PART I—FINANCIAL INFORMATION


~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A~~”)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)



FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2024 (“this Report”) contains certain statements that are considered “forward-looking statements” as defined in and within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of ~~1933, as amended, and the Exchange Act of 1934, as amended.~~1995. Forward-looking statements ~~which are~~do not represent historical facts or statements of current conditions. Instead, forward-looking statements represent management’s current beliefs and expectations, based on certain assumptions and ~~describe~~estimates made by, and information available to, management at the time the statements are made, regarding our future plans, strategies, operations, financial results or other events and ~~expectations,~~developments, many of which, by their nature, are inherently uncertain and outside our control. Forward-looking statements are generally identified by ~~our~~the use of words such as “intend,” “plan,” “may,” “should,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity” and similar expressions, whether in the negative or affirmative. All statements about future expectations or projections, including statements about loan volume, the ~~appropriateness~~adequacy of the allowance for ~~loan~~credit losses, operating income and expenses, leverage and debt-to-equity ~~ratio,~~ratios, borrower financial performance, impaired loans, and sources and uses of liquidity, are forward-looking statements. Although we believe ~~that~~ the expectations reflected in our forward-looking statements are based on reasonable assumptions, actual results and performance may differ materially from our forward-looking ~~statements due to several factors. Factors~~statements. Therefore, you should not place undue reliance on any forward-looking statement and should consider the risks and uncertainties that could cause ~~future results~~our current expectations to vary from our forward-looking statements, ~~include,~~including, but ~~are~~ not limited to, ~~general economic conditions,~~ legislative changes ~~including those~~ that could affect our tax status ~~governmental monetary~~ and ~~fiscal policies,~~other matters, demand for our loan products, lending competition, changes in the quality or composition of our loan portfolio, changes in our ability to access external financing, changes in the credit ratings on our debt, valuation of collateral supporting impaired loans, charges associated with our operation or disposition of foreclosed assets, ~~regulatory and economic conditions in the rural electric industry,~~ nonperformance of counterparties to our derivative agreements, economic conditions and regulatory or technological changes within the rural electric industry, the costs and ~~effects~~impact of legal or governmental proceedings involving us or our members, general economic conditions, governmental monetary and fiscal policies, the occurrence and effect of natural disasters, including severe weather events or public health emergencies, and the factors listed and described under “Item 1A. Risk Factors” ofin our Annual Report on Form 10-K for the fiscal year ended May 31, ~~2017~~2023 (“~~2017~~2023 Form 10-K”)~~. Except~~, as well as any risk factors identified under “Part II—Item 1A. Risk Factors” in this Report. Forward-looking statements speak only as of the date they are made, and, except as required by law, we undertake no obligation to update ~~or publicly release~~ any ~~revisions to~~ forward-looking ~~statements~~statement to reflect the impact of events, circumstances or changes in expectations that arise after the date ~~on which the~~any forward-looking statement is made.



INTRODUCTION

As of February 29, 2024, our financial statements included the consolidated accounts of National Rural Utilities Cooperative Finance Corporation (“CFC”) and National Cooperative Services Corporation (“NCSC”). On December 1, 2023, Rural Telephone Finance Cooperative (“RTFC”), which was consolidated into our financial statements in prior periods, completed the sale of its business to NCSC (hereon referred to as the “RTFC sale transaction”). The sale was accounted for pursuant to ASC 805-50 “Transactions between Entities under Common Control.” Following the RTFC sale transaction, our principal operations are currently organized for management reporting purposes into two business segments, which are based on the accounts of each of the legal entities included in our consolidated financial statements: CFC and NCSC. We provide additional information on the RTFC sale transaction under “Note 1—Summary of Significant Accounting Policies.”

CFC is a member-owned, nonprofit finance cooperative association ~~incorporated under the laws of the District of Columbia in April 1969. CFC’s~~with a principal purpose isof providing financing to ~~provide~~ its members ~~with financing~~ to supplement the loan programs of the Rural Utilities Service (“RUS”) of the United States Department of Agriculture (“USDA”). CFC ~~makes~~extends loans to its rural electric members ~~so they can acquire, construct~~for construction, acquisitions, system and ~~operate~~facility repairs and maintenance, enhancements and ongoing operations to support the goal of electric distribution and generation and transmission ~~and related facilities.~~(“power supply”) systems of providing reliable, affordable power to the customers they service. CFC also provides its members and associates with credit enhancements in the form of letters of credit and guarantees of debt obligations. As a cooperative, CFC is owned by and exclusively serves its membership, which consists of not-for-profit entities or subsidiaries or affiliates of not-for-profit entities. CFC is exempt from federal income taxes under Section 501(c)(4) ~~of the Internal Revenue Code. As a~~tax-exempt, member-owned cooperative, CFC’s objective is not to maximize profit, but rather to offer ~~its~~ members cost-based financial products and services. The interest rates on lending products offered to our

Table of Contents

member borrowers reflect our funding costs plus a spread to cover operating expenses and estimated credit losses, while also generating sufficient earnings to cover interest owed on our debt obligations and achieve certain financial target goals. Because CFC ~~funds its activities primarily through~~is a tax-exempt cooperative, we cannot issue equity securities as a source of funding. CFC’s primary funding sources consist of a combination of public and private issuances of debt securities, member investments and retained equity. ~~As a Section 501(c)(4) tax-exempt, member-owned cooperative, we cannot issue equity securities.~~

Our financial statements include the consolidated accounts of CFC, National Cooperative Services Corporation (“NCSC”), Rural Telephone Finance Cooperative (“RTFC”) and subsidiaries created and controlled by CFC to hold foreclosed assets resulting from defaulted loans or bankruptcy. NCSC is a member-owned taxable ~~member-owned~~ cooperative that ~~may~~is permitted to provide financing to two types of members: NCSC electric and NCSC telecommunication. NCSC electric members consist of members of CFC, government or quasi-government entities which own electric utility systems that meet the Rural Electrification Act definition of ~~“rural”~~“rural,” and for-profit and nonprofit entities that are owned, operated or controlled by, or provide significant benefits to certain members of CFC. NCSC telecommunication members, formerly RTFC ~~is a taxable Subchapter T cooperative association that provides financing for its~~members, consist of rural telecommunications members and their affiliates. ~~CFC did not have any entities that held foreclosed assets as of November 30, 2017 or May 31, 2017.~~ See “Item 1. ~~Business—Overview” of~~Business” in our ~~2017~~2023 Form 10-K for additional information on the business structure, principal purpose, members and core business activities of each of these ~~entities.~~classes of members. Unless stated otherwise, references to “we,” “our” or “us” relate to CFC and its consolidated entities. All references to members within this document include members, associates and affiliates of CFC and its consolidated ~~entities.~~entities, except where indicated otherwise.

~~Management monitors a variety of key indicators to evaluate our business performance.~~ The following MD&A is intended to ~~provide~~enhance the ~~reader with an~~ understanding of our consolidated financial statements by providing material information that we believe is relevant in evaluating our results of operations, financial condition and liquidity ~~by discussing~~and the ~~drivers~~potential impact of material known events or uncertainties that, based on management’s assessment, are reasonably likely to cause the financial information included in this Report not to be necessarily indicative of our future financial performance. Management monitors a variety of key indicators and metrics to evaluate our business performance. We discuss these key measures and factors influencing changes from period to ~~period and the key measures used by management to evaluate performance, such as net interest income, net interest yield, loan growth, debt-to-equity ratio, growth and credit quality metrics.~~period. Our MD&A is provided as a supplement to, and should be read in conjunction with, ~~our~~the unaudited ~~condensed~~ consolidated financial statements ~~and related notes~~included in this Report, our audited consolidated financial statements and related notes for the fiscal year ended May 31, 2023 (“fiscal year 2023”) included in our ~~2017~~2023 Form 10-K and additional information, ~~contained in our 2017 Form 10-K,~~ including the risk factors discussed under ~~“Part I—Item~~“Item 1A. Risk Factors,” contained in our 2023 Form 10-K, as well as ~~any risk factors identified under “Part II—Item 1A. Risk Factors”~~additional information contained elsewhere in this Report.

~~SUMMARY OF SELECTED FINANCIAL DATA~~

~~Table~~Our fiscal year begins on June 1~~provides a summary of consolidated selected financial data for the~~ and ends on May 31. Reference to “Q3 FY2024” and “YTD FY2024” refer to three and ~~six~~nine months ended ~~November 30, 2017~~February 29, 2024, respectively. Reference to “Q3 FY2023” and ~~2016,~~“YTD FY2023” refer to three and ~~as of November 30, 2017 and May 31, 2017. In addition to~~nine months ended February 28, 2023, respectively.

Non-GAAP Financial Measures

Our reported financial ~~measures~~results are determined in ~~accordance~~conformity with generally accepted accounting principles in the United States (“U.S. GAAP”), management also evaluates performance based on certain non-GAAP measures and metrics, which we refer to as “adjusted” measures. Certain financial covenant provisions in our credit agreements are also based on non-GAAP financial measures. Our key non-GAAP financial measures are adjusted net income, adjusted net interest income, adjusted interest expense, adjusted net interest yield, adjusted times interest earned ratio (“adjusted TIER”) and adjusted debt-to-equity ratio. The most comparable GAAP measures are net income, net interest income, interest expense, net interest yield, TIER and debt-to-equity ratio, respectively. The primary adjustments we make to calculate these non-GAAP measures consist of (i) adjusting interest expense and net interest income to include the impact of net periodic derivative cash settlements; (ii) adjusting net income, senior debt and total equity to exclude the non-cash impact of the accounting for derivative financial instruments; (iii) adjusting senior debt to exclude the amount that funds CFC member loans guaranteed by RUS, subordinated deferrable debt and members’ subordinated certificates; and (iv) adjusting total equity to include subordinated deferrable debt and members’ subordinated certificates and exclude cumulative derivative forward value gains and losses and accumulated other comprehensive income. We believe our non-GAAP adjusted measures, which are not a substitute for GAAP and may not be consistent with similarly titled non-GAAP measures used by other companies, provide meaningful information and are useful to investors because management evaluates performance based on these metrics, and certain financial covenants in our committed bank revolving line of credit agreements and debt indentures are based on adjusted measures. See “Non-GAAP Financial Measures” for a detailed reconciliation of these adjusted measures to the most comparable GAAP measures.

~~Table 1: Summary of Selected Financial Data~~

Three Months Ended November 30, Six Months Ended November 30,
(Dollars in thousands) 2017 2016 Change 2017 2016 Change
Statement of operations
Interest income $ 265,823
$ 257,156
3% $ 531,738
$ 513,991
3%
Interest expense (195,170 ) (183,654 ) 6 (387,901 ) (364,734 ) 6
Net interest income 70,653
73,502
(4) 143,837
149,257
(4)
Fee and other income 5,542
5,097
9 9,487
9,627
(1)
Total net revenue 76,195
78,599
(3) 153,324
158,884
(3)
Benefit (provision) for loan losses 304
(738 ) ** 602
(2,666 ) **
Derivative gains⁽¹⁾
125,593
340,660
(63) 79,395
152,367
(48)
Results of operations of foreclosed assets (10 ) (549 ) (98) (34 ) (1,661 ) (98)
Operating expenses⁽²⁾
(21,914 ) (20,632 ) 6 (43,550 ) (41,491 ) 5
Other non-interest expense (618 ) (517 ) 20 (1,140 ) (960 ) 19
Income before income taxes 179,550
396,823
(55) 188,597
264,473
(29)
Income tax expense (827 ) (1,519 ) (46) (859 ) (1,430 ) (40)
Net income $ 178,723
$ 395,304
(55) $ 187,738
$ 263,043
(29)

Three Months Ended November 30, Six Months Ended November 30,
2017 2016 Change 2017
2016 Change
Adjusted operational financial measures
Adjusted interest expense⁽³⁾
$ (214,805 ) $ (205,241 ) 5% $ (427,758 ) $ (409,711 ) 4%
Adjusted net interest income⁽³⁾
51,018
51,915
(2) 103,980
104,280
—
Adjusted net income⁽³⁾
33,495
33,057
1 68,486
65,699
4

Selected ratios
Fixed-charge coverage ratio/TIER ⁽⁴⁾
1.92
3.15
(123) bps 1.48
1.72
(24) bps
Adjusted TIER⁽³⁾
1.16
1.16
— 1.16
1.16
—
Net interest yield⁽⁵⁾
1.12 % 1.21 % (9) 1.14 % 1.23 % (9)
Adjusted net interest yield⁽³⁾⁽⁶⁾
0.81
0.86
(5) 0.83
0.86
(3)
Net charge-off rate⁽⁷⁾
—
—
— —
0.02
(2)

November 30, 2017 May 31, 2017 Change
Balance sheet
Cash and cash equivalents $ 280,315
$ 166,615
68%
Investment securities 339,566
92,554
267
Loans to members⁽⁸⁾
24,824,691
24,367,044
2
Allowance for loan losses (36,774 ) (37,376 ) (2)
Loans to members, net 24,787,917
24,329,668
2
Total assets 25,880,243
25,205,692
3
Short-term borrowings 3,557,192
3,342,900
6
Long-term debt 18,386,819
17,955,594
2
Subordinated deferrable debt 742,341
742,274
—
Members’ subordinated certificates 1,399,675
1,419,025
(1)
Total debt outstanding 24,086,027
23,459,793
3
Total liabilities 24,640,195
24,106,887
2
Total equity 1,240,048
1,098,805
13
Guarantees⁽⁹⁾
662,496
889,617
(26)

Selected ratios period end
Allowance coverage ratio⁽¹⁰⁾
0.15 % 0.15 % —
Debt-to-equity ratio⁽¹¹⁾
19.87
21.94
(207)
Adjusted debt-to-equity ratio⁽³⁾
6.12
5.95
17

^{____________________________}

** Change is not meaningful.

⁽¹⁾Consists of derivative cash settlements and derivative forward value gains (losses). Derivative cash settlement amounts represent net periodic contractual interest accruals related to derivatives not designated for hedge accounting. Derivative forward value gains (losses) represent changes in fair value during the period, excluding net periodic contractual interest accruals, related to derivatives not designated for hedge accounting and expense amounts reclassified into income related to the cumulative transition loss recorded in accumulated other comprehensive income as of June 1, 2001, as a result of the adoption of the derivative accounting guidance that required derivatives to be reported at fair value on the balance sheet.

⁽²⁾Consists of salaries and employee benefits and the other general and administrative expenses components of non-interest expense, each of which are presented separately on our consolidated statements of operations.

⁽³⁾~~See “Non-GAAP Financial Measures” for details on the calculation of these non-GAAP adjusted measures and the reconciliation to the most comparable GAAP measures.~~

⁽⁴⁾Calculated based on net income (loss) plus interest expense for the period divided by interest expense for the period. The fixed-charge coverage ratios and TIER were the same during each period presented because we did not have any capitalized interest during these periods.

⁽⁵⁾~~Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.~~

⁽⁶⁾~~Calculated based on annualized adjusted net interest income for the period divided by average interest-earning assets for the period.~~

⁽⁷⁾~~Calculated based on annualized net charge-offs (recoveries) for the period divided by average total outstanding loans for the period.~~

⁽⁸⁾~~Consists of the outstanding principal balance of member loans plus unamortized deferred loan origination costs, which totaled $11 million as of both November 30, 2017 and May 31, 2017.~~

⁽⁹⁾Reflects the total amount of member obligations for which CFC has guaranteed payment to a third party as of the end of each period. This amount represents our maximum exposure to loss, which significantly exceeds the guarantee liability recorded on our consolidated balance sheets. See “Note 10—Guarantees” for additional information.

⁽¹⁰⁾~~Calculated based on the allowance for loan losses at period end divided by total outstanding loans at period end.~~

⁽¹¹⁾~~Calculated based on total liabilities at period end divided by total equity at period end.~~

~~EXECUTIVE SUMMARY~~

Our primary objective as a member-owned cooperative lender is to provide cost-based financial products to our rural electric members while maintaining a sound financial position required for investment-grade credit ratings on our debt instruments. Our objective is not to maximize net income; therefore, the rates we charge our member-borrowers reflect our adjusted interest expense plus a spread to cover our operating expenses, a provision for loan losses and earnings sufficient to achieve interest coverage to meet our financial objectives. Our goal is to earn an annual minimum adjusted TIER of 1.10 and to maintain an adjusted debt-to-equity ratio at approximately or below 6.00-to-1.

We are subject to period-to-period volatility ~~in our reported GAAP results~~ due to changes in market conditions and differences in the way our financial assets and liabilities are accounted for under U.S. GAAP. Our financial assets and liabilities expose us to interest-rate ~~risk. We~~risk, therefore we use derivatives, primarily interest rate swaps, ~~as part of our strategy in managing this risk. Our derivatives are intended~~ to economically hedge and manage the interest-rate sensitivity mismatch between our financial assets and liabilities. We are required under U.S. GAAP to carry derivatives at fair value on our consolidated balance ~~sheet;~~sheets; however, the financial assets and liabilities for which we use derivatives to economically hedge are carried at amortized cost. Changes in interest rates and ~~spreads~~the shape of the swap curve result in periodic fluctuations in the fair value of our derivatives, which may cause volatility in our earnings because we do not apply hedge ~~accounting.~~accounting for our interest rate swaps. As a result, the mark-to-market changes in our ~~derivatives~~interest rate swaps are recorded in earnings. ~~Based on the composition~~The majority of our ~~derivatives, we generally record~~derivative portfolio consists of pay-fixed swaps with longer maturities, leading to derivative losses ~~in earnings~~ when interest rates decline and derivative gains when interest rates rise. This earnings volatility generally is not indicative of the underlying economics of our business, as the derivative forward fair value gains or losses recorded each period may or may not be realized over time, depending on the terms of our derivative instruments and future changes in market conditions that impact ~~actual derivative~~the periodic cash settlement ~~amounts. As such,~~amounts of our interest rate swaps.

Therefore, management uses ~~our~~non-GAAP financial measures, which we refer to as “adjusted” measures, to evaluate financial performance. Our key non-GAAP financial measures are adjusted ~~non-~~net income, adjusted net interest income, adjusted interest expense, adjusted net interest yield, adjusted times interest earned ratio (“TIER”), adjusted debt-to-equity ratio and members’ equity. The most comparable U.S. GAAP ~~results, which~~financial measures are net income, net interest income, interest expense, net interest yield, TIER, debt-to-equity ratio, and CFC equity, respectively. The primary adjustments we make to calculate these non-GAAP financial measures consist of (i) adjusting interest expense and net interest income to include ~~realized~~the impact of net periodic derivative cash settlements ~~but~~income (expense) amounts; (ii) adjusting net income, total liabilities and total equity to exclude the non-cash impact of ~~unrealized~~the accounting for derivative financial instruments; (iii) adjusting total

Table of Contents

liabilities to exclude the amount that funds CFC member loans guaranteed by RUS, subordinated deferrable debt and members’ subordinated certificates; (iv) adjusting total equity to include subordinated deferrable debt and members’ subordinated certificates and exclude cumulative derivative forward value gains and losses and accumulated other comprehensive income (“AOCI”); and (v) adjusting CFC equity to exclude derivative forward value gains and losses and AOCI.

We believe our non-GAAP financial measures, which should not be considered in isolation or as a substitute for measures determined in conformity with U.S. GAAP, provide meaningful information and are useful to investors because management evaluates performance based on these metrics for purposes of (i) establishing short- and long-term 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. In addition, certain of the financial covenants in our committed bank revolving line of credit agreements and debt indentures are based on non-GAAP financial measures, as the forward fair value gains and losses related to ~~evaluate~~ our ~~operating performance. Because derivative forward fair value gains and losses~~interest rate swaps that are excluded from our non-GAAP financial measures do not ~~impact~~affect our cash flows, liquidity or ability to service our ~~debt costs, our~~debt. Our non-GAAP financial ~~debt covenants~~measures may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are ~~also based on~~calculated. We provide a reconciliation of our non-GAAP adjusted ~~results.~~measures to the most directly comparable U.S. GAAP measures in the section “Non-GAAP Financial Measures and Reconciliations.”

~~Financial Performance~~


EXECUTIVE SUMMARY

Reported Results

~~We reported~~Net Income and TIER

The table below shows our net income ~~of $179 million~~ and a TIER ~~of 1.92~~ for the ~~quarter ended November 30, 2017 (“current quarter”), compared with~~periods presented and the variance between these periods. We provide a more detailed discussion of our reported results under the section “Consolidated Results of Operations.”

Table 1: Net Income and TIER


(Dollars in thousands)	Q3 FY2024		Q3 FY2023		Change		YTD FY2024		YTD FY2023		Change
Net income	$	31,189	$	163,217	$	(132,028)	$	407,508	$	514,855	$	(107,347)






TIER	1.09		1.58		(0.49)		1.41		1.70		(0.29)

Q3 FY2024 versus Q3 FY2023

The decrease in net income was primarily driven by:

•An unfavorable shift from gains to losses recorded in our derivative portfolio of ~~$395~~$121 million, primarily attributable to decreases in interest rates across the entire swap curve during Q3 FY2024. In comparison, the interest rates across the swap curve increased during Q3 FY2023;

•A decrease in net interest income of $7 million, attributable to a decrease in the net interest yield of 14 basis points, or 16%, to 0.74%, partially offset by an increase in average interest-earning assets of $2,266 million, or 7%;

•A reduction in the benefit for credit losses of $5 million. We recorded a benefit for credit losses of $6 million for Q3 FY2024 compared to $11 million for Q3 FY2023, resulting primarily from decreases in the asset-specific allowance for both periods; and

•An increase in operating and ~~a TIER~~other non-interest expenses of ~~3.15 for the same prior-year quarter. We reported~~$5 million;

Partially offset by:

•A favorable shift from losses to gains recorded on our investment securities of $6 million, primarily due to period-to-period market fluctuations in fair value.

Table of Contents

YTD FY2024 versus YTD FY2023

The decrease in net income was primarily driven by:

•A decrease in derivative gains of ~~$188~~$64 million, primarily attributable to less pronounced increases in the medium- and ~~a TIER of 1.48 for the six months ended November 30, 2017,~~longer-term swap interest rates during YTD FY2024 compared ~~with a~~to YTD FY2023;

•A decrease in net interest income of ~~$263~~$53 million, attributable to a decrease in the net interest yield of 28 basis points, or 27%, to 0.76%, partially offset by an increase in average interest-earning assets of $2,243 million, or 7%; and

•An increase in operating and other non-interest expenses of $16 million;

Partially offset by:

•A favorable shift from provision to benefit for credit losses of $9 million. We recorded a benefit for credit losses of $5 million for YTD FY2024, resulting primarily from a decrease in the asset-specific allowance, partially offset by an increase in the collective allowance due to loan portfolio growth. In comparison, we recorded a provision for credit losses of $4 million for YTD FY2023, driven primarily by increases in the collective allowance and in the asset-specific allowance;

•A favorable shift from losses to gains recorded on our investment securities of $14 million, primarily due to period-to-period market fluctuations in fair value; and an increase in fee and other income of $3 million.

The decreases in TIER ~~of 1.72~~ for ~~the same prior-year period.~~ Q3 FY2024 and YTD FY2024, compared to Q3 FY2023 and YTD FY2023, were primarily driven by increased interest expense during Q3 FY2024 and YTD FY2024.

Debt-to-Equity Ratio

Our debt-to-equity ratio decreased to ~~19.87-to-1~~11.52 as of ~~November 30, 2017,~~February 29, 2024, from ~~21.94-to-1~~12.14 as of May 31, ~~2017,~~2023, primarily due to an increase in equity ~~resulting~~resulting from our reported net income of ~~$188~~$408 million for ~~the six months ended November 30, 2017,~~YTD FY2024, which was partially offset by ~~patronage capital retirement of $45 million in September 2017.~~

The variance of $217 million between our reported net income of $179 million in the current quarter and our net income of $395 million for the same prior-year quarter was driven primarily by mark-to-market changes in the fair value of our derivatives. We recognized derivative gains of $126 million in the current quarter, which were largely attributable to a ~~net increase in the fair value of our pay-fixed swaps~~ as interest rates increased across the yield curve. In comparison, we recognized derivative gains of $341 million in the same prior-year quarter, attributable to a net increase in the fair value of our pay-fixed swaps due to an increase in medium-term and longer-term interest rates and a general steepening of the yield curve. In addition, we experienced a decrease in equity of $10 million from CFC’s deconsolidation of RTFC and $113 million from CFC Board of Directors’ authorized patronage capital retirements, of which $72 million was paid to members in September 2023 and $41 million was paid from CFC to RTFC in December 2023 in connection with the RTFC sale transaction, which is discussed further under “Note 1—Summary of Significant Accounting Policies.”

Non-GAAP Adjusted Results

Adjusted Net Income and Adjusted TIER

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

Table 2: Adjusted Net Income and Adjusted TIER


(Dollars in thousands)	Q3 FY2024		Q3 FY2023		Change		YTD FY2024		YTD FY2023		Change
Adjusted Net income	$	88,006	$	79,543	$	8,463	$	224,136	$	184,820	$	39,316
Adjusted TIER	1.29		1.30		(0.01)		1.25		1.26		(0.01)

Q3 FY2024 versus Q3 FY2023

The increase in adjusted net income was primarily driven by:

•An increase in adjusted net interest income of $3$13 million, ~~as a result~~driven by the combined impact of ~~compression~~an increase in ~~the net~~

~~interest yield~~average interest-earning assets of $2,266 million, or 7%, and an increase in operating expenses of $1 million, which were partially offset by a favorable shift in the provision for loan losses of $1 million. Our net interest yield was 1.12% for the current quarter, a decrease of 9 basis points from the same prior-year quarter due to an increase in our cost of funds.

The variance of $75 million between our reported net income of $188 million for the six months ended November 30, 2017 and our net income of $263 million for the same prior-year period was also driven primarily by mark-to-market changes in the fair value of our derivatives. We recognized derivative gains of $79 million for the six months ended November 30, 2017, largely due to the increase in interest rates across the yield curve. In comparison, we recognized derivative gains of $152 million in the same prior-year period, attributable to the increase in medium-term and longer-term interest rates during the period. In addition, we experienced a decrease in net interest income of $5 million due to the compression in the net interest yield and an increase in operating expenses of $2 million, which were partially offset by a favorable shift in the provision for loan losses of $3 million. Our net interest yield was 1.14% for the six months ended November 30, 2017, a decrease of 9 basis points from the same prior-year period due to an increase in our cost of funds.

~~Adjusted Non-GAAP Results~~

Our adjusted net income totaled $33 million and our adjusted TIER was 1.16 for both the current quarter and the same prior-year quarter. Our adjusted net income totaled $68 million and adjusted TIER was 1.16 for the six months ended November 30, 2017, compared with adjusted net income of $66 million and adjusted TIER of 1.16 for the same prior-year period. Our adjusted debt-to-equity ratio increased to 6.12-to-1 as of November 30, 2017, from 5.95-to-1 as of May 31, 2017, largely due to an increase in debt outstanding to fund loan growth.

While adjusted net income for the current quarter and six months ended November 30, 2017 remained relatively unchanged from the same prior-year periods, adjusted net interest income decreased slightly due to compression in the adjusted net interest yield ~~resulting~~of 7 basis points, or 6%, to 1.18%; and

•A favorable shift from anlosses to gains recorded on our investment securities of $6 million;

Table of Contents

Partially offset by:

•A reduction in the benefit for credit losses of $5 million; and

•An increase in ~~our cost~~operating and other non-interest expenses of ~~funds.~~ $5 million.

YTD FY2024 versus YTD FY2023

The ~~combined impact of the decrease~~increase in adjusted net income was primarily driven by:

•An increase in adjusted net interest income ~~and~~of $29 million, driven by the combined impact of an increase in ~~operating expenses was offset by the favorable shift~~average interest-earning assets of $2,243 million, or 7%, and an increase in the ~~provision for loan losses. Our~~ adjusted net interest yield ~~was 0.81% and 0.83% for current quarter and the six months ended November 30, 2017, respectively, a decrease~~ of 54 basis points, or 4%, to 1.13%;

•A favorable shift from losses to gains recorded on our investment securities of $14 million;

•A favorable shift from provision to benefit for credit losses of $9 million; and ~~3 basis points, respectively,~~an increase in fee and other income of $3 million;

Partially offset by:

•An increase in operating and other non-interest expenses of $16 million.

Adjusted Debt-to-Equity Ratio

Our financial goals focus on maintaining an adjusted debt-to-equity ratio at approximately 6-to-1 or below. The adjusted debt-to-equity ratio increased to 6.29 as of February 29, 2024 from ~~the same prior-year period~~6.04 as of May 31, 2023, due to an increase in adjusted liabilities resulting from additional borrowings to fund growth in our ~~adjusted cost of funds.~~

~~Lending Activity~~

~~Loans to members totaled $24,825 million as of November 30, 2017,~~loan portfolio, partially offset by an increase ~~of $458 million, or 2%, from May 31, 2017.~~in adjusted equity. The increase in adjusted equity was primarily due to ~~an increase in CFC distribution loans~~our adjusted net income of ~~$405~~$224 million ~~an increase in NCSC loans of $126 million and an increase in RTFC loans of $17 million, which were~~for YTD FY2024, partially offset by a decrease in equity of $10 million from CFC’s deconsolidation of RTFC and $113 million from CFC Board of Directors’ authorized patronage capital retirements, as discussed above.

Lending and Credit Quality

We segregate our loan portfolio into segments based on the borrower member class, which consists of CFC distribution, CFC power supply, ~~loans of $91 million.~~CFC statewide and associate, NCSC electric and NCSC telecommunications (“telecom”). Prior to the RTFC sale transaction on December 1, 2023, NCSC electric and NCSC telecom were referred to as NCSC and RTFC, respectively.

~~Long-term loan advances~~Loans to members totaled $1,127 million during the six months ended November 30, 2017, with approximately 58% of those advances for capital expenditures by members and 31% for the refinancing of loans made by other lenders. CFC had long-term fixed-rate loans totaling $519 million that were scheduled to reprice during the six months ended November 30, 2017. Of this total, $441 million repriced to a new long-term fixed rate, $78 million repriced to a long-term variable rate and $1 million were repaid in full.

~~Financing Activity~~

Our outstanding debt volume generally increases and decreases in response to member loan demand. As total outstanding loans increased during the six months ended November 30, 2017, our debt volume also increased. Total debt outstanding was $24,086$34,412 million as of ~~November 30, 2017,~~February 29, 2024, an increase of ~~$626~~$1,880 million, or 3%6%, from May 31, ~~2017. The increase was primarily attributable to a~~2023, reflecting net ~~increase~~increases in ~~member commercial paper~~long-term and ~~daily liquidity fund notes~~line of ~~$543 million, a net increase in dealer medium-term notes~~credit loans of ~~$394~~$1,473 million and a$407 million, respectively. Our loan portfolio composition remained largely unchanged from May 31, 2023 with 78% of loans outstanding to CFC distribution borrowers, 16% to CFC power supply borrowers, 3% to NCSC electric borrowers, 2% to NCSC telecom borrowers, and 1% to CFC statewide and associate borrowers as of February 29, 2024.

We believe the overall credit quality of our loan portfolio remained strong as of February 29, 2024. We had no loan charge-offs or recoveries during Q3 FY2024 and Q3 FY2023. We recorded $1 million in net ~~increase~~loan recoveries to previously charged-off loan amounts during YTD FY2024. In comparison, we experienced net charge-offs totaling $15 million during YTD FY2023, which resulted in ~~notes payable~~an annualized net charge-off rate of 0.06% for YTD FY2023.

We had one loan totaling $85 million classified as nonperforming as of February 29, 2024. In comparison, we had two loans totaling $89 million classified as nonperforming as of May 31, 2023. The reduction was due to the ~~Federal Financing Bank under~~receipt of $4 million in payments to pay off one nonperforming loan. In March 2024, we received a $36 million payment on the ~~Guaranteed Underwriter Program~~outstanding nonperforming loan, which reduced its balance to $49 million as of the ~~USDA (“Guaranteed Underwriter Program”)~~date of ~~$74 million. These increases were~~this Report.

Table of Contents

Financing and Liquidity

Total debt outstanding increased $1,542 million, or 5%, to $32,541 million as of February 29, 2024, primarily due to borrowings to fund the increase in loans to members. We issued an aggregate principal amount of long-term dealer medium-term notes totaling $1,850 million during Q3 FY2024, of which $1,550 million was at an average fixed interest rate of 4.87% with an average term of five years and $300 million was at a ~~net decrease~~floating interest rate with a term of three years. We also issued $100 million of 7.125% subordinated deferrable debt due in 2053 during Q3 FY2024. Outstanding dealer commercial paper ~~outstanding of $420 million.~~

On November 9, 2017, we closed on a $750 million committed loan facility (“Series M”) from the Federal Financing Bank under the Guaranteed Underwriter Program. Pursuant to this facility, we may borrow any time before July 15, 2022. Each

advance is subject to quarterly amortization and a final maturity not longer than 20 years from the advance date. With the closing of this committed loan facility, the amount available for access under the Guaranteed Underwriter Program increased to $1,375was $899 million as of ~~November 30, 2017.~~February 29, 2024.

~~On November 20, 2017, we amended~~During YTD FY2024, Fitch Ratings (“Fitch”), S&P Global Inc.(“S&P”) and ~~restated the three-year~~Moody’s Investors Service (“Moody’s”) affirmed CFC’s credit ratings and ~~five-year committed bank revolving line~~stable outlook.

Our available liquidity consists of credit agreements to extend the maturity dates to November 20, 2020 and November 20, 2022, respectively, and to terminate certain third-party bank commitments totaling $40 million under the three-year agreement and $40 million under the five-year agreement. The total commitment amount from third-parties under the amended three-year and five-year bank revolving line of credit agreements is $1,493 million and $1,592 million, respectively, resulting in a combined total commitment amount under the two facilities of $3,085 million.

~~We provide additional information on our financing activities below under~~ ~~“Consolidated Balance Sheet Analysis—Debt” and “Liquidity Risk.”~~

~~Outlook for the Next 12 Months~~

We currently expect the amount of long-term loan advances to exceed anticipated loan repayments over the next 12 months. We have scheduled maturities of higher-cost debt over the next 12 months, including $1,875 million in collateral trust bonds with a weighted average coupon rate of 8.18%. We expect that we will be able to replace this higher-cost debt with lower-cost funding, which will reduce our aggregate weighted average funding cost. As a result of the anticipated decrease in our funding cost, we expect that our net interest income, net interest yield, adjusted net interest income and adjusted net interest yield will increase.

Long-term debt scheduled to mature over the next 12 months totaled $2,880 million as of November 30, 2017. In addition, during the third quarter of fiscal year 2018 we expect to redeem $325 million of long-term debt prior to maturity. We believe we have sufficient liquidity from the combination of existing cash, member loan repayments, committed bank revolving lines of credit and our ability to issue debt in the capital markets, to our members and in private placements, to meet the demand for member loan advances and satisfy our obligations to repay long-term debt maturing over the next 12 months. As of November 30, 2017, we had access to liquidity reserves totaling $7,047 million, which consisted of (i) $280 million in cash and cash equivalents, ~~(ii) up to $1,375 million available under committed loan facilities under the Guaranteed Underwriter Program, (iii) up to $3,083 million available~~investments in debt securities and availability under committed bank revolving line of credit agreements, ~~(iv) up to $300 million available~~committed loan facilities under ~~a committed revolving note purchase agreement with Farmer Mac,~~the USDA Guaranteed Underwriter Program (“Guaranteed Underwriter Program”), and ~~(v) up to $2,009 million available under~~ a revolving note purchase agreement with the Federal Agricultural Mortgage Corporation (“Farmer ~~Mac, subject~~Mac”). As of February 29, 2024, our available liquidity totaled $6,595 million and was $358 million below our total scheduled debt obligations over the next 12 months of $6,953 million. In addition to ~~market conditions.~~our existing available liquidity, we expect to receive $1,535 million from scheduled long-term loan principal payments over the next 12 months.

We believe we can continue to roll over ~~outstanding~~our member short-term ~~debt~~investments of ~~$2,977~~$3,206 million ~~as of November 30, 2017,~~ based on our expectation that our members will continue to reinvest their excess cash primarily in ~~our commercial paper, daily~~short-term investment products offered by CFC. Our members historically have maintained a relatively stable level of short-term investments in CFC. Member short-term investments in CFC have averaged $3,543 million over the last 12 fiscal quarter-end reporting periods. Our available liquidity fund, select notes and medium-term notes. Although we expect to continue accessing the dealer commercial paper market to help meet our liquidity needs, we intend to manage our short-term wholesale funding risk by maintaining outstanding dealer commercial paper at an amount below $1,250 million for the foreseeable future. We expect to continue to be in compliance with the covenants under our committed bank revolving line of credit agreements, which will allow us to mitigate our roll-over risk as we can draw on these facilities to repay dealer or member commercial paper that cannot be

~~rolled over.~~

~~While we are not subject to bank regulatory capital rules, we generally aim to maintain an adjusted debt-to-equity ratio at approximately or below 6.00-to-1. Our adjusted debt-to-equity ratio was 6.12~~ as of ~~November 30, 2017, above~~February 29, 2024 was $2,848 million in excess of, or 1.8 times over, our ~~targeted threshold due to~~total scheduled debt obligations, excluding member short-term investments, over the ~~increase~~next 12 months of $3,747 million.

Outlook

As further described below in ~~debt outstanding to fund~~the “Liquidity Risk—Projected Near-Term Sources and Uses of Funds” section, we currently anticipate net long-term loan ~~growth. Due to anticipated asset~~ growth ~~we expect our adjusted debt-to-equity ratio to be above 6.00-to-1~~of $1,847 million over the next 12 months. We also expect that our variable-rate line of credit loans outstanding will remain at approximately the current level over the same period.

In March 2024, the Federal Open Market Committee (“FOMC”) of the Federal Reserve signaled the expectation of no additional increases in the federal funds rate. The FOMC expects the U.S. economy to remain strong in 2024, with the median projected Gross Domestic Product (“GDP”) growth rate at 2.1% in 2024, up from 1.4% in its December 2023 projection. In addition, the Federal Reserve revised higher its inflation expectations and lowered its expected unemployment rate in 2024. Despite an improved economic outlook and inflation remaining above the 2% long-term target, the FOMC projects 75 basis points of federal funds rate cuts in 2024, bringing the target rate to 4.6% by December 31, 2024. Consensus market outlook for interest rates indicates declining interest rates across the yield curve in 2024. Although the yield curve is expected to remain inverted throughout calendar year 2024, given the expected drop in short-term interest rates, the yield curve inversion is expected to narrow in 2024.

Projected Reported Results

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

•A slight increase in our reported net interest income. However, we expect a decrease in our reported net interest yield over the next 12 months compared to the 12-month period ended February 29, 2024. See “Market Risk—Interest Rate Risk Assessment” for an additional discussion.

Projected Non-GAAP Adjusted Results

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

•Decreases in our adjusted net interest income and adjusted net interest yield over the next 12 months relative to the 12-month period ended February 29, 2024, primarily due to the current yield curve assumptions and our balance sheet position. See “Market Risk—Interest Rate Risk Assessment” for an additional discussion.

Table of Contents

•Decreases in our adjusted net income and adjusted TIER over the next 12 months, primarily attributable to increased operating expenses and a projected decrease in adjusted net interest income.

•Our adjusted debt-to-equity ratio will remain above our target of 6-to-1, primarily due to the projected increase in total debt outstanding to fund anticipated growth in our loan portfolio.

As stated above, we exclude the impact of unrealized derivative forward fair value gains and losses from our non-GAAP financial measures. As the majority of our swaps are long-term with an average remaining life of approximately 15 years as of February 29, 2024, the unrealized periodic derivative forward value gains and losses are largely based on future expected changes in longer-term interest rates, which we are unable to accurately predict for each reporting period over the next 12 months. Due to the difficulty in predicting these unrealized amounts, we are unable to provide without unreasonable effort a reconciliation of our forward-looking adjusted financial measures to the most directly comparable GAAP financial measures.



~~CRITICAL ACCOUNTING POLICIES AND ESTIMATES~~

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates and assumptions that affect the amount of assets, liabilities, income and expenses in the consolidated financial statements. Understanding our accounting policies and the extent to which we use management’s judgment and estimates in

applying these policies is integral to understanding our financial statements. We provide a discussion of our significant accounting policies under “Note 1—Summary of Significant Accounting Policies” in our 2017 Form 10-K.

