of our data, which include strategic and proprietary information. This risk continues to increase and cyberattack methods continue to evolve in sophistication, velocity and frequency.
In particular, the value of the foreclosed assets or entities may deteriorate and have a negative impact on our results of operations. We assess foreclosed assets, if any, for impairment periodically as required under generally accepted accounting principles in the U.S. (“U.S. GAAP.”) Impairment charges, if required, represent a reduction to earnings in the period of the charge.
In particular, the value of the foreclosed assets or entities may deteriorate and have a negative impact on our results of operations. We assess foreclosed assets, if any, for impairment periodically as required under generally accepted accounting principles in the U.S. (“U.S. GAAP”). Impairment charges, if required, represent a reduction to earnings in the period of the charge.
The failure to attract, retain or motivate skilled employees, along with the increased costs, could impair our ability to achieve our performance targets and otherwise have a material adverse effect on our business, financial condition and results of operations. Regulatory and Compliance Risks Loss of our tax-exempt status could adversely affect our earnings.
The failure to attract, retain or motivate skilled employees, along with the increased costs, could impair our ability to achieve our performance targets and otherwise have a material adverse effect on our business, financial condition and results of operations. 20 Table of Contents Regulatory and Compliance Risks Loss of our tax-exempt status could adversely affect our earnings.
Based on our interest rate swap agreements subject to rating triggers, if our senior unsecured ratings fell to or below Baa2 by Moody’s or below BBB by S&P, and the agreements were consequently terminated as of May 31, 2024, all agreements for which we owe amounts when netted for each counterparty pursuant to a master netting agreement were in a net payable position of approximately $1 million as of that date.
Based on our interest rate swap agreements subject to rating triggers, if our senior unsecured ratings fell to or below Baa2 by Moody’s or below BBB by S&P, and the agreements were consequently terminated as of May 31, 2025, all agreements for which we owe amounts when netted for each counterparty pursuant to a master netting agreement were in a net payable position of approximately $2 million as of that date.
MD&A—Non-GAAP Financial Measures and Reconciliations” for additional information on our non-GAAP financial measures and a reconciliation to the most comparable U.S. GAAP financial measures. Pursuant to our collateral trust bond indentures, we are required to maintain eligible pledged collateral at least equal to 100% of the principal amount of the bonds issued under the indenture.
MD&A—Non-GAAP Financial Measures and Reconciliations” for additional 17 Table of Contents information on our non-GAAP financial measures and a reconciliation to the most comparable U.S. GAAP financial measures. Pursuant to our collateral trust bond indentures, we are required to maintain eligible pledged collateral at least equal to 100% of the principal amount of the bonds issued under the indenture.
In order to access the commercial paper markets at current levels, we believe that we need to maintain our short-term ratings at the current level from Moody’s, S&P and Fitch Ratings (“Fitch”).
In order to access the commercial paper markets at current levels, we believe that we need to maintain our short-term ratings at the current level from Moody’s and Fitch Ratings (“Fitch”).
CFC’s directors are elected or appointed from our membership, with 10 director positions filled by directors of members, 10 director positions filled by general managers or chief executive officers of members, two positions appointed by NRECA and one at-large position that must, among other things, be a director, financial officer, general manager or chief executive of one of our members.
CFC’s directors are elected or appointed from our membership, with 10 director positions filled by directors of members, 10 director positions filled by general managers or chief executive officers of members, two positions appointed by NRECA until June 2027 and one at-large position that must, among other things, be a director, financial officer, general manager or chief executive of one of our members.
In addition, we must maintain loans pledged as collateral for various debt issuances at or below 150% of the related secured debt outstanding as a condition to 17 Table of Contents borrowing under our revolving credit agreements.
In addition, we must maintain loans pledged as collateral for various debt issuances at or below 150% of the related secured debt outstanding as a condition to borrowing under our revolving credit agreements.
In addition, if a counterparty fails to perform on a derivative obligation, we could incur 16 Table of Contents a financial loss to replace the derivative with another counterparty and/or a loss through the failure of the counterparty to pay us amounts owed.
In addition, if a counterparty fails to perform on a derivative obligation, we could incur a financial loss to replace the derivative with another counterparty and/or a loss through the failure of the counterparty to pay us amounts owed.
Loans to rural electric utility cooperatives accounted for approximately 98% of our total loans outstanding as of May 31, 2024.
Loans to rural electric utility cooperatives accounted for approximately 98% of our total loans outstanding as of May 31, 2025.
The largest total exposure to a single borrower or controlled group represented 1% of total loans outstanding as of May 31, 2024. Texas historically has had the largest number of borrowers with loans outstanding and the largest loan concentration in any one state. Loans outstanding to Texas borrowers represented 17% of total loans outstanding as of May 31, 2024.
The largest total exposure to a single borrower or controlled group represented 1% of total loans outstanding as of May 31, 2025. Texas historically has had the largest number of borrowers with loans outstanding and the largest loan concentration in any one state. Loans outstanding to Texas borrowers represented 16% of total loans outstanding as of May 31, 2025.
MD&A—Critical Accounting Estimates” and “Note 1—Summary of Significant Accounting Policies” to our consolidated financial statements. Item 1B. Unresolved Staff Comments None.
MD&A—Critical Accounting Estimates” and “Note 1—Summary of Significant Accounting Policies” to our consolidated financial statements. Item 1B. Unresolved Staff Comments None. 21 Table of Contents
Our operations may be subject to disruption due to the occurrence of natural disasters, acts of terrorism or war, public health emergencies, such as a reemergence of the COVID-19 pandemic, or other unexpected or disastrous conditions, events or emergencies beyond our control, some of which may be intensified by the effects of a government response to the event, or climate change.
Our operations may be subject to disruption due to the occurrence of natural disasters, acts of terrorism or war, public health emergencies, or other unexpected or disastrous conditions, events or emergencies beyond our control, some of which may be intensified by the effects of a government response to the event, or climate change.
After taking into consideration master netting agreements for our interest rate swaps, we were in a net receivable position of $611 million and a net payable position of $1 million as of May 31, 2024. A decline in our credit rating could trigger payments under our derivative agreements, which could impair our financial results.
After taking into consideration master netting agreements for our interest rate swaps, we were in a net receivable position of $506 million and a net payable position of $2 million as of May 31, 2025. 16 Table of Contents A decline in our credit rating could trigger payments under our derivative agreements, which could impair our financial results.
Loans outstanding to electric utility organizations represented approximately 98% of our total loans outstanding as of May 31, 2024. We had 885 borrowers with loans outstanding as of May 31, 2024, and our 20 largest borrowers accounted for 20% of total loans outstanding as of May 31, 2024.
Loans 14 Table of Contents outstanding to electric utility organizations represented approximately 98% of our total loans outstanding as of May 31, 2025. We had 899 borrowers with loans outstanding as of May 31, 2025, and our 20 largest borrowers accounted for 19% of total loans outstanding as of May 31, 2025.
The factors listed above, individually or in combination, could result in declining sales or increased power supply and operating 15 Table of Contents costs and could potentially cause a deterioration in the financial performance of our members and the value of the collateral securing their loans.
The factors listed above, individually or in combination, could result in declining sales or increased power supply and operating costs and could potentially cause a deterioration in the financial performance of our members and the value of the collateral securing their loans. This could impair their ability to repay us in accordance with the terms of their loans.
MD&A—Enterprise Risk Management.” You should consider the following risks together with all of the other information in this report. 14 Table of Contents RISK FACTORS Credit Risks We are subject to credit risk given that borrowers may not be able to meet their contractual obligations in accordance with agreed-upon terms, which could have a material adverse effect on our financial condition, results of operations and liquidity.