We have identified certain accounting policies as critical because they involve significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our results of operations or financial condition. Our most critical accounting policies and estimates involve the determination of the allowance for loan losses and fair value. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. There were no material changes in the key inputs and assumptions used in our critical accounting policies during the six months ended November 30, 2017. Management has discussed significant judgments and assumptions in applying our critical accounting policies with the Audit Committee of our board of directors. We provide additional information on our critical accounting policies and estimates under “MD&A—Critical Accounting Policies and Estimates” in our 2017 Form 10-K. See “Item 1A. Risk Factors” in our 2017 Form 10-K for a discussion of the risks associated with management’s judgments and estimates in applying our accounting policies and methods.

~~ACCOUNTING CHANGES AND OTHER DEVELOPMENTS~~

See “Note 1—Summary of Significant Accounting Policies” for information on accounting standards adopted during the current quarter, as well as recently issued accounting standards not yet required to be adopted and the expected impact of these accounting standards. To the extent we believe the adoption of new accounting standards has had or will have a material impact on our consolidated results of operations, financial condition or liquidity, we discuss the impact in the applicable section(s) of this MD&A. We also discuss the expected impact of H.R. 1, the ~~Tax Cuts and Jobs Act~~ ~~(“The Act”), which the President of the United States signed and enacted into law on December 22, 2017.~~

CONSOLIDATED RESULTS OF OPERATIONS

~~The~~This section ~~below~~ provides a comparative discussion of our ~~condensed~~ consolidated results of operations between ~~the three months ended November 30, 2017~~Q3 FY2024 and ~~2016~~Q3 FY2023, and ~~the six months ended November 30, 2017~~between YTD FY2024 and ~~2016.~~YTD FY2023. Following this section, we provide a ~~comparative~~discussion and analysis of material changes between amounts reported on our ~~condensed~~ consolidated balance sheets as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023. You should read these sections together with our “Executive Summary—~~Outlook for the Next 12 Months”~~Outlook” where we discuss trends and other factors that we expect will affect our future results of operations.

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 ~~which include loans and investment securities,~~ and the interest expense on our interest-bearing liabilities. Our net interest yield represents the difference between the yield on our interest-earning assets and the cost of our interest-bearing liabilities plus the impact ~~from~~of non-interest bearing funding. We expect net interest income and our net interest yield to fluctuate based on changes in interest rates and changes in the amount and composition of our interest-earning assets and interest-bearing liabilities. We do not fund each individual loan with specific debt. Rather, we attempt to minimize costs and maximize efficiency by proportionately funding large aggregated amounts of loans.

Table 23 presents ~~our~~ average ~~balance sheets for the three and six months ended November 30, 2017 and 2016, and~~balances 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 23 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 ~~adjusted~~financial measures to the most comparable U.S. GAAP financial measures under “Non-GAAP Financial ~~Measures.~~Measures and Reconciliations.”

Table of Contents

Table 2:3: Average Balances, Interest Income/Interest Expense and Average Yield/Cost




	Q3 FY2024						Q3 FY2023
(Dollars in thousands)	Average Balance		Interest Income/Expense		Average Yield/Cost		Average Balance		Interest Income/Expense		Average Yield/Cost
Assets:
Long-term fixed-rate loans(1)	$	29,833,708	$	324,528	4.38	%	$	27,985,457	$	288,200	4.18	%
Long-term variable-rate loans	860,320		15,296		7.15		916,868		13,648		6.04
Line of credit loans	3,562,227		62,298		7.03		3,165,591		45,653		5.85


Other, net(2)	—		(431)		—		—		(389)		—
Total loans	34,256,255		401,691		4.72		32,067,916		347,112		4.39
Cash, time deposits and investment securities	910,430		10,144		4.48		833,024		6,180		3.01
Total interest-earning assets	$	35,166,685	$	411,835	4.71	%	$	32,900,940	$	353,292	4.35	%
Other assets, less allowance for credit losses(3)	1,160,625						1,041,947
Total assets(3)	$	36,327,310					$	33,942,887

Liabilities:
Commercial paper	$	3,051,437	$	42,348	5.58	%	$	2,901,375	$	31,943	4.47	%
Other short-term borrowings	1,637,296		21,682		5.33		2,047,112		18,696		3.70
Short-term borrowings(4)	4,688,733		64,030		5.49		4,948,487		50,639		4.15
Medium-term notes	7,968,782		84,224		4.25		6,423,373		57,056		3.60
Collateral trust bonds	7,069,156		67,561		3.84		7,614,181		70,859		3.77
Guaranteed Underwriter Program notes payable	6,869,399		54,962		3.22		6,378,600		46,477		2.96
Farmer Mac notes payable	3,894,223		42,497		4.39		3,225,962		30,469		3.83
Other notes payable	2,112		28		5.33		2,557		15		2.38
Subordinated deferrable debt	1,209,070		20,411		6.79		986,642		12,881		5.29
Subordinated certificates	1,201,360		13,306		4.45		1,228,253		13,313		4.40
Total interest-bearing liabilities	$	32,902,835	$	347,019	4.24	%	$	30,808,055	$	281,709	3.71	%
Other liabilities(3)	544,225						614,711
Total liabilities(3)	33,447,060						31,422,766
Total equity(3)	2,880,250						2,520,121
Total liabilities and equity(3)	$	36,327,310					$	33,942,887
Net interest spread(5)					0.47	%					0.64	%
Impact of non-interest bearing funding(6)					0.27						0.24
Net interest income/net interest yield(7)			$	64,816	0.74	%			$	71,583	0.88	%

Adjusted net interest income/adjusted net interest yield:
Interest income			$	411,835	4.71	%			$	353,292	4.35	%
Interest expense			347,019		4.24				281,709		3.71
Add: Net periodic derivative cash settlements interest income(8)			(38,342)		(2.04)				(18,634)		(1.00)
Adjusted interest expense/adjusted average cost(9)			$	308,677	3.77	%			$	263,075	3.46	%
Adjusted net interest spread(7)					0.94						0.89
Impact of non-interest bearing funding(6)					0.24						0.22
Adjusted net interest income/adjusted net interest yield(10)			$	103,158	1.18	%			$	90,217	1.11	%

Table of Contents


	Three Months Ended November 30,
			YTD FY2024
			YTD FY2024
			YTD FY2024																						YTD FY2023
(Dollars in thousands)	2017							2016							(Dollars in thousands)	Average Balance			Interest Income/Expense						Average Yield/Cost								Average Balance				Interest Income/Expense						Average Yield/Cost
Assets:	Average Balance		Interest Income/Expense			Average Yield/Cost		Average Balance		Interest Income/Expense			Average Yield/Cost
Long-term fixed-rate loans⁽¹⁾	$	22,458,429	$	248,926		4.45	%	$	21,772,579	$	243,817		4.49	%
Long-term fixed-rate loans(1)
Long-term fixed-rate loans(1)																$	29,170,484		$	937,316					4.29		%						$	27,592,829			$	845,270					4.10	%
Long-term variable-rate loans	886,257		6,097			2.76		751,460		4,987			2.66
Line of credit loans	1,330,776		8,588			2.59		1,046,826		5,553			2.13
TDR loans⁽²⁾	12,929		222			6.89		13,505		231			6.86
Other income, net⁽³⁾	—		(306		)	—		—		(281		)	—

Other, net(2)

Other, net(2)

Other, net(2)
Total loans	24,688,391		263,527			4.28		23,584,370		254,307			4.32
Cash, time deposits and investment securities	528,158		2,296			1.74		761,354		2,849			1.50
Total interest-earning assets	$	25,216,549	$	265,823		4.23	%	$	24,345,724	$	257,156		4.24	%	Total interest-earning assets	$	34,189,808	$	$	1,181,778			4.62			4.62		%						$	31,947,185	$		$	984,464	4.12				4.12	%
Other assets, less allowance for loan losses	526,627							624,014
Total assets	$	25,743,176						$	24,969,738
Other assets, less allowance for credit losses(3)
Total assets(3)
Total assets(3)
Total assets(3)

Liabilities:
Short-term debt	$	2,998,298	$	10,116		1.35	%	$	3,037,831	$	5,409		0.71	%

Liabilities:

Liabilities:
Commercial paper
Commercial paper
Commercial paper																$	2,524,302		$	103,923					5.50		%						$	2,886,202			$	70,735					3.28	%
Other short-term borrowings
Short-term borrowings(4)
Medium-term notes	3,375,389		27,544			3.27		3,399,885		24,705			2.91
Collateral trust bonds	7,637,919		85,321			4.48		7,256,608		84,951			4.70
Guaranteed Underwriter Program notes payable	5,066,574		35,688			2.83		4,862,958		36,216			2.99
Farmer Mac notes payable	2,496,587		11,947			1.92		2,288,013		7,587			1.33
Other notes payable	35,295		391			4.44		41,026		458			4.48
Subordinated deferrable debt	742,319		9,417			5.09		742,187		9,411			5.09
Subordinated certificates	1,415,352		14,746			4.18		1,442,871		14,917			4.15
Total interest-bearing liabilities	$	23,767,733	$	195,170		3.29	%	$	23,071,379	$	183,654		3.19	%	Total interest-bearing liabilities	$	31,957,482	$	$	987,145			4.13			4.13		%						$	29,881,420	$		$	736,621	3.30				3.30	%
Other liabilities	842,246							1,101,635
Total liabilities	24,609,979							24,173,014
Total equity	1,133,197							796,724
Total liabilities and equity	$	25,743,176						$	24,969,738

Net interest spread⁽⁴⁾						0.94	%						1.05	%
Impact of non-interest bearing funding⁽⁵⁾						0.18							0.16
Net interest income/net interest yield⁽⁶⁾			$	70,653		1.12	%			$	73,502		1.21	%
Other liabilities(3)
Total liabilities(3)
Total liabilities(3)
Total liabilities(3)
Total equity(3)
Total equity(3)
Total equity(3)
Total liabilities and equity(3)
Total liabilities and equity(3)
Total liabilities and equity(3)
Net interest spread(5)
Net interest spread(5)
Net interest spread(5)																															0.49	%																0.82	%
Impact of non-interest bearing funding(6)
Net interest income/net interest yield(7)															Net interest income/net interest yield(7)							$	194,633					0.76		%											$	247,843				1.04	%

Adjusted net interest income/adjusted net interest yield:
Adjusted net interest income/adjusted net interest yield:
Adjusted net interest income/adjusted net interest yield:
Interest income
Interest income
Interest income			$	265,823		4.23	%			$	257,156		4.24	%						$	1,181,778			4.62			4.62		%											$	984,464		4.12			4.12	%
Interest expense			195,170			3.29				183,654			3.19
Add: Net accrued periodic derivative cash settlements⁽⁷⁾			19,635			0.72				21,587			0.81
Adjusted interest expense/adjusted average cost⁽⁸⁾			$	214,805		3.63	%			$	205,241		3.57	%

Adjusted net interest spread⁽⁴⁾						0.60	%						0.67	%
Impact of non-interest bearing funding						0.21							0.19
Adjusted net interest income/adjusted net interest yield⁽⁹⁾			$	51,018		0.81	%			$	51,915		0.86	%
Add: Net periodic derivative cash settlements interest (income) expense(8)
Adjusted interest expense/adjusted average cost(9)															Adjusted interest expense/adjusted average cost(9)							$	892,167					3.73		%											$	723,971				3.24	%
Adjusted net interest spread(7)
Impact of non-interest bearing funding(6)
Adjusted net interest income/adjusted net interest yield(10)															Adjusted net interest income/adjusted net interest yield(10)							$	289,611					1.13		%											$	260,493				1.09	%

Table of our strategy in managing our credit risk exposure, we entered into a long-term standby purchase commitment agreement with Farmer Mac on August 31, 2015, as amended on May 31, 2016. Under this agreement, we may designate certain loans to be covered under the commitment, as approved by Farmer Mac, and in the event any such loan later goes into payment default for at least 90 days, upon request by us, Farmer Mac must purchase such loan at par value. The outstanding principal balance of loans covered under this agreement totaled $792 million as of November 30, 2017, compared with $843 million as of May 31, 2017. No loans have been put to Farmer Mac for purchase pursuant to this agreement. In addition, RUS guaranteed long-term loans totaling $164 million and $167 million as of November 30, 2017 and May 31, 2017, respectively.Contents

Credit Concentration

Concentrations of credit may exist when a lender has large credit exposures to single borrowers, large credit exposures to borrowers in the same industry sector or engaged in similar activities or large credit exposures to borrowers in a geographic region that would cause the borrowers to be similarly impacted by economic or other conditions in the region.As ~~a tax-exempt, member-owned finance cooperative, CFC’s principal purpose is~~discussed above under “Credit Risk—Loan Portfolio Credit Risk,” because we lend primarily to ~~provide funding to America’s~~our rural electric utility ~~cooperatives~~cooperative members, our loan portfolio is inherently subject to ~~assist them in acquiring, constructing~~single-industry and ~~operating~~single-obligor credit concentration risk. Loans outstanding to electric ~~distribution, transmission~~utility organizations totaled $33,850 million and ~~related facilities. We serve electric~~ $32,032 million as of February 29, 2024 and ~~telecommunications members throughout the United States~~May 31, 2023, respectively, and ~~its territories, including 49 states, the District~~ represented approximately 98% and 99% of ~~Columbia, American Samoa and Guam. Texas had the largest concentration of outstanding loans to borrowers in any one state, with approximately 15% of~~our total loans outstanding as of ~~both November 30, 2017~~each respective date. Our credit exposure is partially mitigated by long-term loans guaranteed by RUS, which totaled $116 million and $123 million as of February 29, 2024 and May 31, 2017. Our consolidated membership totaled 1,459 members and 217 associates as of November 30, 2017. As such, we have a loan portfolio with single-industry and single-obligor concentration risk. Outstanding loans to electric utility organizations represented approximately 99% of the total outstanding loan portfolio as of November 30, 2017, unchanged from May 31, 2017. The remaining outstanding loans in our portfolio were to RTFC members, affiliates and associates in the telecommunications industry.2023, respectively.

Single-Obligor Concentration

Table 2013 displays the outstanding loan exposure ~~of the~~ for our 20 largest borrowers, by ~~exposure type~~legal entity and ~~by company,~~member class, as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017. The~~2023. Our 20 largest borrowers consisted of 12 distribution systems and eight power supply systems as of February 29, 2024 compared to 10 distribution systems 9and 10 power ~~supply~~ supply systems ~~and 1 NCSC associate member~~ as of ~~both November 30, 2017 and~~ May 31, ~~2017.~~ 2023. The largest total ~~outstanding~~ exposure to a single borrower or controlled group represented approximately 2% 1% of total loans ~~and guarantees~~ outstanding as of both ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023.

Table ~~20: Credit~~13: Loans—Loan Exposure to 20 Largest Borrowers


	February 29, 2024				May 31, 2023
(Dollars in thousands)	Amount		% of Total		Amount		% of Total
Member class:
CFC:
Distribution	$	4,139,902	12	%	$	3,600,193	11	%
Power supply	2,427,916		7		2,782,098		9
Total CFC	6,567,818		19		6,382,291		20
NCSC Electric	179,500		1		205,321		—
Total loan exposure to 20 largest borrowers	6,747,318		20		6,587,612		20
Less: Loans covered under Farmer Mac standby purchase commitment	(234,663)		(1)		(266,754)		(1)
Net loan exposure to 20 largest borrowers	$	6,512,655	19	%	$	6,320,858	19	%

We entered into a long-term standby purchase commitment agreement with Farmer Mac during fiscal year 2016. Under this agreement, we may designate certain long-term loans to be covered under the commitment, subject to approval by Farmer Mac, and in the event any such loan later goes into payment default for at least 90 days, upon request by us, Farmer Mac must purchase such loan at par value. The aggregate unpaid principal balance of designated and Farmer Mac approved loans was $398 million and $436 million as of February 29, 2024 and May 31, 2023, respectively. Loan exposure to our 20 largest borrowers covered under the Farmer Mac agreement totaled $235 million and $267 million as of February 29, 2024 and May 31, 2023, respectively, which reduced our exposure to the 20 largest borrowers to 19% as of each respective date. 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. The consolidated number of borrowers with loans outstanding totaled 893 and 884 as of February 29, 2024 and May 31, 2023, respectively, located in 49 states and the District of Columbia. Of the 893 and 884 borrowers with loans outstanding as of February 29, 2024 and May 31, 2023, respectively, 50 and 52 were electric power supply borrowers as of each respective date. Electric power supply borrowers generally require significantly more capital than electric distribution and telecommunications borrowers.

Table of Contents

November 30, 2017 May 31, 2017 Change
(Dollars in thousands) Amount % of Total Amount % of Total
By exposure type:
Loans $ 5,832,139
23 % $ 5,749,885
23 % $ 82,254
Guarantees 129,070
—
354,619
1
(225,549 )
Total exposure to 20 largest borrowers 5,961,209
23
6,104,504
24
(143,295 )
Less: Loans covered under Farmer Mac standby purchase commitment (367,464 ) (1 ) (351,699 ) (1 ) (15,765 )
Net exposure to 20 largest borrowers $ 5,593,745
22 % $ 5,752,805
23 % $ (159,060 )

By company:
CFC $ 5,711,341
22 % $ 5,899,709
23 % $ (188,368 )
NCSC 249,868
1
204,795
1
45,073
Total exposure to 20 largest borrowers 5,961,209
23
6,104,504
24
(143,295 )
Less: Loans covered under Farmer Mac standby purchase commitment (367,464 ) (1 ) (351,699 ) (1 ) (15,765 )
Net exposure to 20 largest borrowers $ 5,593,745
22 % $ 5,752,805
23 % $ (159,060 )

~~Credit Performance~~

~~As part~~Texas, which had 67 and 69 borrowers with loans outstanding as of February 29, 2024 and May 31, 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. Loans outstanding to Texas-based borrowers totaled $5,688 million and $5,529 million as of February 29, 2024 and May 31, 2023, respectively, and accounted for approximately 16% and 17% of total loans outstanding as of each respective date. Of the loans outstanding to Texas-based borrowers, $133 million and $155 million as of February 29, 2024 and May 31, 2023, respectively, were covered by the Farmer Mac standby repurchase agreement, which reduced our credit risk ~~management~~exposure to Texas-based borrowers to $5,555 million and $5,373 million as of each respective date. See “Note 4—Loans” for information on the Texas-based number of borrowers and loans outstanding by legal entity and member class.

Credit Quality Indicators

Assessing the overall credit quality of our loan portfolio and measuring our credit risk is an ongoing process wethat involves tracking payment status, modifications to borrowers experiencing financial difficulty, nonperforming loans, charge-offs, the internal risk ratings of our borrowers and other indicators of credit risk. We monitor and ~~evaluate~~subject each borrower and loan facility in our loan portfolio ~~and assign numeric internal~~to an individual risk ~~ratings~~assessment based on quantitative and qualitative ~~assessments. Our ratings are intended to align with the federal banking regulatory credit risk rating classification definitions of pass, special mention, substandard~~factors. Payment status trends and ~~doubtful. The special mention, substandard, and doubtful categories are intended to comply with the definition of criticized loans by the banking regulatory authorities. Internal~~internal risk ratings ~~and payment status trends~~ are indicators, among others, of the ~~level~~probability of borrower default and overall credit ~~risk in~~quality of our loan portfolio.

~~The~~ We believe the overall credit ~~risk~~quality of our loan portfolio remained ~~low, as evidenced by our~~ strong asset quality metrics, including senior secured positions on most of our loans and low levels of criticized exposure, nonaccrual loans and charge-offs. As displayed in Table 19 above, 92% of our total outstanding loans were secured as of both November 30, 2017 and May 31, 2017. As displayed in “Note 4—Loans and Commitments,” 0.5% of the loans in our portfolio were classified as criticized as of both November 30, 2017 and May 31, 2017. Below we provide information on certain additional credit quality indicators, including modified loans that are consideredFebruary 29, 2024.

Loan Modifications to ~~be troubled debt restructurings (“TDRs”), nonperforming loans and net charge-offs.~~Borrowers Experiencing Financial Difficulty

~~Troubled Debt Restructurings~~

We actively monitor problem loans and, from time to time, attempt to work with borrowers to manage such exposures through loan workouts or modifications that better align with the borrower’s current ability to pay. A Therefore, as part of our loss mitigation efforts, we may provide modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for exercising remedies. We consider the impact of all loan modifications when estimating the credit quality of our loan portfolio and establishing the allowance for credit losses.

On June 1, 2023, we adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326) – Troubled Debt Restructurings and Vintage Disclosures, using the prospective adoption method. The ASU eliminated the accounting guidance for TDRs and enhanced the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty, which are to be applied prospectively. For additional information on the adoption of ASU 2022-02 see “Note 1—Summary of Significant Accounting Policies.”

We had no loan modifications to borrowers experiencing financial difficulty during Q3 FY2024. We had one loan modification to a NCSC telecom borrower experiencing financial difficulty during YTD FY2024. This loan received a term extension and had an amortized cost of $3 million as of February 29, 2024, representing 1% of the NCSC telecom loan portfolio. Loans modified to borrowers experiencing financial difficulty totaled $3 million as of February 29, 2024, consisting of one NCSC telecom loan as discussed above, which wasperforming in accordance with the terms of the loan agreement. There were no unadvanced loan commitments related to this loan.

Troubled Debt Restructurings—Prior to Adoption of ASU 2022-02

As discussed above, ASU 2022-02 eliminated the accounting guidance for TDRs. Prior to the adoption of ASU 2022-02, a loan restructuring or modification of terms is accounted for as a TDR if, for economic or legal reasons related to the borrower’s financial difficulties, a concession is granted to the borrower that we would ~~not~~not otherwise consider. ~~TDR~~

We had loans ~~generally are initially placed on nonaccrual status, although in many cases such loans were already on nonaccrual status prior~~outstanding to modification. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed against earnings. These loans may be returned to performing status and the accrual of interest resumed if the borrower performs under the modified terms for an extended period of time, and we expect the borrower to continue to perform in accordance with the modified terms. In certain limited circumstances intwo borrowers totaling $8 million which ~~a TDR loan is current at the modification date, the loan may remain on accrual status at the time of modification.~~

Table 21 presents the carrying value of loans modified as TDRs in prior periods as of November 30, 2017 and May 31, 2017. These loans were considered individually impaired as of the end of each period presented.

~~Table 21: TDR Loans~~

November 30, 2017 May 31, 2017
(Dollars in thousands) Carrying Amount % of Total Loans Outstanding Carrying Amount % of Total Loans Outstanding
TDR loans:
CFC $ 6,507
0.03 % $ 6,581
0.02 %
RTFC 6,341
0.02
6,592
0.03
Total TDR loans $ 12,848
0.05 % $ 13,173
0.05 %

Performance status of TDR loans:
Performing TDR loans $ 12,848
0.05 % $ 13,173
0.05 %

~~As indicated in Table 21, we did not~~ have ~~any TDR loans classified as nonperforming as of November 30, 2017 or May 31, 2017. TDR loans classified as performing as of November 30, 2017 and May 31, 2017 were~~been performing in accordance with the terms of their respective restructured loan agreement for an extended period of time and were classified as performing TDR loans and on accrual status as of May 31, 2023. We had loans outstanding to Brazos totaling $23 million classified as nonperforming TDR loans during Q3 FY2023, which were on non-accrual status as of May 31, 2023. During Q1 FY2024, we received the ~~respective reported dates.~~remaining payment of Brazos’ loans outstanding of $23 million in accordance with the provisions of Brazos’ plan of reorganization to repay its loans in full. Prior to the Brazos loan restructuring, we have not had any loan modifications that were required to be accounted for as TDRs since fiscal year 2016.

Table of Contents

Nonperforming Loans

~~In addition to TDR loans that may be classified as nonperforming, we also may have nonperforming loans that have not been modified as a TDR loan.~~ We classify ~~such~~ loans as nonperforming at the earlier of the date when we determine: (i) interest or principal payments on the loan is past due 90 days or more; (ii) as a result of court proceedings, the collection of interest or principal payments based on the original contractual terms is not expected; or (iii) the full and timely collection of interest or principal is otherwise uncertain. Once a loan is classified as nonperforming, we generally place the loan on nonaccrual status. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed against earnings.

We had ~~no loans~~a loan to one CFC electric power supply borrower totaling $85 million classified as nonperforming as of ~~November 30, 2017 or~~February 29, 2024. In comparison, we had loans to two CFC electric power supply borrowers totaling $89 million classified as nonperforming as of May 31, ~~2017. In addition, we did not have any past due~~2023. Nonperforming loans represented 0.25% and 0.27% of total loans outstanding as of ~~either November 30, 2017 or~~February 29, 2024 and May 31, ~~2017.~~2023, respectively. The reduction in nonperforming loans of $4 million was due to the receipt of $4 million in loan payments from Brazos Sandy Creek to pay off its nonperforming loan outstanding during the YTD FY2024. In March 2024, we received a $36 million payment on the outstanding nonperforming loan, which reduced its balance to $49 million as of the date of this Report.

We provide additional information on ~~the credit quality of our loan portfolio~~nonperforming loans in “Note 4—~~Loans and Commitments.~~Loans—Credit Quality Indicators—Nonperforming Loans.”

Net Charge-Offs

~~Table 22 presents~~We had no loan charge-offs or recoveries during Q3 FY2024 and Q3 FY2023. We recorded $1 million in net loan recoveries to previously charged-off loan amounts during YTD FY2024. We received a total of $28 million in loan payments from Brazos and Brazos Sandy Creek to repay their $27 million of total loans outstanding in full during YTD FY2024. The additional payments received totaling $1 million were recorded as net loan recoveries on the Brazos and Brazos Sandy Creek previously charged-off loan amounts during YTD FY2024. In comparison, we experienced net charge-offs totaling $15 million for the CFC electric power supply loan portfolio related to Brazos and Brazos Sandy Creek nonperforming loans during YTD FY2023, which resulted in an annualized net charge-off rate of 0.06%for ~~the three~~YTD FY2023. Prior to Brazos’ and ~~six months ended November 30,~~Brazos Sandy Creek’s bankruptcy filings, we had not experienced any defaults or charge-offs in our electric utility and telecommunications loan portfolios since fiscal year 2013 and 2017, ~~and 2016.~~respectively.

~~Table 22: Net Charge-Offs (Recoveries)~~Borrower Risk Ratings

Three Months Ended November 30, Six Months Ended November 30,
(Dollars in thousands) 2017 2016 2017
2016
Charge-offs:
RTFC $ —
$ —
$ —
$ 2,119
Recoveries:
CFC —
(53 ) —
(106 )
Net charge-offs (recoveries) $ —
$ (53 ) $ —
$ 2,013

Average total loans outstanding $ 24,688,391
$ 23,584,370
$ 24,634,266
$ 23,499,922

Net charge-off rate⁽¹⁾
— % — % — % 0.02 %

~~____________________________~~

⁽¹⁾~~Calculated based on annualized net charge-offs (recoveries) for the period divided by average total outstanding loans for the period.~~

As ~~displayed in Table 22,~~part of our management of credit risk, we ~~experienced no charge-offs during~~maintain a credit risk rating framework under which we employ a consistent process for assessing the ~~current quarter and the six months ended November 30, 2017. Charge-offs totaled $2 million during the six months ended November 30, 2016, all~~credit quality of ~~which were related to~~

~~telecommunications loans in the RTFC portfolio. Our average annual net charge-off rate has been less than 0.01% over the last three fiscal years.~~

~~Allowance for Loan Losses~~

The allowance for loan losses is determined based upon evaluation of the loan portfolio, past loss experience, specific problem loans, economic conditions and other pertinent factors that, in management’s judgment, could affect the risk of loss in theour loan portfolio. We ~~review~~evaluate each borrower and ~~adjust the allowance quarterly to cover estimated probable losses inherent~~loan facility in our loan portfolio and assign internal borrower and loan facility risk ratings based on consideration of a number of quantitative and qualitative factors. We categorize loans in our portfolio based on our internally assigned borrower risk ratings, which are intended to assess the general creditworthiness of the borrower and probability of default. Our borrower risk ratings align with the U.S. federal banking regulatory agencies’ credit risk definitions of pass and criticized categories, with the criticized category further segmented among special mention, substandard and doubtful. Pass ratings reflect relatively low probability of default, while criticized ratings have a higher probability of default. Our internally assigned borrower risk ratings serve as the primary credit quality indicator for our loan portfolio. Because our internal borrower risk ratings provide important information on the probability of default, they are a key input in determining our allowance for credit losses.

Criticized loans totaled $268 million and $323 million as of February 29, 2024 and May 31, 2023, respectively, and represented approximately 1% of total loans outstanding as of each ~~balance sheet~~respective date. The decrease of $55 million in criticized loans was primarily due to loan payments received from Brazos and Brazos Sandy Creek in the doubtful category and a decrease in loans outstanding for one CFC electric distribution borrower in the special mention category during YTD FY2024. Each of the borrowers with loans outstanding in the criticized category was current with regard to all principal and interest amounts due to us as of February 29, 2024. In contrast, each of the borrowers with loans outstanding in the criticized category, with the exception of Brazos Sandy Creek, was current with regard to all principal and interest amounts due to us as of May 31, 2023.

Table of Contents

We provide additional information on our borrower risk rating framework in our 2023 Form 10-K under “Item 7. MD&A Credit Risk—Loan Portfolio Credit Risk—Credit Quality Indicators.” See “Note 4—Loans” of this Report for detail, by member class, on loans outstanding in each borrower risk rating category.

Allowance for Credit Losses

We are required to maintain an allowance based on a current estimate of credit losses that are expected to occur over the remaining contractual term of the loans in our portfolio. Our allowance for credit losses consists of a collective allowance and an asset-specific allowance. The collective allowance is established for loans in our portfolio that share similar risk characteristics and are therefore evaluated on a collective, or pool, basis in measuring expected credit losses. The asset-specific allowance is established for loans in our portfolio that do not share similar risk characteristics with other loans in our portfolio and are therefore evaluated on an individual basis in measuring expected credit losses.

Table 14 presents, by legal entity and member class, loans outstanding and the related allowance for credit losses and allowance coverage ratio as of February 29, 2024 and May 31, 2023 and the allowance components as of each date.

Table ~~23 summarizes changes~~14: Allowance for Credit Losses by Borrower Member Class and Evaluation Methodology


	February 29, 2024						May 31, 2023
(Dollars in thousands)	Loans Outstanding(1)		Allowance for Credit Losses		Allowance Coverage Ratio (2)		Loans Outstanding (1)		Allowance for Credit Losses		Allowance Coverage Ratio(2)
Member class:
CFC:
Distribution	$	26,876,308	$	16,005	0.06	%	$	25,437,077	$	14,924	0.06	%
Power supply	5,731,520		26,291		0.46		5,437,242		33,306		0.61
Statewide and associate	258,181		1,228		0.48		200,368		1,194		0.60
Total CFC	32,866,009		43,524		0.13		31,074,687		49,424		0.16
NCSC:
Electric	984,182		3,503		0.36		956,874		2,464		0.26
Telecom	548,521		1,968		0.36		487,788		1,206		0.25
Total NCSC	1,532,703		5,471		0.36		1,444,662		3,670		0.25
Total	$	34,398,712	$	48,995	0.14		$	32,519,349	$	53,094	0.16

Allowance components:
Collective allowance	$	34,306,336	$	31,359	0.09	%	$	32,398,910	$	27,335	0.08	%
Asset-specific allowance	92,376		17,636		19.09		120,439		25,759		21.39
Total allowance for credit losses	$	34,398,712	$	48,995	0.14		$	32,519,349	$	53,094	0.16

Allowance coverage ratios:
Nonaccrual loans (3)	$	84,987			57.65	%	$	112,209			47.32	%

___________________________

(1) Represents the unpaid principal balance, net of discounts, charge-offs and recoveries, of loans as of each period end. Excludes unamortized deferred loan origination costs of $14 million and $13 millionas of February 29, 2024 and May 31, 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.

(3)Calculated based on the total allowance for credit losses at period end divided by loans outstanding on nonaccrual status at period end. Nonaccrual loans represented 0.25% and 0.35% of total loans outstanding as of February 29, 2024 and May 31, 2023, respectively. We provide additional information on our nonaccrual loans in “Note 4—Loans” in this Report.

The allowance for credit losses and allowance coverage ratio decreased to $49 million and 0.14%, respectively, as of February 29, 2024, from $53 million and 0.16%, respectively, as of May 31, 2023. The $4 million decrease in the allowance for ~~loan~~credit losses ~~for~~reflected a reduction in the ~~three and six months ended November 30, 2017 and 2016, and provides a comparison~~asset-specific allowance of $8 million, partially offset by an increase in collective allowance of $4 million. The decrease in the asset-specific allowance ~~by company as of November 30, 2017 and May 31, 2017.~~

~~Table 23: Allowance for Loan Losses~~was primarily attributable to an increase in

Table of Contents

Three Months Ended November 30, Six Months Ended November 30,
(Dollars in thousands) 2017 2016 2017 2016
Beginning balance $ 37,078
$ 33,120
$ 37,376
$ 33,258
(Benefit) provision for loan losses (304 ) 738
(602 ) 2,666
Net recoveries (charge-offs) —
53
—
(2,013 )
Ending balance $ 36,774
$ 33,911
$ 36,774
$ 33,911

November 30, 2017 May 31, 2017
Allowance for loan losses by company:
CFC $ 28,799
$ 29,499
NCSC 3,117
2,910
RTFC 4,858
4,967
Total $ 36,774
$ 37,376

Allowance coverage ratios:
Loans to members $ 24,824,691
$ 24,367,044
Percentage of loans to members 0.15 % 0.15 %

the expected payments on a nonperforming CFC power supply loan. The increase in the collective allowance ~~for~~was primarily due to loan ~~losses of $37 million as of November 30, 2017 decreased slightly from fiscal year end May 31, 2017, while~~portfolio growth and a slight decline in the ~~allowance coverage ratio remained unchanged at 0.15%. The~~overall credit quality and ~~performance statistics~~risk profile of our loan ~~portfolio continued to remain strong.~~ portfolio.

We experienced no charge-offs during the three and six months ended November 30, 2017 and we had no loans classified as nonperforming as of the end of the period. In comparison, we recorded a net charge-off of $2 million during the six months ended November 30, 2016. Loans designated as individually impaired totaled $13 million as of both November 30, 2017 and May 31, 2017, and the specific allowance related to these loans totaled $1 million and $2 million, respectively.

~~For additional information on~~discuss our methodology for ~~determining~~estimating the allowance for ~~loan~~credit losses ~~see~~under the CECL model in “Note 1—Summary of Significant Accounting ~~Policies”~~Policies—Allowance for Credit Losses” and provide information on management’s judgment and the uncertainties involved in our ~~2017~~determination of the allowance for credit losses in “MD&A—Critical Accounting Estimates—Allowance for Credit Losses” in our 2023 Form 10-K. ~~See “Note 4—Loans and Commitments” of this Report for~~We provide additional information on ~~the credit quality of~~ our ~~loan portfolio~~loans and ~~the~~ allowance for ~~loan losses.~~credit losses under “Note 4—Loans” and “Note 5—Allowance for Credit Losses” of this Report.

Counterparty Credit Risk

~~We are exposed~~In addition to credit exposure from our borrowers, we enter into other types of financial transactions in the ordinary course of business that expose us to counterparty credit risk, primarily related to ~~the performance of the parties with which we entered into financial~~ transactions ~~primarily for derivative instruments,~~involving our cash ~~time deposits~~ and cash equivalents, securities held in our investment securities ~~that we have with various financial institutions. To~~portfolio and derivatives. We mitigate ~~this~~our risk weby only ~~enter~~entering into these transactions with ~~financial institutions~~counterparties with investment-grade ~~ratings.~~ 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.

Cash and Investments Securities Counterparty Credit Exposure

Our cash and ~~time deposits~~cash equivalents and investment securities totaled $145 million and $372 million, respectively, as of February 29, 2024. The primary credit exposure associated with investments held in our investments portfolio is that issuers will not repay principal and interest in accordance with the contractual terms. Our cash and cash equivalents with financial institutions generally have an original maturity of less than one ~~year.~~year and pursuant to our investment policy guidelines, all fixed-income debt securities, at the time of purchase, must be rated at least investment grade based on external credit ratings from at least two of the leading global credit rating agencies, when available, or the corresponding equivalent, when not available. We therefore believe that the risk of default by these counterparties is low. As of February 29, 2024, our overall counterparty credit risk was deemed to be satisfactory and not materially changed compared with May 31, 2023.

We provide additional information on the holdings in our investment portfolio below under “Liquidity Risk—Investment Portfolio” and in “Note 3—Investment Securities.”

Derivative Counterparty Credit Exposure

Our derivative counterparty credit exposure relates principally to interest-rate swap contracts. We generally engage in over-the-counter (“OTC”) derivative transactions, which expose us to individual counterparty credit risk because these transactions are executed and settled directly between us and each counterparty. We are exposed to the risk that an individual derivative counterparty defaults on payments due to us, which we may not be able to collect or which may require us to seek a replacement derivative from a different counterparty. This replacement may be at a higher cost, or we may be unable to find a suitable replacement.

We manage our derivative counterparty credit ~~risk by requiring that derivative counterparties participate in one~~exposure through diversification of our ~~committed bank revolving line of~~derivative positions among various counterparties and by executing derivative transactions with financial institutions that have investment-grade credit ~~agreements, monitoring the overall credit worthiness of each counterparty, using counterparty specific credit risk limits, executing~~ratings and maintaining enforceable master netting arrangements with these counterparties, which allow us to net derivative assets and ~~diversifying~~liabilities with the same counterparty. We also manage the credit risk associated with our derivative ~~transactions among multiple counterparties. Our~~counterparties by using internal credit risk analysis, limits and monitoring process. We had 12 active derivative counterparties ~~had~~with credit ratings ranging from A1Aa1 to ~~Baa2~~Baa1 by Moody’s ~~Investors Service (“Moody’s”)~~as of both February 29, 2024 and May 31, 2023, and from AA- to BBB+ and AA- to A- by S&P ~~Global Ratings (“S&P”)~~ as of ~~November 30, 2017. Our largest counterparty exposure, based on the~~February 29, 2024 and May 31, 2023, respectively. The total outstanding notional amount ~~represented~~of derivatives with these counterparties was $7,345 million and $7,816 million as of February 29, 2024 and May 31, 2023, respectively. The highest single derivative counterparty concentration, by outstanding notional amount, accounted for approximately 24% and 23% of the total outstanding notional amount of our derivatives as of ~~both November 30, 2017~~February 29, 2024 and May 31, ~~2017,~~2023, respectively.

~~Credit Risk-Related Contingent Features~~

~~Our~~While our derivative agreements include netting provisions that allow for offsetting of all contracts ~~typically contain mutual early termination provisions, generally~~with a given counterparty in the ~~form~~event of ~~a credit rating trigger. Under the mutual credit rating trigger provisions, either counterparty may, but is not obligated to, terminate and settle the agreement if the credit rating~~default by one of the ~~other counterparty falls to~~two parties, we report the fair value of our derivatives on a ~~level specified in the agreement. If~~gross basis by

Table of Contents

individual contract as either a derivative ~~contract~~asset or derivative liability on our consolidated balance sheets. The fair value of our derivatives includes credit valuation adjustments reflecting counterparty credit risk. We estimate our exposure to credit loss on our derivatives by calculating the replacement cost to settle at current market prices, as defined in our derivative agreements, all outstanding derivatives in a net gain position at the counterparty level where a right of legal offset exists. We provide information on the impact of netting provisions under our master swap agreements and collateral pledged, if any, in “Note 9—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 ~~terminated, the amount to be received or paid by us would be~~ equal to the ~~mark-to-market value, as defined~~amount of our outstanding derivatives in a net gain position, at the ~~agreement,~~individual counterparty level, which totaled $530 million and $349 million as of ~~the termination date.~~February 29, 2024 and May 31, 2023, respectively.