RISK FACTORS Credit Risks We are subject to credit risk given that borrowers may not be able to meet their contractual obligations in accordance with agreed-upon terms, which could have a material adverse effect on our financial condition, results of operations and liquidity.
Therefore, the following should not be considered a complete discussion of all the risks and uncertainties we may face. For information on how we manage our key risks, see “Item 7.
Therefore, the following should not be considered a complete discussion of all the risks and uncertainties we may face. For information on how we manage our key risks, see “Item 7. MD&A—Enterprise Risk Management.” You should consider the following risks together with all of the other information in this Report.
Labor shortages and supply chain complications exacerbated by, among other things, the invasion of Ukraine by Russia and subsequent sanctions and export controls against Russia, has contributed to rising inflationary pressures. General inflation in the United States has risen to levels not experienced in recent decades.
Labor shortages and supply chain complications exacerbated by, among other things, the invasion of Ukraine by Russia and subsequent sanctions and export controls against Russia and increased geopolitical tensions between the United States and Canada, China and Mexico, has contributed to continuing inflationary pressures.
This could impair their ability to repay us in accordance with the terms of their loans. In such case, it may lead to risk rating downgrades, which may result in an increase in our allowance for credit losses and a decrease in our net income.
In such cases, it may lead to risk rating downgrades, which may result in an increase in our allowance for credit losses and a decrease in our net income.
Certain Relationships and Related Transactions, and Director Independence—Review and Approval of Transactions with Related Persons” for a description of our policies with regard to approval of loans to members affiliated with CFC directors. 19 Table of Contents Natural or man-made disasters, including widespread health emergencies, or other external events beyond our control such as acts of terrorism or war, could disrupt our business and adversely affect our results of operations and financial condition.
Natural or man-made disasters, including widespread health emergencies, or other external events beyond our control such as acts of terrorism or war, could disrupt our business and adversely affect our results of operations and financial condition.
Further, FEMA does not provide relief for events caused by human error and, as a result, the majority of wildfires may not be covered events.
As a result, the programs on which our members have relied upon may not be implemented in their current forms or payments may not be received on a timely basis. Further, FEMA does not provide relief for events caused by human error and, as a result, the majority of wildfires may not be covered events.
Rising energy prices, interest rates and wages, among other things, may increase our operating costs as well as both the operating and borrowing costs of our members and disrupt our business.
Rising energy prices, interest rates and wages, and the pending tariffs to be imposed by the United States on imported goods may increase our operating costs, as well as both the operating and borrowing costs of our members, potentially disrupting our business.
CFC currently has loans outstanding to members that are affiliated with CFC directors and may periodically extend new loans to such members. The relationship of CFC’s directors to our members may give rise to conflicts of interests from time to time. See “Item 13.
The relationship of CFC’s directors to our members may give rise to conflicts of interests from time to time. See “Item 13. Certain Relationships and Related Transactions, and Director Independence— 19 Table of Contents Review and Approval of Transactions with Related Persons” for a description of our policies with regard to approval of loans to members affiliated with CFC directors.
Removed
While we believe our members would largely be reimbursed by Federal Emergency Management Agency (“FEMA”) relief programs for eligible storm-related damages, such programs may not be implemented in their current forms or payments may not be received on a timely basis.
Added
While our members have traditionally largely been reimbursed by Federal Emergency Management Agency (“FEMA”) relief programs for eligible storm-related damages, in January 2025, an executive order established the FEMA Review Council with the intent of implementing significant reforms to FEMA and 15 Table of Contents its reimbursement programs.
Added
Ongoing organizational and policy reforms at FEMA, including leadership changes, staffing reductions and evolving federal and state roles, may present a risk to the eligibility and timing of disaster cost reimbursements.
Added
The use of new and emerging technologies through artificial intelligence and machine learning may intensify this risk as adversaries may leverage artificial intelligence to craft more sophisticated phishing schemes, automate social engineering attacks or generate malware with increased speed.
Added
Upon the termination of the two positions appointed by NRECA in June 2027, two at-large positions will be filled by an executive staff member of our Class B members and a director of our Class D members. CFC currently has loans outstanding to members that are affiliated with CFC directors and may periodically extend new loans to such members.
Added
While general inflation in the United States has decreased from peak levels in 2022, it remains at levels not experienced in recent decades. Certain utility assets of our members, such as transformers and solar panels, are highly sensitive to supply chain complications.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Our strategy encompasses technology, process and people. The technology components are designed to provide multiple layers of system security, controls and monitors for our infrastructure, data and applications. Our security infrastructure and resources are focused on the monitoring of threats and the defense of our external and internal networks, endpoints, data resources and identity management.
The technology components are designed to provide multiple layers of system security, controls and monitors for our infrastructure, data and applications. Our security infrastructure and resources are focused on the monitoring of threats and the defense of our external and internal networks, endpoints, data resources and identity management.
The reports include information on material cybersecurity incidents, if any, and management actions to protect CFC. Upon the occurrence of a material cybersecurity incident, the Board of Directors will be promptly notified so it may properly evaluate such cybersecurity incident, including management’s remediation plan.
The reports include information on significant cybersecurity incidents, if any, and management actions to protect CFC. We promptly notify the board of directors upon the occurrence of a significant cybersecurity incident so it may properly evaluate the incident, including management’s remediation plan.
Collectively, they are also 22 Table of Contents responsible for information security policies, organizational readiness and the escalation of certain cybersecurity incidents from our cybersecurity personnel to senior management based on our incident response procedures.
Our COO and Director, Information Security are also responsible for information security policies, organizational readiness and the escalation of certain cybersecurity incidents from our cybersecurity personnel to senior management based on our incident response procedures.
On an annual basis, our Chief Information Officer (“CIO”) and Director, Information Security, provide the Board an overview of the company’s technology strategy and planned activities to continually improve the cybersecurity program, as well as threats and cybersecurity incidents.
On an annual basis, members of our staff responsible for cybersecurity provide the board an overview of the company’s technology strategy and planned activities to continually improve the cybersecurity program, as well as threats and cybersecurity incidents.
Our Director, Information Security, who dually reports to the COO and CIO, has over a decade of information security management experience and as a Certified Information Systems Security Professional.
Our Director, Information Security, who reports to our Chief Operating Officer ( “ COO”), has over a decade of information security management experience and is a Certified Information Systems Security Professional.
Because these risks could have a material adverse impact on our operations and reputation, both management and the CFC Board of Directors are actively engaged in the oversight of the cybersecurity program and our continuous efforts in monitoring, measuring and managing the risks. 21 Table of Contents Risk Management and Strategy The primary goal of CFC’s cybersecurity operations is to prevent, identify, mitigate and respond on a timely basis to cybersecurity threats in order to reduce operational risk and business impact.
Because these risks could have a material adverse impact on our operations and reputation, both management and the CFC Board of Directors are actively engaged in the oversight of the cybersecurity program and our continuous efforts in monitoring, measuring and managing the risks.
Mandatory training is required on a quarterly basis for all CFC employees to promote leading practices in protecting information, data and operations in a continually changing environment. The effectiveness of our cybersecurity operations is regularly examined and tested by third-party vendors who specialize in cybersecurity risk management.
Mandatory training is required on a quarterly basis for all CFC employees to promote leading practices in protecting information, data and operations in a continually changing environment.
Our first line of defense includes our CIO and Director, Information Security, who work to ensure that the day-to-day execution of the company’s technology and security operations are in alignment with corporate policies and procedures. Our CIO, who reports to our Chief Operating Officer ( “ COO ” ), has over two decades of experience managing technology risk.
Our first line of defense includes our cybersecurity team lead by our Director, Information Security, who work to ensure that the day-to-day execution of the company’s technology and security operations are in alignment with corporate policies and procedures.
Our second line of defense includes our Cybersecurity Committee and the enterprise risk-management framework under the direction of the Chief Risk Officer to monitor cybersecurity functions and risk management.
Our second line of defense includes our Cybersecurity Committee and the enterprise risk-management framework under the direction of the Chief Risk Officer to monitor cybersecurity functions and risk management. Our Cybersecurity Committee is composed of members of management including, but not limited to, the COO, Chief Risk Officer, General Counsel and Vice President, Internal Audit.
Furt her, on at least an annual basis, the Board of Directors reviews management reports concerning the disclosure controls and procedures in place to enable CFC to make accurate and timely disclosures about any material cybersecurity incidents.
Furt her, on at least an annual basis, the board of directors reviews management reports concerning the disclosure controls and procedures in place to enable CFC to make accurate and timely disclosures about any material cybersecurity incidents. 22 Table of Contents Role of Management Management is directly involved in steering the company’s cybersecurity program employing a multi-disciplinary approach that operates through a “three lines of defense ” model.
Role of Management Management is directly involved in steering the company’s cybersecurity program employing a multi-disciplinary approach that operates through a three lines of defense model. Management’s approach helps ensure the organization works collaboratively to monitor, assess and respond to cybersecurity incidents at all levels and functions consistent with our incident response procedures and corporate practices.
Management’s approach helps ensure the organization works collaboratively to monitor, assess and respond to cybersecurity incidents at all levels and functions consistent with our incident response procedures and corporate practices.
In addition to the COO, CIO and Director, Information Security, our Cybersecurity Committee is composed of members of management including, but not limited to, the Chief Risk Officer, General Counsel and Vice President, Internal Audit. The Cybersecurity Committee helps ensure corporate policy compliance and reports directly to the Board of Directors regarding material cybersecurity incidents and emerging threats.
The Cybersecurity Committee helps ensure corporate policy compliance and reports directly to the board of directors regarding material cybersecurity incidents and emerging threats.
Added
Risk Management and Strategy The primary goal of CFC’s cybersecurity operations is to prevent, identify, mitigate and respond on a timely basis to cybersecurity threats in order to reduce operational risk and business impact. Our strategy encompasses technology, process and people.
Added
We established requirements regarding the use of company-approved generative artificial intelligence tools to ensure that all employees utilize such tools in a manner that safeguards sensitive information and aligns with legal requirements and CFC’s ethical standards. The effectiveness of our cybersecurity operations is regularly examined and tested by third-party vendors who specialize in cybersecurity risk management.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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CFC establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Accordingly, no reserve has been recorded with respect to any legal proceedings at this time. Item 4. Mine Safety Disclosures Not applicable. PART II Item 5.
CFC establishes reserves for specific legal matters when it determines that the likelihood of an unfavorable outcome is probable and the loss is reasonably estimable. Accordingly, no reserve has been recorded with respect to any legal proceedings at this time. Item 4. Mine Safety Disclosures Not applicable. 23 Table of Contents PART II Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Not applicable. Item 6. Reserved 23 Table of Contents
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Not applicable. Item 6. Reserved

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Quantitative and Qualitative Disclosures About Market Risk 78 Item 8.
Quantitative and Qualitative Disclosures About Market Risk 79 Item 8.
Financial Statements and Supplementary Data 79 Report of Independent Registered Public Accounting Firm 80 Consolidated Statements of Operations 83 Consolidated Statements of Comprehensive Income (Loss) 84 Consolidated Balance Sheets 85 i Page Consolidated Statements of Changes in Equity 86 Consolidated Statements of Cash Flows 87 Notes to Consolidated Financial Statements 89 Note 1 — Summary of Significant Accounting Policies 89 Note 2 — Interest Income and Interest Expense 100 Note 3 — Investment Securities 101 Note 4 — Loans 102 Note 5 — Allowance for Credit Losses 114 Note 6 — Short-Term Borrowings 116 Note 7 — Long-Term Debt 117 Note 8 — Subordinated Deferrable Debt 121 Note 9 — Members’ Subordinated Certificates 122 Note 10 — Derivative Instruments and Hedging Activities 124 Note 11 — Equity 128 Note 12 — Employee Benefits 131 Note 13 — Guarantees 132 Note 14 — Fair Value Measurement 134 Note 15 — Variable Interest Entities 138 Note 16 — Business Segments 140
Financial Statements and Supplementary Data 80 Report of Independent Registered Public Accounting Firm 81 Consolidated Statements of Operations 83 Consolidated Statements of Comprehensive Income (Loss) 84 Consolidated Balance Sheets 85 i Page Consolidated Statements of Changes in Equity 86 Consolidated Statements of Cash Flows 87 Notes to Consolidated Financial Statements 89 Note 1 — Summary of Significant Accounting Policies 89 Note 2 — Interest Income and Interest Expense 100 Note 3 — Investment Securities 100 Note 4 — Loans 102 Note 5 — Allowance for Credit Losses 113 Note 6 — Short-Term Borrowings 115 Note 7 — Long-Term Debt 116 Note 8 — Subordinated Deferrable Debt 119 Note 9 — Members’ Subordinated Certificates 120 Note 10 — Derivative Instruments and Hedging Activities 122 Note 11 — Equity 126 Note 12 — Employee Benefits 129 Note 13 — Guarantees 131 Note 14 — Fair Value Measurement 133 Note 15 — Variable Interest Entities 137 Note 16 — Business Segments 139
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) 24 Introduction 24 N on-GAAP Finan cial Measures 24 Executive Summary 25 Consolidated Results of Operations 30 Consolidated Balance Sheet Analysis 38 Enterprise Risk Management 46 Credit Risk 47 Liquidity Risk 56 Market Risk 68 Operational Risk 70 Critical Accounting Estimates 71 Recent Accounting Changes and Other Developments 73 Non-GAAP Financial Measures and Reconciliations 74 Item 7A.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) 24 Introduction 24 Non-GAAP Financial Measures 24 Executive Summary 25 Consolidated Results of Operations 31 Consolidated Balance Sheet Analysis 40 Enterprise Risk Management 47 Credit Risk 48 Liquidity Risk 57 Market Risk 69 Operational Risk 71 Critical Accounting Estimates 72 Recent Accounting Changes and Other Developments 74 Non-GAAP Financial Measures and Reconciliations 74 Item 7A.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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We use derivatives as a tool in matching the duration and repricing characteristics of our assets and liabilities, which we discuss above in “Consolidated Results of Operations—Non-Interest Income—Derivative Gains (Losses) and “Note 10—Derivative Instruments and Hedging Activities.” Interest Rate Risk Assessment Our Asset Liability Management (“ALM”) framework includes the use of analytic tools and capabilities, enabling CFC to generate a comprehensive profile of our interest rate risk exposure.
We use derivatives as a tool in matching the duration and repricing characteristics of our assets and liabilities, which we discuss above in “Consolidated Results of Operations—Non-Interest Income—Derivative Gains (Losses)” and “Note 10—Derivative Instruments and Hedging Activities.” Interest Rate Risk Assessment Our Asset Liability Management (“ALM”) framework includes the use of analytic tools and capabilities, enabling CFC to generate a comprehensive profile of our interest rate risk exposure.
(2) We include net periodic derivative cash settlement interest amounts as a component of interest expense in deriving adjusted net interest income. See the section “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of the non-GAAP financial measures presented in this Report to the most comparable U.S.