~~Our senior unsecured credit ratings from Moody’s and S&P were A2 and A, respectively, as~~We provide additional detail on our derivative agreements, including a discussion of ~~November 30, 2017. Both Moody’s and S&P had our ratings on stable outlook as of November 30, 2017. Table 24 displays the notional amounts of our~~ derivative contracts with credit rating triggers ~~as of November 30, 2017,~~ and the payments that would be required if the contracts were terminated as of that date because of a downgrade of our unsecured credit ratings or the counterparty’s unsecured credit ratings below A3/A-, below Baa1/BBB+ to or below Baa2/BBB, below Baa3/BBB- or to or below Ba2/BB+ by Moody’s or S&P, respectively. In calculating the paymentsettlement amounts that would be required upon termination of the derivative contracts, we assumed that the amounts for each counterparty would be netted in accordance with the provisions of the counterparty's master netting agreements. The net payment amounts are based on the fair value of the underlying derivative instrument, excluding the credit risk valuation adjustment, plus any unpaid accrued interest amounts.

~~Table 24: Rating Triggers for Derivatives~~

(Dollars in thousands)
Notional
Amount
Payable Due From CFC Receivable Due to CFC Net (Payable)/Receivable
Impact of rating downgrade trigger:
Falls below A3/A-⁽¹⁾
$ 56,985
$ (11,670 ) $ —
$ (11,670 )
Falls below Baa1/BBB+ 7,236,383
(143,459 ) 7,428
(136,031 )
Falls to or below Baa2/BBB ⁽²⁾
455,152
—
1,577
1,577
Falls below Baa3/BBB- 264,981
(18,102 ) —
(18,102 )
Total $ 8,013,501
$ (173,231 ) $ 9,005
$ (164,226 )

^{____________________________}

⁽¹⁾ ~~Rating trigger for CFC falls below A3/A-, while rating trigger for counterparty falls below Baa1/BBB+ by Moody’s or S&P, respectively.~~

⁽²⁾ ~~Rating trigger for CFC falls to or below Baa2/BBB, while rating trigger for counterparty falls to or below Ba2/BB+ by Moody’s or S&P, respectively.~~

The aggregate fair value amount, including the credit risk valuation adjustment, of all interest rate swaps with rating triggers that were in a net liability position was $173 million as of November 30, 2017. There were no counterparties that fell below the rating trigger levels in our interest swap contracts as of November 30, 2017. If a counterparty has a credit rating that falls below the rating trigger level specified in the interest swap contract, we have the option to terminate all derivatives with the counterparty. However, we generally do not terminate such agreements early because our interest rate swaps are critical to our matched funding strategy.event of a ratings trigger, in “Note 9—Derivative Instruments and Hedging Activities.”

See “Item 1A. Risk Factors” in our ~~2017~~2023 Form 10-K and “Item 1A. Risk Factors” of this Report for additional information about credit ~~risk~~risks related to our business.



LIQUIDITY RISK

We ~~consider~~define liquidity ~~to be~~as the ability to ~~access funding or~~ convert assets tointo cash quickly and efficiently, ormaintain access to ~~rollover~~available funding and roll-over or issue new debt ~~both~~ under normal operating conditions and ~~under~~ periods of CFC-specific and/or market stress, ~~at a reasonable cost~~ to ensure that we can meet borrower loan requests, pay current and ~~other short-term cash obligations.~~

~~Liquidity Risk Management~~

~~Our liquidity risk management framework is designed to meet our liquidity objectives of providing a reliable source of funding to members,~~ ~~meet maturing debt and other~~future obligations ~~issue new debt~~ and fund our operations onin a cost-effective ~~basis under normal operating conditions as well as under CFC-specific and/or market stress conditions.~~manner. We ~~engage in various activities to manage liquidity risk and achieve~~provide additional information on our liquidity ~~objectives. Our Asset Liability Committee establishes guidelines that are intended~~risk-management framework under “Item 7. MD&A—Liquidity Risk—Liquidity Risk Management” in our 2023 Form 10-K.

In addition to ~~ensure that we maintain sufficient, diversified~~cash on hand, our primary sources of ~~liquidity~~funds include member loan principal repayments, securities held in our investment portfolio, committed bank revolving lines of credit, committed loan facilities under the Guaranteed Underwriter Program, a revolving note purchase agreement with Farmer Mac and proceeds from debt issuances to ~~cover potential funding requirements as well as unanticipated contingencies.~~members and in the public capital markets. Our ~~Treasury group develops strategies~~primary uses of funds include loan advances to ~~manage~~members, principal and interest payments on borrowings, periodic interest settlement payments related to our ~~targeted liquidity position, projects our funding needs under various scenarios, including adverse circumstances,~~derivative contracts and ~~monitors our liquidity position on an ongoing basis.~~operating expenses.

Available Liquidity ~~Reserve~~

As part of our strategy in managing liquidity risk and meeting our liquidity objectives, we seek to maintain ~~access to liquidity in the form~~various committed sources of ~~both on-balance sheet and off-balance sheet~~ funding ~~sources~~ that are ~~readily accessible for immediate~~available to meet our near-term liquidity needs. Table ~~25 below~~15 presents ~~the components of our liquidity reserve and~~ a comparison between our available liquidity, which consists of ~~the~~cash and cash equivalents, our debt securities investment portfolio and amounts ~~available~~under committed credit facilities, as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023.

Table of Contents

Table ~~25:~~15: Available Liquidity ~~Reserve~~

November 30, 2017 May 31, 2017
(Dollars in millions) Total Accessed Available Total Accessed Available
Cash and cash equivalents $ 280
$ —
$ 280
$ 167
$ —
$ 167
Committed bank revolving line of credit agreements—unsecured⁽¹⁾
3,085
2
3,083
3,165
1
3,164
Guaranteed Underwriter Program committed facilities—secured⁽²⁾
6,548
5,173
1,375
5,798
5,073
725
Farmer Mac revolving note purchase agreement, dated March 24, 2011—secured⁽³⁾
4,500
2,491
2,009
4,500
2,513
1,987
Farmer Mac revolving note purchase agreement, dated July 31, 2015—secured 300
—
300
300
—
300
Total $ 14,713
$ 7,666
$ 7,047
$ 13,930
$ 7,587
$ 6,343

^{February 29, 2024 May 31, 2023
(Dollars in millions) Total Accessed Available Total Accessed Available
Liquidity sources:
Cash and investment debt securities:
Cash and cash equivalents $ 145 $ — $ 145 $ 199 $ — $ 199
Debt securities investment portfolio(1) 335 — 335 475 — 475
Total cash and investment debt securities 480 — 480 674 — 674
Committed credit facilities:
Committed bank revolving line of credit agreements—unsecured(2) 2,800 2 2,798 2,600 2 2,598
Guaranteed Underwriter Program committed facilities—secured(3) 9,923 8,723 1,200 9,473 8,448 1,025
Farmer Mac revolving note purchase agreement—secured(4) 6,000 3,883 2,117 6,000 3,150 2,850
Total committed credit facilities 18,723 12,608 6,115 18,073 11,600 6,473
Total available liquidity $ 19,203 $ 12,608 $ 6,595 $ 18,747 $ 11,600 $ 7,147 ____________________________}

⁽¹⁾Represents the aggregate fair value of our portfolio of debt securities as of period end. 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. The accessed amount of $2 million ~~and $1 million~~ as of ~~November 30, 2017~~both February 29, 2024 and May 31, ~~2017, respectively,~~2023, relates to letters of credit issued pursuant

to the four-year revolving line of credit agreement.

⁽²⁾(3)The committed facilities under the Guaranteed ~~Underwriting~~Underwriter Program are not revolving.

⁽³⁾(4)Availability subject to market conditions.

~~Borrowing Capacity~~Although as a nonbank financial institution we are not subject to regulatory liquidity requirements, our liquidity management framework includes monitoring our liquidity and funding positions on an ongoing basis and assessing our ability to meet our scheduled debt obligations and other cash flow requirements based on point-in-time metrics as well as forward-looking projections. Our liquidity and funding assessment takes into consideration amounts available under existing liquidity sources, the expected rollover of member short-term investments and scheduled loan principal payment amounts, as well as our continued ability to access the capital markets and other non-capital market related funding sources.

Liquidity Risk Assessment

We utilize several measures to assess our liquidity risk and ensure we have adequate coverage to meet our liquidity needs. Our primary liquidity measures indicate the extent to which we have sufficient liquidity to cover the payment of scheduled debt obligations over the next 12 months. We calculate our liquidity coverage ratios under several scenarios that take into consideration various assumptions about our near-term sources and uses of liquidity, including the assumption that maturities of member short-term investments will not have a significant impact on our anticipated cash outflows. Our members have historically maintained a relatively stable level of short-term investments in CFC in the form of daily liquidity fund notes, commercial paper, select notes and medium-term notes. As such, we expect that our members will continue to reinvest their excess cash in short-term investment products offered by CFC.

Table 16 presents our primary liquidity coverage ratios as of February 29, 2024 and May 31, 2023 and displays the calculation of each ratio as of these respective dates based on the assumptions discussed above.

Table of Contents

Table 16: Liquidity Coverage Ratios


(Dollars in millions)	February 29, 2024		May 31, 2023
Liquidity coverage ratio:(1)
Total available liquidity(2)	$	6,595	$	7,147
Debt scheduled to mature over next 12 months:
Short-term borrowings	4,605		4,546
Long-term and subordinated debt scheduled to mature over next 12 months	2,348		2,383
Total debt scheduled to mature over next 12 months	6,953		6,929
Excess (deficit) in available liquidity over debt scheduled to mature over next 12 months	$	(358)	$	218

Liquidity coverage ratio	0.95		1.03

Liquidity coverage ratio, excluding expected maturities of member short-term investments(3)
Total available liquidity(2)	$	6,595	$	7,147
Total debt scheduled to mature over next 12 months	6,953		6,929
Exclude: Member short-term investments	(3,206)		(3,253)
Total debt, excluding member short-term investments, scheduled to mature over next 12 months	3,747		3,676
Excess in available liquidity over total debt, excluding member short-term investments, scheduled to mature over next 12 months	$	2,848	$	3,471

Liquidity coverage ratio, excluding expected maturities of member short-term investments	1.76		1.94

___________________________

(1)Calculated based on available liquidity at period end divided by total debt scheduled to mature over the next 12 months at period end.

(2)Total available liquidity is presented above in Table 15.

(3)Calculated based on available liquidity at period end divided by debt, excluding member short-term investments, scheduled to mature over the next 12 months.

As presented in Table 16 above, our available liquidity of $6,595 million as of February 29, 2024 was $358 million below our total scheduled debt obligations over the next 12 months of $6,953 million, consisting of short-term borrowings and long-term and subordinated debt. The short-term borrowings scheduled maturity amount consists of member investments of $3,206 million, dealer commercial paper of $899 million and Farmer Mac notes payable of $500 million. The long-term and subordinated scheduled debt obligations over the next 12 months of $2,348 million consist of debt maturities and scheduled debt payment amounts, of which, $149 million was from member investments.

We believe we can continue to roll over our member short-term investments of $3,206 million as of February 29, 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. Member short-term investments in CFC have averaged $3,543 million over the last 12 fiscal quarter-end reporting periods. Our available liquidity as of February 29, 2024 was $2,848 million in excess of, or 1.8 times over, our total scheduled debt obligations, excluding member short-term investments, over the next 12 months of $3,747 million. In addition, we expect to ~~cash,~~receive $1,535 million from scheduled long-term loan principal payments over the next 12 months.

We expect to continue accessing the dealer commercial paper market as a cost-effective means of satisfying our incremental short-term liquidity needs. Although the intra-quarter amount of dealer commercial paper outstanding may fluctuate based on our liquidity ~~reserve includes access~~requirements, our intent is to ~~funds under~~manage our short-term wholesale funding risk by maintaining the dealer commercial paper outstanding at each quarter-end within a range of $1,000 million to $1,500 million. 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 ~~banks,~~the covenants of these agreements so we can draw on these facilities, if necessary, to repay dealer or member commercial paper that cannot be refinanced with similar debt. In addition, under master repurchase agreements we have with our bank counter parties, we can obtain short-term funding in secured borrowing transactions by selling

Table of Contents

investment-grade corporate debt securities from our investment securities portfolio subject to an obligation to repurchase the same or similar securities at an agreed-upon price and date.

The issuance of long-term debt, which represents the most significant component of our funding, allows us to reduce our reliance on short-term borrowings, as well as effectively manage our refinancing and interest rate risk. We expect to continue to issue long-term debt in the public capital markets and under our other non-capital market debt arrangements to meet our funding needs and believe that we have sufficient sources of liquidity to meet our debt obligations and support our operations over the next 12 months.

Investment Securities Portfolio

We have an investment portfolio of debt securities classified as trading and equity securities, both of which are reported on our consolidated balance sheets at fair value. Our debt securities investment portfolio is intended to serve as an additional source of liquidity. Under master repurchase agreements that we have with counterparties, we can obtain short-term funding by selling investment-grade corporate debt securities from our investment portfolio subject to an obligation to repurchase the same or similar securities at an agreed-upon price and date. Because we retain effective control over the transferred securities, transactions under these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities. The obligation to repurchase the securities is reflected as a component of our short-term borrowings on our consolidated balance sheets. The aggregate fair value of debt securities underlying repurchase transactions is parenthetically disclosed on our consolidated balance sheets. We had no borrowings under repurchase agreements outstanding as of both February 29, 2024 and May 31, 2023; therefore, we had no debt securities in our investment portfolio pledged as collateral as of each respective date.

Our investment portfolio also included equity securities with a fair value of $37 million and $35 million as of February 29, 2024 and May 31, 2023, respectively, consisting primarily of preferred stock securities that are not as readily redeemable, therefore, we excluded the equity securities from our available liquidity.

We provide additional information on our investment securities portfolio in “Note 3—Investment Securities” of this Report.

Borrowing Capacity Under Various Credit Facilities

The aggregate borrowing capacity under our committed bank revolving line of credit agreements, committed loan facilities under the Guaranteed Underwriter Program and ~~our~~ revolving note purchase ~~agreements~~agreement with Farmer ~~Mac. Following~~Mac totaled $18,723 million and $18,073 million as of February 29, 2024 and May 31, 2023, respectively, and the aggregate amount available for access totaled $6,115 million and $6,473 million as of each respective date. The following is a discussion of our borrowing capacity and key terms and conditions under each of these credit facilities.

Committed Bank Revolving Line of Credit Agreements—Unsecured

Our committed bank revolving lines of credit may be used for general corporate purposes; however, we generally rely on them as a backup source of liquidity for our member and dealer commercial paper. ~~We had $3,085 million of commitments under~~On November 20, 2023, we amended the three-year and four-year committed bank revolving line of credit agreements asto extend the maturity dates to November 28, 2026 and November 28, 2027, respectively, and to include a $100 million swingline facility under each agreement. In connection with the amendments to the revolving line of credit agreements, commitments from the existing banks increased by $100 million under each of the three-year and four-year revolving credit agreements. Commitments of $150 million under each agreement will expire at the prior maturity dates of November ~~30, 2017.~~28, 2025 and November 28, 2026. The total commitment amount under the three-year facility and the four-year facility was $1,345 million and $1,455 million, respectively, resulting in a combined total commitment amount under the two facilities of $2,800 million. Under our current committed bank revolving line of credit agreements, we have the ability to request up to $300 million of letters of credit, which would result in a reduction in the remaining available amount under the facilities.

On November 20, 2017, we amended and restated the three-year and five-year committed bank revolving line of credit agreements to extend the maturity dates to November 20, 2020 and November 20, 2022, respectively, and to terminate certain third-party bank commitments totaling $40 million under the three-year agreement and $40 million under the five- year agreement. As a result,Table 17 presents the total commitment amount from third-parties under the three-year facility and the five-year facility is $1,493 million and $1,592 million, respectively, resulting in a combined total commitment amount under the two facilities of $3,085 million.

~~Table 26 presents the total commitment, the net amount available for use and the outstanding letters of credit~~ under our committed bank revolving line of credit agreements, outstanding letters of credit and the amount available for access as of ~~November 30, 2017. We did not have any outstanding borrowings under our bank revolving line~~February 29, 2024.

Table of ~~credit agreements as of November 30, 2017.~~Contents

Table ~~26:~~17: Committed Bank Revolving Line of Credit Agreements


	November 30, 2017
			February 29, 2024													February 29, 2024
(Dollars in millions)	Total Commitment			Letters of Credit Outstanding		Net Available for Advance		Maturity	Annual Facility Fee ⁽¹⁾	(Dollars in millions)	Total Commitment		Letters of Credit Outstanding		Amount Available for Access		Maturity	Annual Facility Fee (1)
Bank revolving line of credit term:
3-year agreement	$	1,493		$	—	$	1,493	November 20, 2020	7.5 bps
5-year agreement	1,592			2		1,590		November 20, 2022	10 bps
3-year agreement
3-year agreement											$	150	$	—	$	150	November 28, 2025	7.5 bps
3-year agreement										3-year agreement	1,195		—		1,195		November 28, 2026	7.5 bps
Total 3-year agreement
4-year agreement
4-year agreement
4-year agreement											150		—		150		November 28, 2026	10.0 bps
4-year agreement										4-year agreement	1,305		2		1,303		November 28, 2027	10.0 bps
Total 4-year agreement
Total	$	3,085		$	2	$	3,083
Total
Total											$	2,800	$	2	$	2,798

^{____________________________}

⁽¹⁾Facility fee based on CFC’s senior unsecured credit ratings in accordance with the established pricing schedules at the inception of the related agreement.

~~Our~~We did not have any outstanding borrowings under our committed bank revolving line of credit agreements as of February 29, 2024; however, we had letters of credit outstanding of $2 million under the four-year committed bank revolving agreement as of this date.

Although our committed bank revolving line of credit agreements do not contain a material adverse change clause or rating triggers that would limit the banks’ obligations to provide funding under the terms of the ~~agreements; however,~~agreements, we must be in compliance with the covenants to draw on the facilities. 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. ~~See “Debt Covenants and Financial Ratios” below for additional information, including the specific financial ratio requirements under our committed bank revolving line of credit agreements.~~

Guaranteed Underwriter Program Committed Facilities—Secured

Under the Guaranteed Underwriter Program, we can borrow from the Federal Financing Bank and use the proceeds to extend new loans to our members and refinance existing ~~indebtedness.~~member debt. As part of the program, we pay fees, based on our outstanding borrowings, that ~~support~~are intended to help fund the USDA Rural Economic Development Loan and Grant ~~program.~~program and thereby support additional investment in rural economic development projects. The borrowings under this program are guaranteed by the RUS. Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the advance.

On ~~November 9, 2017,~~December 19, 2023, we closed on a ~~$750~~$450 million Series U committed loan facility ~~(“Series M”)~~ from the U.S. Treasury Department’s Federal Financing Bank under the Guaranteed Underwriter Program. Pursuant to this facility, we may borrow any time before July 15, ~~2022.~~2028. Each advance is subject to quarterly amortization and a final maturity not longer than 2030 years from the ~~advance date. The closing~~date of ~~this committed loan facility increased~~ the ~~amount available for access~~advance.

As displayed in Table 15, we had accessed $8,723 million under the Guaranteed Underwriter Program and up to ~~$1,375~~$1,200 million was available for borrowing as of ~~November 30, 2017.~~February 29, 2024. Of ~~this~~the $1,200 million available borrowing amount, ~~$250~~$750 million is available for advance through ~~January~~July 15, ~~2019, $375~~2027 and $450 million is available for advance through ~~October 15, 2019 and $750 million is available through~~ July 15, ~~2022.~~

2028. We are required to pledge eligible distribution system loans or power supply system loans as collateral in an amount at least equal to ~~the~~our total outstanding borrowings under the Guaranteed Underwriter ~~Program. See “Consolidated Balance Sheet Analysis—Debt—Collateral Pledged” and “Note 4—Loans and Commitments” for additional information on pledged collateral.~~Program committed loan facilities, which totaled $6,844 million as of February 29, 2024.

Farmer Mac Revolving Note Purchase ~~Agreements—~~Agreement—Secured

~~As indicated in Table 25, we~~We have ~~two revolving note purchase agreements with Farmer Mac, which together allow us to borrow up to $4,800 million from Farmer Mac. Under the terms of the first~~a revolving note purchase agreement with Farmer Mac ~~dated March 24, 2011, as amended,~~ under which we can borrow up to $6,000 million from Farmer Mac at any time, subject to market conditions, ~~up to $4,500 million at any time~~ through ~~January 11, 2020, and such date shall automatically extend on each anniversary date of the closing for an additional year,~~June 30, 2027. The agreement has successive automatic one-year renewals beginning June 30, 2026, unless ~~prior to any such anniversary date,~~ Farmer Mac provides ~~us with a~~425 days’ written notice ~~that the draw period will not be extended beyond the remaining term. This revolving note purchase~~of non-renewal.

Table of Contents

Under this agreement, allows us to borrow, repay and re-borrow funds at any time through maturity, as market conditions permit, provided that the outstanding principal amount at any time does not exceed the total available under the agreement. Each borrowing under the note purchase agreement is evidenced by a pricing agreement setting forth the interest rate, maturity date and other related terms as we may negotiate with Farmer Mac at the time of each such borrowing. We may select a fixed rate or variable rate at the time of each advance with a maturity as determined in the applicable pricing agreement. We had outstanding secured notes payable totaling ~~$2,491~~$3,883 million and ~~$2,513~~$3,150 million as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017, respectively,~~2023, respectively. We borrowed $500 million in short-term notes payable and $300 million in long-term notes payable under ~~the Farmer Mac revolving note purchase agreement of $4,500 million. The available borrowing amount totaled $2,009 million as of November 30, 2017.~~

~~Under the terms of the second revolving~~this note purchase agreement with Farmer Mac dated July 31, 2015, we can borrow up to $300 million at any time through July 31, 2018 at a fixed spread over LIBOR. This agreement also allows us to borrow, repay and re-borrow funds at any time through maturity, provided thatduring YTD FY2024. As displayed in Table 15, the ~~outstanding principal~~ amount ~~at any time does not exceed the total~~ available ~~under the agreement. We had no outstanding notes payable~~for borrowing under this agreement was $2,117 million as of ~~November 30, 2017 and May 31, 2017.~~February 29, 2024. We ~~currently do not expect to renew this agreement.~~

~~Pursuant to both Farmer Mac revolving note purchase agreements, we~~ are required to pledge eligible electric distribution system or electric power supply system loans as collateral in an amount at least equal to the total principal amount of notes ~~outstanding. See “Consolidated Balance Sheet Analysis—Debt—Collateral Pledged” and “Note 4—Loans and Commitments” for~~outstanding under this agreement.

We provide additional information on pledged ~~collateral.~~collateral below under “Pledged Collateral” in this section and in “Note 3—Investment Securities” and “Note 4—Loans.”

Short-Term Borrowings

~~We rely on~~Our short-term borrowings, which we ~~refer to as our short-term funding portfolio, as a~~ ~~source~~rely on to meet our daily, near-term funding ~~needs. Our short-term funding portfolio consists~~needs, consist of commercial paper, which we offer to members and dealers, select notes and daily liquidity fund notes offered to members, ~~and bank-bid notes and~~ medium-term notes offered to members and ~~dealers. Table 27 displays the composition of our short-term~~dealers and funds from repurchase secured borrowing transactions.

Short-term borrowings increased $59 million to $4,605 million as of ~~November 30, 2017 and~~February 29, 2024, from $4,546 million as of May 31, ~~2017.~~

~~Table 27: Short-Term Borrowings~~

November 30, 2017 May 31, 2017
(Dollars in thousands)
Amount
Outstanding
% of Total Debt Outstanding Amount
Outstanding % of Total Debt Outstanding
Short-term borrowings:
Commercial paper:
Commercial paper sold through dealers, net of discounts $ 579,859
2 % $ 999,691
4 %
Commercial paper sold directly to members, at par 1,133,057
5
928,158
4
Total commercial paper 1,712,916
7
1,927,849
8
Select notes 770,376
3
696,889
3
Daily liquidity fund notes 866,065
4
527,990
2
Medium-term notes sold to members 207,835
1
190,172
1
Total short-term borrowings $ 3,557,192
15 % $ 3,342,900
14 %

~~Our short-term borrowings totaled $3,557 million~~2023, and accounted for 14% and 15% of total debt outstanding as of ~~November 30, 2017, compared with $3,343 million, or 14%,~~each respective period.

Member investments have historically been our primary source of ~~total debt outstanding~~short-term borrowings. Table 18 displays the composition, by funding source, of our short-term borrowings as of ~~May 31, 2017. Of the total outstanding commercial paper, $580 million and $1,000 million was issued to dealers as of November 30, 2017~~February 29, 2024 and May 31, ~~2017,~~2023. As indicated in Table 18, members’ investments represented 70% and 72% of our outstanding short-term borrowings as of February 29, 2024 and May 31, 2023, respectively.

Table 18: Short-Term Borrowings—Funding Sources

~~respectively. We intend~~


	February 29, 2024				May 31, 2023
(Dollars in thousands)	Amount Outstanding		% of Total Short-Term Borrowings		Amount Outstanding		% of Total Short-Term Borrowings
Funding source:
Members	$	3,205,670	70	%	$	3,253,108	72	%
Farmer Mac notes payable	500,000		11		—		—
Capital markets	898,956		19		1,293,167		28
Total	$	4,604,626	100	%	$	4,546,275	100	%

Our intent is to manage our short-term wholesale funding risk by maintaining ~~outstanding~~the dealer commercial paper outstanding at aneach quarter-end within a range of $1,000 million to $1,500 million, although the intra-quarter amount ~~below $1,250~~of dealer commercial paper outstanding may fluctuate based on our liquidity requirements. Dealer commercial paper outstanding was $899 million and $1,293 million as of February 29, 2024 and May 31, 2023, respectively.

See “Note 6—Short-Term Borrowings” for ~~the foreseeable future.~~additional information on our short-term borrowings.

Long-Term and Subordinated Debt

Long-term and subordinated debt, which represents the most significant ~~component~~source of our ~~funding.~~ funding, totaled $27,937 million and $26,453 million as of February 29, 2024 and May 31, 2023, respectively, and accounted for 86% and 85% of total debt outstanding as of each respective date. See Table 19 below for a summary of our long-term and subordinated debt issuances and repayments during YTD FY2024.

The issuance of long-term debt allows us to reduce our reliance on short-term borrowings and effectively manage our refinancing and interest rate risk, due in part to the multi-year contractual maturity structure of long-term debt. In addition to access to private debt facilities, we also issue debt in the public capital markets. ~~Under~~Pursuant to Rule 405 of the ~~SEC rules,~~Securities Act, we are classified as a “well-known seasoned issuer.” ~~In November 2017, we filed a new~~Under our effective shelf registration ~~statement for our senior~~statements filed with the U.S. Securities and ~~subordinated~~Exchange Commission (“SEC”), we may offer and issue the following debt ~~securities under which we can register~~ securities:

Table of Contents

•an unlimited amount of collateral trust bonds and senior and subordinated debt securities, including medium-term notes, member capital securities and subordinated deferrable debt, until ~~November 2020.~~October 2026; and

•daily liquidity fund notes up to $20,000 million in the aggregate—with a $3,000 million limit on the aggregate principal amount outstanding at any time—until March 2025.

Although we register member capital securities and the daily liquidity fund notes with the SEC, these securities are not available for sale to the general public. Medium-term notes are available for sale to both the general public and members. Notwithstanding the foregoing, we have contractual limitations with respect to the amount of senior indebtedness we may incur. ~~See “MD&A—Liquidity Risk” of our 2017 Form 10-K for additional information on our shelf registration statements with the SEC.~~

~~As discussed in~~ “~~Consolidated Balance Sheet Analysis—~~Long-Term Debt” l~~ong-term~~ and ~~subordinated debt totaled $20,529 million~~Subordinated Debt—Issuances and accounted for 85% of total debt outstanding as of November 30, 2017, compared with $20,117 million, or 86%, of total debt outstanding as of May 31, 2017. The increase in total debt outstanding, including long-term and subordinated debt, was primarily due to the issuance of debt to fund loan portfolio growth. Repayments

Table 2819 summarizes long-term and subordinated debt issuances and ~~principal maturities and amortizations, including repurchases and redemptions,~~repayments during ~~the six months ended November 30, 2017.~~YTD FY2024.

Table ~~28: Issuances and Maturities of~~19: Long-Term and Subordinated Debt⁽¹⁾— Issuances and Repayments


	YTD FY2024
(Dollars in thousands)	Issuances		Repayments(1)
Debt product type:
Collateral trust bonds	$	—	$	855,000
Guaranteed Underwriter Program notes payable	275,000		152,020
Farmer Mac notes payable	300,000		67,137
Medium-term notes sold to members	91,418		118,851
Medium-term notes sold to dealers	2,983,856		953,841
Other notes payable	—		1,169
Subordinated deferrable debt	100,000		100,000
Members’ subordinated certificates	98		25,109
Total	$	3,750,372	$	2,273,127

Six Months Ended November 30, 2017
(Dollars in thousands) Issuances Maturities Increase/Decrease
Long-term and subordinated debt activity:⁽¹⁾

Collateral trust bonds $ —
$ 5,000
$ (5,000 )
Guaranteed Underwriter Program notes payable 100,000
25,556
74,444
Farmer Mac notes payable —
21,925
(21,925 )
Medium-term notes sold to members 125,335
143,547
(18,212 )
Medium-term notes sold to dealers 402,592
7,791
394,801
Members’ subordinated certificates 3,989
23,340
(19,351 )
Total $ 631,916
$ 227,159
$ 404,757
____________________________

^{____________________________}(1) Repayments include principal maturities, scheduled amortization payments, repurchases and redemptions.

⁽¹⁾~~Amounts exclude unamortized debt issuance costs~~

Long-Term and ~~discounts.~~Subordinated Debt—Principal Maturity and Amortization

Table 2920 summarizes ~~the~~ scheduled principal maturity and amortization of ~~the principal amount of~~our long-term debt, subordinated deferrable debt and members’ subordinated certificates outstanding as of ~~November 30, 2017.~~February 29, 2024, in each fiscal year during the five-year period ending May 31, 2028, and thereafter.

Table ~~29: Principal Maturity of~~20: Long-Term and Subordinated ~~Debt~~Debt—Scheduled Principal Maturities and Amortization(1)


(Dollars in thousands)	Scheduled Amortization(2)		% of Total
Fiscal year ending May 31:
2024	$	141,061	1	%
2025	2,628,068		9
2026	3,657,273		13
2027	2,959,653		10
2028	2,168,156		8
Thereafter	16,628,554		59
Total	$	28,182,765	100	%

____________________________

Table of Contents

(Dollars in thousands)
Amount
Maturing ⁽¹⁾
% of Total
Fiscal year ending:
May 31, 2018 $ 1,065,619
5 %
May 31, 2019 2,672,139
13
May 31, 2020 1,428,928
7
May 31, 2021 1,323,843
6
May 31, 2022 1,573,604
8
Thereafter 12,463,802
61
Total $ 20,527,935
100 %
(1) Amounts presented are based on the face amount of debt outstanding as of February 29, 2024, and therefore does not include related debt issuance costs and discounts.

^{____________________________}

⁽¹⁾~~Excludes $1 million in subscribed and unissued member subordinated certificates for which a payment has been received.~~ (2) Member loan subordinated certificates totaling ~~$290~~$136 million amortize annually based on the unpaid principal balance of the related loan.

On January 2, 2018, we provided notice to RUS that on January 16, 2018 we will redeem $325 million of notes payable outstanding under the Guaranteed Underwriter Program, with an original maturity of April 15, 2026.

We provide additional information on our financing activities under the above ~~under~~ “Consolidated Balance Sheet Analysis—Debt” and in “Note 7—Long-Term Debt” and “Note 8—Subordinated Deferrable Debt.”

~~Investment Portfolio~~Pledged Collateral

~~In addition~~Under our secured borrowing agreements, we are required to pledge loans, investment debt securities or other collateral and maintain certain pledged collateral ratios. Of our ~~primary sources~~total debt outstanding of liquidity discussed above, we have an investment portfolio, composed of time deposits, available-for-sale investment securities and held-to-maturity investment securities, which totaled $391 million and $319$32,541 million as of ~~November 30, 2017~~February 29, 2024, $17,462 million, or 54%, was secured by pledged loans totaling $21,644 million. In comparison, of our total debt outstanding of $30,999 million as of May 31, 2023, $17,450 million, or 56%, was secured by pledged loans totaling $21,038 million. Following is additional information on the collateral pledging requirements for our secured borrowing agreements.

Secured Borrowing Agreements—Pledged Loan Requirements

We are required to pledge loans or other collateral in transactions under our collateral trust bond indentures, bond agreements under the Guaranteed Underwriter Program and note purchase agreement with Farmer Mac. Total debt outstanding is presented on our consolidated balance sheets net of unamortized discounts and issuance costs. Our collateral pledging requirements are based, however, on the face amount of secured outstanding debt, which excludes net unamortized discounts and issuance costs. However, as discussed below, we typically maintain pledged collateral in excess of the required percentage. 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.

Table 21 displays the collateral coverage ratios pursuant to these secured borrowing agreements as of February 29, 2024 and May 31, ~~2017,~~2023.

Table 21: Collateral Pledged


	Requirement Coverage Ratios
			Maximum Committed Bank Revolving Line of Credit Agreements		Actual Coverage Ratios(1)
	Minimum Debt Indentures				February 29, 2024		May 31, 2023
Secured borrowing agreement type:
Collateral trust bonds 1994 indenture	100	%	150	%	132	%	115	%
Collateral trust bonds 2007 indenture	100		150		130		114
Guaranteed Underwriter Program notes payable	100		150		118		117
Farmer Mac notes payable	100		150		116		136
Clean Renewable Energy Bonds Series 2009A(2)	100		150		—		129

___________________________

(1) Calculated based on the amount of collateral pledged divided by the face amount of outstanding secured debt.

(2) Collateral includes cash pledged. Clean renewable energy bonds series 2009A matured and was paid off in full as of February 29, 2024.

Table 22 displays the unpaid principal balance of loans pledged for secured debt, the excess collateral pledged and unencumbered loans as of February 29, 2024 and May 31, 2023.

Table of Contents

Table 22: Loans—Unencumbered Loans


(Dollars in thousands)	February 29, 2024		May 31, 2023
Total loans outstanding(1)	$	34,398,712	$	32,519,349
Less: Loans required pledged under secured debt agreements(2)	(17,664,095)		(17,664,350)
Loans pledged in excess of required amount(2)(3)	(3,979,507)		(3,373,580)
Total pledged loans	(21,643,602)		(21,037,930)
Unencumbered loans	$	12,755,110	$	11,481,419

Unencumbered loans as a percentage of total loans outstanding

37%

35%

____________________________

(1) Represents the unpaid principal balance of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $14 million and $13 millionas of February 29, 2024 and May 31, 2023, respectively.~~We intend~~

(2) Reflects unpaid principal balance of pledged loans.

(3) Excludes cash collateral pledged to secure debt. If there is an event of default under most of our indentures, we can only withdraw the excess collateral if we substitute cash or permitted investments of equal value.

As displayed above in Table 22, we had excess loans pledged as collateral totaling $3,980 million and $3,374 million as of February 29, 2024 and May 31, 2023, respectively. To ensure that we do not fall below the minimum collateral coverage ratio requirement, we typically pledge loans in excess of the required amount for the following reasons: (i) our ~~investment portfolio to remain adequately liquid to serve as a contingent supplemental source~~distribution and power supply loans are typically amortizing loans that require scheduled principal payments over the life of ~~liquidity for unanticipated liquidity needs.~~

~~During~~ the ~~second quarter of fiscal year 2018, we~~ ~~commenced~~loan, whereas the ~~purchase of additional investment securities,~~ ~~consisting primarily of certificates of deposit, commercial paper, corporate~~ debt securities ~~commercial mortgage-backed securities,~~issued under secured indentures and other asset-backed securities. Pursuant to our investment policy guidelines, all fixed-income securities, at the time of purchase, must be rated at least investment grade based on external credit ratings, when available, or the corresponding equivalent, when not available. Securities rated investment grade, that is those rated Baa3 or higher by Moody’s or BBB- or higher by S&P, are generally considered by the rating agencies to be of lower credit risk than non-investment grade securities. Weagreements typically have bullet maturities; (ii) distribution and power supply borrowers have the ~~positive intent~~option to prepay their loans; and ~~ability to hold these securities to maturity. As such, we have classified them as held to maturity on our condensed consolidated balance sheet.~~(iii) individual loans may become ineligible for various reasons, some of which may be temporary.

~~Our investment portfolio is unencumbered and structured so that securities have active secondary or resale markets under normal market conditions. The objective of the portfolio is to achieve returns~~ ~~commensurate with the level of risk assumed subject to CFC’s investment policy guidelines and liquidity requirements.~~

We provide additional information on ~~available-for-sale~~our borrowings, including the maturity profile, below in the “Liquidity Risk” section and ~~held-to-maturity investment securities held~~additional information on pledged loans in “Note 4—Loans” of this Report. For additional detail on each of our debt product types, refer to “Note 5—Short-Term Borrowings,” “Note 7—Long-Term Debt,” “Note 8—Subordinated Deferrable Debt” and “Note 9—Members’ Subordinated Certificates” in our 2023 Form 10-K.

Off-Balance Sheet Arrangements

In the ordinary course of business, we engage in financial transactions that are not presented on our ~~investment portfolio~~consolidated balance sheets, or may be recorded on our consolidated balance sheets in amounts that are different from the full contract or notional amount of the transaction. Our off-balance sheet arrangements consist primarily of unadvanced loan commitments intended to meet the financial needs of our members and guarantees of member obligations, which may affect our liquidity and funding requirements based on the likelihood that borrowers will advance funds under the loan commitments or we will be required to perform under the guarantee obligations. We provide information on our unadvanced loan commitments in “Note ~~3—Investment Securities.~~4—Loans” and information on our guarantee obligations in “Note 11—Guarantees.”

Projected Near-Term Sources and Uses of ~~Liquidity~~Funds

As discussed above, our primary sources of liquidity include cash flows from operations, our short-term funding portfolio, our liquidity reserve and the issuance of long-term and subordinated debt, as well as loan principal and interest payments. Our primary uses of liquidity include loan advances to members, principal and interest payments on borrowings, periodic settlement payments related to derivative contracts, costs related to the disposition of foreclosed assets and operating expenses.

Table 3023 below displays a projection of our ~~projected~~primary long-term sources and ~~uses~~uses of ~~cash,~~funds, by quarter, over each of the next six ~~quarters through~~fiscal quarters. Our projection is based on the ~~quarter ending May 31, 2019. Our projected liquidity position, reflects our current plan to expand our investment portfolio. Our assumptions also include the following:~~following, which includes several assumptions: (i) the estimated issuance of long-term debt, including ~~collateral trust bonds~~capital market and ~~private placement of~~other non-capital market term debt, is based on ~~maintaining a matched funding position within~~ 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 ~~portfolio with~~scheduled amortization repayment amounts represent scheduled loan principal payments for long-term loans outstanding as of February 29, 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. In addition, amounts available under our committed bank revolving lines of credit, ~~serving~~net increases in dealer commercial paper and short-term member investments are intended to serve as a backup liquidity facility for commercial paper and on maintaining outstanding dealer commercial paper at an amount below $1,250 million; (ii) long-term loan scheduled amortization payments represent the scheduled long-term loan payments for loans outstanding assource of ~~November 30, 2017, and our current estimate~~liquidity.