(2) We include net periodic derivative cash settlement interest amounts as a component of interest expense in deriving adjusted net interest income. See the section “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of the non-GAAP financial measures presented in this Report to the most comparable U.S. GAAP financial measures.
GAAP measures in the section “Non-GAAP Financial Measures and Reconciliations.” EXECUTIVE SUMMARY Reported Results Net Income and TIER The table 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.” See “Item 7.
GAAP measures in the section “Non-GAAP Financial Measures and Reconciliations.” EXECUTIVE SUMMARY 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.” See “Item 7.
The increase in the collective allowance was due to the growth in our loan portfolio, a slight decline in the overall credit quality of our loan portfolio and slightly higher expected default rates derived from a third-party utility sector default data used in estimating the allowance for credit losses.
The increase in the collective allowance for FY2024 was due to the growth in our loan portfolio, a slight decline in the overall credit quality of our loan portfolio and slightly higher expected default rates derived from third-party utility sector default data used in estimating the allowance for credit losses.
The Chief Risk Officer provides reports to the CFC Board of Directors at each regularly scheduled board meeting, and more frequently as requested by the board of directors, relating to, among other things, the ongoing progress of managing key risks at CFC given the ERM framework; management’s responses and mitigation plan for any critical business risk trending negatively or 46 Table of Contents exceeding prevailing risk limits and guidelines as identified during the risk assessment process; the status of any gaps or deficiencies in the ERM process; CFC’s overall risk universe profile and important trends; and emerging risks and opportunities previously not identified or reported.
The Chief Risk Officer provides reports to the CFC Board of Directors at each regularly scheduled board meeting, and more frequently as requested by the board of directors, relating to, among other things, the ongoing progress of managing key risks at CFC given the ERM framework; management’s responses and mitigation plan for any critical business risk trending negatively or 47 Table of Contents exceeding prevailing risk limits and guidelines as identified during the risk assessment process; the status of any gaps or deficiencies in the ERM process; CFC’s overall risk universe profile and important trends; and emerging risks and opportunities previously not identified or reported.
Our projection is based on the following, which includes several assumptions: (i) the estimated issuance of long-term debt, including capital market and other non-capital market term debt, is based on our market-risk management goal of minimizing the mismatch between the cash flows from our financial assets and our financial liabilities; (ii) long-term loan scheduled amortization repayment amounts represent scheduled loan principal payments for long-term loans outstanding as of May 31, 2024 and estimated loan principal payments for long-term loan advances, plus estimated prepayment amounts on long-term loans; (iii) long-term and subordinated debt maturities consist of both scheduled principal maturity and amortization amounts and projected principal maturity and amortization amounts on term debt outstanding in each period presented; and (iv) long-term loan advances are based on our current projection of member demand for loans.
Our projection is based on the following, which includes several assumptions: (i) the estimated issuance of long-term debt, including capital market and other non-capital market term debt, is based on our market-risk management goal of minimizing the mismatch between the cash flows from our financial assets and our financial liabilities; (ii) long-term loan scheduled amortization repayment amounts represent scheduled loan principal payments for long-term loans outstanding as of May 31, 2025 and estimated loan principal payments for long-term loan advances, plus estimated prepayment amounts on long-term loans; (iii) long-term and subordinated debt maturities consist of both scheduled principal maturity and amortization amounts and projected principal maturity and amortization amounts on term debt outstanding in each period presented; and (iv) long-term loan advances are based on our current projection of member demand for loans.
We expect period-to-period market fluctuations in the fair value of our equity and debt investment securities, which we report together with realized gains and losses from the sale of investment securities on our consolidated statements of operations.
We expect period-to-period market fluctuations in the fair value of our equity and debt investment securities, which we report together with realized gains and losses from the sale of investment securities in our consolidated statements of operations.
As a result of this change, we retained 79% of adjusted net income for FY2024 in members’ capital reserve, compared with 56% for FY2023. 45 Table of Contents ENTERPRISE RISK MANAGEMENT Overview CFC has an Enterprise Risk Management (“ERM”) framework that is designed to identify, assess, monitor and manage the risks we assume in conducting our activities to serve the financial needs of our members.
As a result of this change, we retained 79% of adjusted net income for FY2024 in members’ capital reserve, compared with 56% for FY2023. 46 Table of Contents ENTERPRISE RISK MANAGEMENT Overview CFC has an Enterprise Risk Management (“ERM”) framework that is designed to identify, assess, monitor and manage the risks we assume in conducting our activities to serve the financial needs of our members.
Following this section, we provide a discussion and analysis of material changes in amounts reported on our consolidated balance sheet as of May 31, 2024 and 2023. 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.
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.
Table 10: Debt—Debt Product Types Debt Product Type Maturity Range Market Secured/Unsecured Short-term funding programs: Commercial paper 1 to 270 days Capital markets, members and affiliates Unsecured Select notes 30 to 270 days Members and affiliates Unsecured Daily liquidity fund notes Demand note Members and affiliates Unsecured Securities sold under repurchase agreements 1 to 90 days Capital markets Secured Other funding programs: Medium-term notes 9 months to 30 years Capital markets, members and affiliates Unsecured Collateral trust bonds (1) Up to 30 years Capital markets Secured Guaranteed Underwriter Program notes payable (2) Up to 30 years U.S. government Secured Farmer Mac notes payable (3) Up to 30 years Other noncapital markets Secured Other notes payable (4) Up to 3 years Other noncapital markets Both Subordinated deferrable debt (5) Up to 45 years Capital markets Unsecured Members’ subordinated certificates (6) Up to 100 years Members Unsecured Revolving credit agreements Up to 5 years Bank institutions Unsecured ____________________________ (1) Collateral trust bonds are secured by the pledge of permitted investments and eligibl e mortgage notes from distribution system borrowers in an amount at least equal to the outstanding principal amount of collateral trust bonds.
Table 12: Debt—Debt Product Types Debt Product Type Maturity Range Market Secured/Unsecured Short-term funding programs: Commercial paper 1 to 270 days Capital markets, members and affiliates Unsecured Select notes 30 to 270 days Members and affiliates Unsecured Daily liquidity fund notes Demand note Members and affiliates Unsecured Securities sold under repurchase agreements 1 to 90 days Capital markets Secured Other funding programs: Medium-term notes 9 months to 30 years Capital markets, members and affiliates Unsecured Collateral trust bonds (1) Up to 30 years Capital markets Secured Guaranteed Underwriter Program notes payable (2) Up to 30 years U.S. government Secured Farmer Mac notes payable (3) Up to 30 years Other noncapital markets Secured Subordinated deferrable debt (4) Up to 45 years Capital markets Unsecured Members’ subordinated certificates (5) Up to 100 years Members Unsecured Revolving credit agreements Up to 5 years Bank institutions Unsecured ____________________________ (1) Collateral trust bonds are secured by the pledge of permitted investments and eligibl e mortgage notes from distribution system borrowers in an amount at least equal to the outstanding principal amount of collateral trust bonds.
We have not issued foreign-denominated debt since 2007, and as of May 31, 2024 and 2023, there were no foreign currency derivative instruments outstanding. For operational management and decision-making purposes, we subtract derivative forward value gains (losses) and foreign currency adjustments from our net income when calculating TIER and for other net income presentation purposes.
We have not issued foreign-denominated debt since 2007, and as of May 31, 2025 and 2024, there were no foreign currency derivative instruments outstanding. For operational management and decision-making purposes, we subtract derivative forward value gains (losses) and foreign currency adjustments from our net income when calculating TIER and for other net income presentation purposes.
Our MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and related notes for the fiscal year ended May 31, 2024 included in this Report and additional information contained elsewhere in this Report, including the risk factors discussed under “Item 1A.
Our MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and related notes for the fiscal year ended May 31, 2025 included in this Report and additional information contained elsewhere in this Report, including the risk factors discussed under “Item 1A.
Generally, the amount of a charge-off is the recorded investment in excess of the discounted expected cash flows from the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral securing the loan. We report charge-offs net of amounts recovered on previously charged-off loans. We had no charge-offs during FY2024.
Generally, the amount of a charge-off is the recorded investment in excess of the discounted expected cash flows from the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral securing the loan. We report charge-offs net of amounts recovered on previously charged-off loans. We had no charge-offs during FY2025 and FY2024.
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, 2024 and 2023; therefore, we had no debt securities in our investment portfolio pledged as collateral as of each respective date.
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.
(2) Consists of late payment fees and net amortization of deferred loan fees and loan origination costs. 31 Table of Contents (3) The average balance represents average monthly balances, which is calculated based on the month-end balance as of the beginning of the reporting period and the balances as of the end of each month included in the specified reporting period.
(2) Consists of late payment fees and net amortization of deferred loan fees and loan origination costs. 33 Table of Contents (3) The average balance represents average monthly balances, which is calculated based on the month-end balance as of the beginning of the reporting period and the balances as of the end of each month included in the specified reporting period.
Table 4 displays the change in net interest income between periods and the extent to which the variance for each category of interest-earning assets and interest-bearing liabilities is attributable to (i) changes in volume, which represents the change in the average balances of our interest-earning assets and interest-bearing liabilities or volume, and (ii) changes in the rate, which represents the change in the average interest rates of these assets and liabilities.
Table 6 displays the change in net interest income between periods and the extent to which the variance for each category of interest-earning assets and interest-bearing liabilities is attributable to (i) changes in volume, which represents the change in the average balances of our interest-earning assets and interest-bearing liabilities or volume, and (ii) changes in the rate, which represents the change in the average interest rates of these assets and liabilities.
While management uses its best judgment to assess loss data and other factors to determine the allowance for credit losses, changes in our loss assumptions, adjustments to assigned borrower risk ratings, the use of alternate external data sources or other factors could affect our estimate of probable credit losses inherent in the portfolio as of each balance sheet date, which would also impact the related provision for credit losses recognized in our consolidated statements of operations.
While management uses its best judgment to assess loss data and other factors to determine the allowance for credit losses, changes in our loss assumptions, adjustments to assigned borrower risk ratings, the use of alternate external data sources or other factors could affect our estimate of probable credit losses inherent in the portfolio as of each balance sheet date, which would also impact the related 73 Table of Contents provision for credit losses recognized in our consolidated statements of operations.
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. 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.
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. 29 Table of Contents 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.
We believe our internal historical loss experience serves as a more reliable estimate of loss severity than third-party data due to the organizational structure and operating environment of rural utility cooperatives, our lending practice of generally requiring a senior security position on the assets and revenue of borrowers for long-term loans, the approach we take in working with borrowers that may be experiencing operational or financial issues and other factors discussed in “Credit Risk—Loan Portfolio Credit Risk.” 72 Table of Contents We generally consider nonperforming loans as well as loans that have been modified with borrowers experiencing financial difficulty for individual evaluation given the risk characteristics of such loans and establish an asset-specific allowan ce for these loans.
We believe our internal historical loss experience serves as a more reliable estimate of loss severity than third-party data due to the organizational structure and operating environment of rural utility cooperatives, our lending practice of generally requiring a senior security position on the assets and revenue of borrowers for long-term loans, the approach we take in working w ith borrowers that may be experiencing operational or financial issues and other factors discussed in “Credit Risk—Loan Portfolio Credit Risk.” We generally consider nonperforming loans as well as loans that have been modified with borrowers experiencing financial difficulty for individual evaluation given the risk characteristics of such loans and establish an asset-specific allowan ce for these loans.
As the majority of our swaps are long-term with an average remaining life of approximately 14 years as of May 31, 2024 , the unrealized periodic derivative forward value gains and losses are largely based on future expected changes in l onger-term interest rates, which we are unable to accurately predict for each reporting period over the next 12 months.
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 l onger-term interest rates, which we are unable to accurately predict for each reporting period over the next 12 months.
Table 3 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.
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.
We did not change our allowance methodology or the nature of the underlying key inputs and assumptions used in measuring our allowance for credit losses during FY2024. Sensitivity Analysis As noted above, our allowance for credit losses is sensitive to a variety of factors.
We did not change our allowance methodology or the nature of the underlying key inputs and assumptions used in measuring our allowance for credit losses during FY2025. Sensitivity Analysis As noted above, our allowance for credit losses is sensitive to a variety of factors.
We therefore believe that the risk of default by these counterparties is low. As of May 31, 2024, our overall counterparty credit risk was deemed to be satisfactory and not materially changed compared with May 31, 2023.
We therefore believe that the risk of default by these counterparties is low. As of May 31, 2025, our overall counterparty credit risk was deemed to be satisfactory and not materially changed compared with May 31, 2024.
These amounts were determined based on certain assumptions, including that variable-rate debt continues to accrue interest at the contractual rates in effect as of May 31, 2024 until maturity, and redeemable debt continues to accrue interest until its contractual maturity.
These amounts were determined based on certain assumptions, including that variable-rate debt continues to accrue interest at the contractual rates in effect as of May 31, 2025 until maturity, and redeemable debt continues to accrue interest until its contractual maturity.
Pursuant to this facility, we may borrow any time before July 15, 2028. Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the advance.
Pursuant to this facility, we may borrow any time before July 15, 2029. Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the advance.
We provide additional information on our investment securities portfolio in “Note 3—Investment Securities” of this Report.
We provide additional information on our investment securities portfolio in “Note 3—Investment Securities” in this Report.
The weighted average term selected by our members on the long-term fixed-rate loans has continued to decline due to the elevated interest rate environment. 39 Table of Contents 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 “Item 1.
The weighted average term selected by our members on the long-term fixed-rate loans has continued to decline due to the elevated interest rate environment. 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 “Item 1.
Additionally, we have access to funds under borrowing arrangements with banks, other noncapital markets and U.S. government agencies. Table 10 displays our primary funding sources and their selected key attributes.
Additionally, we have access to funds under borrowing arrangements with banks, other noncapital markets and U.S. government agencies. Table 12 displays our primary funding sources and their selected key attributes.
In addition to the collateral 47 Table of Contents pledged to secure our loans, distribution and power supply borrowers also are required to set rates charged to customers to achieve certain specified financial ratios.
In addition to the collateral pledged to secure our loans, distribution and power supply borrowers also are required to set rates charged to customers to 48 Table of Contents achieve certain specified financial ratios.
We provide information on the impact of netting provisions under our master swap agreements and collateral pledged, if any, in “Note 10—Derivative Instruments and Hedging Activities—Impact of Derivatives on Consolidated Balance Sheets.” We believe our exposure to derivative counterparty risk, at any point in time, is equal to the amount of our outstanding derivatives in a net gain position, at the individual counterparty level, which totaled $611 million and $349 million as of May 31, 2024 and 2023, respectively.
We provide information on the impact of netting provisions under our master swap agreements and collateral pledged, if any, in “Note 10—Derivative Instruments and Hedging Activities—Impact of Derivatives on Consolidated Balance Sheets.” We believe our exposure to derivative counterparty risk, at any point in time, is equal to the amount of our outstanding derivatives in a net gain position, at the individual counterparty level, which totaled $506 million and $611 million as of May 31, 2025 and 2024, respectively.