Table of long-term loan prepayments, which the amount and timing of are subject to change; (iii) other loan repayments and other loan advances primarily relate to line of credit repayments and advances; (iv) long-term debt maturities reflect scheduled maturities of outstanding term debt for the periods presented; and (v) long-term loan advances reflect our current estimate of member demand for loans, the amount and timing of which are subject to change.Contents

Table ~~30:~~ 23: Liquidity—Projected Long-Term Sources and Uses of ~~Liquidity~~^Funds(1)

Projected Sources of Liquidity Projected Uses of Liquidity
(Dollars in millions) Long-Term Debt Issuance
Anticipated Long-Term
Loan Repayments⁽²⁾

Other Loan Repayments⁽³⁾
Total Projected
Sources of
Liquidity
Long-Term Debt Maturities⁽⁴⁾
Long-Term
Loan Advances
Other Loan Advances⁽⁵⁾
Total Projected
Uses of
Liquidity
Other Sources/ (Uses) of Liquidity⁽⁶⁾

3Q FY 2018 $ 1,070
$ 309
$ 36
$ 1,415
$ 1,141
$ 741
$ 62
$ 1,944
$ 463
4Q FY 2018 490
286
—
776
333
307
—
640
(141 )
1Q FY 2019 385
305
52
742
162
313
—
475
(262 )
2Q FY 2019 1,335
323
—
1,658
1,569
290
13
1,872
227
3Q FY 2019 845
291
—
1,136
696
493
—
1,189
28
4Q FY 2019 585
272
—
857
398
485
—
883
40
Total $ 4,710
$ 1,786
$ 88
$ 6,584
$ 4,299
$ 2,629
$ 75
$ 7,003
$ 355


	Projected Long-Term Sources of Funds				Projected Long-Term Uses of Funds
(Dollars in millions)	Long-Term Debt Issuance		Anticipated Long-Term Loan Repayments(2)		Total Projected Long-Term Sources of Funds		Long-Term and Subordinated Debt Maturities(3)		Long-Term Loan Advances		Total Projected Long-Term Uses of Funds

Q4 FY2024	$	657	$	380	$	1,037	$	552	$	889	$	1,441
Q1 FY2025	—		387		387		385		845		1,230
Q2 FY2025	1,115		385		1,500		994		723		1,717
Q3 FY2025	1,930		383		2,313		1,342		925		2,267
Q4 FY2025	639		392		1,031		421		793		1,214
Q1 FY2026	780		402		1,182		776		752		1,528
Total	$	5,121	$	2,329	$	7,450	$	4,470	$	4,927	$	9,397

^{____________________________}

⁽¹⁾The dates presented represent the end of each quarterly period through the quarter ~~ending May~~ended August 31, ~~2019.~~2025.

⁽²⁾Anticipated long-term loan repayments include scheduled long-term loan amortizations ~~repricings~~ and ~~sales.~~anticipated cash repayments at repricing date.

⁽³⁾~~Other loan repayments include anticipated short-term loan repayments.~~

⁽⁴⁾Long-term debt maturities also ~~includes~~include medium-term notes with an original maturity of one year or less and expected early redemptions of debt.

⁽⁵⁾~~Other loan advances include anticipated short-term loan advances.~~

⁽⁶⁾~~Includes net increase or decrease to dealer commercial paper, and purchases and maturity of investments.~~

As displayed in Table ~~30,~~23, we currently project long-term advances of ~~$1,651~~$3,382 million over the next 12 months, which we ~~anticipate~~project will exceed anticipated long-term loan repayments over the same period of ~~$1,223~~$1,535 million, byresulting in net long-term loan growth of approximately ~~$428 million.~~ $1,847 million over the next 12 months.

The estimates presented above are developed at a particular point in time based on our expected future business growth and funding. Our actual results and future estimates may vary, perhaps significantly, from the current projections, as a result of changes in market conditions, management actions or other factors.

Credit Ratings

Our funding and liquidity, borrowing capacity, ability to access capital markets and other sources of funds and the cost of these funds are partially dependent on our credit ratings.Rating agencies base their ratings on numerous factors, including liquidity, capital adequacy, industry position, member support, management, asset quality, quality of earnings and the probability of systemic support. Significant changes in these factors could result in different ratings.

Table 3124 displays our credit ratings as of ~~November 30, 2017,~~February 29, 2024, which ~~were~~remain unchanged as of the date of ~~the filing of~~ this Report.

Table ~~31:~~24: Credit Ratings

February 29, 2024

Moody’s

S&P

Fitch

CFC credit ratings and outlook:

~~November 30, 2017~~

~~Moody’s~~

~~S&P~~

~~Fitch~~

Long-term issuer credit rating⁽¹⁾

A-

Senior secured debt⁽²⁾

A-

A+

Senior unsecured debt⁽³⁾

A-

~~Commercial paper~~Subordinated debt

~~P-1~~

BBB

~~A-1~~

F1BBB+

~~Outlook~~Commercial paper

P-1

~~Stable~~

A-2

Outlook

Stable

Rating agency credit opinion date

February 21, 2024

December 7, 2023

September 22, 2023

^{___________________________}

⁽¹⁾Based on our senior unsecured debt rating.

⁽²⁾Applies to our collateral trust bonds.

⁽³⁾Applies to our medium-term notes.

During the three months ended November 30, 2017, Moody’s and S&P affirmed our ratings and outlook. In order to access the commercial paper markets at attractive rates, we believe we need to maintain our current commercial paper credit ratings of P-1 by Moody’s, A-1 by S&P and F1 by Fitch. In addition, the notes payable to the Federal Financing Bank and guaranteed by RUS under the Guaranteed Underwriter Program contain a provision that if during any portion of the fiscal

year, our senior secured credit ratings do not have at least two of the following ratings: (i) A3 or higher from Moody’s, (ii) A- or higher from S&P, (iii) A- or higher from Fitch or (iv) an equivalent rating from a successor rating agency to any of the above rating agencies, we may not make cash patronage capital distributions in excess of 5% of total patronage capital. See “Credit Risk—Counterparty Credit Risk—Derivative Counterparty Credit ~~Risk-Related Contingent Features”~~Exposure” above for information on credit rating provisions related to our derivative contracts.

Table of Contents

Financial Ratios

Our debt-to-equity ratio decreased to ~~19.87-to-1~~11.52 as of ~~November 30, 2017,~~February 29, 2024, from ~~21.94-to-1~~12.14 as of May 31, ~~2017,~~2023, primarily due to an increase in equity ~~resulting~~ from our reported net income of ~~$188~~$408 million for ~~the six months ended November 30, 2017,~~YTD FY2024, which was partially offset by a decrease in equity of $10 million from CFC’s deconsolidation of RTFC and $113 million from CFC Board of Directors’ authorized patronage capital ~~retirement~~retirements during the period.

While our goal is to maintain an adjusted debt-to-equity ratio of ~~$45 million in September 2017.~~

~~Our~~approximately 6-to-1, the adjusted debt-to-equity ratio increased to ~~6.12-to-1~~6.29 as of ~~November 30, 2017,~~February 29, 2024 from ~~5.95-to-1~~6.04 as of May 31, ~~2017, largely~~2023, due to an increase in ~~debt outstanding~~adjusted liabilities resulting from additional borrowings to fund growth in our loan ~~growth. We provide a reconciliation of~~portfolio, partially offset by an increase in adjusted equity. The increase in adjusted equity was primarily due to our adjusted ~~debt-to-equity ratio to~~net income of $224 million for YTD FY2024, partially offset by a decrease in equity of $10 million from CFC’s deconsolidation of RTFC and $113 million from CFC Board of Directors’ authorized patronage capital retirements during the ~~most comparable GAAP measure and an explanation of the adjustments below in “Non-GAAP Financial Measures.”~~period.

Debt Covenants

As part of our short-term and long-term borrowing arrangements, we are subject to various financial and operational covenants. If we fail to maintain specified financial ratios, such failure could constitute a default by CFC of certain ~~debt~~ covenants under our committed bank revolving line of credit agreements and senior debt indentures. We were in compliance with all covenants and conditions under our committed bank revolving line of credit agreements and senior debt indentures as of ~~November 30, 2017.~~February 29, 2024.

As discussed above in ~~“Summary of Selected~~“Non-GAAP Financial ~~Data,~~Measures,” the financial covenants set forth in our committed bank revolving line of credit agreements and senior debt indentures are based on ~~adjusted~~adjusted financial measures, including adjusted TIER. We provide a reconciliation of adjusted TIER and other non-GAAP financial measures disclosed in this Report to the most comparable U.S. GAAP financial measures below in “Non-GAAP Financial Measures and Reconciliations.” See “Item 7. MD&A—Non-GAAP Financial Measures” in our 2023 Form 10-K for a discussion of each of our non-GAAP measures and an explanation of the adjustments ~~below in “Non-GAAP Financial Measures.”~~to derive these measures.



MARKET RISK

Interest rate risk represents our primary source of market ~~risk. Interest~~risk, as interest rate-volatility can have a significant impact on the earnings and overall financial condition of a financial institution. We are exposed to interest rate risk primarily from the differences in the timing between the maturity or repricing of our loans and the liabilities funding our loans. We seek to generate stable adjusted net interest income on a sustained and long-term basis by minimizing the mismatch between the cash flows from our financial assets and our financial liabilities. We use derivatives as a tool in matching the duration and repricing characteristics of our interest-rate sensitive assets and liabilities. We provide additional information on our management of interest rate risk in our 2023 Form 10-K under “Item 7. MD&A—Market Risk—Interest Rate Risk Management.” Below we discuss how we manage and measure interest rate risk.

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 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. Below we present two measures used to assess our interest rate risk exposure: (i) the interest rate sensitivity of projected net interest income and adjusted net interest income; and (ii) duration gap.

Interest Rate Sensitivity Analysis

We regularly evaluate the sensitivity of our interest-earning assets and the interest-bearing liabilities funding those assets and our net interest income and adjusted net interest income projections under multiple interest rate scenarios. Each month we update our ALM models to reflect our existing balance sheet position and incorporate different assumptions about

Table of Contents

forecasted changes in our balance sheet position over the next 12 months. Based on the forecasted balance sheet changes, we generate various projections of net interest income and adjusted net interest income over the next 12 months. Management reviews and assesses these projections and underlying assumptions to identify a baseline scenario of projected net interest income and adjusted net interest income over the next 12 months, which reflects what management considers, at the time, as the most likely scenario. As discussed under “Non-GAAP Financial Measures,” we derive adjusted net interest income by adjusting our reported interest expense and net interest income to include the impact of net derivative cash settlements amounts.

Our interest rate sensitivity analyses take into consideration existing interest rate-sensitive assets and liabilities as of the reported balance sheet date and forecasted changes to the balance sheet over the next 12 months under management’s baseline projection. As discussed in the “Executive Summary—Outlook” section, we currently anticipate net long-term loan growth of $1,847 million over the next 12 months. We also expect that our variable-rate line of credit loans outstanding will remain at approximately the current level over the same period. Although the yield curve is expected to remain inverted throughout calendar year 2024, given the expected drop in short-term interest rates, the yield curve inversion is expected to narrow in 2024.

Based on our current forecast assumptions, including the yield curve forecast noted above, we project a slight increase in our reported net interest income, however, we expect a decrease in our reported net interest yield over the next 12 months compared to the 12-month period ended February 29, 2024. We also project a decrease in our adjusted net interest income and adjusted net interest yield over the next 12 months relative to the 12-month period ended February 29, 2024, primarily due to the current yield curve assumptions and our balance sheet position.

Table 25 presents the estimated percentage impact that a hypothetical instantaneous parallel shift of plus or minus 100 basis points in the interest rate yield curve, relative to our base case forecast yield curve, would have on our projected baseline 12-month net interest income and adjusted net interest income as of February 29, 2024 and May 31, 2023. In instances where the hypothetical instantaneous interest rate shift of minus 100 basis points results in a negative interest rate, we assume an interest rate floor rate of 0% in a negative interest rate. We also present the estimated percentage impact on our projected baseline 12-month net interest income and adjusted net interest income assuming a hypothetical inverted yield curve under which shorter-term interest rates increase by an instantaneous 75 basis points and longer-term interest rates decrease by an instantaneous 75 basis points.

Table 25: Interest Rate Sensitivity Analysis


	February 29, 2024						May 31, 2023
Estimated Impact(1)	+ 100 Basis Points		– 100 Basis Points		Inverted		+ 100 Basis Points		– 100 Basis Points		Inverted
Net interest income	(4.19)	%	4.30	%	(10.64)	%	(4.41)	%	4.70	%	(5.88)	%
Derivative cash settlements	12.34	%	(12.34)	%	10.31	%	11.50	%	(11.58)	%	9.38	%
Adjusted net interest income(2)	8.14	%	(8.04)	%	(0.34)	%	7.09	%	(6.88)	%	3.50	%

____________________________

(1)The actual impact on our reported and adjusted net interest income may differ significantly from the sensitivity analysis presented.

(2)We include net periodic derivative cash settlement interest expense 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.

The changes in the sensitivity measures between February 29, 2024 and May 31, 2023 are primarily attributable to changes in the size and composition of our forecasted balance sheet, as well as changes in current interest rates and forecasted interest rates. As the interest rate sensitivity simulations displayed in Table 25 indicate, we would expect an unfavorable impact on our projected net interest income over a 12-month horizon as of February 29, 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. However, we would expect an unfavorable impact on our adjusted net interest income over a 12-month horizon as of February 29, 2024, under the hypothetical scenario of an instantaneous parallel shift of minus 100 basis points in the interest rate yield curve and a slight decline under a further inverted yield curve.

Table of Contents

Duration Gap

The duration gap, which represents the difference between the estimated duration of our interest-earning assets and the estimated duration of our interest-bearing liabilities, summarizes the extent to which the cash flows for assets and liabilities are matched over time. We use derivatives in managing the differences in timing between the maturities or repricing of our interest earning assets and the debt funding those assets. A positive duration gap indicates that the duration of our interest-earning assets is greater than the duration of our debt and derivatives, and therefore denotes an increased exposure to rising interest rates over the long term. Conversely, a negative duration gap indicates that the duration of our interest-earning assets is less than the duration of our debt and derivatives, and therefore denotes an increased exposure to declining interest rates over the long term. 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.

The duration gap widened slightly to negative 1.54 months as of February 29, 2024, from negative 1.34 months as of May 31, 2023 and was within the risk ~~arising from~~limits and guidelines established by CFC’s Asset Liability Committee as of each respective date. The slight widening of the duration gap is primarily due to an increase in line of credit loans outstanding of $407 million, which reduced the duration of interest-earning assets.

Limitations of Interest Rate Risk Measures

While we believe that the interest income sensitivities and duration gap measures provided are useful tools in assessing our interest rate risk exposure, there are inherent limitations in any methodology used to estimate the exposure to changes in market interest rates. These measures should be understood as estimates rather than as precise measurements. The interest rate sensitivity analyses only contemplate certain hypothetical movements in interest rates and are performed at a particular point in time based on the existing balance sheet and, in some cases, expected future business growth and funding mix assumptions. The strategic actions that management may ~~result in differences between~~take to manage our balance sheet may differ significantly from our projections, which could cause our actual interest income to differ substantially from the ~~timing of contractual maturities, re-pricing characteristics~~above sensitivity analysis. Moreover, as discussed above, we use various other methodologies to measure and ~~prepayments on our assets and their related liabilities.~~

~~Interest Rate Risk Management~~

Our interest rate risk exposure is primarily related to the funding of the fixed-rate loan portfolio. Our Asset Liability Committee provides oversight over maintaining our interest rate position within a prescribed policy range using approved strategies. The Asset Liability Committee reviews a complete interest rate risk analysis, reviews proposed modifications, if any, tomonitor our interest rate risk ~~management strategy and considers adopting strategy changes. Our Asset Liability Committee monitors~~under multiple interest rate risk and meets quarterly to review and discuss information such as national economic forecasts, federal funds and interest rate forecasts, interest rate gap analysis, our liquidity position, loan and debt maturities, short-term and long-term funding needs, anticipated loan demands, credit concentration risk, derivative counterparty exposure and financial forecasts. The Asset Liability Committee also discusses the compositionscenarios, which, together, provide a comprehensive profile of ~~fixed-rate versus variable-rate lending, new funding opportunities, changes to the nature and mix of assets and liabilities for structural mismatches, and interest rate swap transactions.~~

~~Matched Funding Objective~~

Our funding objective is to manage the matched funding of asset and liability repricing terms within a range of adjusted total assets (calculated by excluding derivative assets from total assets) deemed appropriate by the Asset Liability Committee based on the current environment and extended outlook for interest rates. We refer to the difference between fixed-rate loans

~~scheduled for amortization or repricing and the fixed-rate liabilities and equity funding those loans as~~ our interest rate ~~gap. Our primary strategies for managing~~risk.


CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in our ~~interest rate risk include~~consolidated financial statements. Understanding our accounting policies and the extent to which we use management’s judgment and estimates in applying these policies is integral to understanding our financial statements. We provide a discussion of our significant accounting policies in “Note 1—Summary of Significant Accounting Policies” in our 2023 Form 10-K.

Certain accounting estimates are considered critical because they involve significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of ~~derivatives~~reasonably different estimates and ~~limiting the amount of fixed-rate assets that can be funded by variable-rate debt to~~assumptions could have a ~~specified percentage of adjusted total assets based on market conditions.~~

We provide our members with many options on loans with regard to interest rates, the term for which the selected interest rate is in effect and the ability to convert or prepay the loan. Long-term loans generally have maturities of up to 35 years. Borrowers may select fixed interest rates for periods of one year through the life of the loan. We do not match fund the majority of our fixed-rate loans with a specific debt issuance at the time the loans are advanced. We fund the amount of fixed-rate assets that exceed fixed-rate debt and members’ equity with short-term debt, primarily commercial paper.

~~Interest Rate Gap Analysis~~

To monitor and mitigate interest rate risk in the funding of fixed-rate loans, we perform a monthly interest rate gap analysis that provides a comparison between fixed-rate assets repricing or maturing by year and fixed-rate liabilities and members’ equity maturing by year.

~~We maintain an unmatched position~~material impact on our ~~fixed-rate assets within a targeted range~~results of ~~adjusted total assets.~~operations or financial condition. The limited unmatched position is intended to provide flexibility to ensure that we are able to match the current maturing portion of long-term fixed rate loans based on maturity date and the opportunity in the current low interest rate environment to increase the gross yield on our fixed rate assets without taking what we would consider to be excessive risk.

Table 32 displays the scheduled amortization and repricing of fixed-rate assets and liabilities outstanding as of November 30, 2017. We exclude variable-rate loans from our interest rate gap analysis as we do not consider the interest rate risk on these loans to be significant because they are subject to repricing at least monthly. Loans with variable interest rates accounted for 10% and 9% of our total loan portfolio as of November 30, 2017 and May 31, 2017, respectively. Fixed-rate liabilities include debt issued at a fixed rate as well as variable-rate debt swapped to a fixed rate using interest rate swaps. Fixed-rate debt swapped to a variable rate using interest rate swaps is excluded from the analysis since it is used to match fund the variable-rate loan pool. With the exception of members’ subordinated certificates, which are generally issued with extended maturities, and commercial paper, our liabilities have average maturities that closely match the repricing terms (but not the maturities) of our fixed-rate loans.

~~Table 32: Interest Rate Gap Analysis~~

(Dollars in millions) Prior to 5/31/18 Two Years 6/1/18 to 5/31/20 Two Years 6/1/20 to
5/31/22 Five Years 6/1/22 to
5/31/27 10 Years 6/1/27 to 5/31/37 6/1/37 and Thereafter Total
Asset amortization and repricing $ 987
$ 3,409
$ 2,847
$ 5,551
$ 6,652
$ 2,970
$ 22,416
Liabilities and members’ equity:

Long-term debt $ 1,909
$ 3,687
$ 2,249
$ 5,331
$ 4,206
$ 1,298
$ 18,680
Subordinated certificates 11
36
69
946
162
665
1,889
Members’ equity ⁽¹⁾
—
23
24
108
297
856
1,308
Total liabilities and members’ equity⁽²⁾
$ 1,920
$ 3,746
$ 2,342
$ 6,385
$ 4,665
$ 2,819
$ 21,877
Gap ⁽³⁾
$ (933 ) $ (337 ) $ 505
$ (834 ) $ 1,987
$ 151
$ 539

Cumulative gap (933 ) (1,270 ) (765 ) (1,599 ) 388
539

Cumulative gap as a % of total assets (3.61 )% (4.91 )% (2.96 )% (6.18 )% 1.50 % 2.08 %
Cumulative gap as a % of adjusted total assets⁽⁴⁾
(3.62 ) (4.92 ) (2.97 ) (6.20 ) 1.50
2.09

^{____________________________}

⁽¹⁾~~Includes the portion~~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 estimate.We describe our allowance methodology and process for estimating the allowance for credit losses under “Note 1—Summary of Significant Accounting Policies—Allowance for Credit Losses–Loan Portfolio—Current Methodology” in our 2023 Form 10-K.

We identify the key inputs used in determining the allowance for credit losses, discuss the assumptions that require the most significant management judgment and contribute to the estimation uncertainty and disclose the sensitivity of our allowance to hypothetical changes in the assumptions underlying the calculation of our reported allowance for credit losses under “Item 7. MD&A—Critical Accounting Estimates” in our 2023 Form 10-K. Management established policies and control procedures intended to ensure that the methodology used for determining our allowance for credit losses, including any judgments and assumptions made as part of such method, are well-controlled and applied consistently from period to period.

Table of Contents

We regularly evaluate the key inputs and assumptions used in determining the allowance for credit losses and ~~subordinated deferrable debt allocated~~update them, as necessary, to ~~fund fixed-rate assets~~better reflect present conditions, including current trends in credit performance and ~~excludes noncash adjustments from~~borrower risk profile, portfolio concentration risk, changes in risk-management practices, changes in the regulatory environment and other factors relevant to our loan portfolio segments. 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 the current quarter.

We discuss the risks and uncertainties related to management’s judgments and estimates in applying accounting ~~for derivative financial instruments.~~

⁽²⁾~~Debt is presented based on call date.~~

⁽³⁾~~Calculated based~~policies that have been identified as critical accounting estimates under “Item 1A. Risk Factors—Regulatory and Compliance Risks” in our 2023 Form 10-K. We provide additional information on the ~~amount of assets amortizing~~allowance for credit losses under the section “Credit Risk—Allowance for Credit Losses” and ~~repricing less total liabilities and members’ equity.~~“Note 5—Allowance for Credit Losses” in this Report.

⁽⁴⁾~~Adjusted total assets represents total assets reported in our condensed consolidated balance sheets less derivative assets.~~


RECENT ACCOUNTING CHANGES AND OTHER DEVELOPMENTS

~~The difference, or interest rate gap, of $539 million between the fixed-rate loans scheduled for amortization or repricing of $22,416 million~~Recent Accounting Changes

We provide information on recently adopted accounting standards and the ~~fixed-rate liabilities~~adoption impact on CFC’s consolidated financial statements and ~~equity funding~~recently issued accounting standards not yet required to be adopted and the ~~loans~~expected adoption impact in “Note 1—Summary of ~~$21,877 million presented~~Significant Accounting Policies.” To the extent we believe the adoption of new accounting standards has had or will have a material impact on our consolidated results of operations, financial condition or liquidity, we discuss the impact in ~~Table 32 reflects~~ the ~~amount~~applicable section(s) of fixed-rate assets that are funded with short-term and variable-rate debt as of November 30, 2017. The gap of $539 million represented 2.08% of total assets and 2.09% of adjusted total assets (total assets excluding derivative assets) as of November 30, 2017. As discussed above, we manage this ~~gap within a prescribed range because funding long-term, fixed-rate loans with short-term and variable-rate debt may expose us to higher interest rate and liquidity risk.~~MD&A.



NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

InAs discussed above in the section “Non-GAAP Financial Measures,” in addition to financial measures determined in accordance with U.S. GAAP, management evaluates performance based on certain non-GAAP financial measures, which we refer to as “adjusted” financial measures. ~~We provide a discussion of each of these non-GAAP measures in our 2017 Form 10-K under “Item 7. MD&A—Non-GAAP Measures.”~~ Below we provide a reconciliation of our adjusted financial measures presented in this Report to the most comparable U.S. GAAP ~~measures~~financial measures. See “Item 7. MD&A—Non-GAAP Financial Measures” in ~~this section. We believe~~our 2023 Form 10-K for a discussion of each of our non-GAAP ~~adjusted metrics, which are not a substitute for GAAP~~financial measures and may not be consistent with similarly titled non-GAAP measures used by other companies, provide meaningful information and are useful to investors because management uses these metrics to compare operating results across financial reporting periods, for internal budgeting and forecasting purposes, for compensation decisions and for short- and long-term strategic planning decisions. In addition, certainan explanation of the ~~financial covenants in our committed bank revolving line of credit agreements~~adjustments to derive these measures.

Net Income and ~~debt indentures are based on our adjusted measures.~~Adjusted Net Income

~~Statements of Operations Non-GAAP Adjustments~~

Table 3326 provides a reconciliation of adjusted interest expense, adjusted net interest income, adjusted total revenue and adjusted net income to the comparable U.S. GAAP ~~measures three and six months ended November 30, 2017 and 2016. The~~financial measures. These adjusted ~~amounts~~financial measures are used in the calculation of our adjusted net interest yield and adjusted TIER.

Table ~~33: Adjusted Financial Measures — Income Statement~~

of Contents

Three Months Ended November 30, Six Months Ended November 30,
(Dollars in thousands) 2017 2016 2017 2016
Interest expense $ (195,170 ) $ (183,654 ) $ (387,901 ) $ (364,734 )
Include: Derivative cash settlements (19,635 ) (21,587 ) (39,857 ) (44,977 )
Adjusted interest expense $ (214,805 ) $ (205,241 ) $ (427,758 ) $ (409,711 )

Net interest income $ 70,653
$ 73,502
$ 143,837
$ 149,257
Include: Derivative cash settlements (19,635 ) (21,587 ) (39,857 ) (44,977 )
Adjusted net interest income $ 51,018
$ 51,915
$ 103,980
$ 104,280

Net income $ 178,723
$ 395,304
$ 187,738
$ 263,043
Exclude: Derivative forward value gains 145,228
362,247
119,252
197,344
Adjusted net income $ 33,495
$ 33,057
$ 68,486
$ 65,699
Table 26: Adjusted Net Income



(Dollars in thousands)	Q3 FY2024		Q3 FY2023		YTD FY2024		YTD FY2023
Adjusted net interest income:
Interest income	$	411,835	$	353,292	$	1,181,778	$	984,464
Interest expense	(347,019)		(281,709)		(987,145)		(736,621)
Include: Derivative cash settlements interest income(1)	38,342		18,634		94,978		12,650
Adjusted interest expense	(308,677)		(263,075)		(892,167)		(723,971)
Adjusted net interest income	$	103,158	$	90,217	$	289,611	$	260,493

Adjusted total revenue:
Net interest income	$	64,816	$	71,583	$	194,633	$	247,843
Fee and other income	5,025		5,326		16,173		13,548
Total revenue	69,841		76,909		210,806		261,391
Include: Derivative cash settlements interest income(1)	38,342		18,634		94,978		12,650
Adjusted total revenue	$	108,183	$	95,543	$	305,784	$	274,041

Adjusted net income:
Net income	$	31,189	$	163,217	$	407,508	$	514,855
Exclude: Derivative forward value gains (losses)(2)	(56,817)		83,674		183,372		330,035
Adjusted net income	$	88,006	$	79,543	$	224,136	$	184,820

____________________________

(1)Represents the net periodic contractual interest income (expense) amount on our interest-rate swaps during the reporting 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. However, we use derivatives as economic hedges as part of our strategy to manage the interest rate risk associated with funding our loan portfolio. We therefore consider the ~~cost of~~interest income and expense incurred on our derivatives to be ~~an inherent~~part of our funding cost ~~of funding and hedging our loan portfolio and, therefore, economically similar~~in addition to the interest expense ~~that~~on our debt. As such, we ~~recognize on debt issued for funding. We therefore include~~add net periodic derivative cash settlements ininterest income and expense amounts to our reported interest expense to derive our adjusted interest expense and adjusted net interest income. We exclude ~~the~~ unrealized derivative forward value ~~of derivatives~~gains and losses from our adjusted total revenue and adjusted net income.

TIER and Adjusted TIER

Table 34 ~~presents~~27 displays the calculation of our TIER and adjusted ~~TIER for the three and six months ended November 30, 2017 and 2016.~~TIER.

Table ~~34:~~27: TIER and Adjusted TIER



	Q3 FY2024	Q3 FY2023	YTD FY2024	YTD FY2023
TIER (1)	1.09	1.58	1.41	1.70

Adjusted TIER (2)	1.29	1.30	1.25	1.26

Three Months Ended November 30, Six Months Ended November 30,
2017 2016 2017 2016
TIER ⁽¹⁾
1.92
3.15
1.48
1.72

Adjusted TIER ⁽²⁾
1.16
1.16
1.16
1.16
____________________________

^{____________________________}

⁽¹⁾TIER is calculated based on our net income (loss) plus interest expense for the period divided by interest expense for the period.

⁽²⁾Adjusted TIER is calculated based on adjusted net income (loss) plus adjusted interest expense for the period divided by adjusted interest expense for the period.

~~Debt-to-Equity~~Liabilities and Equity and Adjusted ~~Debt-to-Equity~~Liabilities and Equity

Table 3528 provides a reconciliation between ~~the~~our total liabilities and total equity ~~used to calculate the debt-to-equity~~ and the adjusted amounts used in the calculation of our adjusted debt-to-equity ~~ratios~~ratio as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023. As indicated in ~~the table below,~~Table 28, subordinated debt is treated in the same manner as equity in calculating our adjusted-debt-to-equity ratio.

Table ~~35: Adjusted Financial Measures — Balance Sheet~~

of Contents

(Dollars in thousands) November 30, 2017
May 31, 2017
Total liabilities $ 24,640,195
$ 24,106,887
Exclude:
Derivative liabilities 304,307
385,337
Debt used to fund loans guaranteed by RUS 164,172
167,395
Subordinated deferrable debt 742,341
742,274
Subordinated certificates 1,399,675
1,419,025
Adjusted total liabilities $ 22,029,700
$ 21,392,856

Total equity $ 1,240,048
$ 1,098,805
Include:

Subordinated deferrable debt 742,341
742,274
Subordinated certificates 1,399,675
1,419,025
Total subordinated debt and certificates 2,142,016
2,161,299
Exclude:
Prior year-end cumulative derivative forward value losses (340,976 ) (520,357 )
Current year derivative forward value gains 119,252
179,381
Total cumulative derivative forward value losses (221,724 ) (340,976 )
Accumulated other comprehensive income ⁽¹⁾
3,316
3,702
Adjusted total equity $ 3,600,472
$ 3,597,378
Table 28: Adjusted Liabilities and Equity

^{____________________________}

^{(Dollars in thousands) February 29, 2024 May 31, 2023
Adjusted total liabilities:
Total liabilities $ 33,023,892 $ 31,422,811
Exclude:
Derivative liabilities 87,809 115,074
Debt used to fund loans guaranteed by RUS 116,139 122,873
Subordinated deferrable debt 1,286,872 1,283,436
Subordinated certificates 1,198,115 1,223,126
Adjusted total liabilities $ 30,334,957 $ 28,678,302
Adjusted total equity:
Total equity $ 2,867,861 $ 2,589,249
Exclude:
Prior fiscal year-end cumulative derivative forward value gains(1) 343,098 90,831
Year-to-date derivative forward value gains(1) 183,372 252,267
Period-end cumulative derivative forward value gains(1) 526,470 343,098
AOCI attributable to derivatives(2) 772 1,001
Subtotal 527,242 344,099
Include:
Subordinated deferrable debt 1,286,872 1,283,436
Subordinated certificates 1,198,115 1,223,126
Subtotal 2,484,987 2,506,562
Adjusted total equity $ 4,825,606 $ 4,751,712}

____________________________

(1) Represents consolidated total derivative forward value gains.

(2) Represents the AOCI amount related to derivatives. See “Note 9—10—Equity” for ~~a breakout~~the additional components of ~~our AOCI components.~~AOCI.

Debt-to-Equity and Adjusted Debt-to-Equity Ratios

Table 3629 displays the calculations of our debt-to-equity and adjusted debt-to-equity ratios as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023.

Table ~~36:~~29: Debt-to-Equity Ratio and Adjusted Debt-to-Equity Ratio

(Dollars in thousands)

February 29, 2024

May 31, 2023

Debt-to equity ratio:

Total liabilities

Total equity

Debt-to-equity ratio (1)

November 30, 2017

May 31, 2017

Debt-to-equity ratio ⁽¹⁾

19.87

21.94

Adjusted debt-to-equity ratio ⁽²⁾

6.12

5.95

Adjusted debt-to-equity ratio:

Adjusted total liabilities(2)

Adjusted total equity(2)

Adjusted debt-to-equity ratio(3)

^{____________________________}

⁽¹⁾Calculated based on total liabilities ~~as of the~~at period end ~~of the period~~ divided by total equity asat period end.

Table of Contents

(2)See Table 28 above for details on the ~~end~~calculation of these non-GAAP financial measures and the ~~period.~~reconciliation to the most comparable U.S. GAAP financial measures.

⁽²⁾(3) Calculated based on adjusted total liabilities at period end divided by adjusted total equity at period end.


~~Item 1.~~	~~Financial Statements~~

Total CFC Equity and Members’ Equity

Members’ equity excludes the noncash impact of derivative forward value gains (losses) and foreign currency adjustments recorded in net income and amounts recorded in accumulated other comprehensive income. Because these amounts generally have not been realized, they are not available to members and are excluded by the CFC Board of Directors in determining the annual allocation of adjusted net income to patronage capital, to the members’ capital reserve and to other member funds. Table 30 provides a reconciliation of members’ equity to total CFC equity as of February 29, 2024 and May 31, 2023. We present the components of accumulated other comprehensive income in “Note 10—Equity.”

Table 30: Members’ Equity


(Dollars in thousands)	February 29, 2024		May 31, 2023
Members’ equity:
Total CFC equity	$	2,848,380	$	2,562,059
Exclude:
Accumulated other comprehensive income	853		8,343
Period-end cumulative derivative forward value gains attributable to CFC(1)	525,096		342,624
Subtotal	525,949		350,967
Members’ equity	$	2,322,431	$	2,211,092

____________________________

(1)Represents period-end cumulative derivative forward value gains for CFC only, as total CFC equity does not include the noncontrolling interests of the variable interest entities, which we are required to consolidate. We report the separate results of operations for CFC in “Note 14—Business Segments.” The period-end cumulative derivative forward value total gain amounts as of February 29, 2024 and May 31, 2023 are presented above in Table 28.

Table of Contents

Item 1. Financial Statements


				Page

	~~Page~~
~~Condensed~~ Consolidated Statements of Operations (Unaudited)			4547
	~~Condensed~~ Consolidated Statements of Comprehensive Income (Loss) (Unaudited)			4648
	~~Condensed~~ Consolidated Balance Sheets (Unaudited)			4749
	~~Condensed~~ Consolidated Statements of Changes in Equity (Unaudited)			4850
	~~Condensed~~ Consolidated Statements of Cash Flows (Unaudited)			4951
	Notes to ~~Condensed~~ Consolidated Financial Statements (Unaudited)			5053
	Note 1 — Summary of Significant Accounting Policies			5053
	Note 2 — ~~Variable~~ Interest ~~Entities~~Income and Interest Expense			5455
	Note 3 — Investment Securities			5556
	Note 4 — Loans ~~and Commitments~~			5857
	Note 5 — ~~Short-Term Borrowings~~Allowance for Credit Losses			6770
	Note 6 — ~~Long-Term Debt~~Short-Term Borrowings			6972
	Note 7 — Long-Term Debt			73
	Note 8 — Subordinated Deferrable Debt			7076
	Note 89 — Derivative Instruments and Hedging Activities			7076
	~~Note 9 — Equity~~		73
Note 10 — ~~Guarantees~~Equity		7680
	Note 11 — Guarantees			81
	Note 12 — Fair Value Measurement			7783
	Note 1213 — Variable Interest Entities			85
	Note 14 — Business Segments			8087

Table of

Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


(Dollars in thousands)	Q3 FY2024		Q3 FY2023		YTD FY2024		YTD FY2023
Interest income	$	411,835	$	353,292	$	1,181,778	$	984,464
Interest expense	(347,019)		(281,709)		(987,145)		(736,621)
Net interest income	64,816		71,583		194,633		247,843
Benefit (provision) for credit losses	6,559		11,318		5,131		(3,806)
Net interest income after benefit (provision) for credit losses	71,375		82,901		199,764		244,037
Non-interest income:
Fee and other income	5,025		5,326		16,173		13,548
Derivative gains (losses)	(18,475)		102,308		278,350		342,685
Investment securities gains (losses)	4,140		(1,402)		8,916		(5,574)
Total non-interest income (loss)	(9,310)		106,232		303,439		350,659
Non-interest expense:
Salaries and employee benefits	(16,706)		(14,808)		(49,126)		(42,792)
Other general and administrative expenses	(13,283)		(10,507)		(43,878)		(35,289)
Losses on early extinguishment of debt	(33)		—		(998)		—
Other non-interest expense	(287)		(298)		(715)		(975)
Total non-interest expense	(30,309)		(25,613)		(94,717)		(79,056)
Income before income taxes	31,756		163,520		408,486		515,640
Income tax provision	(567)		(303)		(978)		(785)
Net income	31,189		163,217		407,508		514,855
Less: Net loss (income) attributable to noncontrolling interests	281		(321)		262		(541)
Net income attributable to CFC	$	31,470	$	162,896	$	407,770	$	514,314

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these statements.

Three Months Ended November 30, Six Months Ended November 30,
(Dollars in thousands) 2017 2016 2017
2016
Interest income $ 265,823
$ 257,156
$ 531,738
$ 513,991
Interest expense (195,170 ) (183,654 ) (387,901 ) (364,734 )
Net interest income 70,653
73,502
143,837
149,257
Benefit (provision) for loan losses 304
(738 ) 602
(2,666 )
Net interest income after benefit (provision) for loan losses 70,957
72,764
144,439
146,591
Non-interest income:

Fee and other income 5,542
5,097
9,487
9,627
Derivative gains 125,593
340,660
79,395
152,367
Results of operations of foreclosed assets (10 ) (549 ) (34 ) (1,661 )
Total non-interest income 131,125
345,208
88,848
160,333
Non-interest expense:

Salaries and employee benefits (12,009 ) (11,451 ) (23,832 ) (22,875 )
Other general and administrative expenses (9,905 ) (9,181 ) (19,718 ) (18,616 )
Other non-interest expense (618 ) (517 ) (1,140 ) (960 )
Total non-interest expense (22,532 ) (21,149 ) (44,690 ) (42,451 )
Income before income taxes 179,550
396,823
188,597
264,473
Income tax expense (827 ) (1,519 ) (859 ) (1,430 )
Net income 178,723
395,304
187,738
263,043
Less: Net income attributable to noncontrolling interests (1,150 ) (2,575 ) (1,032 ) (1,885 )
Net income attributable to CFC $ 177,573
$ 392,729
$ 186,706
$ 261,158

See accompanying notes to condensed consolidated financial statements.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)


(Dollars in thousands)	Q3 FY2024		Q3 FY2023		YTD FY2024		YTD FY2023
Net income	$	31,189	$	163,217	$	407,508	$	514,855
Other comprehensive income (loss):

Changes in unrealized gains on derivative cash flow hedges	—		6,691		483		6,691
Reclassification to earnings of realized gains on derivatives	(7,818)		(177)		(8,132)		(555)
Defined benefit plan adjustments	53		100		159		300
Other comprehensive income (loss)	(7,765)		6,614		(7,490)		6,436
Total comprehensive income	23,424		169,831		400,018		521,291
Less: Total comprehensive loss (income) attributable to non-controlling interests	281		(321)		262		(541)
Total comprehensive income attributable to CFC	$	23,705	$	169,510	$	400,280	$	520,750

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these statements.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

~~CONDENSED~~ CONSOLIDATED ~~STATEMENTS OF COMPREHENSIVE INCOME~~BALANCE SHEETS

(UNAUDITED)


(Dollars in thousands)	February 29, 2024		May 31, 2023
Assets:
Cash and cash equivalents	$	144,848	$	198,936
Restricted cash	8,209		8,301
Total cash, cash equivalents and restricted cash	153,057		207,237

Investment securities:
Debt securities trading, at fair value	335,032		474,875
Equity securities, at fair value	36,645		35,494
Total investment securities, at fair value	371,677		510,369
Loans to members	34,412,334		32,532,086
Less: Allowance for credit losses	(48,995)		(53,094)
Loans to members, net	34,363,339		32,478,992
Accrued interest receivable	189,448		172,723
Other receivables	30,748		31,243
Fixed assets, net of accumulated depreciation of $82,060 and $77,508 as of February 29, 2024 and May 31, 2023, respectively	85,000		86,011

Derivative assets	616,640		460,762
Other assets	81,844		64,723
Total assets	$	35,891,753	$	34,012,060

Liabilities:
Accrued interest payable	$	296,897	$	212,340
Debt outstanding:
Short-term borrowings	4,604,626		4,546,275
Long-term debt	25,451,631		23,946,548
Subordinated deferrable debt	1,286,872		1,283,436
Members’ subordinated certificates:
Membership subordinated certificates	628,620		628,614
Loan and guarantee subordinated certificates	323,332		348,349
Member capital securities	246,163		246,163
Total members’ subordinated certificates	1,198,115		1,223,126
Total debt outstanding	32,541,244		30,999,385

Deferred income	34,445		38,601
Derivative liabilities	87,809		115,074
Other liabilities	63,497		57,411
Total liabilities	33,023,892		31,422,811

Equity:
CFC equity:
Retained equity	2,847,527		2,553,716
Accumulated other comprehensive income	853		8,343
Total CFC equity	2,848,380		2,562,059
Noncontrolling interests	19,481		27,190
Total equity	2,867,861		2,589,249
Total liabilities and equity	$	35,891,753	$	34,012,060

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these statements.