We perform an annual comprehensive review of each of our borrowers, following the receipt of the borrower’s annual audited financial statements, to reassess the borrower’s risk rating. In addition, interim risk-rating adjustments may occur as a result of updated information affecting a borrower’s ability to fulfill its obligations or other significant developments and trends.
We perform an annual comprehensive review of each of our borrowers, following the receipt of the borrower’s annual audited financial statements, to reassess the borrower’s risk rating. In addition, interim risk-rating adjustments may occur as a result of 72 Table of Contents updated information affecting a borrower’s ability to fulfill its obligations or other significant developments and trends.
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 3.
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.
Of the 18 defaults, one remains unreso lved with an expected ultimate resolution date in calendar year 2025; nine resulted in no loss; and eight resulted in cumulative net charge-offs of $100 million. Of this amount, $81 million was attributable to seven electric power supply cooperatives and $19 million was attributable to one electric distribution cooperative.
Of the 18 defaults, one remains unresolved with an expected ultimate resolution date in calendar year 2025; nine resulted in no loss; and eight resulted in cumulative net charge-offs of $100 million. Of this amount, $81 million was attributable to seven electric power supply cooperatives and $19 million was attributable to one electric distribution cooperative.
No loans have been put to Farmer Mac for purchase pursuant to this agreement. 49 Table of Contents Geographic Concentration Although our organizational structure and mission result in single-industry concentration, we serve a geographically diverse group of electric and telecommunications borrowers throughout the U.S.
No loans have been put to Farmer Mac for purchase pursuant to this agreement. Geographic Concentration Although our organizational structure and mission result in single-industry concentration, we serve a geographically diverse group of electric and telecommunications borrowers throughout the U.S.
For example, changes in the inputs below, without taking into consideration the impact of other potential offsetting or correlated inputs, would have the following effect on our allowance for credit losses as of May 31, 2024. • A 10% increase or decrea se in the default rates for all of our portfolio segments would result in a corresponding increase or decrease of approximately $3 million. • A 1% increase or decrease in the recovery rates for all of our portfolio segments would result in a corresponding decrease or increase of approximately $9 million. • A one-notch downgrade in the internal borr ower risk ratings for our entire loan portfolio would result in an increase of approximately $34 million, while a one-notch upgrade would result in a decrease of approximately $19 million.
For example, changes in the inputs below, without taking into consideration the impact of other potential offsetting or correlated inputs, would have the following effect on our allowance for credit losses as of May 31, 2025. • A 10% increase or decrea se in the default rates for all of our portfolio segments would result in a corresponding increase or decrease of approximately $3 million. • A 1% increase or decrease in the recovery rates for all of our portfolio segments would result in a corresponding decrease or increase of approximately $10 million. • A one-notch downgrade in the internal borr ower risk ratings for our entire loan portfolio would result in an increase of approximately $37 million, while a one-notch upgrade would result in a decrease of approximately $19 million.
The determination of the allowance for expected credit losses over the remaining expected life of the loans in our loan portfolio involves a significant degree of management judgment and level of estimation uncertainty. As such, we have identified our accounting policy governing the estimation of 71 Table of Contents the allowance for credit losses as a critical accounting estim ate.
The determination of the allowance for expected credit losses over the remaining expected life of the loans in our loan portfolio involves a significant degree of management judgment and level of estimation uncertainty. As such, we have identified our accounting policy governing the estimation of the allowance for credit losses as a critical accounting estim ate.
Long-term and subordinated debt accounted for 87% and 85% of total debt outstanding as of May 31, 2024 and 2023, respectively. We provide additional information on our long-term debt below under the section “Liquidity Risk” and “Note 7—Long-Term Debt” and “Note—Subordinated Deferrable Debt” in this Report.
Long-term and subordinated debt accounted for 85% and 87% of total debt outstanding as of May 31, 2025 and 2024, 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.
Our portfolio of equity securities consists primarily of preferred stock securities that are not as readily redeemable; therefore, we exclude our portfolio of equity securities from our available liquidity. (2) The committed bank revolving line of credit agreements consist of a three-year and a four-year revolving line of credit agreement.
Our portfolio of equity securities consists primarily of preferred stock securities that are not as readily redeemable; therefore, we exclude our portfolio of equity securities from our available liquidity. 57 Table of Contents (2) The committed bank revolving line of credit agreements consist of a three-year and a four-year revolving line of credit agreement.
However, we would expect an unfavorable impact on our adjusted net interest income over a 12-month horizon as of May 31, 2024, under the hypothetical scenario of an instantaneous parallel shift of minus 100 basis points in the interest rate yield curve.
We would expect an unfavorable impact on our adjusted net interest income over a 12-month horizon as of May 31, 2025, under the hypothetical scenario of an instantaneous parallel shift of minus 100 basis points in the interest rate yield curve.
Long-term loan advances totaled $3,371 million during FY2024 , of which approximately 93% was provided to members for capital expenditures, 1% was provided for the refinancing of loans made by other lenders, and 6% was provided for other purposes, primarily business acquisitions.
In com parison, long-term loan advances totaled $3,371 million during FY2024, of which approximately 93% was provided to members for capital expenditures, 1% was provided for the refinancing of loans made by other lenders and 6% was provided for other purposes, primarily business acquisitions.
Adjusted average cost is calculated based on the adjusted interest expense for the period divided by total average interest-bearing liabilities during the period. (10) 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.
Adjusted average cost is calculated based on the adjusted interest expense for the period divided by total average interest-bearing liabilities during the period. (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.
(2) Represents the change in fair value of our interest rate swaps during the reporting period due to changes in expected future interest rates over the remaining life of our derivative contracts. We primarily fund our loan portfolio through the issuance of debt.
(2) Represents the change in fair value of our interest rate swaps during the reporting period due to changes in expected future interest rates over the remaining life of our derivative contracts. 75 Table of Contents We primarily fund our loan portfolio through the issuance of debt.
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 2023 Form 10-K for a comparative discussion of our consolidated results of operations between FY2023 and FY2022.
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.
As the interest rate sensitivity simulations displayed in Table 31 indicate, we would expect an unfavorable impact on our projected net interest income over a 12-month horizon as of May 31, 2024, under the hypothetical scenario of an instantaneous parallel shift of plus 100 basis points in the interest rate yield curve and a further inverted yield curve.
As the interest rate sensitivity simulations displayed in Table 32 indicate, we would expect an unfavorable impact on our projected net interest income over a 12-month horizon as of May 31, 2025, under the hypothetical scenario of an instantaneous parallel shift of plus 100 basis points in the interest rate yield curve and an inverted yield curve.
We routinely measure and assess our interest rate risk 68 Table of Contents exposure using various methodologies through the use of ALM models that enable us to accurately measure and monitor our interest rate risk exposure under multiple interest rate scenarios using several different techniques.
We routinely measure and assess our interest rate risk exposure using various methodologies through the use of ALM models that enable us to accurately measure and monitor our interest rate risk exposure under multiple interest rate scenarios using several different techniques.
We believe we can continue to roll ove r our member short-term investments of $3,328 million based on our expectation that our members will continue to reinvest their excess cash primarily in short-term investment products offered by CFC. Our members historically have maintained a relatively stable level of short-term investments in CFC.
We believe we can continue to roll ove r our member short-term investments of $2,885 million based on our expectation that our members will continue to reinvest their excess cash primarily in short-term investment products offered by CFC. Our members historically have maintained a relatively stable level of short-term investments in CFC.
We are required to pledge eligible distribution system loans or power supply system loans as collateral in an amount at least equal to our total outstanding borrowings under the Guaranteed Underwriter Program committed loan facilities, which totaled $6,492 million as of May 31, 2024.
We are required to pledge eligible distribution system loans or power supply system loans as collateral in an amount at least equal to our total outstanding borrowings under the Guaranteed Underwriter Program committed loan facilities, which totaled $6,457 million as of May 31, 2025.
Excludes unamortized deferred loan origination costs of $14 million and $13 million as of May 31, 2024 and 2023, respectively. (2) Calculated based on the allowance for credit losses attributable to each member class and allowance components at period-end divided by the related loans outstanding at period-end.
Excludes unamortized deferred loan origination costs of $16 million and $14 million as of May 31, 2025 and 2024, respectively. (2) Calculated based on the allowance for credit losses attributable to each member class and allowance components at period-end divided by the related loans outstanding at period-end.
We mitigate our risk by only entering into these transactions with counterparties with investment-grade ratings, establishing operational guidelines and counterparty exposure limits and monitoring our counterparty credit risk position. We evaluate our counterparties based on certain quantitative and qualitative factors, and periodically assign internal risk rating grades to our counterparties.
We mitigate our risk by only entering into these transactions with counterparties with investment-grade ratings, establishing operational guidelines and counterparty 55 Table of Contents exposure limits and monitoring our counterparty credit risk position. We evaluate our counterparties based on certain quantitative and qualitative factors, and periodically assign internal risk rating grades to our counterparties.
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 2024, the CFC Board of Directors authorized the allocation of $1 million of net earnings for FY2024 to the cooperative educational fund.
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 2025, the CFC Board of Directors authorized the allocation of $1 million of net earnings for FY2025 to the cooperative educational fund.
MD&A—Consolidated Results of Operations” in our 2023 Form 10-K for a comparative discussion of our consolidated results of operations between FY2023 and FY2022. Net Interest Income 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.
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. Net Interest Income 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.
Non-Interest Income Non-interest income consists of fee and other income, gains and losses on derivatives not accounted for in hedge accounting relationships, and gains and losses on equity and debt investment securities, which consists of both unrealized and realized gains and losses. Table 5 presents the components of non-interest income (loss) recorded in our consolidated statements of operations.
Non-Interest Income Non-interest income consists of fee and other income, gains and losses on derivatives not accounted for in hedge accounting relationships, and gains and losses on equity and debt investment securities, which consist of both unrealized and realized gains and losses. Table 7 presents the components of non-interest income recorded in our consolidated statements of operations.
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.
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 24 Table of Contents U.S.
Our most significant contractual obligations include scheduled payments on our debt obligations. Table 28 displays scheduled amounts due on our debt obligations as of May 31, 2024 and the expected timing of these payments. The amounts presented reflect undiscounted future cash payment amounts due pursuant to these obligations, aggregated by the type of contractual obligation.
Our most significant contractual obligations include scheduled payments on our debt obligations. Table 29 displays scheduled amounts due on our debt obligations as of May 31, 2025 and the expected timing of these payments. The amounts presented reflect undiscounted future cash payment amounts due pursuant to these obligations, aggregated by the type of contractual obligation.
We report the separate results of operations for CFC in “Note 16—Business Segments.” The period-end cumulative derivative forward value total gain amounts as of May 31, 2024 and 2023 are presented above in Table 34.
We report the separate results of operations for CFC in “Note 16—Business Segments.” The period-end cumulative derivative forward value total gain amounts as of May 31, 2025 and 2024 are presented above in Table 36.
In July 2024, the CFC Board of Directors also authorized the retirement of patronage capital totalin g $47 million, of which $30 million represented 50% of the patronage capital allocation for FY2024 and $17 million represen ted the portion of the allocation from fiscal year 1999 net earnings that had been held for 25 years pursuant to the CFC Board of Directors’ policy.
In July 2024, the CFC Board of Directors also authorized the retirement of patronage capital totaling $47 million, of which $30 million represented 50% of the patronage capital allocation for FY2024 and $17 million represented the portion of the allocation from fiscal year 1999 net earnings that had been held for 25 years pursuant to the CFC Board of Directors’ policy.
Business—Loan and Guarantee Programs” and “Note 4—Loans” in this Report for addition information on our loans to members.” Debt We utilize both short-term borrowings and long-term debt as part of our funding strategy and asset/liability interest rate risk management.
Business—Loan and Guarantee Programs” and “Note 4—Loans” in this Report for addition information on our loans to members.” 41 Table of Contents 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.
Texas, which had 67 and 69 borrowers with loans outstanding as of May 31, 2024 and 2023, respectively, accounted for the largest number of borrowers with loans outstanding in any one state as of each respective date, as well as the largest concentration of loan exposure in any one state.
Texas, which had 68 and 67 borrowers with loans outstanding as of May 31, 2025 and 2024, respectively, accounted for the largest number of borrowers with loans outstanding in any one state as of each respective date, as well as the largest concentration of loan exposure in any one state.
TIER is calculated by adding the interest expense to net income and dividing that total by the interest expense. We adjust the TIER calculation to add the derivative cash settlements income (expense) to the interest expense and to remove the derivative forward value gains (losses) and foreign currency adjustments from total net income.
TIER is calculated by adding the interest expense to net income and dividing that total by the interest expense. We adjust the TIER calculation to add the derivative cash settlements income (expense) to the interest 74 Table of Contents expense and to remove the derivative forward value gains (losses) and foreign currency adjustments from total net income.
Some of these electric cooperatives are leveraging these fiber assets to offer access to broadband services to the communities they serve, either directly or by partnering with local telecommunication companies and others. We are currently aware of 212 broadband projects by different CFC member cooperatives, and we financed or are financing 125 of these 212 broadband projects.
Some of these electric cooperatives are leveraging these fiber assets to offer access to broadband services to the communities they serve, either directly or by partnering with local telecommunication companies and others. We are currently aware of 216 broadband projects by different CFC member cooperatives, and we have financed or are financing 130 of these 216 broadband projects.
We have been and expect to continue to be in compliance with the covenants under our committed bank revolving line of credit agreements. As such, we could draw on these facilities to repay dealer or member commercial paper that cannot be rolled over. Guaranteed Underwriter Program Committed Facilities—Secured Under the Guaranteed Underwriter Program, we can borrow from the U.S.
We have been and expect to continue to be in compliance with the covenants under our committed bank revolving line of credit agreements. As such, we could draw on these facilities to repay commercial paper that cannot be rolled over. 60 Table of Contents Guaranteed Underwriter Program Committed Facilities—Secured Under the Guaranteed Underwriter Program, we can borrow from the U.S.
GAAP financial measures below in “Non-GAAP Financial Measures and Reconciliations.” MARKET RISK Interest rate risk represents our primary source of market risk, as interest rate volatility can have a significant impact on the earnings and overall financial condition of a financial institution.
GAAP financial measures below in “Non-GAAP Financial Measures and Reconciliations.” MARKET RISK Interest rate risk represents our primary source of market risk, as interest rate volatility or changes in interest rates can have a significant impact on our earnings and overall financial condition as a financial institution.
While the duration gap provides a relatively concise and simple measure of the interest rate risk inherent in our consolidated balance sheet as of the reported date, it does not incorporate projected changes in our consolidated balance sheet.
While the duration gap provides a relatively concise and simple measure of the interest rate risk inherent 70 Table of Contents on our consolidated balance sheet as of the reported date, it does not incorporate projected changes in our consolidated balance sheet.
The substantial majority of loans to our borrowers are long-term fixed-rate loans with terms of up to 35 years. Long-term fixed-rate loans accounted for 88% and 87% of total loans outstanding as of May 31, 2024 and 2023, respectively.