Three Months Ended November 30, Six Months Ended November 30,
(Dollars in thousands) 2017 2016 2017 2016
Net income $ 178,723
$ 395,304
$ 187,738
$ 263,043
Other comprehensive income (loss):

Unrealized gains (losses) on available-for-sale investment securities 8
(1,761 ) (1,143 ) (1,772 )
Reclassification of losses on foreclosed assets to net income —
—
—
9,823
Reclassification of derivative gains to net income (194 ) (199 ) (386 ) (396 )
Defined benefit plan adjustments 126
44
253
88
Other comprehensive income (loss) (60 ) (1,916 ) (1,276 ) 7,743
Total comprehensive income 178,663
393,388
186,462
270,786
Less: Total comprehensive income attributable to noncontrolling interests (1,150 ) (2,575 ) (1,032 ) (1,885 )
Total comprehensive income attributable to CFC $ 177,513
$ 390,813
$ 185,430
$ 268,901

See accompanying notes to condensed consolidated financial statements.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

~~(UNAUDITED)~~

(Dollars in thousands) November 30, 2017
May 31, 2017
Assets:
Cash and cash equivalents $ 280,315
$ 166,615
Restricted cash 11,323
21,806
Time deposits 51,000
226,000
Investment securities:
Available for sale, at fair value 91,411
92,554
Held to maturity, at amortized cost 248,155
—
Total investment securities 339,566
92,554
Loans to members 24,824,691
24,367,044
Less: Allowance for loan losses (36,774 ) (37,376 )
Loans to members, net 24,787,917
24,329,668
Accrued interest receivable 116,770
111,493
Other receivables 38,410
45,469
Fixed assets, net 125,444
122,260
Derivative assets 87,453
49,481
Other assets 42,045
40,346
Total assets $ 25,880,243
$ 25,205,692

Liabilities:

Accrued interest payable $ 143,085
$ 137,476
Debt outstanding:
Short-term borrowings 3,557,192
3,342,900
Long-term debt 18,386,819
17,955,594
Subordinated deferrable debt 742,341
742,274
Members’ subordinated certificates:

Membership subordinated certificates 630,391
630,098
Loan and guarantee subordinated certificates 548,187
567,830
Member capital securities 221,097
221,097
Total members’ subordinated certificates 1,399,675
1,419,025
Total debt outstanding 24,086,027
23,459,793
Deferred income 67,690
73,972
Derivative liabilities 304,307
385,337
Other liabilities 39,086
50,309
Total liabilities 24,640,195
24,106,887

Commitments and contingencies

Equity:
CFC equity:

Retained equity 1,197,730
1,056,778
Accumulated other comprehensive income 11,899
13,175
Total CFC equity 1,209,629
1,069,953
Noncontrolling interests 30,419
28,852
Total equity 1,240,048
1,098,805
Total liabilities and equity $ 25,880,243
$ 25,205,692

See accompanying notes to condensed consolidated financial statements.

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)


	Q3 FY2024
(Dollars in thousands)	Membership Fees and Educational Fund		Patronage Capital Allocated		Members’ Capital Reserve		Unallocated Net Income		CFC Retained Equity		Accumulated Other Comprehensive Income (Loss)		Total CFC Equity		Non-controlling Interests		Total Equity


Balance as of November 30, 2023	$	2,886	$	934,135	$	1,202,152	$	718,215	$	2,857,388	$	8,618	$	2,866,006	$	30,134	$	2,896,140
Net income (loss)	—		—		—		31,470		31,470		—		31,470		(281)		31,189
Other comprehensive loss	—		—		—		—		—		(7,765)		(7,765)		—		(7,765)
Patronage capital retirement	—		(66,502)		25,353		—		(41,149)		—		(41,149)		—		(41,149)
Other	(182)		—		—		—		(182)		—		(182)		(10,372)		(10,554)
Balance as of February 29, 2024	$	2,704	$	867,633	$	1,227,505	$	749,685	$	2,847,527	$	853	$	2,848,380	$	19,481	$	2,867,861

	YTD FY2024

Balance as of May 31, 2023	$	3,534	$	1,006,115	$	1,202,152	$	341,915	$	2,553,716	$	8,343	$	2,562,059	$	27,190	$	2,589,249


Net income (loss)	—		—		—		407,770		407,770		—		407,770		(262)		407,508
Other comprehensive loss	—		—		—		—		—		(7,490)		(7,490)		—		(7,490)
Patronage capital retirement	—		(138,482)		25,353		—		(113,129)		—		(113,129)		—		(113,129)
Other	(830)		—		—		—		(830)		—		(830)		(7,447)		(8,277)
Balance as of February 29, 2024	$	2,704	$	867,633	$	1,227,505	$	749,685	$	2,847,527	$	853	$	2,848,380	$	19,481	$	2,867,861



	Q3 FY2023
(Dollars in thousands)	Membership Fees and Educational Fund		Patronage Capital Allocated		Members’ Capital Reserve		Unallocated Net Income (Loss)		CFC Retained Equity		Accumulated Other Comprehensive Income		Total CFC Equity		Non-controlling Interests		Total Equity
Balance as of November 30, 2022	$	2,859	$	896,096	$	1,062,286	$	443,072	$	2,404,313	$	2,080	$	2,406,393	$	27,319	$	2,433,712
Net income	—		—		—		162,896		162,896		—		162,896		321		163,217
Other comprehensive income	—		—		—		—		—		6,614		6,614		—		6,614
Patronage capital retirement	—		—		—		—		—		—		—		—		—
Other	(110)		—		—		—		(110)		—		(110)		—		(110)
Balance as of February 28, 2023	$	2,749	$	896,096	$	1,062,286	$	605,968	$	2,567,099	$	8,694	$	2,575,793	$	27,633	$	2,603,426

	YTD FY2023

Balance as of May 31, 2022	$	3,387	$	954,988	$	1,062,286	$	91,654	$	2,112,315	$	2,258	$	2,114,573	$	27,396	$	2,141,969


Net income	—		—		—		514,314		514,314		—		514,314		541		514,855
Other comprehensive income	—		—		—		—		—		6,436		6,436		—		6,436
Patronage capital retirement	—		(58,892)		—		—		(58,892)		—		(58,892)		(2,704)		(61,596)
Other	(638)		—		—		—		(638)		—		(638)		2,400		1,762
Balance as of February 28, 2023	$	2,749	$	896,096	$	1,062,286	$	605,968	$	2,567,099	$	8,694	$	2,575,793	$	27,633	$	2,603,426

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these statements.

(Dollars in thousands) Membership
Fees and
Educational
Fund Patronage
Capital
Allocated Members’
Capital
Reserve Unallocated
Net Income
(Loss) CFC
Retained
Equity Accumulated
Other
Comprehensive
Income Total
CFC
Equity Non-controlling
Interests Total
Equity
Balance as of May 31, 2017 $ 2,900
$ 761,701
$ 630,305
$ (338,128 ) $ 1,056,778
$ 13,175
$ 1,069,953
$ 28,852
$ 1,098,805
Net income —
—
—
186,706
186,706
—
186,706
1,032
187,738
Other comprehensive loss —
—
—
—
—
(1,276 ) (1,276 )

(1,276 )
Patronage capital retirement —
(45,220 ) —
—
(45,220 ) —
(45,220 ) —
(45,220 )
Other (534 ) —
—
—
(534 ) —
(534 ) 535
1
Balance as of November 30, 2017 $ 2,366
$ 716,481
$ 630,305
$ (151,422 ) $ 1,197,730
$ 11,899
$ 1,209,629
$ 30,419
$ 1,240,048

Balance as of May 31, 2016 $ 2,772
$ 713,853
$ 587,219
$ (513,610 ) $ 790,234
$ 1,058
$ 791,292
$ 26,086
$ 817,378
Net income —
—
—
261,158
261,158
—
261,158
1,885
263,043
Other comprehensive income —
—
—
—
—
7,743
7,743
—
7,743
Patronage capital retirement —
(42,129 ) —
—
(42,129 ) —
(42,129 ) —
(42,129 )
Other (578 ) —
—
—
(578 ) —
(578 ) 620
42
Balance as of November 30, 2016 $ 2,194
$ 671,724
$ 587,219
$ (252,452 ) $ 1,008,685
$ 8,801
$ 1,017,486
$ 28,591
$ 1,046,077

See accompanying notes to condensed consolidated financial statements.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

~~CONDENSED~~ CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


(Dollars in thousands)	YTD FY2024		YTD FY2023
Cash flows from operating activities:
Net income	$	407,508	$	514,855
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred loan fees	(4,914)		(5,720)
Amortization of debt issuance costs and discounts	21,975		21,692
Amortization of guarantee fee	15,480		14,144
Depreciation and amortization	7,910		3,815
Provision (benefit) for credit losses	(5,131)		3,806
Loss on early extinguishment of debt	998		—


Unrealized (gains) losses on equity and debt securities	(13,736)		2,638
Derivative forward value gains	(183,372)		(330,035)
Advances on loans held for sale	(222,500)		(148,142)
Proceeds from sales of loans held for sale	207,500		191,942
Changes in operating assets and liabilities:
Accrued interest receivable	(16,725)		(50,438)

Accrued interest payable	84,557		101,740
Deferred income	758		1,929
Other	(33,115)		(25,648)
Net cash provided by operating activities	267,193		296,578

Cash flows from investing activities:
Advances on loans held for investment, net	(1,863,331)		(2,384,524)
Investments in fixed assets, net	(4,199)		(14,586)








Purchase of trading securities	—		(118,065)
Proceeds from sales and maturities of trading securities	147,608		125,268
Cash impact of VIE deconsolidation	(10,341)		—




Net cash used in investing activities	(1,730,263)		(2,391,907)

Cash flows from financing activities:
Proceeds from (repayments of) short-term borrowings ≤ 90 days, net	(360,558)		49,287
Proceeds from short-term borrowings with original maturity > 90 days	2,486,862		2,141,018
Repayments of short-term borrowings with original maturity > 90 days	(2,067,953)		(2,271,841)
Payments for issuance costs for revolving bank lines of credit	(2,612)		(2,108)
Proceeds from issuance of long-term debt, net of discount and issuance costs	3,634,422		4,069,959
Payments for retirement of long-term debt	(2,148,018)		(1,801,904)

Proceeds from issuance of subordinated debt	103,500		—
Payments for issuance costs for subordinated deferrable debt	(1,109)		—
Payments for retirement of subordinated deferrable debt	(100,000)		—
Proceeds from issuance of members’ subordinated certificates	98		6,127
Payments for retirement of members’ subordinated certificates	(25,109)		(16,873)
Payments for retirement of patronage capital	(110,202)		(59,189)
Repayments for membership fees, net	(431)		(1)
Net cash provided by financing activities	1,408,890		2,114,475
Net increase (decrease) in cash, cash equivalents and restricted cash	(54,180)		19,146
Beginning cash, cash equivalents and restricted cash	207,237		161,114
Ending cash, cash equivalents and restricted cash	$	153,057	$	180,260

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these statements.

Table of Contents

Six Months Ended November 30,
(Dollars in thousands) 2017 2016
Cash flows from operating activities:
Net income $ 187,738
$ 263,043
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred loan fees (6,149 ) (6,024 )
Amortization of debt issuance costs and deferred charges 5,148
4,619
Amortization of discount on long-term debt 4,943
4,666
Amortization of issuance costs for bank revolving bank line of credit 2,768
2,925
Depreciation and amortization of fixed assets 3,769
3,578
Provision (benefit) for loan losses (602 ) 2,666
Results of operations of foreclosed assets —
1,661
Derivative forward value gains (119,252 ) (197,344 )
Changes in operating assets and liabilities:
Accrued interest receivable (5,277 ) 520
Accrued interest payable 5,609
2,559
Deferred income (133 ) 1,784
Other (7,589 ) (5,711 )
Net cash provided by operating activities 70,973
78,942

Cash flows from investing activities:
Advances on loans (4,185,985 ) (3,925,089 )
Principal collections on loans 3,728,773
3,295,412
Net investment in fixed assets (6,437 ) (11,294 )
Net cash proceeds from sale of foreclosed assets —
47,094
Proceeds from foreclosed assets —
4,036
Net proceeds from (investments in) time deposits 175,000
(300,000 )
Purchases of held-to-maturity investments (248,181 ) —
Change in restricted cash 10,483
(17,644 )
Net cash used in investing activities (526,347 ) (907,485 )

Cash flows from financing activities:
Proceeds from short-term borrowings, net 181,501
750,466
Proceeds from short-term borrowings with original maturity greater than 90 days 570,060
443,960
Repayments of short term-debt with original maturity greater than 90 days (537,269 ) (469,314 )
Payments for issuance costs for revolving bank lines of credit (2,402 ) (2,478 )
Proceeds from issuance of long-term debt, net of issuance costs 625,021
690,277
Payments for retirement of long-term debt (203,819 ) (555,874 )
Payments for issuance costs for subordinated deferrable debt —
(68 )
Proceeds from issuance of members’ subordinated certificates 3,989
1,660
Payments for retirement of members’ subordinated certificates (23,340 ) (3,020 )
Payments for retirement of patronage capital (44,667 ) (41,510 )
Net cash provided by financing activities 569,074
814,099
Net increase (decrease) in cash and cash equivalents 113,700
(14,444 )
Beginning cash and cash equivalents 166,615
204,540
Ending cash and cash equivalents $ 280,315
$ 190,096

Supplemental disclosure of cash flow information:
Cash paid for interest $ 374,098
$ 349,965
Cash paid for income taxes 152
383

See accompanying notes to condensed consolidated financial statements.


NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(Dollars in thousands)	YTD FY2024		YTD FY2023
Supplemental disclosure of cash flow information:
Cash paid for interest	$	881,859	$	619,052
Cash paid for income taxes	395		201

Non-cash financing and investing activities:
Equity investment, at cost, obtained in exchange for loan held for investment	$	—	$	7,778

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these statements.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

National Rural Utilities Cooperative Finance Corporation (“CFC”) is a tax-exempt, member-owned cooperative association incorporated under the laws of the District of Columbia in April 1969. CFC’s principal purpose is to provide its members with financing to supplement the loan programs of the Rural Utilities Service (“RUS”) of the United States Department of Agriculture (“USDA”). CFC makes loans to its rural electric members so they can acquire, construct and operate electric distribution systems, electric generation and transmission (“power supply”) systems and related facilities. CFC also provides its members and associates with credit enhancements in the form of letters of credit and guarantees of debt obligations. As a cooperative, CFC is owned by and exclusively serves its membership, which consists of not-for-profit entities or subsidiaries or affiliates of not-for-profit entities. ~~CFC is exempt from federal income taxes.~~

Basis of Presentation and Use of Estimates

The accompanying unaudited interim ~~condensed~~ consolidated financial statements have been prepared in ~~accordance~~conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and should be read in conjunction with the audited consolidated financial statements, and related notes thereto, included in CFC’s Annual Report on Form 10-K for the fiscal year ended May 31, 2017 (“2017 Form 10-K”). We believe that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and related disclosures. While management makes its best judgment, actual amounts or results could differ from these estimates. Our most significant estimates and assumptions involve determining the allowance for loan losses and the fair value of financial assets and liabilities. The results of operations in the interim financial statements is not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year ending May 31, 2018.

~~Principles of Consolidation~~

~~The accompanying condensed~~These consolidated financial statements include the accounts of CFC and variable interest entities (“VIEs”) where CFC is the primary beneficiary and subsidiary entities created and controlled by CFC to hold foreclosed assets. CFC did not have any entities that held foreclosed assets as of November 30, 2017 or May 31, 2017. All intercompany balances and transactions have been eliminated.beneficiary. National Cooperative Services Corporation (“NCSC”) ~~and Rural Telephone Finance Cooperative (“RTFC”) are VIEs which are~~is a VIE that is required to be consolidated by CFC. NCSC is a taxable member-owned cooperative that may provide financing to members of CFC, government or quasi-government entities which own electric utility systems that meet the Rural Electrification Act definition of ~~“rural”,~~“rural,” its rural telecommunications members and their affiliates, and for-profit and nonprofit entities that are owned, operated or controlled by, or provide significant benefits to certain members of CFC. Previously, Rural Telephone Finance Cooperative (“RTFC”) qualified as a VIE that was required to be consolidated by CFC. RTFC iswas a taxable Subchapter T cooperative association that ~~provides~~provided financing for its rural telecommunications members and their affiliates. Subsequent to December 1, 2023, in connection with the sale of RTFC’s business to NCSC, CFC is no longer a primary beneficiary of RTFC and therefore does not consolidate RTFC in its consolidated financial statements. See additional discussion under “RTFC Sale Transaction” below.

All intercompany balances and transactions have been eliminated. Unless stated otherwise, references to “we,” “our” or “us” relate to CFC and its consolidated ~~entities.~~entity.

~~Restricted Cash~~

~~Restricted cash, which totaled $11 million~~The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and ~~$22 million~~assumptions that affect the reported amounts and related disclosures during the period. Management’s most significant estimates and assumptions involve determining the allowance for credit losses. These estimates are based on information available as of ~~November 30, 2017~~the date of the consolidated financial statements. While management makes its best judgments, actual amounts or results could differ from these estimates. In the opinion of management, these unaudited interim financial statements reflect all adjustments of a normal, recurring nature that are necessary for the fair statement of results for the periods presented. The results in the interim financial statements included in our Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2024 (“this Report”) are not necessarily indicative of results that may be expected for the full fiscal year, and the unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in CFC’s Annual Report on Form 10-K for the fiscal year ended May 31, ~~2017, respectively, consisted primarily~~2023 (“2023 Form 10-K”).

Our fiscal year begins on June 1 and ends on May 31. Reference to “Q3 FY2024” and “YTD FY2024” refer to three and nine months ended February 29, 2024, respectively. Reference to “Q3 FY2023” and “YTD FY2023” refer to three and nine months ended February 28, 2023, respectively.

Table of funds held in escrow. On July 1, 2016, CFC completed the sale of Caribbean Asset Holdings, LLC (“CAH”), an entity that held foreclosed assets, to ATN VI Holdings, LLC. In connection with the sale, $16 million of the sale proceeds was deposited into escrow to fund potential indemnification claims for a period of 15 months following the closing. On September 27, 2017, we received a claim notice from the purchaser of CAH asserting potential indemnification claims and seeking funding from the escrow. On November 10, 2017, funds held in escrow totaling $13 million were released to CFC. The remaining $3 million remains in escrow for claims under evaluation for indemnification.Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

RTFC Sale Transaction

~~Interest Income~~

On December 1, 2023, RTFC sold and transferred all of its loans and certain other assets and liabilities to NCSC, which was accounted for pursuant to ASC 805-50 “Transactions between Entities under Common Control” as a sale of RTFC’s business to NCSC (hereon referred to as the “RTFC sale transaction”). The transfer was recorded at RTFC’s historical carrying amounts and therefore did not have an impact on the consolidated financial statements. In connection with the RTFC sale transaction, the CFC Board of Directors approved the early retirement of $66 million of allocated but unretired CFC patronage capital to RTFC at a discounted amount of $41 million, which was paid from CFC to RTFC in December 2023 and the remaining $25 million was allocated to CFCmembers’ capital reserve as of February 29, 2024. Following the closing of the RTFC sale transaction on December 1, 2023, CFC concluded that it is no longer the primary beneficiary of RTFC and accordingly, deconsolidated RTFC from its consolidated financial statements, resulting in a $10 million reduction in noncontrolling interest primarily attributable to cash held by RTFC. We did not record a gain or loss in association with CFC’s deconsolidation of RTFC.

New Accounting Standards Adopted in Fiscal Year 2024

Financial Instruments-Credit Losses, Troubled Debt Restructurings (“TDRs”) and Vintage Disclosures

In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which addresses and amends areas identified by the FASB as part of its post-implementation review of the accounting standard that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings (“TDR”) by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for entities, such as CFC, that have adopted the CECL accounting standard. We adopted the guidance on June 1, 2023 using the prospective adoption method. Accordingly, we will continue to account for existing TDR loans pursuant to the prior TDR accounting guidance until the loans are subsequently modified or settled, and to provide the disclosure required for TDR loans for the comparative periods prior to the adoption. While the guidance resulted in expanded disclosures, it did not have an impact on our consolidated results of operation, financial condition or liquidity from adoption of this accounting standard.

New Accounting Standards Issued But Not Yet Adopted

Segment Reporting-Improvements to Reportable Segment Disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which introduce key amendments to enhance disclosures for public entities’ reportable segments. The amendments require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments also expand the interim segment disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted and requires retrospective application to all prior periods presented in the financial statements. We expect to adopt the guidance in fiscal year 2025, and the interim disclosure requirements in the first quarter of fiscal year 2026. We are currently in the process of reviewing the guidance and evaluating its impact on our consolidated financial statements and related disclosures.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Disclosure Improvements-Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements - Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in this update modify the disclosure or presentation requirements of a variety of Topics in the Accounting Standards Codification (“ASC”) in response to the SEC’s Release No. 33-10532, Disclosure Update and Simplification Initiative, and align the ASC’s requirements with the SEC’s regulations. For entities subject to the SEC’s existing disclosure requirements, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective. Early adoption is prohibited. We are currently in the process of evaluating the impact of the amendment on our consolidated financial statements and related disclosures.


NOTE 2—INTEREST INCOME AND INTEREST EXPENSE

The following table ~~presents~~displays the components of interest income, by interest-earning asset ~~category, for the three~~type, and ~~six months ended November 30, 2017~~interest expense, by debt product type, presented on our consolidated statements of operations.

Table 2.1: Interest Income and ~~2016.~~Interest Expense



(Dollars in thousands)	Q3 FY2024		Q3 FY2023		YTD FY2024		YTD FY2023
Interest income:






Loans(1)	$	401,691	$	347,112	$	1,159,269	$	968,629
Cash, time deposits and investment securities	10,144		6,180		22,509		15,835
Total interest income	411,835		353,292		1,181,778		984,464

Interest expense:(2)(3)
Short-term borrowings	71,485		50,639		192,909		116,034





Long-term debt	241,817		204,876		693,269		541,678


Subordinated debt	33,717		26,194		100,967		78,909
Total interest expense	347,019		281,709		987,145		736,621

Net interest income	$	64,816	$	71,583	$	194,633	$	247,843

Three Months Ended November 30, Six Months Ended November 30,
(Dollars in thousands) 2017 2016 2017
2016
Interest income by interest-earning asset type:
Long-term fixed-rate loans⁽¹⁾
$ 248,926
$ 243,817
$ 498,290
$ 487,945
Long-term variable-rate loans 6,097
4,987
11,960
9,514
Line of credit loans 8,588
5,553
17,295
11,519
TDR loans⁽²⁾
222
231
448
449
Other income, net⁽³⁾
(306 ) (281 ) (538 ) (565 )
Total loans 263,527
254,307
527,455
508,862
Cash, time deposits and investment securities 2,296
2,849
4,283
5,129
Total interest income $ 265,823
$ 257,156
$ 531,738
$ 513,991
____________________________

^{____________________________}

⁽¹⁾Includes loan conversion fees, which are generally deferred and recognized asin interest income over the period to maturity using the effective interest ~~method.~~

⁽²⁾~~Troubled debt restructuring (“TDR”) loans.~~

⁽³⁾~~Consists of~~method, late payment fees, commitment fees and net amortization of deferred loan fees and loan origination costs.

Deferred income of $68 million and $74 million as of November 30, 2017 and May 31, 2017, respectively, consists primarily of deferred loan conversion fees totaling $63 million and $68 million, respectively.

~~Interest Expense~~

~~The following table presents interest expense, by debt product type, for the three and six months ended November 30, 2017 and 2016.~~

Three Months Ended November 30, Six Months Ended November 30,
(Dollars in thousands) 2017 2016 2017 2016
Interest expense by debt product type:⁽¹⁾⁽²⁾

Short-term borrowings $ 10,116
$ 5,409
$ 20,655
$ 10,291
Medium-term notes 27,544
24,705
52,660
48,290
Collateral trust bonds 85,321
84,951
170,598
170,000
Guaranteed Underwriter Program notes payable 35,688
36,216
71,290
71,988
Farmer Mac notes payable 11,947
7,587
23,437
14,486
Other notes payable 391
458
781
916
Subordinated deferrable debt 9,417
9,411
18,833
18,837
Subordinated certificates 14,746
14,917
29,647
29,926
Total interest expense $ 195,170
$ 183,654
$ 387,901
$ 364,734

^{____________________________}

⁽¹⁾(2) Includes amortization of debt discounts and debt issuance costs, which are generally deferred and recognized as interest expense over the period to maturity using the effective interest method. Issuance costs related to dealer commercial paper, however, are recognized asin interest expense immediately as incurred.

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

⁽²⁾(3) Includes fees related to funding arrangements, such as up-front fees paid to banks participating in our committed bank revolving line of credit agreements. ~~Depending~~Based on the nature of the ~~fee, amounts may be~~fees, the amount is either recognized immediately as incurred or deferred and recognized asin interest expense ratably over the term of the ~~arrangement or recognized immediately as incurred.~~ arrangement.

~~Recently Issued But Not Yet Adopted Accounting Standards and Tax Reform~~

~~Tax Cuts and Jobs Act~~

~~On December 22, 2017, the President of the United States signed and enacted into law H.R. 1, the~~ ~~Tax Cuts and Jobs Act~~ (“The Act”), which, except for certain provisions, is effective for tax years beginning on or after January 1, 2018. The Act significantly changes existing U.S. tax law and includes numerous provisions that will affect businesses. One of the primary changes is a reduction in the federal statutory corporate U.S.Deferred income tax rate to 21% percent from 35% and other changes that impact business-related exclusions, deductions and credits. CFC is exempt from federal income tax under Section 501(c)(4) of the Internal Revenue Code. NCSC is subject to federal income tax; however, NCSC’s annual taxable income and federal income tax is not material to our consolidated results of operations, financial position or liquidity. RTFC is subject to federal income tax; however, the allocation of patronage capital to its members is a deduction that historically has resulted in a significant reduction in its annual taxable income and federal income tax. Therefore, we do not expect The Act to have a material impactreported on our consolidated ~~results~~balance sheets of ~~operations, financial condition or liquidity.~~$34 million and $39 million as of February 29, 2024 and May 31, 2023, respectively, consists primarily of deferred loan conversion fees that totaled $26 million and $30 million as of each respective date.

~~Derivatives and Hedging—Targeted Improvements to Accounting for Hedging Activities~~

~~In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12,~~ ~~Derivatives and Hedging—Targeted Improvements to Accounting for Hedging Acti~~vities, which is intended to simplify and amend the application of hedge accounting to more clearly portray the economics of an entity’s risk management strategies in its financial statements. The new guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting, reduce complexity in fair value hedges of interest rate risk and eases certain documentation and assessment requirements of hedge effectiveness. It also changes how companies assess effectiveness and amends the presentation and disclosure requirements. The guidance is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim period or fiscal year before the effective date. The guidance is effective for us beginning June 1, 2019. We currently do not apply hedge accounting. If we continue to not apply hedge accounting to our derivatives, the adoption of the new guidance will have no impact on our consolidated financial statements.

~~Receivables—Nonrefundable Fees and Other Cost~~

~~In March 2017, FASB issued ASU 2017-08,~~ ~~Receivables—Nonrefundable Fees and Other~~ ~~Costs,~~which shortens the amortization period for the premium on certain purchased callable debt securities, that have a set call date and price, to the earliest call date. The guidance is effective for public entities in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. This update is effective for us beginning June 1, 2019. The adoption of this guidance will change the amortization period to the earliest call date for our purchased callable debt securities held at a premium; however, we do not expect that the adoption of this guidance will have a material impact on our consolidated financial statements.

~~Statement of Cash Flows—Restricted Cash~~

~~In November 2016, FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows—Restricted Cash,~~ which requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for public entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This update is effective for us beginning June

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1, 2018. The adoption of this guidance will change the presentation of restricted cash presented on our statement of cash flows; however, it will have no impact on our consolidated results of operations, financial condition or liquidity.

~~Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments~~

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments,~~ which changes the accounting for credit losses on certain financial assets to an expected loss model from the incurred loss model currently in use. The new guidance will likely result in earlier recognition of credit losses based on measuring the expected credit losses over the estimated life of financial assets held at each reporting date. The expected loss model will be the basis for determining the allowance for credit losses for loans and leases, unfunded lending commitments, held-to-maturity debt securities and other debt instruments measured at amortized cost. In addition, the new guidance modifies the other-than-temporary impairment model for available-for-sale debt securities to require the recognition of credit losses through a valuation allowance, which allows for the reversal of credit impairments in future periods. The ASU will also require enhanced disclosures to help users of financial statements better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. The new standard is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. This update is effective for us beginning June 1, 2020. Upon adoption, we will be required to record a cumulative-effect adjustment to retained earnings. The impact on our consolidated financial statements from the adoption of this new guidance will depend on the composition and risk profile of our loan portfolio as of the date of adoption. We do not expect to early adopt this guidance.

~~Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities~~

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities,~~ which amends certain aspects of the recognition, measurement, presentation and disclosure of certain financial instruments, including equity investments and liabilities measured at fair value under the fair value option. The guidance also updates fair value presentation and disclosure requirements for financial instruments measured at amortized cost. The ASU requires investments in equity securities that do not result in consolidation and are not accounted for under the equity method to be measured at fair value with changes in the fair value recognized through net income, unless one of two available exceptions apply. For financial liabilities where the fair value option has been elected, the portion of the total change in fair value caused by changes in the company’s own credit risk is required to be presented separately in OCI. The classification and measurement guidance is effective for public entities in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This update will be effective for us beginning June 1, 2018. Upon adoption, we will be required to reclassify the gain (loss) related to our equity investment securities classified as available-for-sale from accumulated other comprehensive income (“AOCI”) to retained earnings as a cumulative-effect adjustment and begin recording future changes in fair value through earnings. We had a gain of $11 million recorded in AOCI for our available-for-sale equity investments as of November 30, 2017. The impact on our consolidated financial statements at adoption will depend on the net unrealized gains (losses) recorded in AOCI for these equity investments as of the date of adoption.

~~Revenue from Contracts with Customers~~

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers~~, which modifies the guidance used to recognize revenue from contracts with customers for transfers of goods or services and transfers of nonfinancial assets, unless those contracts are within the scope of other guidance. The new guidance is effective for us beginning June 1, 2018. Because the scope of the guidance explicitly excludes net interest income as well as many other revenues for financial assets and liabilities including loans, securities, and derivatives, which account for the substantial majority of our revenues, we do not expect that the adoption of the guidance will have a material impact, if any, on our consolidated financial statements.

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~NOTE 2—VARIABLE INTEREST ENTITIES~~

NCSC and RTFC meet the definition of a VIE because they do not have sufficient equity investment at risk to finance their activities without financial support. CFC is the primary source of funding for NCSC and the sole source of funding for RTFC. Under the terms of management agreements, CFC manages the business operations of NCSC and RTFC. CFC also unconditionally guarantees full indemnification for any loan losses of NCSC and RTFC pursuant to guarantee agreements with each company. CFC earns management and guarantee fees from its agreements with NCSC and RTFC.

NCSC and RTFC creditors have no recourse against CFC in the event of a default by NCSC and RTFC, unless there is a guarantee agreement under which CFC has guaranteed NCSC or RTFC debt obligations to a third party. The following table provides information on incremental consolidated assets and liabilities of VIE’s included in CFC’s condensed consolidated financial statements, after applying intercompany eliminations, as of November 30, 2017 and May 31, 2017.

(Dollars in thousands) November 30, 2017 May 31, 2017
Total loans outstanding $ 1,111,438
$ 968,343
Other assets 10,477
10,157
Total assets $ 1,121,915
$ 978,500

Long-term debt $ 10,000
$ 10,000
Other liabilities 38,202
36,899
Total liabilities $ 48,202
$ 46,899

~~The following table provides information on CFC’s credit commitments to NCSC and RTFC, and its potential exposure to loss as of November 30, 2017 and May 31, 2017.~~

(Dollars in thousands) November 30, 2017
May 31, 2017
CFC credit commitments $ 5,500,000
$ 5,500,000
Outstanding commitments:
Borrowings payable to CFC⁽¹⁾
1,075,319
931,686
CFC third-party guarantees 16,801
14,697
Other credit enhancements 19,052
20,963
Total credit enhancements 35,853
35,660
Total outstanding commitments 1,111,172
967,346
CFC available credit commitments $ 4,388,828
$ 4,532,654

~~____________________________~~

⁽¹⁾ ~~Borrowings payable to CFC are eliminated in consolidation.~~

CFC loans to NCSC and RTFC are secured by all assets and revenues of NCSC and RTFC. CFC’s maximum potential exposure for the credit enhancements totaled $39 million. The maturities for obligations guaranteed by CFC extend through 2031.

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~



NOTE 3—INVESTMENT SECURITIES

~~We record purchases and sales of securities on a trade-date basis. The accounting and measurement framework for~~Our investment securities differs depending on the security classification. We currently classify and account for our investment securities as either available for sale (“AFS”) or held to maturity (“HTM”) based on our investment strategy and management’s assessmentportfolio consists of our intent and ability to hold the securities until maturity. Securities that we may sell prior to maturity in response to changes in our investment strategy, liquidity needs, credit risk mitigating considerations, market risk profile or for other reasons are classified as AFS. Securities that we have the positive intent and ability to hold until maturity are classified as HTM.

~~We report~~debt securities classified as ~~AFS on our condensed consolidated balance sheets at~~trading and equity securities with readily determinable fair values. We therefore record changes in the fair value of our debt and equity securities in earnings and report these unrealized changes together with ~~unrealized~~realized gains orand losses ~~recorded~~from the sale of securities as a component of ~~accumulated other comprehensive~~non-interest income ~~(“AOCI”). We report securities classified as HTM on~~in our ~~condensed~~ consolidated ~~balance sheets at amortized cost. Interest income on fixed-income securities, including amortization~~statements of ~~premiums and accretion of discounts, is generally recognized over the contractual life of the securities based on the effective yield method.~~operations.

~~We did not have any securities classified as HTM as of May 31, 2017. During the second quarter of fiscal year 2018, we~~ ~~commenced the purchase of additional investment securities,~~ consisting primarily of certificates of deposit, commercial paper, corporate debt securities, commercial mortgage-backed securities (“MBS”) and other asset-backed securities (“ABS”). We have the positive intent and ability to hold these securities to maturity. As such, we have classified them as held to maturity on our condensed consolidated balance sheet.

Pursuant to our investment policy guidelines, all fixed-income securities, at the time of purchase, must be rated at least investment grade based on external credit ratings, when available, or the corresponding equivalent, when not available. Securities rated investment grade, that is those rated Baa3 or higher by Moody’s Investors Service (“Moody’s”) or BBB- or higher by S&P Global Ratings (“S&P”), are generally considered by the rating agencies to be of lower credit risk than non-investment grade securities.

~~Amortized Cost and Fair Value of Investment~~Debt Securities

The following ~~tables present~~table presents the ~~amortized cost~~composition of our investment debt securities portfolio and the fair value ~~our investment securities and the corresponding gross unrealized gains and losses, by classification category and major security type,~~ as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023.

Table 3.1: Investments in Debt Securities, at Fair Value


(Dollars in thousands)	February 29, 2024		May 31, 2023
Debt securities, at fair value:



Corporate debt securities	$	291,308	$	401,367

Commercial agency mortgage-backed securities (“MBS”)(1)	6,760		7,237


U.S. state and municipality debt securities	10,921		27,300
Foreign government debt securities	500		974
Other asset-backed securities(2)	25,543		37,997
Total debt securities trading, at fair value	$	335,032	$	474,875

____________________________

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~(1)Consists of securities backed by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”).

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

November 30, 2017
(Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Available for sale:
Farmer Mac—Series A Non-Cumulative Preferred Stock $ 30,000
$ 1,032
$ —
$ 31,032
Farmer Mac—Series B Non-Cumulative Preferred Stock 25,000
1,924
—
26,924
Farmer Mac—Series C Non-Cumulative Preferred Stock 25,000
2,750
—
27,750
Farmer Mac—Class A Common Stock 538
5,167
—
5,705
Total investment securities, available-for-sale 80,538
10,873
—
91,411

Held to maturity:
Certificates of deposit 4,146
1
(1 ) 4,146
Commercial paper 7,196
1
(1 ) 7,196
Corporate bonds 210,099
5
(872 ) 209,232
Commercial MBS, non-agency 4,041
—
(3 ) 4,038
Other ABS⁽¹⁾
22,673
—
(28 ) 22,645
Total investment securities, held-to-maturity 248,155
7
(905 ) 247,257

Total investment securities $ 328,693
$ 10,880

$ (905 )
$ 338,668

^{____________________________}

⁽¹⁾(2)Consists primarily of securities backed by auto lease loans, equipment-backed loans, auto loans and credit card loans.

May 31, 2017
(Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Available for sale:

Farmer Mac—Series A Non-Cumulative Preferred Stock $ 30,000
$ 1,585
$ —
$ 31,585
Farmer Mac—Series B Non-Cumulative Preferred Stock 25,000
1,940
—
26,940
Farmer Mac—Series C Non-Cumulative Preferred Stock 25,000
4,150
—
29,150
Farmer Mac—Class A Common Stock 538
4,341
—
4,879
Total investment securities, available-for-sale $ 80,538
$ 12,016
$ —
$ 92,554

~~For additional information on the~~We recognized net unrealized gains ~~(losses) losses recorded~~ on our ~~available-for-sale investment~~debt securities ~~see “Note 9—Equity—Accumulated Other Comprehensive Income.”~~of $5 million and $13 million for Q3 FY2024 and YTD FY2024, respectively. We recognized net unrealized gains of $2 million and net unrealized losses of $7 million on our debt securities for Q3 FY2023 and YTD FY2023, respectively.

~~Investment~~We did not sell any debt securities during the YTD FY2024 and YTD FY2023; therefore, no realized gains or losses were recorded during these periods for sale of securities.

Equity Securities ~~in Gross Unrealized Loss Position~~

~~An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis.~~ The following table presents the ~~fair value~~composition of our equity security holdings and gross unrealized losses for investments in a gross loss position, aggregated by security type, and the length of time the securities have been in a continuous unrealized loss position as of November 30, 2017. The securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and twelve months or more based on the point in time that the fair value ~~declined below the amortized cost basis. We did not have any investment securities in a gross unrealized loss position~~ as of February 29, 2024 and May 31, ~~2017.~~2023.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table 3.2: Investments in Equity Securities, at Fair Value


(Dollars in thousands)	February 29, 2024		May 31, 2023
Equity securities, at fair value:
Farmer Mac—Series C non-cumulative preferred stock	$	25,110	$	25,750
Farmer Mac—Class A common stock	11,535		9,744
Total equity securities, at fair value	$	36,645	$	35,494

We recognized net unrealized gains on our equity securities of $1 million for both Q3 FY2024 and YTD FY2024. We recognized net unrealized losses on our equity securities of $2 million and net unrealized gains of $4 million for Q3 FY2023 and YTD FY2023, respectively.


NOTE 4—LOANS

November 30, 2017
Unrealized Loss Position Less than 12 Months Unrealized Loss Position 12 Months or Longer Total
(Dollars in thousands) Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
Held to maturity:
Certificates of deposit $ 1,898
$ (1 ) $ —
$ —
$ 1,898
$ (1 )
Commercial paper 5,594
(1 ) —
—
5,594
(1 )
Corporate bonds 200,170
(872 ) —
—
200,170
(872 )
Commercial MBS, non-agency 4,038
(3 ) —
—
4,038
(3 )
Other asset-backed securities⁽¹⁾
22,645
(28 ) —
—
22,645
(28 )
Total $ 234,345
$ (905 ) $ —
$ —
$ 234,345
$ (905 )

^{____________________________}Our loan portfolio is segregated into segments by borrower member class, which is based on the utility sector of the borrowers because the key operational, infrastructure, regulatory, environmental, customer and financial risks of each sector are similar in nature. Total loan portfolio member class consists of CFC distribution, CFC power supply, CFC statewide and associate, NCSC electric and NCSC telecommunications (“telecom”). Prior to the RTFC sale transaction on December 1, 2023, NCSC electric and NCSC telecom were referred to as NCSC and RTFC, respectively. We offer both long-term and line of credit loans to our borrowers. Under our long-term loan facilities, a borrower may select a fixed interest rate or a variable interest rate at the time of each loan advance. Line of credit loans are revolving loan facilities and generally have a variable interest rate.

⁽¹⁾~~Consists primarily~~

Loans to Members

Loans to members consist of ~~securities backed by auto lease~~ loans ~~equipment-backed~~held for investment and loans ~~auto~~held for sale. The outstanding amount of loans held for investment is recorded based on the unpaid principal balance, net of discounts, charge-offs and recoveries, of loans and ~~credit card loans.~~

~~Other-Than-Temporary Impairment~~

~~We conduct periodic reviews~~deferred loan origination costs. The outstanding amount of ~~all securities with unrealized losses to evaluate whether~~loans held for sale is recorded based on the ~~impairment is other than temporary. The number~~lower of individual securities in an unrealized loss position was 170 as of November 30, 2017. We have assessed each security with gross unrealized losses included in the above table for credit impairment. As part of that assessment, we concluded that the unrealized losses are primarily driven by changes in market interest rates rather than by adverse changes in the credit quality of these securities. Based on our assessment, we expect to recover the entire amortized cost basis of these securities, as we do not intend to sell any of the securities and believe that it is more likely than not that we will not be required to sell prior to recovery of the amortized cost basis. Accordingly, we currently consider the impairment of these securities to be temporary.

~~Contractual Maturity and Yield~~

or fair value. The following table presents loans to members by ~~major security~~legal entity, member class and loan type, ~~the remaining contractual maturity based on amortized cost and fair value~~ as of ~~November 30, 2017~~February 29, 2024 and May 31, 2023.

Table of our HTM investment securities. Because borrowers may have the right to call or prepay certain obligations, the expected maturities of our investments may differ from the scheduled contractual maturities presented below. Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table 4.1: Loans to Members by Member Class and Loan Type

November 30, 2017
(Dollars in thousands) Due in 1 Year or Less Due > 1 Year through 5 Years Due > 5 Years through 10 Years Due >10 Years Total
Amortized cost:
Certificates of deposit $ 4,146
$ —
$ —
$ —
$ 4,146
Commercial paper 7,196
—
—
—
7,196
Corporate bonds —
193,477
16,622
—
210,099
Commercial MBS, non-agency —
—
—
4,041
4,041
Other asset-backed securities⁽¹⁾
—
20,681
1,992
—
22,673
Total $ 11,342
$ 214,158
$ 18,614
$ 4,041
$ 248,155

Fair value:
Certificates of deposit $ 4,146
$ —
$ —
$ —
$ 4,146
Commercial paper 7,196
—
—
—
7,196
Corporate bonds —
192,677
16,555
—
209,232
Commercial MBS, non-agency —
—
—
4,038
4,038
Other ABS⁽¹⁾
—
20,653
1,992
—
22,645
Total $ 11,342
$ 213,330
$ 18,547
$ 4,038
$ 247,257

Weighted average coupon⁽²⁾
0.60 % 2.68 % 2.95 % 2.20 % 2.60 %


	February 29, 2024				May 31, 2023
(Dollars in thousands)	Amount		% of Total		Amount		% of Total
Member class:
CFC:
Distribution	$	26,876,308	78	%	$	25,437,077	78	%
Power supply	5,731,520		16		5,437,242		17
Statewide and associate	258,181		1		200,368		1
Total CFC	32,866,009		95		31,074,687		96
NCSC:
Electric	984,182		3		956,874		3
Telecom	548,521		2		487,788		1
Total NCSC	1,532,703		5	%	$	1,444,662	4	%
Total loans outstanding(1)	34,398,712		100		32,519,349		100
Deferred loan origination costs—CFC(2)	13,622		—		12,737		—
Loans to members	$	34,412,334	100	%	$	32,532,086	100	%

Loan type:
Long-term loans:
Fixed rate	$	30,059,233	88	%	$	28,371,358	87	%
Variable rate	809,585		2		1,024,653		3

Total long-term loans	30,868,818		90		29,396,011		90
Lines of credit	3,529,894		10		3,123,338		10
Total loans outstanding(1)	34,398,712		100		32,519,349		100
Deferred loan origination costs—CFC(2)	13,622		—		12,737		—
Loans to members	$	34,412,334	100	%	$	32,532,086	100	%

^{____________________________}

⁽¹⁾~~Consists primarily of securities backed by auto lease loans, equipment-backed loans, auto loans and credit card loans.~~

⁽²⁾~~Calculated based on~~ Represents the ~~weighted average coupon rate, which excludes the impact of amortization of premium and accretion of discount.~~

The average contractual maturity and weighted average coupon of our HTM investment securities was four years and 2.60%, respectively, as of November 30, 2017. The average credit rating of these securities, based on their lowest credit rating by Moody’s and S&P was A3 and A-, respectively, as of November 30, 2017.

~~Realized Gains and Losses~~

~~We have not sold any of our investment securities during the three and six months ended November 30, 2017 and 2016, and therefore have not recorded any realized gains or losses.~~

~~NOTE 4—LOANS AND COMMITMENTS~~

~~Loans, which are classified as held for investment, are carried at the outstanding~~ unpaid principal balance, net of ~~unamortized~~discounts, charge-offs and recoveries, of loans as of the end of each period.

(2)Deferred loan origination ~~costs. The following table presents loans outstanding, by loan type and by member class, as~~costs are recorded on the books of ~~November 30, 2017 and May 31, 2017.~~CFC.

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

November 30, 2017 May 31, 2017
(Dollars in thousands)
Loans
Outstanding

Unadvanced
Commitments⁽¹⁾

Loans
Outstanding

Unadvanced
Commitments⁽¹⁾
Loan type:
Long-term loans:
Fixed rate $ 22,415,833
$ —
$ 22,136,690
$ —
Variable rate 906,453
4,950,905
847,419
4,802,319
Total long-term loans 23,322,286
4,950,905
22,984,109
4,802,319
Lines of credit 1,491,256
7,575,116
1,372,221
7,772,655
Total loans outstanding 24,813,542
12,526,021
24,356,330
12,574,974
Deferred loan origination costs
11,149

—

10,714

—
Loans to members
$ 24,824,691

$ 12,526,021

$ 24,367,044

$ 12,574,974

Member class:
CFC:
Distribution $ 19,230,740
$ 8,098,698
$ 18,825,366
$ 8,295,146
Power supply 4,414,257
3,412,557
4,504,791
3,276,113
Statewide and associate 57,107
127,622
57,830
144,406
Total CFC 23,702,104
11,638,877
23,387,987
11,715,665
NCSC 739,707
591,119
613,924
584,944
RTFC 371,731
296,025
354,419
274,365
Total loans outstanding 24,813,542
12,526,021
24,356,330
12,574,974
Deferred loan origination costs 11,149
—
10,714
—
Loans to members $ 24,824,691
$ 12,526,021
$ 24,367,044
$ 12,574,974

^{____________________________}

⁽¹⁾The interest rate on unadvanced loan commitments is not set until an advance is made; therefore, all long-term unadvanced loan commitments are reported as variable-rate. However, the borrower may select either a fixed or a variable rate when an advance on a commitment is made.

~~Unadvanced Loan Commitments~~

Unadvanced loan commitments represent approved and executed loan contracts for which funds have not been advanced to borrowers. The following table summarizes the available balance under unadvanced loan commitments as of November 30, 2017 and the related maturities by fiscal year and thereafter by loan type:

Available
Balance
Notional Maturities of Unadvanced Loan Commitments
(Dollars in thousands) 2018 2019 2020 2021 2022 Thereafter
Line of credit loans $ 7,575,116

$ 342,159

$ 4,343,222

$ 641,613

$ 950,998

$ 773,772

$ 523,352
Long-term loans 4,950,905

215,806

986,952

649,436

676,899

1,885,338

536,474
Total $ 12,526,021

$ 557,965

$ 5,330,174

$ 1,291,049

$ 1,627,897

$ 2,659,110

$ 1,059,826

Unadvanced line of credit commitments accounted for 60% of total unadvanced loan commitments as of November 30, 2017, while unadvanced long-term loan commitments accounted for 40% of total unadvanced loan commitments. Unadvanced line of credit commitments are typically revolving facilities for periods not to exceed five years. Unadvanced

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

line of credit commitments generally serve as supplemental back-up liquidity to our borrowers. Historically, borrowers have not drawn the full commitment amount for line of credit facilities, and we have experienced a very low utilization rate on line of credit loan facilities regardless of whether or not we are obligated to fund the facility where a material adverse change exists. Our unadvanced long-term loan commitments have a five-year draw period under which a borrower may advance funds prior to the expiration of the commitment. We expect that the majority of the long-term unadvanced loan commitments of $4,951 million will be advanced prior to the expiration of the commitment.

Because we historically have experienced a very low utilization rate on line of credit loan facilities, which account for the majority of our total unadvanced loan commitments, we believe the unadvanced loan commitment total of $12,526 million as of November 30, 2017 is not necessarily representative of our future funding cash requirements.

~~Unadvanced Loan Commitments—Conditional~~

The substantial majority of our line of credit commitments and all of our unadvanced long-term loan commitments include material adverse change clauses. Unadvanced loan commitments subject to material adverse change clauses totaled $9,741 million and $9,973 million as of November 30, 2017 and May 31, 2017, respectively. Prior to making an advance on these facilities, we confirm that there has been no material adverse change in the business or condition, financial or otherwise, of the borrower since the time the loan was approved and confirm that the borrower is currently in compliance with loan terms and conditions. In some cases, the borrower’s access to the full amount of the facility is further constrained by the designated purpose, imposition of borrower-specific restrictions or by additional conditions that must be met prior to advancing funds.

~~Unadvanced Loan Commitments—Unconditional~~

Unadvanced loan commitments not subject to material adverse change clauses at the time of each advance consisted of unadvanced committed lines of credit totaling $2,785 million and $2,602 million as of November 30, 2017 and May 31, 2017, respectively. As such, we are required to advance amounts on these committed facilities as long as the borrower is in compliance with the terms and conditions of the facility.

~~The following table summarizes the available balance under unconditional committed lines of credit, and the related maturities by fiscal year and thereafter, as of November 30, 2017.~~

Available
Balance
Notional Maturities of Unconditional Committed Lines of Credit
(Dollars in thousands) 2018 2019 2020 2021 2022 Thereafter
Committed lines of credit $2,784,511 $130,000 $517,130 $395,711 $630,631 $677,818 $433,221

Loan Sales

We may transfer ~~from time to time,~~whole loans and participating interests to third ~~parties under our direct~~parties. These transfers are typically made concurrently or within a short period of time with the closing of the loan sale ~~program.~~ or participation agreement at par value and meet the accounting criteria required for sale accounting.

We sold CFC ~~loans with outstanding balances totaling $110 million~~ and ~~$31 million,~~NCSC loans, at par for cash, totaling $208 million and $192 million during ~~the six months ended November 30, 2017~~YTD FY2024 and ~~2016,~~YTD FY2023, respectively. We recorded immaterial losses ~~upon~~on the sale of these ~~loans,~~ loans attributable to the unamortized deferred loan origination costs associated with the transferred ~~loans.~~

~~Pledging~~loans. We had loans held for sale totaling $15 million as of ~~Loans~~

~~We are required to pledge eligible mortgage notes in an amount at least equal~~February 29, 2024, which were sold subsequent to the ~~outstanding~~quarter end. We had no loans held for sale as of May 31, 2023.

Accrued Interest Receivable

We report accrued interest on loans separately on our consolidated balance ~~of our secured debt. The following table summarizes our loans outstanding~~sheets as collateral pledged to secure our collateral trust bonds, Clean Renewable Energy Bonds, notes payable to Farmer Mac and notes payable to the Federal Financing Bank and guaranteed by RUS under the Guaranteed Underwriter Programa component of the ~~USDA (“Guaranteed Underwriter Program”)~~line item accrued interest receivable rather than as a component of loans to members. Accrued interest on loans totaled $149 million and ~~the amount~~$133 million as of ~~the~~February 29, 2024 and May 31, 2023, respectively. Accrued interest receivable amounts generally represent

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

three months or less of accrued interest on loans outstanding. Because our policy is to write off past-due accrued interest receivable in a timely manner, we elected not to measure an allowance for credit losses for accrued interest receivable on loans outstanding. We also elected to exclude accrued interest receivable from the credit quality disclosures required under CECL.

~~corresponding debt~~

Credit Concentration

Because we lend primarily to our rural electric utility cooperative members, we have had a loan portfolio subject to single-industry and single-obligor concentration risks since our inception in 1969. Loans outstanding to electric utility organizations of $33,850 million and $32,032 million as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017. See “Note 5—Short-Term Borrowings”~~2023, respectively, accounted for 98% and ~~“Note 6—Long-Term Debt” for information on our borrowings.~~

(Dollars in thousands) November 30, 2017 May 31, 2017
Collateral trust bonds:
2007 indenture:
Distribution system mortgage notes $ 8,527,458
$ 8,740,572
RUS-guaranteed loans qualifying as permitted investments 143,564
146,373
Total pledged collateral $ 8,671,022
$ 8,886,945
Collateral trust bonds outstanding 7,697,711
7,697,711

1994 indenture:
Distribution system mortgage notes $ 253,323
$ 263,007
Collateral trust bonds outstanding 220,000
225,000

Farmer Mac:
Distribution and power supply system mortgage notes $ 2,876,351
$ 2,942,456
Notes payable outstanding 2,491,464
2,513,389

Clean Renewable Energy Bonds Series 2009A:
Distribution and power supply system mortgage notes $ 13,950
$ 14,943
Cash 1,225
481
Total pledged collateral $ 15,175
$ 15,424
Notes payable outstanding 13,214
13,214

Federal Financing Bank:
Distribution and power supply system mortgage notes $ 5,876,050
$ 5,833,515
Notes payable outstanding 5,060,192
4,985,748

~~Credit Concentration~~

We serve electric and telecommunications members throughout the United States and its territories, including 49 states, the District of Columbia, American Samoa and Guam. Texas had the largest concentration of outstanding loans to borrowers in any one state, with approximately 15%99% of total loans outstanding as of both November 30, 2017 and May 31, 2017. Our consolidated membership totaled 1,459 members and 217 associates as of November 30, 2017. As such, we have a loan portfolio with single-industry and single-obligor concentration risk. Outstanding loans to electric utility organizations represented approximately 99% of the total outstanding loan portfolio as of November 30, 2017, unchanged from May 31, 2017.each respective date. The remaining loans outstanding ~~loans~~ in our portfolio were to ~~RTFC~~ members, affiliates and associates in the telecommunications industry. Our credit exposure is partially mitigated by long-term loans guaranteed by RUS, which totaled $116 million and $123 million as of February 29, 2024 and May 31, 2023, respectively.

Single-Obligor Concentration

The outstanding loan exposure ~~of the~~for our 20 largest borrowers ~~was 23%~~totaled $6,747 million and ~~24%~~$6,588 million as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017, respectively. The~~2023, respectively, representing 20% of total loans outstanding as of each respective date. Our 20 largest borrowers consisted of 12 distribution systems and eight power supply systems as of February 29, 2024 compared to 10 distribution systems 9and 10 power ~~supply~~ supply systems ~~and 1 NCSC associate member~~ as of ~~both November 30, 2017 and~~ May 31, ~~2017.~~2023. The largest total outstanding exposure to a single borrower or controlled group represented approximately 2%1% of total loans ~~and guarantees~~ outstanding as of both ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023.

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Credit Quality~~

We closely monitor loan performance trends to manage and evaluate our credit risk exposure. We seek to provide a balance between meeting the credit needs of our members, while also ensuring the sound credit quality of our loan portfolio. Payment status and internal risk ratings are key indicators, among others, of the level of credit risk in our loan portfolio.

~~As part of our strategy in managing our credit risk exposure, we~~ entered into a long-term standby purchase commitment agreement with Farmer ~~Mac.~~Mac during fiscal year 2016. Under this agreement, we may designate certain long-term loans to be covered under the commitment, subject to approval by Farmer Mac, and in the event any such loan later goes into payment default for at least 90 days, upon request by us, Farmer Mac must purchase such loan at par value. ~~The aggregate unpaid principal balance of designated and Farmer Mac approved loans was $792 million and $843 million as of November 30, 2017 and May 31, 2017, respectively. Under the agreement, we~~We are required to pay Farmer Mac a monthly fee based on the unpaid principal balance of loans covered under the purchase commitment. NoThe aggregate unpaid principal balance of designated and Farmer Mac approved loans was $398 million and $436 million as of February 29, 2024 and May 31, 2023, respectively. Loan exposure to our 20 largest borrowers covered under the Farmer Mac agreement totaled $235 million and $267 million as of February 29, 2024 and May 31, 2023, respectively, which reduced our exposure to the 20 largest borrowers to 19% as of each respective date. We have had no loan defaults for loans covered under this agreement; therefore, no loans have been put to Farmer Mac for purchase pursuant to ~~this~~the standby purchase agreement as of ~~November 30, 2017. Also, we had~~February 29, 2024. Our credit exposure is also mitigated by long-term loans ~~totaling $164 million~~guaranteed by RUS.

Geographic Concentration

Although our organizational structure and ~~$167 million as~~mission result in single-industry concentration, we serve a geographically diverse group of ~~November 30, 2017~~electric and telecommunications borrowers throughout the U.S. The consolidated number of borrowers with loans outstanding totaled 893 and 884 as of February 29, 2024 and May 31, ~~2017,~~2023, respectively, located in 49 states and the District of Columbia. Of the 893 and 884 borrowers with loans outstanding, 50 and 52 were electric power supply borrowers

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

as of February 29, 2024 and May 31, 2023, respectively. Electric power supply borrowers generally require significantly more capital than electric distribution and telecommunications borrowers.

Texas accounted for the largest number of borrowers with loans outstanding in any one state as of both February 29, 2024 and May 31, 2023, as well as the largest concentration of loan exposure. The following table presents the Texas-based number of borrowers and loans outstanding by legal entity and member class, as of February 29, 2024 and May 31, 2023.

Table 4.2: Loan Exposure to Texas-Based Borrowers


	February 29, 2024					May 31, 2023
(Dollars in thousands)	Number of Borrowers	Amount		% of Total		Number of Borrowers	Amount		% of Total
Member class:
CFC:
Distribution	57	$	4,446,098	13	%	57	$	4,319,937	13	%
Power supply	6	1,140,297		3		8	1,128,941		4
Statewide and associate	1	82,571		—		1	51,504		—
Total CFC	64	5,668,966		16		66	5,500,382		17
NCSC:
Electric	1	8,667		—		1	16,667		—
Telecom	2	10,764		—		2	11,755		—
Total NCSC	3	19,431		—		3	28,422		—
Total loan exposure to Texas-based borrowers	67	5,688,397		16		69	5,528,804		17
Less: Loans covered under Farmer Mac standby purchase commitment		(132,866)		—			(155,409)		—
Net loan exposure to Texas-based borrowers		$	5,555,531	16	%		$	5,373,395	17	%

Credit Quality Indicators

Assessing the overall credit quality of our loan portfolio and measuring our credit risk is an ongoing process that ~~were guaranteed by~~involves tracking payment status, modifications to borrowers experiencing financial difficulty, nonperforming loans, charge-offs, the ~~Rural Utilities Service (“RUS”)~~internal risk ratings of our borrowers and other indicators of credit risk. We monitor and subject each borrower and loan facility in our loan portfolio to an individual risk assessment based on quantitative and qualitative factors. Payment status trends and internal risk ratings are indicators, among others, of the ~~United States Department~~probability of ~~Agriculture.~~borrower default and overall credit quality of our loan portfolio.

Payment Status of Loans

Loans are considered delinquent when contractual principal or interest amounts become past due 30 days or more following the scheduled payment due date. Loans are placed on nonaccrual status when payment of principal or interest is 90 days or more past due or management determines that the full collection of principal and interest is doubtful. The ~~tables below present~~following table presents the payment status, by legal entity and member class, of loans outstanding ~~by member class~~ as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017. As indicated in the table, we did not have any past due loans as~~2023.

Table of ~~either November 30, 2017 or May 31, 2017.~~Contents

November 30, 2017
(Dollars in thousands) Current 30-89 Days Past Due
90 Days or More
Past Due ⁽¹⁾

Total
Past Due

Total Financing
Receivables
Nonaccrual Loans
CFC:
Distribution $ 19,230,740
$ —
$ —
$ —
$ 19,230,740
$ —
Power supply 4,414,257
—
—
—
4,414,257
—
Statewide and associate 57,107
—
—
—
57,107
—
CFC total 23,702,104
—
—
—
23,702,104
—
NCSC 739,707
—
—
—
739,707
—
RTFC 371,731
—
—
—
371,731
—
Total loans outstanding $ 24,813,542
$ —
$ —
$ —
$ 24,813,542
$ —

Percentage of total loans 100.00 % — % — % — % 100.00 % — %

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table 4.3: Payment Status of Loans Outstanding


	May 31, 2017																			February 29, 2024
(Dollars in thousands)	Current			30-89 Days Past Due			90 Days or More Past Due ⁽¹⁾			Total Past Due			Total Financing Receivables			Nonaccrual Loans			(Dollars in thousands)	Current			30-89 Days Past Due			> 90 Days Past Due				Total Past Due				Total Loans Outstanding				Nonaccrual Loans
Member class:
CFC:
CFC:
CFC:
Distribution	$	18,825,366		$	—		$	—		$	—		$	18,825,366		$	—		Distribution	$	26,876,308		$	—		$	—			$	—			$	26,876,308			$	—
Power supply	4,504,791			—			—			—			4,504,791			—			Power supply	5,731,520									—				5,731,520				84,987
Statewide and associate	57,830			—			—			—			57,830			—
CFC total	23,387,987			—			—			—			23,387,987			—
NCSC	613,924			—			—			—			613,924			—
RTFC	354,419			—			—			—			354,419			—
Total CFC																			Total CFC	32,866,009									—				32,866,009				84,987
NCSC:
Electric
Electric
Electric																				984,182									—				984,182				—
Telecom																			Telecom	548,521									—				548,521				—
Total NCSC																			Total NCSC	1,532,703									—				1,532,703				—
Total loans outstanding	$	24,356,330		$	—		$	—		$	—		$	24,356,330		$	—		Total loans outstanding	$	34,398,712		$	—		$	—			$	—			$	34,398,712			$	84,987

Percentage of total loans	100.00		%	—		%	—		%	—		%	100.00		%	—		%
Percentage of total loans
Percentage of total loans																				100.00		%	—		%	—		%		—		%		100.00		%		0.25		%

^{____________________________}

⁽¹⁾ ~~All~~


	May 31, 2023
(Dollars in thousands)	Current			30-89 Days Past Due			> 90 Days Past Due			Total Past Due			Total Loans Outstanding			Nonaccrual Loans
Member class:
CFC:
Distribution	$	25,437,077		$	—		$	—		$	—		$	25,437,077		$	—
Power supply	5,432,895			—			4,347			4,347			5,437,242			112,209
Statewide and associate	200,368			—			—			—			200,368			—
Total CFC	31,070,340			—			4,347			4,347			31,074,687			112,209
NCSC:
Electric	920,159			36,715			—			36,715			956,874			—
Telecom	487,788			—			—			—			487,788			—
Total NCSC	1,407,947			36,715			—			36,715			1,444,662			—
Total loans outstanding	$	32,478,287		$	36,715		$	4,347		$	41,062		$	32,519,349		$	112,209

Percentage of total loans	99.87		%	0.11		%	0.02		%	0.13		%	100.00		%	0.35		%

We had no delinquent loans ~~90 days or more past due are~~as of February 29, 2024. In comparison, we had one CFC electric power supply borrower, Brazos Sandy Creek Electric Cooperative Inc. (“Brazos Sandy Creek”), with a delinquent loan totaling $4 million and one NCSC electric borrower with a delinquent loan of $37 million as of May 31, 2023. The decrease in loans on nonaccrual ~~status.~~status of $27 million to $85 million as of February 29, 2024, from $112 million as of May 31, 2023 was due to the receipt of loan principal payments from Brazos Electric Power Cooperative, Inc. (“Brazos”) and Brazos Sandy Creek during the three months ended August 31, 2023 (“Q1 FY2024”). We received a total of $28 million in loan payments from Brazos and Brazos Sandy Creek to repay their $27 million of total loans outstanding in full during Q1 FY2024. The additional payments received of $1 million were recorded as loan recoveries on the Brazos and Brazos Sandy Creek previously charged-off loan amounts.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Loan Modifications to Borrowers Experiencing Financial Difficulty

We actively monitor problem loans and, from time to time, attempt to work with borrowers to manage such exposures through loan workouts or modifications that better align with the borrower’s current ability to pay. Therefore, as part of our loss mitigation efforts, we may provide modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for exercising remedies. We consider the impact of all loan modifications when estimating the credit quality of our loan portfolio and establishing the allowance for credit losses.

On June 1, 2023, we adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326) – Troubled Debt ~~Restructured (“TDR”)~~Restructurings and Vintage Disclosures, using the prospective adoption method.The ASU eliminated the accounting guidance for TDRs and enhanced the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty, which are to be applied prospectively. For additional information on the adoption of ASU 2022-02 see “Note 1—Summary of Significant Accounting Policies.”

~~We did not have any loans~~ modified to borrowers experiencing financial difficulty totaled $3 million as of February 29, 2024, consisting of one NCSC telecom loan as ~~TDRs during~~discussed above, which wasperforming in accordance with the ~~six months ended November 30, 2017. The following table provides a summary~~terms of ~~loans modified as TDRs in prior periods,~~ the ~~performance status of these loans and the~~loan agreement. There were no unadvanced loan commitments related to this loan.

Troubled Debt Restructurings—Prior to the Adoption of ASU 2022-02

As discussed above, ASU 2022-02 eliminated the accounting guidance for TDRs. Prior to the adoption of ASU 2022-02, a loan restructuring or modification of terms was accounted for as a TDR if, for economic or legal reasons related to the borrower’s financial difficulties, a concession was granted to the borrower that we would not otherwise consider. The following table presents the outstanding balance of modified loans accounted for as TDRs and the performance status, by legal entity and member class, of these loans as of ~~November 30, 2017 and~~ May 31, ~~2017.~~2023.

November 30, 2017 May 31, 2017
(Dollars in thousands)
Loans
Outstanding
% of Total Loans
Unadvanced
Commitments

Loans
Outstanding
% of Total Loans
Unadvanced
Commitments
TDR loans:
Performing TDR loans:
CFC/Distribution $ 6,507
0.03 % $ —
$ 6,581
0.02 % $ —
RTFC 6,341
0.02
—
6,592
0.03
—
Total performing TDR loans 12,848
0.05
—
13,173
0.05
—
Total TDR loans $ 12,848
0.05 % $ —
$ 13,173
0.05 % $ —
Table 4.4: Troubled Debt Restructurings—Prior to the Adoption of ASU 2022-02

~~We did not have any TDR loans classified as nonperforming~~


	May 31, 2023
(Dollars in thousands)		Number of Borrowers	Outstanding Amount (1)		% of Total Loans Outstanding
TDR loans:


Member class:
CFC—Distribution		1	$	4,638	0.02	%
CFC—Power Supply		1	22,875		0.07
NCSC—Telecom		1	3,592		0.01
Total TDR loans		3	$	31,105	0.10	%

Performance status of TDR loans:
Performing TDR loans		2	$	8,230	0.03	%
Nonperforming TDR loans		1	22,875		0.07
Total TDR loans		3	$	31,105	0.10	%

____________________________

(1) Represents the unpaid principal balance net of charge-offs and recoveries as of ~~November 30, 2017 or~~the end of each period.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

There were no unadvanced commitments related to these loans as of May 31, ~~2017. TDR~~2023. We had loans ~~classified as performing as of November 30, 2017 and May 31, 2017 were~~outstanding to two borrowers totaling $8 million which have been performing in accordance with the terms of their respective restructured loan agreement for an extended period of time and were classified as performing TDR loans and on accrual status as of ~~the respective reported dates. One borrower with a~~May 31, 2023. We had loans outstanding to Brazos totaling $23 million classified as nonperforming TDR ~~loan also had a line of credit facility, restricted for fuel purchases only, totaling $6 million~~loans during Q3 FY2023, which were on non-accrual status as of ~~both November 30, 2017 and~~ May 31, ~~2017. The~~2023. During Q1 FY2024, we received the remaining payment of Brazos’ loans outstanding ~~amount under this facility totaled approximately $1~~of $23 million ~~and $0.5 million~~in accordance with the provisions of Brazos’ plan of reorganization to repay its loans in full. Prior to the Brazos loan restructuring, we have not had any loan modifications that were required to be accounted for as ~~of November 30, 2017 and May 31, 2017, respectively, and was classified as performing as of each respective date.~~TDRs since fiscal year 2016.

Nonperforming Loans

In addition to TDR loans that may be classified as nonperforming, we also may have nonperforming loans that have not been modified as a TDR loan. We did not have any loans classified as nonperforming as of November 30, 2017 or May 31, 2017.

~~We had no foregone interest income for loans on nonaccrual status during the three and six months ended November 30,~~

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~2017. We had foregone interest income for loans on nonaccrual status totaling $31 thousand during the six months ended November 30, 2016.~~

~~Impaired Loans~~

~~The following table provides information on loans classified as individually impaired loans as of November 30, 2017 and May 31, 2017.~~

November 30, 2017 May 31, 2017
(Dollars in thousands)
Recorded
Investment

Related
Allowance

Recorded
Investment

Related
Allowance
With no specific allowance recorded:
CFC $ 6,507
$ —
$ 6,581
$ —

With a specific allowance recorded:
RTFC 6,341
1,330
6,592
1,640
Total impaired loans $ 12,848
$ 1,330
$ 13,173
$ 1,640

The following table presents the outstanding balance of nonperforming loans, by ~~company,~~legal entity and member class, as of February 29, 2024 and May 31, 2023. Loans classified as nonperforming are placed on nonaccrual status.

Table 4.5: Nonperforming Loans


	February 29, 2024					May 31, 2023
(Dollars in thousands)	Number of Borrowers	Outstanding Amount (1)		% of Total Loans Outstanding		Number of Borrowers	Outstanding Amount (1)		% of Total Loans Outstanding
Nonperforming loans:
Member class:


CFC—Power supply	1	$	84,987	0.25	%	2	$	89,334	0.27	%


Total nonperforming loans	1	$	84,987	0.25	%	2	$	89,334	0.27	%

____________________________

(1) Represents the ~~average~~unpaid principal balance net of charge-offs and recoveries as of the end of each period.

Nonperforming loans totaled $85 million as of February 29, 2024, a decrease of $4 million from May 31, 2023, due to the receipt of $4 million in loan payments from Brazos Sandy Creek to pay off its nonperforming loan outstanding during Q1 FY2024, as discussed above. In March 2024, we received a $36 million payment on the outstanding nonperforming loan, which reduced its balance to $49 million as of the date of this Report.

Net Charge-Offs

We had no charge-offs or recoveries during Q3 FY2024 and Q3 FY2023. As mentioned above, during YTD FY2024, we recorded ~~investment for individually impaired loans~~ $1 million in net loan recoveries on the Brazos and ~~the interest income recognized on these loans~~Brazos Sandy Creek previously charged-off loan amounts. In comparison, we experienced net charge-offs totaling $15 million for the ~~three~~CFC electric power supply loan portfolio related to Brazos and ~~six months ended November 30,~~Brazos Sandy Creek nonperforming loans during YTD FY2023, which resulted in an annualized net charge-off rate of 0.06% for YTD FY2023. Prior to Brazos’ and Brazos Sandy Creek’s bankruptcy filings, we had not experienced any defaults or charge-offs in our electric utility and telecommunications loan portfolios since fiscal year 2013 and 2017, ~~and 2016.~~respectively.

Three Months Ended November 30,
2017 2016 2017 2016
(Dollars in thousands) Average Recorded Investment Interest Income Recognized
CFC $ 6,507
$ 6,581
$ 142
$ 144
RTFC 6,423
6,924
80
87
Total impaired loans $ 12,930
$ 13,505
$ 222
$ 231

Six Months Ended November 30,
2017 2016 2017 2016
(Dollars in thousands) Average Recorded Investment Interest Income Recognized
CFC $ 6,541
$ 6,645
$ 286
$ 274
RTFC 6,486
8,729
162
175
Total impaired loans $ 13,027
$ 15,374
$ 448
$ 449

~~Internal~~Borrower Risk Ratings

As part of ~~Loans~~

~~We evaluate~~our management of credit risk, we maintain a credit risk rating framework under which we employ a consistent process for assessing the credit quality of our ~~loans using an~~loan portfolio. We evaluate each borrower and loan facility in our loan portfolio and assign internal borrower and loan facility risk ~~rating system that employs similar criteria for all member classes. Our internal risk rating system is~~ratings based on ~~a determination~~the consideration of a ~~borrower’s risk~~number of ~~default utilizing both~~ quantitative and qualitative ~~measurements.~~factors. Each risk rating is reassessed annually following the receipt of the borrower’s audited financial statements; however, interim ~~risk rating downgrades or upgrades~~risk-rating adjustments may occur as a result of updated information affecting a borrower’s ability to fulfill its obligations or other significant developments orand trends. We categorize loans in our portfolio based on

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

our internally assigned borrower risk ratings, which are intended to assess the general creditworthiness of the borrower and probability of default. Our borrower risk ratings ~~fall into~~align with the U.S. federal banking regulatory agencies’ credit risk definitions of pass and criticized categories, with the criticized category further segmented among special mention, substandard and doubtful. Pass ratings reflect relatively low probability of default, while criticized ratings have a higher probability of default.

The following ~~four categories based on~~is a description of the ~~criteria identified below.~~borrower risk rating categories.

•Pass: Borrowers that are not ~~experiencing difficulty and/~~included in the categories of special mention, substandard or ~~not showing a potential or well-defined credit weakness.~~

doubtful.

•Special Mention: Borrowers that may be characterized by a potential credit weakness or deteriorating financial condition that is not sufficiently serious to warrant a classification of substandard or doubtful.

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

•Substandard: Borrowers that display a well-defined credit weakness that may jeopardize the full collection of principal and interest.

•Doubtful: Borrowers that have a well-defined credit weakness ~~and the~~or weaknesses that make full collection of principal and interest, ison the basis of currently known facts, conditions and collateral values, highly questionable orand improbable.

~~Loans to borrowers~~Our internally assigned borrower risk ratings serve as the primary credit quality indicator for our loan portfolio. Because our internal borrower risk ratings provide important information on the probability of default, they are a key input in ~~the pass and special mention categories are generally included in the collective loan portfolio for purposes of~~ determining ~~the~~our allowance for ~~loan~~credit losses. Loans to borrowers in the substandard and doubtful categories are generally considered to be individually impaired and therefore reflected in the impaired loan portfolio. The special mention, substandard, and doubtful categories are intended to comply with the definition of criticized loans by the banking regulatory authorities.

~~The following tables present~~Table 4.6 displays total loans outstanding, by ~~member class and~~ borrower risk rating category ~~based on the risk ratings used in the estimation of our allowance for loan losses~~and by legal entity and member class, as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~

November 30, 2017
(Dollars in thousands) Pass Special Mention Substandard Doubtful Total
CFC:
Distribution $ 19,122,976
$ 107,764
$ —
$ —
$ 19,230,740
Power supply 4,414,257
—
—
—
4,414,257
Statewide and associate 57,107
—
—
—
57,107
CFC total 23,594,340
107,764
—
—
23,702,104
NCSC 739,707
—
—
—
739,707
RTFC 365,390
—
6,341
—
371,731
Total loans outstanding $ 24,699,437
$ 107,764
$ 6,341
$ —
$ 24,813,542

May 31, 2017
(Dollars in thousands) Pass Special Mention Substandard Doubtful Total
CFC:
Distribution $ 18,715,810
$ 109,556
$ —
$ —
$ 18,825,366
Power supply 4,504,791
—
—
—
4,504,791
Statewide and associate 56,654
1,176
—
—
57,830
CFC total 23,277,255
110,732
—
—
23,387,987
NCSC 612,592
1,332
—
—
613,924
RTFC 346,944
—
7,475
—
354,419
Total loans outstanding $ 24,236,791
$ 112,064
$ 7,475
$ —
$ 24,356,330

~~Allowance for Loan Losses~~

~~We maintain an allowance for loan losses at a level estimated by management~~2023. The borrower risk rating categories presented below correspond to ~~provide for probable losses inherent~~the borrower risk rating categories used in ~~the loan portfolio as of each balance sheet date. Our allowance for loan losses consists of an amount for loans collectively evaluated for impairment, referred to as~~calculating our collective allowance ~~and an amount~~ for credit losses. If a parent company provides a guarantee of full repayment of loans ~~designated as individually impaired, referred to as our specific~~of a subsidiary borrower, we include the loans outstanding in the borrower risk-rating category of the guarantor parent company rather than the risk rating category of the subsidiary borrower for purposes of calculating the collective allowance.