The substantial majority of loans to our borrowers are long-term fixed-rate loans with terms of up to 35 years. Long-term fixed-rate loans accounted for 85% and 88% of total loans outstanding as of May 31, 2025 and 2024, respectively.
We had 12 active derivative counterparties with credit ratings ranging from Aa1 to Baa1 by Moody’s as of both May 31, 2024 and 2023, and fro m AA- to BBB+ and AA- to A- by S&P as of May 31, 2024 and 2023, respectively.
We had 12 active derivative counterparties with credit ratings ranging from Aa1 to Baa1 by Moody’s as of both May 31, 2025 and 2024, and fro m AA- to BBB+ by S&P as of both May 31, 2025 and 2024.
We did not have any outstanding borrowings under our committed bank revolving line of credit agreements as of May 31, 2024; however, we had letters of credit outstanding of $2 million under the four-year committed bank revolving agreement as of this date.
We did not have any outstanding borrowings under our committed bank revolving line of credit agreements as of May 31, 2025; however, we had letters of credit outstanding of $7 million under the four-year committed bank revolving agreement as of this date.
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 $7,597 million, $7,668 million and $8,406 million for FY2024, FY2023 and FY2022, respectively.
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.
The accessed amount of $2 million as of both May 31, 2024 and 2023, relates to letters of credit issued pursuant to the four-year revolving line of credit agreement. (3) The committed facilities under the Guaranteed Underwriter Program are not revolving. (4) Availability subject to market conditions.
The accessed amount of $7 million and $2 million as of May 31, 2025 and 2024, respectively, relates to letters of credit issued pursuant to the four-year revolving line of credit agreement. (3) The committed facilities under the Guaranteed Underwriter Program are not revolving. (4) Availability subject to market conditions.
Risk Factors.” Our fiscal year begins on June 1 and ends on May 31. References to “FY2024,” “FY2023” and “FY2022” refer to the fiscal years ended May 31, 2024, 2023 and 2022, respectively. NON-GAAP FINANCIAL MEASURES Our reported financial results are determined in conformity with generally accepted accounting principles in the United States (“U.S.
Risk Factors.” Our fiscal year begins on June 1 and ends on May 31. References to “FY2025,” “FY2024” and “FY2023” refer to the fiscal years ended May 31, 2025, 2024 and 2023, respectively. NON-GAAP FINANCIAL MEASURES Our reported financial results are determined in conformity with generally accepted accounting principles in the United States (“U.S.
We believe we can continue to roll over our member short-term investments of $3,328 million as of May 31, 2024, 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.
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.
Under the provisions of our committed bank revolving line of credit agreements, the excess collateral that we are allowed to pledge cannot exceed 150% of the outstanding borrowings under our collateral trust bond indentures, the Guaranteed Underwriter Program or the Farmer Mac note purchase agreements.
Under the provisions of our committed bank revolving line of credit agreements, the excess collateral that we are allowed to pledge cannot exceed 150% of the outstanding borrowings under our collateral trust bond 2007 indentures, the Guaranteed Underwriter Program or the Farmer Mac note purchase agreements as of May 31, 2025.
We provide information on our unadvanced loan commitments in “Note 4—Loans” and information on our guarantee obligations in “Note 13—Guarantees.” Projected Near-Term Sources and Uses of Funds Table 29 below displays a projection of our primary long-term sources and uses of funds, by quarter, over each of the next six fisc al quarters.
We provide information on our unadvanced loan commitments in “Note 4—Loans” and information on our guarantee obligations in “Note 13—Guarantees.” Projected Near-Term Sources and Uses of Funds Table 30 below displays a projection of our primary long-term sources and uses of funds as of May 31, 2025 , by quarter, over each of the next six fisc al quarters.
GAAP and may not be consistent with similarly titled non-GAAP financial measures used by other companies, provide meaningful information and are useful to investors because management evaluates performance based on these metrics for purposes of (i) establishing performance goals; (ii) budgeting and forecasting; (iii) comparing period-to-period operating results, analyzing changes in results and identifying potential trends; and (iv) making compensation decisions.
GAAP and may not be consistent with similarly titled non-GAAP financial measures used by other companies, provide meaningful information and are useful to investors because management evaluates performance based on these metrics for purposes of (i) establishing corporate goals; (ii) budgeting and forecasting; (iii) comparing period-to-period operating results, analyzing changes in results and identifying potential trends; (iv) monitoring our overall leverage and credit ratings; and (v) making compensation decisions.
The borrowings under this program are guaranteed by RUS. Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the advance. On December 19, 2023, we closed on a $450 million Series U committed loan facility from the FFB under the Guaranteed Underwriter Program.
The borrowings under this program are guaranteed by RUS. Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the advance. On December 18, 2024, we closed on a $450 million Series V committed loan facility from the FFB under the Guaranteed Underwriter Program.
Table 3 presents average balances for FY2024, FY2023 and FY2022, 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 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.
(9) 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 on our consolidated statements of operations as a component of derivative gains (losses).
(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).
Our credit exposure is partially mitigated by long-term loans guaranteed by RUS, which totaled $114 million and $123 million as of May 31, 2024 and 2023, respectively. Single-Obligor Concentration Table 15 displays the outstanding loan exposure for our 20 largest borrowers, by legal entity and member class, as of May 31, 2024 and 2023.
Our credit exposure is partially mitigated by long-term loans guaranteed by RUS, which totaled $105 million and $114 million as of May 31, 2025 and 2024, respectively. Single-Obligor Concentration Table 17 displays the outstanding loan exposure for our 20 largest borrowers, by legal entity and member class, as of May 31, 2025 and 2024.
Each of the borrowers with loans outst anding in the criticized category was current with regard to 53 Table of Contents all principal and interest amounts due to us as of May 31, 2024.
Each of the borrowers with loans outst anding in the criticized category was current with regard to all principal and interest amounts due to us as of May 31, 2025 and 2024.
To mitigate commercial paper rollover risk, we expect to continue to maintain our committed bank revolving line of credit agreements and be in compliance with the covenants of these agreements so we can draw on these facilities, if necessary, to repay dealer 58 Table of Contents or member commercial paper that cannot be refinanced with similar debt.
To mitigate commercial paper rollover risk, we expect to continue to maintain our committed bank revolving line of credit agreements and be in compliance with the covenants of these agreements so we can draw on these facilities, if necessary, to repay commercial paper that cannot be refinanced with similar debt.
We believe the overall credit quality of our loan portfolio remained strong as of May 31, 2024. L oan Modifications to Borrowers Experiencing Financial Difficulty We had one loan modification to an NCSC telecom borrower experiencing financial difficulty during FY2024.
We believe the overall credit quality of our loan portfolio remained strong as of May 31, 2025. L oan Modifications to Borrowers Experiencing Financial Difficulty We had no loan modifications to borrowers experiencing financial difficulty entered during FY2025. We had one loan modification to an NCSC telecom borrower experiencing financial difficulty during FY2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk For quantitative and qualitative disclosures about market risk, see “Item 7. MD&A—Market Risk” and “MD&A—Consolidated Results of Operations—Non-Interest Income—Derivatives Gains (Losses)” and also “Note 10—Derivative Instruments and Hedging Activities” in this Report. 78 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk For quantitative and qualitative disclosures about market risk, see “Item 7. MD&A—Market Risk” and “MD&A—Consolidated Results of Operations—Non-Interest Income—Derivatives Gains (Losses)” and also “Note 10—Derivative Instruments and Hedging Activities” in this Report. 79 Table of Contents