We present term loans outstanding as of February 29, 2024, by fiscal year of origination for each year during the five-year annual reporting period beginning in fiscal year 2020, and in the aggregate for periods prior to fiscal year 2020. The origination period represents the date CFC advances funds to a borrower, rather than the execution date of a loan facility for a borrower. Revolving loans are presented separately due to the nature of revolving loans. The substantial majority of loans in our portfolio represent fixed-rate advances under secured long-term facilities with terms up to 35 years, and as indicated in Table 4.6 below, term loan advances made to borrowers prior to fiscal year 2020 totaled $17,832 million, representing 52% of our total loans outstanding of $34,399 million as of February 29, 2024. The average remaining maturity of our long-term loans, which accounted for 90% of total loans outstanding as of February 29, 2024, was 19 years.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table 4.6: Loans Outstanding by Borrower Risk Ratings and Origination Year

~~The following tables summarize changes, by company, in the allowance for loan losses~~


	February 29, 2024
	Term Loans by Fiscal Year of Origination
(Dollars in thousands)	YTD Q3 2024		2023		2022		2021		2020		Prior		Revolving Loans		Total		May 31, 2023
Pass
CFC:
Distribution	$	1,946,451	$	2,383,589	$	2,346,575	$	1,606,185	$	1,780,464	$	14,331,583	$	2,314,132	$	26,708,979	$	25,242,708
Power supply	505,264		456,871		329,193		539,450		171,567		2,914,894		729,294		5,646,533		5,325,033
Statewide and associate	36,880		59,941		23,391		1,748		12,035		17,183		94,814		245,992		187,310
Total CFC	2,488,595		2,900,401		2,699,159		2,147,383		1,964,066		17,263,660		3,138,240		32,601,504		30,755,051
NCSC:
Electric	55,823		259,449		17,785		5,107		185,970		259,995		200,053		984,182		956,874
Telecom	89,204		47,966		76,837		66,373		24,102		191,143		49,716		545,341		484,196
Total NCSC	145,027		307,415		94,622		71,480		210,072		451,138		249,769		1,529,523		1,441,070
Total pass	$	2,633,622	$	3,207,816	$	2,793,781	$	2,218,863	$	2,174,138	$	17,714,798	$	3,388,009	$	34,131,027	$	32,196,121

Special mention
CFC:
Distribution	$	—	$	4,185	$	—	$	4,687	$	—	$	16,572	$	141,885	$	167,329	$	194,369

Statewide and associate	—		—		—		—		—		12,189		—		12,189		13,058
Total CFC	—		4,185		—		4,687		—		28,761		141,885		179,518		207,427
NCSC telecom	—		—		—		—		—		3,180		—		3,180		3,592
Total special mention	$	—	$	4,185	$	—	$	4,687	$	—	$	31,941	$	141,885	$	182,698	$	211,019

Substandard





Total substandard	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Doubtful

CFC power supply	$	—	$	—	$	—	$	—	$	—	$	84,987	$	—	$	84,987	$	112,209


Total doubtful	$	—	$	—	$	—	$	—	$	—	$	84,987	$	—	$	84,987	$	112,209

Total criticized loans	$	—	$	4,185	$	—	$	4,687	$	—	$	116,928	$	141,885	$	267,685	$	323,228
Total loans outstanding	$	2,633,622	$	3,212,001	$	2,793,781	$	2,223,550	$	2,174,138	$	17,831,726	$	3,529,894	$	34,398,712	$	32,519,349

Criticized loans totaled $268 million and $323 million as of ~~and for the three and six months ended November 30, 2017 and 2016.~~

Three Months Ended November 30, 2017
(Dollars in thousands) CFC NCSC RTFC Total
Balance as of August 31, 2017 $ 29,521
$ 2,736
$ 4,821
$ 37,078
Provision (benefit) for loan losses (722 ) 381
37
(304 )
Balance as of November 30, 2017 $ 28,799
$ 3,117
$ 4,858
$ 36,774

Three Months Ended November 30, 2016
(Dollars in thousands) CFC NCSC RTFC Total
Balance as of August 31, 2016 $ 25,062
$ 3,281
$ 4,777
$ 33,120
Provision (benefit) for loan losses 742
383
(387 ) 738
Recoveries 53
—
—
53
Balance as of November 30, 2016 $ 25,857
$ 3,664
$ 4,390
$ 33,911

Six Months Ended November 30, 2017
(Dollars in thousands) CFC NCSC RTFC Total
Balance as of May 31, 2017 $ 29,499
$ 2,910
$ 4,967
$ 37,376
Provision (benefit) for loan losses (700 ) 207
(109 ) (602 )
Balance as of November 30, 2017 $ 28,799
$ 3,117
$ 4,858
$ 36,774

Six Months Ended November 30, 2016
(Dollars in thousands) CFC NCSC RTFC Total
Balance as of May 31, 2016 $ 24,559
$ 3,134
$ 5,565
$ 33,258
Provision for loan losses 1,192
530
944
2,666
Charge-offs —
—
(2,119 ) (2,119 )
Recoveries 106
—
—
106
Net (charge-offs) recoveries 106
—
(2,119 ) (2,013 )
Balance as of November 30, 2016 $ 25,857
$ 3,664
$ 4,390
$ 33,911

~~The tables below present, by company, the components of our allowance for loan losses and the recorded investment of the related loans as of November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023, respectively, and represented approximately 1% of total loans outstanding as of each respective date. The decrease of $55 million in criticized loans was primarily due to loan payments received from Brazos and Brazos Sandy Creek in the doubtful category and a decrease in loans outstanding for one CFC electric distribution borrower in the special mention category during YTD FY2024. Each of the borrowers with loans outstanding in the criticized category was current with regard to all principal and interest amounts due to us as of February 29, 2024. In contrast, each of the borrowers with loans outstanding in the criticized category, with the exception of Brazos Sandy Creek, was current with regard to all principal and interest amounts due to us as of May 31, 2023.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Special Mention

One CFC electric distribution borrower with loans outstanding of $167 million and $194 million as of February 29, 2024 and May 31, 2023, respectively, accounted for the substantial majority of loans in the special mention loan category amount of $183 million and $211 million as of each respective date. This borrower experienced an adverse financial impact from restoration costs incurred to repair damage caused by two successive hurricanes. We expect that the borrower will continue to receive grant funds from the Federal Emergency Management Agency and the state where it is located for the full reimbursement of the hurricane damage-related restoration costs.

Substandard

We did not have any loans classified as substandard as of February 29, 2024 or May 31, 2023.

Doubtful

We had one loan outstanding classified as doubtful totaling $85 million as of February 29, 2024 to a CFC electric power supply borrower. We had loans outstanding classified as doubtful totaling $112 million as of May 31, 2023, consisting of an $85 million loan outstanding to a CFC electric power supply borrower and $27 million of loans outstanding to Brazos and Brazos Sandy Creek. See“Troubled Debt Restructurings—Prior to the Adoption of ASU 2022-02” and “Nonperforming Loans” above for additional information on these loans.

Unadvanced Loan Commitments

Unadvanced loan commitments represent approved and executed loan contracts for which funds have not been advanced to borrowers. The following table presents unadvanced loan commitments, by member class and by loan type, as of February 29, 2024 and May 31, 2023.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

November 30, 2017
(Dollars in thousands) CFC NCSC RTFC Total
Allowance by company:
Collective allowance $ 28,799
$ 3,117
$ 3,528
$ 35,444
Specific allowance —
—
1,330
1,330
Total allowance for loan losses $ 28,799
$ 3,117
$ 4,858
$ 36,774

Recorded investment in loans:
Collectively evaluated loans $ 23,695,597
$ 739,707
$ 365,390
$ 24,800,694
Individually evaluated loans 6,507
—
6,341
12,848
Total recorded investment in loans $ 23,702,104
$ 739,707
$ 371,731
$ 24,813,542

Total recorded investment in loans, net⁽¹⁾
$ 23,673,305
$ 736,590
$ 366,873
$ 24,776,768
Table 4.7: Unadvanced Commitments by Member Class and Loan Type(1)


(Dollars in thousands)	February 29, 2024		May 31, 2023
Member class:
CFC:
Distribution	$	10,159,853	$	9,673,712
Power supply	4,361,646		3,995,128
Statewide and associate	237,250		175,150
Total CFC	14,758,749		13,843,990
NCSC:
Electric	622,080		604,436
Telecom	381,988		340,135
Total NCSC	1,004,068		944,571
Total unadvanced commitments	$	15,762,817	$	14,788,561



Loan type:(2)
Long-term loans:
Fixed rate	$	—	$	—
Variable rate	6,072,610		5,669,634

Total long-term loans	6,072,610		5,669,634
Lines of credit	9,690,207		9,118,927
Total unadvanced commitments	$	15,762,817	$	14,788,561

____________________________

(1)Excludes the portion of any commitment to advance funds under swingline loan facilities in excess of CFC’s total commitment amount in a syndicated credit facility. Other syndicate lenders have an absolute obligation to acquire participations in such swingline loans upon CFC’s election, including during a default by the borrower.

(2)The interest rate on unadvanced loan commitments is not set until an advance is made; therefore, all unadvanced long-term loan commitments are reported as variable rate. However, the borrower may select either a fixed or a variable rate when an advance is drawn under a loan commitment.

The following table displays, by loan type, the available balance under unadvanced loan commitments as of February 29, 2024, and the related maturities in each fiscal year during the five-year period ended May 31, 2028, and thereafter.

Table 4.8: Unadvanced Loan Commitments


	Available Balance		Notional Maturities of Unadvanced Loan Commitments
(Dollars in thousands)			2024		2025		2026		2027		2028		Thereafter
Line of credit loans	$	9,690,207	$	236,468	$	4,559,285	$	1,228,664	$	1,514,794	$	823,429	$	1,327,567
Long-term loans	6,072,610		195,323		692,126		617,431		1,148,164		1,510,517		1,909,049
Total	$	15,762,817	$	431,791	$	5,251,411	$	1,846,095	$	2,662,958	$	2,333,946	$	3,236,616

Unadvanced line of credit commitments accounted for 61% of total unadvanced loan commitments as of February 29, 2024, while unadvanced long-term loan commitments accounted for 39% of total unadvanced loan commitments. Unadvanced line of credit commitments are typically revolving facilities for periods not to exceed five years and generally serve as supplemental back-up liquidity to our borrowers. Historically, borrowers have not drawn the full commitment amount for line of credit facilities, and we have experienced a very low utilization rate on line of credit loan facilities regardless of whether or not we are obligated to fund the facility when a material adverse change has occurred.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

May 31, 2017
(Dollars in thousands) CFC NCSC RTFC Total
Allowance by company:
Collective allowance $ 29,499
$ 2,910
$ 3,327
$ 35,736
Specific allowance —
—
1,640
1,640
Total ending balance of the allowance $ 29,499
$ 2,910
$ 4,967
$ 37,376

Recorded investment in loans:
Collectively evaluated loans $ 23,381,406
$ 613,924
$ 347,827
$ 24,343,157
Individually evaluated loans 6,581
—
6,592
13,173
Total recorded investment in loans $ 23,387,987
$ 613,924
$ 354,419
$ 24,356,330

Total recorded investment in loans, net⁽¹⁾
$ 23,358,488
$ 611,014
$ 349,452
$ 24,318,954
Our unadvanced long-term loan commitments typically have a five-year draw period under which a borrower may draw funds prior to the expiration of the commitment. We expect that the majority of the long-term unadvanced loan commitments of $6,073 million will be advanced prior to the expiration of the commitment.

^{____________________________}

^{Because we historically have experienced a very low utilization rate on line of credit loan facilities, which account for the majority of our total unadvanced loan commitments, we believe the unadvanced loan commitment total of $15,763 million as of February 29, 2024 is not necessarily representative of our future funding requirements.}

Unadvanced Loan Commitments—Conditional

The substantial majority of our line of credit commitments and all of our unadvanced long-term loan commitments include material adverse change clauses. Unadvanced loan commitments subject to material adverse change clauses totaled $12,363 million and $11,617 million as of February 29, 2024 and May 31, 2023, respectively. Prior to making an advance on these facilities, we confirm that there has been no material adverse change in the business or condition, financial or otherwise, of the borrower since the time the loan was approved and confirm that the borrower is currently in compliance with loan terms and conditions. In some cases, the borrower’s access to the full amount of the facility is further constrained by the designated purpose, imposition of borrower-specific restrictions or by additional conditions that must be met prior to advancing funds.

Unadvanced Loan Commitments—Unconditional

Unadvanced loan commitments not subject to material adverse change clauses at the time of each advance consisted of unadvanced committed lines of credit totaling $3,400 million and $3,172 million as of February 29, 2024 and May 31, 2023, respectively. We are required to advance amounts on these committed facilities as long as the borrower is in compliance with the terms and conditions of the facility. The following table summarizes the available balance under unconditional committed lines of credit as of February 29, 2024, and the related maturity amounts in each fiscal year during the five-year period ending May 31, 2028, and thereafter.

Table 4.9: Unconditional Committed Lines of Credit—Available Balance


	Available Balance		Notional Maturities of Unconditional Committed Lines of Credit
(Dollars in thousands)	Available Balance		2024		2025		2026		2027		2028		Thereafter
Committed lines of credit	$	3,399,772	$	4,641	$	405,062	$	374,300	$	1,023,660	$	722,639	$	869,470

Pledged Collateral—Loans

We are required to pledge eligible mortgage notes or other collateral in an amount at least equal to the outstanding balance of our secured debt. Table 4.10 displays the borrowing amount under each of our secured borrowing agreements and the corresponding loans outstanding pledged as collateral as of February 29, 2024 and May 31, 2023. See “Note 6—Short-Term Borrowings” and “Note 7—Long-Term Debt” for information on our secured borrowings and other borrowings.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table 4.10: Pledged Loans


(Dollars in thousands)	February 29, 2024		May 31, 2023
Collateral trust bonds:
2007 indenture:
Collateral trust bonds outstanding	$	6,922,711	$	7,772,711
Pledged collateral:
Distribution system mortgage notes pledged	8,905,624		8,719,287
RUS-guaranteed loans qualifying as permitted investments pledged	116,139		122,874
Total pledged collateral	9,021,763		8,842,161

1994 indenture:
Collateral trust bonds outstanding	$	15,000	$	20,000
Pledged collateral:
Distribution system mortgage notes pledged	19,800		22,900

Guaranteed Underwriter Program:
Notes payable outstanding	$	6,843,623	$	6,720,643
Pledged collateral:
Distribution and power supply system mortgage notes pledged	8,103,472		7,877,558

Farmer Mac:
Notes payable outstanding	$	3,882,761	$	3,149,898
Pledged collateral:
Distribution and power supply system mortgage notes pledged	4,498,567		4,294,282

Clean Renewable Energy Bonds Series 2009A:
Notes payable outstanding	$	—	$	1,098
Pledged collateral:
Distribution and power supply system mortgage notes pledged	—		1,029
Cash	—		391
Total pledged collateral	—		1,420

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


NOTE 5—ALLOWANCE FOR CREDIT LOSSES

We are required to maintain an allowance based on a current estimate of credit losses that are expected to occur over the remaining term of the loans in our portfolio. Our allowance for credit losses consists of a collective allowance and an asset-specific allowance. The collective allowance is established for loans in our portfolio that share similar risk characteristics and are therefore evaluated on a collective, or pool, basis in measuring expected credit losses. The asset-specific allowance is established for loans in our portfolio that do not share similar risk characteristics with other loans in our portfolio and are therefore evaluated on an individual basis in measuring expected credit losses.

Allowance for Credit Losses—Loan Portfolio

The following tables summarize, by legal entity and member class, changes in the allowance for credit losses for our loan portfolio.

Table 5.1: Changes in Allowance for Credit Losses


	Q3 FY2024
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Balance as of November 30, 2023	$	16,037	$	33,312	$	1,271	$	50,620	$	2,941	$	1,993	$	4,934	$	55,554


Provision (benefit) for credit losses	(32)		(7,021)		(43)		(7,096)		562		(25)		537		(6,559)


Balance as of February 29, 2024	$	16,005	$	26,291	$	1,228	$	43,524	$	3,503	$	1,968	$	5,471	$	48,995


	Q3 FY2023
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Balance as of November 30, 2022	$	17,021	$	45,289	$	1,289	$	63,599	$	2,511	$	1,505	$	4,016	$	67,615


Provision (benefit) for credit losses	(367)		(10,934)		(32)		(11,333)		116		(101)		15		(11,318)


Balance as of February 28, 2023	$	16,654	$	34,355	$	1,257	$	52,266	$	2,627	$	1,404	$	4,031	$	56,297


	YTD FY2024
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Balance as of May 31, 2023	$	14,924	$	33,306	$	1,194	$	49,424	$	2,464	$	1,206	$	3,670	$	53,094


Provision (benefit) for credit losses	1,081		(8,047)		34		(6,932)		1,039		762		1,801		(5,131)

Recoveries	—		1,032		—		1,032		—		—		—		1,032
Balance as of February 29, 2024	$	16,005	$	26,291	$	1,228	$	43,524	$	3,503	$	1,968	$	5,471	$	48,995


	YTD FY2023
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Balance as of May 31, 2022	$	15,781	$	47,793	$	1,251	$	64,825	$	1,449	$	1,286	$	2,735	$	67,560


Provision for credit losses	873		1,631		6		2,510		1,178		118		1,296		3,806
Charge-offs	—		(15,069)		—		(15,069)		—		—		—		(15,069)

Balance as of February 28, 2023	$	16,654	$	34,355	$	1,257	$	52,266	$	2,627	$	1,404	$	4,031	$	56,297

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following tables present, by legal entity and member class, the components of our allowance for credit losses as of February 29, 2024 and May 31, 2023.

Table 5.2: Allowance for Credit Losses Components


	February 29, 2024
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Allowance components:
Collective allowance	$	16,005	$	8,932	$	1,228	$	26,165	$	3,503	$	1,691	$	5,194	$	31,359
Asset-specific allowance	—		17,359		—		17,359		—		277		277		17,636
Total allowance for credit losses	$	16,005	$	26,291	$	1,228	$	43,524	$	3,503	$	1,968	$	5,471	$	48,995

Loans outstanding:(1)
Collectively evaluated loans	$	26,872,099	$	5,646,533	$	258,181	$	32,776,813	$	984,182	$	545,341	$	1,529,523	$	34,306,336
Individually evaluated loans	4,209		84,987		—		89,196		—		3,180		3,180		92,376
Total loans outstanding	$	26,876,308	$	5,731,520	$	258,181	$	32,866,009	$	984,182	$	548,521	$	1,532,703	$	34,398,712


Allowance coverage ratios:
Collective allowance coverage ratio(2)	0.06	%	0.16	%	0.48	%	0.08	%	0.36	%	0.31	%	0.34	%	0.09	%
Asset-specific allowance coverage ratio(3)	—		20.43		—		19.46		—		8.71		8.71		19.09
Total allowance coverage ratio(4)	0.06		0.46		0.48		0.13		0.36		0.36		0.36		0.14


	May 31, 2023
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Allowance components:
Collective allowance	$	14,924	$	7,837	$	1,194	$	23,955	$	2,464	$	916	$	3,380	$	27,335
Asset-specific allowance	—		25,469		—		25,469		—		290		290		25,759
Total allowance for credit losses	$	14,924	$	33,306	$	1,194	$	49,424	$	2,464	$	1,206	$	3,670	$	53,094

Loans outstanding:(1)
Collectively evaluated loans	$	25,432,439	$	5,325,033	$	200,368	$	30,957,840	$	956,874	$	484,196	$	1,441,070	$	32,398,910
Individually evaluated loans	4,638		112,209		—		116,847		—		3,592		3,592		120,439
Total loans outstanding	$	25,437,077	$	5,437,242	$	200,368	$	31,074,687	$	956,874	$	487,788	$	1,444,662	$	32,519,349


Allowance coverage ratios:
Collective allowance coverage ratio(2)	0.06	%	0.15	%	0.60	%	0.08	%	0.26	%	0.19	%	0.23	%	0.08	%
Asset-specific allowance coverage ratio(3)	—		22.70		—		21.80		—		8.07		8.07		21.39
Total allowance coverage ratio(4)	0.06		0.61		0.60		0.16		0.26		0.25		0.25		0.16

____________________________

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1)Represents the unpaid principal amount of loans as of the end of each period. Excludes unamortized deferred loan origination costs ~~$11~~of $14 million and $13 millionas of ~~both November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023, respectively.

(2)Calculated based on the collective allowance component at period end divided by collectively evaluated loans outstanding at period end.

(3)Calculated based on the asset-specific allowance component at period end divided by individually evaluated loans outstanding at period end.

(4)Calculated based on the total allowance for credit losses at period end divided by total loans outstanding at period end.

Our allowance for credit losses and allowance coverage ratio decreased to $49 million and 0.14%, respectively, as of February 29, 2024, from $53 million and 0.16%, respectively, as of May 31, 2023. The $4 million decrease in the allowance for credit losses reflected a reduction in the asset-specific allowance of $8 million, partially offset by an increase in the collective allowance of $4 million. The decrease in the asset-specific allowance was primarily attributable to an increase in the expected payments on a nonperforming CFC power supply loan. The increase in the collective allowance was primarily due to loan portfolio growth and a slight decline in the overall credit quality and risk profile of our loan portfolio.

Reserve for Credit Losses—Unadvanced Loan Commitments

~~We also~~In addition to the allowance for credit losses for our loan portfolio, we maintain ~~a reserve~~an allowance for ~~unadvanced loan commitments at a level estimated by management to provide for probable~~credit losses under these commitments as of each balance sheet dated. Unadvanced loan commitments are analyzed and segregated by loan type and risk using our internal risk rating scales. We use these risk classifications, in combination with the probability of commitment usage, and any other pertinent information to estimate a reserve for unadvanced loan commitments, which we ~~record~~refer to as our reserve for credit losses because this amount is reported as a ~~liability~~component of other liabilities on our ~~condensed~~ consolidated balance sheets. We measure the reserve for credit losses for unadvanced loan commitments based on expected credit losses over the contractual period of our exposure to credit risk arising from our obligation to extend credit, unless that obligation is unconditionally cancellable by us. The reserve for ~~these~~credit losses related to our off-balance sheet exposure for unadvanced loan commitments was ~~$0.1~~less than $1 million as of both ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023.



NOTE 5—6—SHORT-TERM BORROWINGS

Short-term borrowings consist of borrowings with an original contractual maturity of one year or less and do not include the current portion of long-term debt. Our short-term borrowings totaled ~~$3,557~~$4,605 million and accounted for ~~15%~~14% of total debt outstanding as of ~~November 30, 2017,~~February 29, 2024, compared with ~~$3,343~~$4,546 million ~~or 14%,~~and 15% of total debt outstanding as of May 31, ~~2017.~~

2023. The following table provides information on our short-term borrowings as of February 29, 2024 and May 31, 2023.

Table 6.1: Short-Term Borrowings Sources



	February 29, 2024				May 31, 2023
(Dollars in thousands)	Amount		% of Total Debt Outstanding		Amount		% of Total Debt Outstanding
Short-term borrowings:
Commercial paper:
Commercial paper dealers, net of discounts	$	898,956	3	%	$	1,293,167	4	%
Commercial paper members, at par	1,158,861		3		1,017,431		4
Total commercial paper	2,057,817		6		2,310,598		8
Select notes to members	1,285,682		4		1,630,799		5
Daily liquidity fund notes to members	279,548		1		238,329		1
Medium-term notes to members	481,579		1		366,549		1
Farmer Mac notes payable (1)	500,000		2		—		—

Total short-term borrowings	$	4,604,626	14	%	$	4,546,275	15	%

____________________________

(1) Advanced under the revolving purchase agreement with Farmer Mac dated March 24, 2011. See “Note 7—Long-Term Debt” for additional information on this revolving note purchase agreement with Farmer Mac.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Committed Bank Revolving Line of Credit Agreements

~~We had $3,085 million and $3,165 million of commitments~~The following table presents the amount available for access under ~~committed~~our bank revolving line of credit agreements as of ~~November 30, 2017 and May 31, 2017, respectively. Under our current committed bank revolving line~~February 29, 2024.

Table 6.2: Committed Bank Revolving Line of ~~credit agreements, we have the ability to request up to $300 million of letters of credit, which would result in a reduction in the remaining available amount under the facilities.~~Credit Agreements Available Amounts

On November 20, 2017, we amended and restated the three-year and five-year committed bank revolving line of credit agreements to extend the maturity dates to November 20, 2020 and November 20, 2022, respectively, and to terminate certain third-party bank commitments totaling $40 million under the three-year agreement and $40 million under the five- year agreement. As a result, the total commitment amount from third-parties under the three-year facility and the five-year facility is $1,493 million and $1,592 million, respectively, resulting in a combined total commitment amount under the two facilities of $3,085 million.


	February 29, 2024
(Dollars in millions)	Total Commitment		Letters of Credit Outstanding		Available Amount		Maturity	Annual Facility Fee (1)
Bank revolving agreements:
3-year agreement	$	150	$	—	$	150	November 28, 2025	7.5 bps
3-year agreement	1,195		—		1,195		November 28, 2026	7.5 bps
Total 3-year agreement	1,345		—		1,345
4-year agreement	150		—		150		November 28, 2026	10.0 bps
4-year agreement	1,305		2		1,303		November 28, 2027	10.0 bps
Total 4-year agreement	1,455		2		1,453
Total	$	2,800	$	2	$	2,798

____________________________

The following table presents the total commitment, the net amount available for use and the outstanding letters of credit under our committed bank revolving line of credit agreements as of November 30, 2017 and May 31, 2017.

November 30, 2017
May 31, 2017

(Dollars in millions) Total Commitment
Letters of Credit Outstanding
Net Available for Use
Total Commitment
Letters of Credit Outstanding
Net Available for Use
Maturity
Annual Facility Fee ⁽¹⁾
3-year agreement $ —
$ —
$ —
$ 1,533
$ —
$ 1,533
November 19, 2019 7.5 bps
3-year agreement 1,493
—
1,493
—
—
—
November 20, 2020 7.5 bps
Total 3-year agreement 1,493
—
1,493
1,533
—
1,533

5-year agreement —
—
—
1,632
1
1,631
November 19, 2021 10 bps
5-year agreement 1,592
2
1,590
—
—
—
November 20, 2022 10 bps
Total 5-year agreement 1,592

2

1,590

1,632

1

1,631

Total $ 3,085
$ 2
$ 3,083
$ 3,165
$ 1
$ 3,164

^{____________________________}

⁽¹⁾Facility fee determined by CFC’s senior unsecured credit ratings based on the pricing schedules put in place at the inception of the related agreement.

On November 20, 2023, we amended the three-year and four-year committed bank revolving line of credit agreements to extend the maturity dates to November 28, 2026 and November 28, 2027, respectively, and to include a $100 million swingline facility under each agreement. In connection with the amendments to the revolving line of credit agreements, commitments from the existing banks increased by $100 million under each of the three-year and four-year revolving credit agreements. Commitments of $150 million under each agreement will expire at the prior maturity dates of November 28, 2025 and November 28, 2026. The total commitment amount under the three-year facility and the four-year facility was $1,345 million and $1,455 million, respectively, resulting in a combined total commitment amount under the two facilities of $2,800 million. These agreements allow us to request up to $300 million of letters of credit, which, if requested, results in a reduction in the total amount available for our use. We were in compliance with all covenants and conditions under the agreements as of February 29, 2024.


NOTE 7—LONG-TERM DEBT

The following table displays, by debt product type, long-term debt outstanding as of February 29, 2024 and May 31, 2023. Long-term debt outstanding totaled $25,452 million and accounted for 78% of total debt outstanding as of February 29, 2024, compared with $23,947 million and 77% of total debt outstanding as of May 31, 2023.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table 7.1: Long-Term Debt by Debt Product Type


(Dollars in thousands)	February 29, 2024		May 31, 2023
Secured long-term debt:
Collateral trust bonds	$	6,937,711	$	7,792,711
Unamortized discount, net	(169,639)		(178,832)
Debt issuance costs	(32,372)		(35,906)
Total collateral trust bonds	6,735,700		7,577,973
Guaranteed Underwriter Program notes payable	6,843,623		6,720,643
Farmer Mac notes payable	3,382,761		3,149,898
Other secured notes payable	—		1,098
Debt issuance costs	—		(2)
Total other secured notes payable	—		1,096
Total secured notes payable	10,226,384		9,871,637
Total secured long-term debt	16,962,084		17,449,610
Unsecured long-term debt:
Medium-term notes sold through dealers	8,182,741		6,152,726
Medium-term notes sold to members	337,827		365,260
Medium term notes sold through dealers and to members	8,520,568		6,517,986
Unamortized premium, net	(1,318)		4
Debt issuance costs	(29,703)		(21,122)
Total unsecured medium-term notes	8,489,547		6,496,868
Unsecured notes payable	—		71
Unamortized discount	—		(1)

Total unsecured notes payable	—		70
Total unsecured long-term debt	8,489,547		6,496,938
Total long-term debt	$	25,451,631	$	23,946,548

Secured Debt

Long-term secured debt of $16,962 million and $17,450 million as of February 29, 2024 and May 31, 2023, respectively, represented 67% and 73% of total long-term debt outstanding as of each respective date. We were in compliance with all covenants and conditions under our ~~committed bank revolving line of credit agreements and there were no borrowings outstanding under these agreements~~debt indentures as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017.~~2023. We are required to pledge eligible mortgage notes in an amount at least equal to the outstanding balance of our secured debt. See “Note 4—Loans” for information on pledged collateral under our secured debt agreements.

Collateral Trust Bonds

Collateral trust bonds represent secured obligations sold to investors in the capital markets. Collateral trust bonds are secured by the pledge of mortgage notes or eligible securities in an amount at least equal to the principal balance of the bonds outstanding. We repaid $855 million of collateral trust bonds that matured during YTD FY2024.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



~~NOTE 6—LONG-TERM DEBT~~

~~The following table displays long-term debt outstanding, by debt type, as of November 30, 2017 and May 31, 2017.~~

(Dollars in thousands) November 30, 2017 May 31, 2017
Unsecured long-term debt:
Medium-term notes sold through dealers $ 2,781,757
$ 2,386,956
Medium-term notes sold to members 404,567
422,779
Subtotal medium-term notes 3,186,324
2,809,735
Unamortized discount (375 ) (382 )
Debt issuance costs (23,192 ) (21,903 )
Total unsecured medium-term notes 3,162,757
2,787,450
Unsecured notes payable 22,799
22,799
Unamortized discount (324 ) (379 )
Debt issuance costs (80 ) (94 )
Total unsecured notes payable 22,395
22,326
Total unsecured long-term debt 3,185,152
2,809,776
Secured long-term debt:

Collateral trust bonds 7,917,711
7,922,711
Unamortized discount (253,449 ) (258,329 )
Debt issuance costs (26,938 ) (30,334 )
Total collateral trust bonds 7,637,324
7,634,048
Guaranteed Underwriter Program notes payable 5,060,192
4,985,748
Debt issuance costs (249 ) (264 )
Total Guaranteed Underwriter Program notes payable 5,059,943
4,985,484
Farmer Mac notes payable 2,491,463
2,513,389
Other secured notes payable 13,214
13,214
Debt issuance costs (277 ) (317 )
Total other secured notes payable 12,937
12,897
Total secured notes payable 7,564,343
7,511,770
Total secured long-term debt 15,201,667
15,145,818
Total long-term debt $ 18,386,819
$ 17,955,594

~~Secured~~Guaranteed Underwriter Program Notes Payable

We ~~had outstanding secured notes payable totaling $5,060~~borrowed $275 million and ~~$4,985~~repaid $152 million as of ~~November 30, 2017 and May 31, 2017, respectively, under bond purchase agreements with Federal Financing Bank and a bond guarantee agreement with RUS issued~~notes payable outstanding under the Guaranteed Underwriter Program ~~which provides guarantees~~during YTD FY2024. We had up to ~~Federal Financing Bank. We pay RUS a fee~~$1,200 million available for access under the Guaranteed Underwriter Program as of ~~30 basis points per year on the total amount outstanding.~~ February 29, 2024.

The ~~closing of this committed loan facility increased the amount available for access~~notes outstanding under the Guaranteed Underwriter Program contain a provision that if during any portion of the fiscal year, our senior secured credit ratings do not have at least two of the following ratings: (i) A3 or higher from Moody’s Investors Service (“Moody’s”), (ii) A- or higher from S&P Global Inc. (“S&P”), (iii) A- or higher from Fitch Ratings (“Fitch”) or (iv) an equivalent rating from a successor rating agency to ~~$1,375 million as~~any of ~~November 30, 2017.~~

the above rating agencies, we may not make cash patronage capital distributions in excess of 5% of total patronage capital. We are required to pledge eligible distribution system or power supply system loans as collateral in an amount at least equal to the total principal amount of notes outstanding under the Guaranteed Underwriter Program. ~~See “Note 4—Loans and Commitments” for additional information on the collateral pledged to secure notes payable under this program.~~

Farmer Mac Notes Payable

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

We have ~~two revolving note purchase agreements with Farmer Mac, which together allow us to borrow up to $4,800 million from Farmer Mac. Under the terms of the first~~a revolving note purchase agreement with Farmer Mac ~~dated March 24, 2011, as amended,~~under which we can borrow up to $6,000 million from Farmer Mac at any time, subject to market conditions, ~~up to $4,500 million at any time~~ through ~~January 11, 2020, and such date shall automatically extend on each anniversary date of the closing for an additional year,~~June 30, 2027. The agreement has successive automatic one-year renewals beginning June 30, 2026, unless ~~prior to any such anniversary date,~~ Farmer Mac provides ~~us with a~~425 days’ written notice ~~that the draw period will not be extended beyond the remaining term. This~~of non-renewal. Pursuant to this revolving note purchase agreement, ~~allows us to~~we can borrow, repay and re-borrow funds at any time through maturity, as market conditions permit, provided that the outstanding principal amount at any time does not exceed the total available under the agreement. Each borrowing under the revolving note purchase agreement is evidenced by a pricing agreement setting forth the interest rate, maturity date and other related terms as we may negotiate with Farmer Mac at the time of each such borrowing. We may select a fixed rate or variable rate at the time of each advance with a maturity as determined in the applicable ~~pricing~~pricing agreement. ~~Under this~~We borrowed a total of $300 million in principal amount of long-term notes payable under the Farmer Mac note purchase agreement ~~with Farmer Mac, we had~~during YTD FY2024. The amount outstanding ~~secured notes payable totaling $2,491~~under this agreement included $500 million of short-term borrowings and ~~$2,513~~$3,383 million of long-term debt as of February 29, 2024. The amount available for borrowing totaled $2,117 million as of ~~November 30, 2017 and May 31, 2017, respectively.~~

Under the terms of the second revolving note purchase agreement with Farmer Mac dated July 31, 2015, we can borrow up to $300 million at any time through July 31, 2018 at a fixed spread over LIBOR. This agreement also allows us to borrow, repay and re-borrow funds at any time through maturity, provided that the outstanding principal amount at any time does not exceed the total available under the agreement. We had no notes payable outstanding under this revolving note purchase agreement with Farmer Mac as of November 30, 2017 and May 31, 2017.

February 29, 2024. We are required to pledge eligible electric distribution system or electric power supply system loans as collateral in an amount at least equal to the total principal amount of notes outstanding under this agreement.

Unsecured Debt

Long-term unsecured debt of $8,490 million and $6,497 million as of February 29, 2024 and May 31, 2023, respectively, represented 33% and 27% of long-term debt outstanding as of each respective date.

Medium-Term Notes

Medium-term notes represent unsecured obligations that may be issued through dealers in the capital markets or directly to our members. During YTD FY2024, we issued an aggregate principal amount of dealer medium-term notes totaling $2,350 million with an average fixed interest rate of 5.03% and an average term of five years, and an aggregate principal amount of dealer medium-term notes totaling $600 million with floating interest rates and an average term of two years. We repaid $900 million in principal amount of dealer medium-term notes that matured during YTD FY2024.

See “Note 7—Long-Term Debt” in our 2023 Form 10-K for additional information on our various long-term debt product types.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


NOTE 8—SUBORDINATED DEFERRABLE DEBT

Subordinated deferrable debt represents long-term debt that is subordinated to all debt other than subordinated certificates held by our members. We had subordinated deferrable debt outstanding of $1,287 million and $1,283 million as of February 29, 2024 and May 31, 2023, respectively. On June 26, 2023, we redeemed $100 million in principal amount of our ~~Farmer Mac revolving note purchase agreements.~~$400 million subordinated deferrable debt due 2043, at par plus accrued interest. As a result, we recognized $1 million of losses on early extinguishment of debt related to unamortized debt issuance costs in our consolidated statements of operations for YTD FY2024.

On February 8, 2024, we issued $100 million of 7.125% subordinated deferrable debt due 2053, which pays interest semi-annually, may be called at par every five years, resets to a new fixed rate every five years based on the five-year U.S. Treasury rate plus a spread of 3.533% and allows us to defer the payment of interest for one or more consecutive interest periods not exceeding 20 consecutive semi-annual periods. To date, we have not exercised our right to defer interest payments. See “Note ~~4—Loans and Commitments”~~8—Subordinated Deferrable Debt” in our 2023 Form 10-K for additional information on the ~~collateral pledged to secure notes payable under these programs.~~

~~We were in compliance with all covenants~~terms and conditions, ~~under~~including maturity and call dates, of our ~~senior debt indentures as of November 30, 2017 and May 31, 2017.~~



~~NOTE 7—SUBORDINATED DEFERRABLE DEBT~~

~~The following table presents~~ subordinated deferrable debt ~~outstanding as of November 30, 2017 and May 31, 2017.~~outstanding.

November 30, 2017 May 31, 2017
(Dollars in thousands) Amount Amount
4.75% due 2043 with a call date of April 30, 2023 $ 400,000
$ 400,000
5.25% due 2046 with a call date of April 20, 2026 350,000
350,000
Debt issuance costs (7,659 ) (7,726 )
Total subordinated deferrable debt $ 742,341
$ 742,274



NOTE 8—9—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

~~Use of Derivatives~~

We are an end user of derivative financial instruments and do not engage in derivative trading. ~~We use derivatives, primarily interest rate swaps and Treasury rate locks, to manage interest rate risk.~~ Derivatives may be privately negotiated contracts, which are often referred to as over-the-counter (“OTC”) derivatives, or they may be listed and traded on an exchange. We generally engage in OTC derivative transactions.

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Accounting for Derivatives~~

~~In accordance with the accounting standards for derivatives and hedging activities, we record~~ Our derivative instruments ~~at fair value as either a derivative asset or derivative liability on~~are an integral part of our condensed consolidated balance sheets. We report derivative asset and liability amounts on a gross basis based on individual contracts, which does not take into consideration the effects of master netting agreements or collateral netting. Derivativesinterest rate risk-management strategy. Our principal purpose in ~~a gain position are reported as derivative assets on our condensed consolidated balance sheets, while derivatives in a loss position are reported as derivative liabilities. Accrued interest related to~~using derivatives is ~~reported on~~to manage our ~~condensed consolidated balance sheets as a component of either accrued~~aggregate interest ~~and other receivables or accrued interest payable.~~

~~If we do not elect hedge accounting treatment, changes in the fair value of~~rate risk profile within prescribed risk parameters. The derivative instruments ~~which~~we use primarily consist of net accrued periodic derivative cash settlements and derivative forward value amounts, are recognized in our consolidated statements of operations under derivative gains (losses). If we elect hedge accounting treatment for derivatives, we formally document, designate and assess the effectiveness of the hedge relationship. Changes in the fair value of derivatives designated as qualifying fair value hedges are recorded in earnings together with offsetting changes in the fair value of the hedged item and any related ineffectiveness. Changes in the fair value of derivatives designated as qualifying cash flow hedges are recorded as a component of OCI, to the extent that the hedge relationships are effective, and reclassified AOCI to earnings using the effective interest method over the term of the forecasted transaction. Any ineffectiveness in the hedging relationship is recognized as a component of derivative gains (losses) in our consolidated statement of operations.

~~We generally do not designate~~ interest rate swaps, which ~~currently represent all~~we typically hold to maturity. In addition, we may use Treasury locks to manage the interest rate risk associated with future debt issuance or debt that is scheduled to reprice in the future. We provide a discussion of our ~~outstanding~~accounting for derivatives ~~for hedge accounting. Accordingly, changes~~policy in ~~the fair value~~“Note 1—Summary of ~~interest rate swaps are reported~~Significant Accounting Policies” in our consolidated statements of operations under derivative gains (losses). Net periodic cash settlements related to interest rate swaps are classified as an operating activity in our consolidated statements of cash flows.2023 Form 10-K.

~~Outstanding~~ Notional Amount of Derivatives Not Designated as Accounting Hedges

~~The notional amount provides an indication of the volume of our derivatives activity, but this amount is not recorded on our condensed consolidated balance sheets.~~ The notional amount is used only as the basis on which interest payments are determined and is not the amount ~~exchanged.~~exchanged, nor recorded on our consolidated balance sheets. The following table shows, by derivative instrument type, the ~~outstanding~~ notional ~~amounts and~~amount, the weighted-average rate paid and the weighted-average interest rate received for our interest rate swaps ~~by type,~~ as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017. The~~2023. For the substantial majority of ~~our~~ interest rate ~~swaps use~~swap agreements, the daily compounded Secured Overnight Financing Rate (“SOFR”) is used as the basis for determining variable interest payment amounts each period.

Table 9.1: Derivative Notional Amount and Weighted Average Rates


	February 29, 2024						May 31, 2023
(Dollars in thousands)	Notional Amount		Weighted- Average Rate Paid		Weighted- Average Rate Received		Notional Amount		Weighted- Average Rate Paid		Weighted- Average Rate Received
Pay-fixed swaps	$	5,920,374	2.77	%	5.56	%	$	5,920,269	2.75	%	5.26	%
Receive-fixed swaps	1,424,563		6.09		3.23		1,700,000		6.05		2.97
Total interest rate swaps	7,344,937		3.42		5.11		7,620,269		3.49		4.75
Forward pay-fixed swaps	—						195,845
Total interest rate swaps	$	7,344,937					$	7,816,114

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Cash Flow Hedges

On November 3, 2023, we executed two Treasury lock agreements with an ~~index based~~aggregate notional amount of $300 million to hedge interest rate risk by locking in the underlying U.S. Treasury interest rate component of interest rate payments on anticipated debt issuances. The Treasury locks were designated and qualified as cash flow hedges. On November 7, 2023, we terminated the ~~London Interbank Offered Rate (“LIBOR”) for either~~Treasury locks upon the ~~pay or receive leg~~pricing of the ~~swap agreement.~~$300 million of notes payable under our Farmer Mac revolving note purchase agreement and recorded a net settlement gain of less than $1 million in accumulated other comprehensive income (“AOCI”), which is reclassified into interest expense over the term of the related Farmer Mac borrowings. We did not have any derivatives designated as accounting hedges as of February 29, 2024 and May 31, 2023.

November 30, 2017 May 31, 2017
(Dollars in thousands)
Notional
Amount

Weighted-
Average
Rate Paid

Weighted-
Average
Rate Received
Notional
Amount Weighted-
Average
Rate Paid Weighted-
Average
Rate Received
Pay-fixed swaps $ 6,974,906
2.84 % 1.39 % $ 6,807,013
2.85 % 1.16 %
Receive-fixed swaps 3,849,000
1.94
2.63
3,699,000
1.72
2.64
Total interest rate swaps 10,823,906
2.52
1.83
10,506,013
2.46
1.68
Forward pay-fixed swaps 226,255
285,383

Total $ 11,050,161
$ 10,791,396

In January 2023, we executed two Treasury lock agreements with an aggregate notional amount of $300 million to hedge interest rate risk on anticipated debt issuances. The agreements, which were scheduled to mature on December 2023, were designated as a cash flow hedge of a forecasted transaction. In February 2023, we terminated the Treasury locks and recorded a settlement gain of $8 million in AOCI. As the hedged forecasted transaction did not occur in the time period specified in the hedge documentation, we reclassified the $8 million gain from AOCI to earnings as a component of derivative gains (losses) on our consolidated statements of operations during Q3 FY2024.

Impact of Derivatives on ~~Condensed~~ Consolidated Balance Sheets

The following table displays the fair value of the derivative assets and derivative liabilities, by derivatives type, recorded on our ~~condensed~~ consolidated balance sheets and the related outstanding notional amount as of ~~our interest rate~~February 29, 2024 and May 31, 2023.

Table 9.2: Derivative Assets and Liabilities at Fair Value


	February 29, 2024				May 31, 2023
(Dollars in thousands)	Fair Value		Notional Amount		Fair Value		Notional Amount (1)
Derivative assets:

Interest rate swaps	$	616,640	$	5,717,705	$	460,762	$	5,405,274
Total derivative assets	$	616,640	$	5,717,705	$	460,762	$	5,405,274

Derivative liabilities:

Interest rate swaps	$	87,809	$	1,627,232	$	115,074	$	2,410,840
Total derivative liabilities	$	87,809	$	1,627,232	$	115,074	$	2,410,840

____________________________

(1) The notional amount as of May 31, 2023 includes $196 million notional amount of forward starting swaps, as shown above in Table 9.1: Derivative Notional Amount and Weighted-Average Rates, with an effective start date in YTD FY2024. The fair value of these swaps as of ~~November 30, 2017 and~~ May 31, ~~2017.~~2023 is included in the above table and in our consolidated financial statements.

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

November 30, 2017 May 31, 2017
(Dollars in thousands) Fair Value Notional Balance Fair Value Notional Balance
Derivative assets $ 87,453
$ 3,916,647
$ 49,481
$ 3,754,120
Derivative liabilities (304,307 ) 7,133,514
(385,337 ) 7,037,276
Total $ (216,854 ) $ 11,050,161
$ (335,856 ) $ 10,791,396

All of our master swap agreements include ~~legally enforceable~~ netting provisions that allow for offsetting of all contracts with a given counterparty in the event of default by one of the two parties. However, ~~as indicated above,~~ we report derivative asset and liability amounts on a gross basis by individual ~~contracts.~~contract. The following table presents the gross fair value of derivative assets and liabilities reported on our ~~condensed~~ consolidated balance sheets as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017,~~2023, and provides information on the impact of netting provisions under our master swap agreements and collateral ~~pledged.~~pledged, if any.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

November 30, 2017

Gross Amount
of Recognized
Assets/ Liabilities

Gross Amount
Offset in the
Balance Sheet

Net Amount of Assets/ Liabilities
Presented
in the
Balance Sheet

Gross Amount
Not Offset in the
Balance Sheet

(Dollars in thousands)
Financial
Instruments

Cash
Collateral
Pledged

Net
Amount
Derivative assets:
Interest rate swaps $ 87,453
$ —
$ 87,453
$ 79,373
$ —
$ 8,080
Derivative liabilities:
Interest rate swaps 304,307
—
304,307
79,373
—
224,934
Table 9.3: Derivative Gross and Net Amounts


	February 29, 2024
	Gross Amount of Recognized Assets/ Liabilities		Gross Amount Offset in the Balance Sheet		Net Amount of Assets/ Liabilities Presented in the Balance Sheet		Gross Amount Not Offset in the Balance Sheet
(Dollars in thousands)							Financial Instruments		Cash Collateral Pledged		Net Amount
Derivative assets:

Interest rate swaps	$	616,640	$	—	$	616,640	$	86,356	$	—	$	530,284

Derivative liabilities:

Interest rate swaps	87,809		—		87,809		86,356		—		1,453


	May 31, 2023
	Gross Amount of Recognized Assets/ Liabilities		Gross Amount Offset in the Balance Sheet		Net Amount of Assets/ Liabilities Presented in the Balance Sheet		Gross Amount Not Offset in the Balance Sheet
(Dollars in thousands)							Financial Instruments		Cash Collateral Pledged		Net Amount
Derivative assets:
Interest rate swaps	$	460,762	$	—	$	460,762	$	112,047	$	—	$	348,715

Derivative liabilities:

Interest rate swaps	115,074		—		115,074		112,047		—		3,027

May 31, 2017

Gross Amount
of Recognized
Assets/ Liabilities

Gross Amount
Offset in the
Balance Sheet

Net Amount of Assets/ Liabilities
Presented
in the
Balance Sheet

Gross Amount
Not Offset in the
Balance Sheet

(Dollars in thousands)
Financial
Instruments

Cash
Collateral
Pledged

Net
Amount
Derivative assets:
Interest rate swaps $ 49,481
$ —
$ 49,481
$ 49,481
$ —
$ —
Derivative liabilities:
Interest rate swaps 385,337
—
385,337
49,481
—
335,856

Impact of Derivatives on ~~Condensed~~ Consolidated Statements of Operations

~~Derivative~~The primary factors affecting the fair value of our derivatives and the derivative gains (losses) recorded in our consolidated statements of operations include changes in interest rates, the shape of the swap curve and the composition of our derivative portfolio. We generally record derivative losses when interest rates decline and derivative gains when interest rates rise, as our derivative portfolio consists of a higher proportion of pay-fixed swaps than receive-fixed swaps.

The following table presents the components of the derivative gains (losses) reported in our ~~condensed~~ consolidated statements of ~~operations consist of derivative cash settlements and derivative forward value gains (losses).~~operations. Derivative cash settlements ~~represent~~interest expense represents the net periodic contractual interest ~~expense accruals on interest rate~~amount for our interest-rate swaps during the reporting period. ~~The derivative~~Derivative forward value gains (losses) represent the change in fair value of our interest rate swaps during the reporting period due to changes in ~~the estimate of~~expected future interest rates over the remaining life of our derivative contracts.

~~The following table presents the components of~~ We classify the derivative ~~gains (losses) reported in our condensed consolidated statements of operations~~cash settlement amounts for the net periodic contractual interest expense on our interest rate swaps ~~for the three and six months ended November 30, 2017 and 2016.~~as an operating activity in our consolidated statements of cash flows.

Table 9.4: Derivative Gains (Losses)



(Dollars in thousands)	Q3 FY2024		Q3 FY2023		YTD FY2024		YTD FY2023
Derivative gains (losses) attributable to:
Derivative cash settlements interest income	$	38,342	$	18,634	$	94,978	$	12,650
Derivative forward value gains (losses)	(56,817)		83,674		183,372		330,035
Derivative gains (losses)	$	(18,475)	$	102,308	$	278,350	$	342,685

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Three Months Ended November 30, Six Months Ended November 30,
(Dollars in thousands) 2017 2016 2017 2016
Derivative cash settlements $ (19,635 ) $ (21,587 ) $ (39,857 ) $ (44,977 )
Derivative forward value gains 145,228
362,247
119,252
197,344
Derivative gains $ 125,593
$ 340,660
$ 79,395
$ 152,367

~~Credit-Risk-Related~~Credit Risk-Related Contingent Features

Our derivative contracts typically contain mutual ~~early termination~~early-termination provisions, generally in the form of a credit rating trigger. Under the mutual credit rating trigger provisions, either counterparty may, but is not obligated to, terminate and settle the agreement if the credit rating of the other counterparty falls tobelow a level specified in the agreement. If a derivative contract is terminated, the amount to be received or paid by us would be equal to the ~~mark-to-market~~prevailing fair value, as defined in the agreement, as of the termination date.

During YTD FY2024, Fitch, S&P and Moody’s affirmed CFC’s credit ratings and stable outlook. Our senior unsecured credit ratings from Moody’s, ~~and~~ S&P ~~were~~and Fitch were A2, A- and A, respectively, as of ~~November 30, 2017. Both~~February 29, 2024. Moody’s, S&P and ~~S&P~~Fitch had our ratings on stable outlook as of ~~November 30, 2017.~~ February 29, 2024. Our credit ratings and outlook remain unchanged as of the date of this Report.

The following table displays the notional amounts of our derivative contracts with rating triggers as of ~~November 30, 2017~~February 29, 2024, and the payments that would be required if the contracts were terminated as of that date because of a downgrade of our unsecured credit ratings or the counterparty’s unsecured credit ratings below A3/A-, below Baa1/BBB+, to or below Baa2/BBB, ~~below Baa3/BBB-~~ or to or below Ba2/BB+ by Moody’s or S&P, respectively. In calculating the payment amounts that would be required upon termination of the derivative contracts, we ~~assumed~~assume that ~~the~~ amounts for each counterparty would be netted in accordance with the provisions of the master netting agreements ~~for each~~with the counterparty. The net payment amounts are based on the fair value of the underlying derivative instrument, excluding the credit risk valuation adjustment, plus any unpaid accrued interest amounts.

Table 9.5: Derivative Credit Rating Trigger Exposure


(Dollars in thousands)	Notional Amount		Payable Due from CFC		Receivable Due to CFC		Net Receivable (Payable)
Impact of rating downgrade trigger:
Falls below A3/A-(1)	$	25,530	$	(782)	$	—	$	(782)
Falls below Baa1/BBB+	4,972,355		(679)		355,604		354,925
Falls to or below Baa2/BBB (2)	311,338		—		23,890		23,890

Total	$	5,309,223	$	(1,461)	$	379,494	$	378,033

(Dollars in thousands)
Notional
Amount
Payable Due From CFC
Receivable
Due to CFC
Net (Payable)/Receivable
Impact of rating downgrade trigger:
Falls below A3/A-⁽¹⁾

$ 56,985

$ (11,670 )
$ —

$ (11,670 )
Falls below Baa1/BBB+ 7,236,383

(143,459 )
7,428

(136,031 )
Falls to or below Baa2/BBB ⁽²⁾
455,152

—

1,577

1,577
Falls below Baa3/BBB- 264,981
(18,102 ) —
(18,102 )
Total $ 8,013,501

$ (173,231 )
$ 9,005

$ (164,226 )
____________________________

^{____________________________}

⁽¹⁾ Rating trigger for CFC falls below A3/A-, while rating trigger for counterparty falls below Baa1/BBB+ by Moody’s or S&P, respectively.

⁽²⁾ Rating trigger for CFC falls to or below Baa2/BBB, while rating trigger for counterparty falls to or below Ba2/BB+ by Moody’s or S&P, respectively.

~~Our largest~~We have interest rate swaps with one counterparty ~~exposure, based on~~that are subject to a ratings trigger and early termination provision in the ~~outstanding notional amount, represented approximately 23%~~event of ~~the total~~a downgrade of CFC’s senior unsecured credit ratings below Baa3, BBB- or BBB- by Moody’s, S&P or Fitch, respectively. The outstanding notional amount of ~~derivatives~~these swaps, which is not included in the above table, totaled $220 million as of ~~both November 30, 2017 and May 31, 2017, respectively.~~ February 29, 2024. These swaps were in an unrealized gain position of $35 million as of February 29, 2024.

The aggregate fair value amount, including the credit ~~risk~~ valuation adjustment, of all interest rate swaps with rating triggers that were in a net liability position was ~~$173~~$1 million as of ~~November 30, 2017.~~February 29, 2024.

Derivative Counterparty Credit Exposure

Our interest-rate swap contracts are subject to credit risk associated with counterparties to these derivative contracts. As mentioned above, we generally engage in OTC derivative transactions, which expose us to individual counterparty credit risk because these transactions are executed and settled directly between us and each counterparty. To manage this risk, we diversify our derivative positions among counterparties with investment-grade credit ratings, perform an internal credit risk

~~NOTE 9—EQUITY~~

Table of Contents

Total equity increased by $141 million to $1,240 million as of November 30, 2017. The increase was primarily attributable to our reported net income of $188 million for the six months ended November 30, 2017, which was partially offset by patronage capital retirement of $45 million in September 2017. The following table presents the components of equity as of November 30, 2017 and May 31, 2017.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

analysis and maintain enforceable master netting arrangements, allowing us to net derivative assets and liabilities with the same counterparty. The fair value of our derivatives includes credit valuation adjustments reflecting counterparty credit risk.

(Dollars in thousands) November 30, 2017 May 31, 2017
Membership fees $ 968
$ 971
Educational fund 1,398
1,929
Total membership fees and educational fund 2,366
2,900
Patronage capital allocated 716,481
761,701
Members’ capital reserve 630,305
630,305
Unallocated net loss:
Prior year-end cumulative derivative forward value losses⁽¹⁾
(332,525 ) (507,904 )
Current year derivative forward value gains ⁽¹⁾
117,340
175,379
Current period-end cumulative derivative forward value losses⁽¹⁾
(215,185 ) (332,525 )
Other unallocated net income (loss) 63,763
(5,603 )
Unallocated net loss (151,422 ) (338,128 )
CFC retained equity 1,197,730
1,056,778
Accumulated other comprehensive income 11,899
13,175
Total CFC equity 1,209,629
1,069,953
Noncontrolling interests 30,419
28,852
Total equity $ 1,240,048
$ 1,098,805

^{____________________________}

⁽¹⁾~~Represents~~We had 12 active derivative ~~forward value gains (losses)~~counterparties with credit ratings ranging from Aa1 to Baa1 by Moody’s as of both February 29, 2024 and May 31, 2023, and from AA- to BBB+ and AA- to A- by S&P as of February 29, 2024 and May 31, 2023, respectively. Our largest counterparty exposure, based on the outstanding notional amount, accounted for ~~CFC only, as total CFC equity does not include the noncontrolling interests~~approximately 24% and 23% of the ~~consolidated variable interest entities NCSC~~total outstanding notional amount of our derivatives as of February 29, 2024 and ~~RTFC. See “Note 12—Business Segments”~~May 31, 2023, respectively. 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 based on the legally enforceable netting provisions under our master swap agreements, which totaled $530 million and $349 million as of February 29, 2024 and May 31, 2023, respectively, as presented in Table 9.3 above.


NOTE 10—EQUITY

Total equity increased $279 million to $2,868 million as of February 29, 2024 compared to May 31, 2023. The increase was attributable primarily to our reported net income of $408 million for ~~the separate statements~~YTD FY2024, partially offset by a decrease in equity of ~~operations for~~$10 million from CFC .

~~In July 2017, the~~’s deconsolidation of RTFC and $113 million from CFC Board of ~~Directors~~Directors’ authorized patronage capital retirements during the ~~allocation~~period, as discussed below.

Allocation of ~~the fiscal year 2017 adjusted net income as follows: $90 million to members in the form~~Net Earnings and Retirement of ~~patronage capital; $43 million to members’ capital reserve; and $1 million to the Cooperative Educational Fund.~~ Patronage Capital

The amount of patronage capital allocated each year by CFC’s Board of Directors is based on adjusted net income, which excludes the impact of derivative forward value gains (losses). See “MD&A—Non-GAAP Financial Measures” for information on adjusted net income.

In ~~July 2017,~~May 2023, the CFC Board of Directors authorized the ~~retirement~~allocation of $1 million of net earnings for fiscal year 2023 to the cooperative educational fund. In July 2023, the CFC Board of Directors authorized the allocation of net earnings for fiscal year 2023 as follows: $110 million to members in the form of patronage capital and $140 million to the members’ capital reserve.

In July 2023, the CFC Board of Directors also authorized the retirement of allocated net earnings totaling ~~$45~~$72 million, of which $55 million represented 50% of the patronage capital allocation for fiscal year ~~2017~~2023 and $17 million represented the portion of the allocation from net earnings for fiscal year 1998 that had been held for 25 years pursuant to the CFC Board of Directors’ policy. The authorized patronage capital retirement amount of ~~$90 million. We~~$72 million was returned ~~the $45 million~~ to members in cash in September ~~2017.~~2023. The remaining portion of the ~~allocated amount~~patronage capital allocation for fiscal year 2023 will be retained by CFC for 25 years ~~under~~pursuant to the guidelines ~~adopted~~adopted by the CFC Board of Directors in June 2009.

~~The~~In connection with the RTFC sale transaction, the CFC Board of Directors ~~is required to make annual allocations~~approved the early retirement of ~~adjusted net income, if any. CFC has made annual retirements~~$66 million of allocated ~~net earnings~~but unretired CFC patronage capital to RTFC at a discounted amount of $41 million, which was paid from CFC to RTFC in 38December 2023 and the remaining $25 million was allocated to CFCmembers’ capital reserve as of the last 39 fiscal years; however, future retirements of allocated amounts are determined based on CFC’s financial condition. The CFC Board of Directors has the authority to change the current practice for allocating and retiring net earnings at any time, subject to applicable laws. February 29, 2024.

See ~~“Item 1. Business—Allocation and Retirement of Patronage Capital” of~~“Note 11—Equity” in our ~~2017~~2023 Form 10-K for additional ~~information.~~information on our policy for allocation and retirement of patronage capital.

Accumulated Other Comprehensive Income (Loss)

The following ~~tables summarize,~~table presents, by component, ~~the activity~~changes in AOCI for the periods presented and the balance of each component as of ~~and for~~ the ~~three and six months ended November 30, 2017 and 2016.~~end of each respective period.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table 10.1: Changes in Accumulated Other Comprehensive Income (Loss)



	Q3 FY2024						Q3 FY2023
(Dollars in thousands)	Unrealized Gains on Derivative Hedges(1)		Unrealized Losses on Defined Benefit Plans(2)		Total		Unrealized Gains on Derivative Hedges(1)		Unrealized Losses on Defined Benefit Plans(2)		Total
Beginning balance	$	11,271	$	(2,653)	$	8,618	$	4,745	$	(2,665)	$	2,080
Changes in unrealized gains	—		—		—		6,691		—		6,691
Realized (gains) losses reclassified to earnings	(7,818)		53		(7,765)		(177)		100		(77)
Ending balance	$	3,453	$	(2,600)	$	853	$	11,259	$	(2,565)	$	8,694


	YTD FY2024						YTD FY2023
(Dollars in thousands)	Unrealized Gains on Derivative Hedges(1)		Unrealized Losses on Defined Benefit Plans(2)		Total		Unrealized Gains on Derivative Hedges(1)		Unrealized Losses on Defined Benefit Plans(2)		Total
Beginning balance	$	11,102	$	(2,759)	$	8,343	$	5,123	$	(2,865)	$	2,258
Changes in unrealized gains	483		—		483		6,691		—		6,691
Realized (gains) losses reclassified to earnings	(8,132)		159		(7,973)		(555)		300		(255)
Ending balance	$	3,453	$	(2,600)	$	853	$	11,259	$	(2,565)	$	8,694

____________________________

(1) Of the derivative gains reclassified to earnings, a portion is reclassified as a component of the derivative gains (losses) line item and the remainder is reclassified as a component of the interest expense line item on our consolidated statements of operations.

(2) Reclassified to earnings as a component of the other non-interest expense line item presented on our consolidated statements of operations.

See “Note 9—Derivative Instruments and Hedging Activities” for discussion on our derivatives designated as accounting hedges. We expect to reclassify realized net gains of $1 million attributable to derivative cash flow hedges from AOCI into earnings over the next 12 months.


NOTE 11—GUARANTEES

We guarantee certain contractual obligations of our members so they may obtain various forms of financing. We use the same credit policies and monitoring procedures in providing guarantees as we do for loans and commitments. If a member system defaults on its obligation to pay debt service, then we are obligated to pay any required amounts under our guarantees. Meeting our guarantee obligations satisfies the underlying obligation of our member systems and prevents the exercise of remedies by the guarantee beneficiary based upon a payment default by a member system. In general, the member system is required to repay any amount advanced by us with interest, pursuant to the documents evidencing the member system’s reimbursement obligation.

The following table displays the notional amount of our outstanding guarantee obligations, by guarantee type and by member class, as of February 29, 2024 and May 31, 2023.

Three Months Ended November 30, 2017
(Dollars in thousands)
Unrealized Gains (Losses)
AFS Securities
Unrealized Gains
Derivatives Unrealized Losses Foreclosed Assets Unrealized Losses Defined Benefit Plan Total
Beginning balance $ 10,865
$ 3,510
$ —
$ (2,416 ) $ 11,959
Unrealized gains 8
—
—
—
8
Losses reclassified into earnings —
—
—
126
126
Gains reclassified into earnings —
(194 ) —
—
(194 )
Other comprehensive income (loss) 8
(194 ) —
126
(60 )
Ending balance $ 10,873
$ 3,316
$ —
$ (2,290 ) $ 11,899

Three Months Ended November 30, 2016
(Dollars in thousands)
Unrealized Gains (Losses)
AFS Securities

Unrealized Gains
Derivatives
Unrealized Losses Foreclosed Assets Unrealized Losses Defined Benefit Plan Total
Beginning balance $ 7,391
$ 4,290
$ —
$ (964 ) $ 10,717
Unrealized losses (1,761 ) —
—
—
(1,761 )
Losses reclassified into earnings —
—
—
44
44
Gains reclassified into earnings —
(199 ) —
—
(199 )
Other comprehensive income (loss) (1,761 ) (199 ) —
44
(1,916 )
Ending balance $ 5,630
$ 4,091
$ —
$ (920 ) $ 8,801

Six Months Ended November 30, 2017
(Dollars in thousands)
Unrealized Gains (Losses)
AFS Securities

Unrealized Gains
Derivatives
Unrealized Losses Foreclosed Assets Unrealized Losses Defined Benefit Plan Total
Beginning balance $ 12,016
$ 3,702
$ —
$ (2,543 ) $ 13,175
Unrealized losses (1,143 ) —
—
—
(1,143 )
Losses reclassified into earnings —
—
—
253
253
Gains reclassified into earnings —
(386 ) —
—
(386 )
Other comprehensive income (loss) (1,143 ) (386 ) —
253
(1,276 )
Ending balance $ 10,873
$ 3,316
$ —
$ (2,290 ) $ 11,899

Table of Contents

Six Months Ended November 30, 2016
(Dollars in thousands)
Unrealized Gains (Losses)
AFS Securities

Unrealized Gains
Derivatives
Unrealized Losses Foreclosed Assets Unrealized Losses Defined Benefit Plan Total
Beginning balance $ 7,402
$ 4,487
$ (9,823 ) $ (1,008 ) $ 1,058
Unrealized losses (1,772 ) —
—
—
(1,772 )
Losses reclassified into earnings —
—
9,823
88
9,911
Gains reclassified into earnings —
(396 ) —
—
(396 )
Other comprehensive income (loss) (1,772 ) (396 ) 9,823
88
7,743
Ending balance $ 5,630
$ 4,091
$ —
$ (920 ) $ 8,801

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table 11.1: Guarantees Outstanding by Type and Member Class

~~We expect to reclassify approximately $0.5 million of amounts in AOCI related to unrealized derivative gains into earnings over the next 12 months.~~


(Dollars in thousands)	February 29, 2024		May 31, 2023
Guarantee type:
Long-term tax-exempt bonds(1)	$	75,005	$	98,405
Letters of credit(2)(3)	718,662		538,393
Other guarantees	185,402		160,023
Total	$	979,069	$	796,821

Member class:
CFC:
Distribution	$	465,158	$	383,644
Power supply	438,408		380,382
Statewide and associate(4)	26,714		17,532
CFC total	930,280		781,558
NCSC	48,789		15,263

Total	$	979,069	$	796,821

____________________________

~~NOTE 10—GUARANTEES~~

~~The following table summarizes total guarantees, by type of guarantee and by member class, as of November 30, 2017 and May 31, 2017.~~

(Dollars in thousands) November 30, 2017 May 31, 2017
Total by type:
Long-term tax-exempt bonds⁽¹⁾
$ 318,425
$ 468,145
Letters of credit⁽²⁾
230,117
307,321
Other guarantees 113,954
114,151
Total $ 662,496
$ 889,617

Total by member class:
CFC:
Distribution $ 129,066
$ 126,188
Power supply 511,624
743,678
Statewide and associate 5,005
5,054
CFC total 645,695
874,920
NCSC 15,227
13,123
RTFC 1,574
1,574
Total $ 662,496
$ 889,617

^{____________________________}

⁽¹⁾Represents the outstanding principal amount of long-term ~~fixed-rate and~~ variable-rate guaranteed bonds.

⁽²⁾Reflects our maximum potential exposure for letters of ~~credit.~~credit, which also includes interest due, if any.

(3)Under a hybrid letter of credit facility, we had $30 million of commitments that may be used for the issuance of letters of credit as of February 29, 2024.

(4)Includes CFC guarantees to NCSC telecom members totaling $25 million and $16 million as of February 29, 2024 and May 31, 2023, respectively.

We had guarantees outstanding totaling $979 million and $797 million as of February 29, 2024 and May 31, 2023, respectively. Guarantees under which our right of recovery from our members was not secured totaled $679 million and $535 million and represented 69% and 67% of total guarantees as of February 29, 2024 and May 31, 2023, respectively.

Long-term tax-exempt bonds of ~~$318~~$75 million and ~~$468~~$98 million as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017,~~2023, respectively, ~~consisted of $251 million and $400 million, respectively,~~consist of adjustable or variable-rate bonds that may be converted to a fixed rate as specified in the applicable indenture for each bond offering. We are unable to determine the maximum amount of interest that we may be required to pay related to the remaining adjustable and variable-rate bonds. Many of these bonds have a call provision that allows us to call the bond in the event of a default, which would limit our exposure to future interest payments on these bonds. Our maximum potential exposure generally is secured by mortgage liens on the members’ assets and future revenue. If a member’s debt is accelerated because of a determination that the interest thereon is not tax-exempt, the member’s obligation to reimburse us for any guarantee payments will be treated as a long-term loan. The remaining long-term tax-exempt bonds of $67 million as of November 30, 2017 are fixed-rate. The maximum potential exposure for these bonds, including the outstanding principal of $67 million and related interest through maturity, totaled $96 million as of November 30, 2017. The maturities for long-term tax-exempt bonds and the related guarantees extend through calendar year ~~2042.~~2037.

Of the outstanding letters of credit of ~~$230~~$719 million and ~~$307~~$538 million as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017,~~2023, respectively, ~~$42~~$200 million and ~~$125~~$138 million respectively, was secured. We did not have any letters of credit outstanding that provided for standby liquidity for adjustable and floating-rate tax-exempt bonds issued for the benefit of our members as of November 30, 2017. Letters of credit include $76 million to provide the standby liquidity for adjustable and floating-rate tax-exempt bonds issued for the benefit of our members as of May 31, 2017. Security provisions include a mortgage lien on

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~substantially all of the member’s assets, future revenue and the member’s investment in our commercial paper.~~were secured at each respective date. The maturities for the outstanding letters of credit as ~~November 30, 2017~~of February 29, 2024 extend through calendar year ~~2027.~~2044.

In addition to the letters of credit listed in the table above, under master letter of credit facilities in place as of ~~November 30, 2017,~~February 29, 2024, we may be required to issue up to an ~~additional $65~~additional $129 million in letters of credit to third parties for the benefit of our members. All of our master letter of credit facilities were subject to ~~material~~material adverse change clauses at the time of issuance as of ~~November 30, 2017.~~February 29, 2024. Prior to issuing a letter of credit, we would confirm that there has been no material adverse change in the business or condition, financial or otherwise, of the borrower since the ~~time the loan~~master letter of credit facility was approved and confirm that the borrower is currently in compliance with the ~~letter of credit~~ terms and ~~conditions.~~conditions of the agreement governing the facility.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The maximum potential exposure for other guarantees was ~~$115~~$185 million and $160 million as of ~~both November 30, 2017~~February 29, 2024 and May 31, ~~2017, all~~2023, respectively, of which ~~were unsecured.~~$25 million was secured as of both February 29, 2024 and May 31, 2023. The maturities for these other guarantees listed in the table above extend through calendar year 2025.

Guarantees under which our right of recovery from our members was not secured totaled $302 million and $297 million and represented 46% and 33% of total guarantees as of November 30, 2017 and May 31, 2017, respectively.

In addition to the guarantees described above, we were also the liquidity provider for ~~$251~~$75 million of variable-rate tax-exempt bonds as of ~~November 30, 2017,~~February 29, 2024, issued for our member cooperatives. While the bonds are in variable-rate mode, in return for a fee, we have unconditionally agreed to purchase bonds tendered or put for redemption if the remarketing agents are unable to sell such bonds to other investors. We were not required to perform as liquidity provider pursuant to these obligations during ~~the six months ended November 30, 2017~~YTD FY2024 or ~~the prior fiscal year.~~YTD FY2023.

Guarantee Liability

~~As of November 30, 2017 and May 31, 2017, we~~We recorded a total guarantee liability ~~of $8 million~~for noncontingent and ~~$15 million respectively, which represents the~~ contingent ~~and noncontingent~~ exposures related to guarantees and liquidity ~~obligations. The contingent guarantee liability was $1~~obligations of $15 million and $13 million as of ~~both November 30, 2017~~February 29, 2024 and May 31, ~~2017, based on management’s estimate of exposure to losses within the guarantee portfolio.~~2023, respectively. The ~~remaining balance of the total~~noncontingent guarantee liability, ~~of $7 million and $14 million as of November 30, 2017 and May 31, 2017, respectively, relates~~which pertains to our ~~noncontingent~~ obligation to stand ready to perform over the term of our guarantees and liquidity obligations ~~that~~ we have entered into or modified since January 1, ~~2003.~~2003 and accounts for the substantial majority of our guarantee liability, totaled $15 million and $12 million as of February 29, 2024 and May 31, 2023, respectively. The remaining amount pertains to our contingent guarantee exposures.



NOTE ~~11—~~12—FAIR VALUE MEASUREMENT

~~We use~~Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value ~~measurements~~accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on the ~~initial recording~~markets in which the assets or liabilities trade and whether the inputs to the valuation techniques used to measure fair value are observable or unobservable. The fair value measurement of ~~certain assets~~a financial asset or liability is assigned a level based on the lowest level of any input that is significant to the fair value measurement in its entirety. The levels, in priority order based on the extent to which observable inputs are available to measure fair value, are Level 1, Level 2 and ~~liabilities and periodic remeasurement of certain assets and liabilities on a recurring or nonrecurring basis.~~Level 3. The accounting guidance for fair value measurements requires that we maximize the use of observable inputs and ~~disclosures establishes a three-level~~minimize the use of unobservable inputs in determining fair value.

The following table presents the carrying value and estimated fair value ~~hierarchy that prioritizes~~of all of our financial instruments, including those carried at amortized cost, as of February 29, 2024 and May 31, 2023. The table also displays the ~~inputs into the valuation techniques used to measure fair value. The levels of~~classification level within the fair value hierarchy based on the degree of observability of the inputs used in ~~priority order, include Level 1, Level 2 and Level 3.~~ the valuation technique for estimating fair value.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table 12.1: Fair Value of Financial Instruments


	February 29, 2024				Fair Value Measurement Level
(Dollars in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	144,848	$	144,848	$	144,848	$	—	$	—
Restricted cash	8,209		8,209		8,209		—		—

Equity securities, at fair value	36,645		36,645		36,645		—		—
Debt securities trading, at fair value	335,032		335,032		—		335,032		—

Deferred compensation investments	7,605		7,605		7,605		—		—
Loans to members, net	34,363,339		30,700,815		—		—		30,700,815
Accrued interest receivable	189,448		189,448		—		189,448		—
Derivative assets	616,640		616,640		—		616,640		—
Total financial assets	$	35,701,766	$	32,039,242	$	197,307	$	1,141,120	$	30,700,815

Liabilities:
Short-term borrowings	$	4,604,626	$	4,606,330	$	—	$	4,106,330	$	500,000
Long-term debt	25,451,631		24,118,137		—		14,744,106		9,374,031
Accrued interest payable	296,897		296,897		—		296,897		—
Guarantee liability	15,313		15,841		—		—		15,841
Derivative liabilities	87,809		87,809		—		87,809		—
Subordinated deferrable debt	1,286,872		1,303,314		252,590		1,050,724		—
Members’ subordinated certificates	1,198,115		1,198,115		—		—		1,198,115
Total financial liabilities	$	32,941,263	$	31,626,443	$	252,590	$	20,285,866	$	11,087,987


	May 31, 2023				Fair Value Measurement Level
(Dollars in thousands)	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents	$	198,936	$	198,936	$	198,936	$	—	$	—
Restricted cash	8,301		8,301		8,301		—		—

Equity securities, at fair value	35,494		35,494		35,494		—		—
Debt securities trading, at fair value	474,875		474,875		—		474,875		—

Deferred compensation investments	6,660		6,660		6,660		—		—
Loans to members, net	32,478,992		29,308,647		—		—		29,308,647
Accrued interest receivable	172,723		172,723		—		172,723		—
Derivative assets	460,762		460,762		—		460,762		—
Total financial assets	$	33,836,743	$	30,666,398	$	249,391	$	1,108,360	$	29,308,647

Liabilities:
Short-term borrowings	$	4,546,275	$	4,547,333	$	—	$	4,547,333	$	—
Long-term debt	23,946,548		22,665,551		—		13,527,393		9,138,158
Accrued interest payable	212,340		212,340		—		212,340		—
Guarantee liability	12,973		12,475		—		—		12,475
Derivative liabilities	115,074		115,074		—		115,074		—
Subordinated deferrable debt	1,283,436		1,261,141		240,831		1,020,310		—
Members’ subordinated certificates	1,223,126		1,223,126		—		—		1,223,126
Total financial liabilities	$	31,339,772	$	30,037,040	$	240,831	$	19,422,450	$	10,373,759

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For additional information regarding fair value measurements, the fair value hierarchy and a description of the methodologies we use to ~~measure~~estimate fair value, see “Note 14—Fair Value Measurement” to the Consolidated Financial Statements in our ~~2017~~2023 Form 10-K.

The following tables present the carrying value and fair value for all of our financial instruments, including those carried at amortized cost, as of November 30, 2017 and May 31, 2017. The tables also display the classification within the fair value hierarchy of the valuation technique used in estimating fair value.

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

November 30, 2017 Fair Value Measurement Level
(Dollars in thousands) Carrying Value Fair Value Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents $ 280,315
$ 280,315
$ 280,315
$ —
$ —
Restricted cash 11,323
11,323
11,323
—
—
Time deposits 51,000
51,000
51,000

Investment securities, available-for-sale 91,411
91,411
91,411
—
—
Investment securities, held-to-maturity 248,155
247,257
—
247,257
—
Deferred compensation investments 5,176
5,176
5,176
—
—
Loans to members, net 24,787,917
24,351,976
—
—
24,351,976
Accrued interest receivable 116,770
116,770
—
116,770
—
Debt service reserve funds 17,151
17,151
17,151
—
—
Derivative assets 87,453
87,453
—
87,453
—

Liabilities:
Short-term borrowings $ 3,557,192
$ 3,556,637
$ 1,446,065
$ 2,110,572
$ —
Long-term debt 18,386,819
18,975,545
—
11,452,351
7,523,194
Accrued interest payable 143,085
143,085
—
143,085
—
Guarantee liability 8,211
8,423
—
—
8,423
Derivative liabilities 304,307
304,307
—
304,307
—
Subordinated deferrable debt 742,341
789,430
—
789,430
—
Members’ subordinated certificates 1,399,675
1,399,697
—
—
1,399,697

May 31, 2017 Fair Value Measurement Level
(Dollars in thousands) Carrying Value Fair Value Level 1 Level 2 Level 3
Assets:
Cash and cash equivalents $ 166,615
$ 166,615
$ 166,615
$ —
$ —
Restricted cash 21,806
21,806
21,806
—
—
Time deposits 226,000
226,000
—
226,000
—
Investment securities, available-for-sale 92,554
92,554
92,554
—
—
Deferred compensation investments 4,693
4,693
4,693
—
—
Loans to members, net 24,329,668
24,182,724
—
—
24,182,724
Accrued interest receivable 111,493
111,493
—
111,493
—
Debt service reserve funds 17,151
17,151
17,151
—
—
Derivative assets 49,481
49,481
—
49,481
—

Liabilities:
Short-term borrowings $ 3,342,900
$ 3,342,990
$ 1,527,990
$ 1,815,000
$ —
Long-term debt 17,955,594
18,744,331
—
11,215,290
7,529,041
Accrued interest payable 137,476
137,476
—
137,476
—
Guarantee liability 15,241
16,204
—
—
16,204
Derivative liabilities 385,337
385,337
—
385,337
—
Subordinated deferrable debt 742,274
788,079
—
788,079
—
Members’ subordinated certificates 1,419,025
1,419,048
—
—
1,419,048

~~NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(UNAUDITED)~~

~~Investment Securities, Held-to-Maturity, Fair Value~~

As discussed above in “Note 3—Investment Securities,” we did not have any securities classified as HTM as of May 31, 2017. During the second quarter of fiscal year 2018, we commenced the purchase of additional investment securities, consisting primarily of certificates of deposit, commercial paper and corporate debt securities, commercial MBS and other ABS traded in secondary markets. We designated these securities as HTM.

Management estimates the fair value of our HTM securities utilizing the assistance of third-party pricing services. Methodologies employed, controls relied upon and inputs used by third-party pricing vendors are subject to management review when such services are provided. This review may consist of, in part, obtaining and evaluating control reports issued and pricing methodology materials distributed. We review the pricing methodologies provided by the vendors in order to determine if observable market information is being used to determine the fair value versus unobservable inputs. Investment securities traded in secondary markets are typically valued using unadjusted vendor prices. These investment securities, which include those measured using unadjusted vendor prices, are generally classified as Level 2 because the valuation typically involves using quoted market prices for similar securities, pricing models, discounted cash flow analyses using significant observable market where available or a combination of multiple valuation techniques ~~for which all significant~~

~~assumptions are observable in the market.~~

Transfers Between Levels

We monitor the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy and transfer between Level 1, Level 2, and Level 3 accordingly. Observable market data includes but is not limited to quoted prices and market transactions. Changes in economic conditions or market liquidity generally will drive changes in availability of observable market data. Changes in availability of observable market data, which also may result in changes in the valuation technique used, are generally the cause of transfers between levels. We did not have any transfers ~~between levels for financial instruments measured at~~into or out of Level 3 of the fair value hierarchy during YTD FY2024 or YTD FY2023.

Assets and Liabilities Measured at Fair Value on a ~~recurring basis for the six months ended November 30, 2017 and 2016.~~Recurring Basis

~~Recurring Fair Value Measurements~~

The following table presents the carrying value and fair value of financial instruments reported in our ~~condensed~~ consolidated financial statements at fair value on a recurring basis as of ~~November 30, 2017~~February 29, 2024 and May 31, ~~2017,~~2023, and the classification of the valuation technique within the fair value hierarchy.

November 30, 2017 May 31, 2017
(Dollars in thousands) Level 1 Level 2 Total Level 1 Level 2 Total
Investment securities, available for sale $ 91,411
$ —
$ 91,411
$ 92,554
$ —
$ 92,554
Deferred compensation investments 5,176
—
5,176
4,693
—
4,693
Derivative assets —
87,453
87,453
—
49,481
49,481
Derivative liabilities —
304,307
304,307
—
385,337
385,337

~~Nonrecurring Fair Value~~

We did ~~not~~not have any assets ~~reported in our condensed consolidated financial statements~~and liabilities measured at fair value on a recurring basis using significant unobservable inputs during YTD FY2024 or YTD FY2023.

Table 12.2: Assets and Liabilities Measured at Fair Value on a Recurring Basis


	February 29, 2024						May 31, 2023
(Dollars in thousands)	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets:
Equity securities, at fair value	$	36,645	$	—	$	36,645	$	35,494	$	—	$	35,494
Debt securities trading, at fair value	—		335,032		335,032		—		474,875		474,875
Deferred compensation investments	7,605		—		7,605		6,660		—		6,660
Derivative assets	—		616,640		616,640		—		460,762		460,762

Liabilities:
Derivative liabilities	$	—	$	87,809	$	87,809	$	—	$	115,074	$	115,074

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis on our consolidated balance sheets. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, such as in the application of ~~November 30, 2017~~the lower of cost or fair value accounting or when we evaluate assets for impairment. We did not have any assets or liabilities measured at fair value on a nonrecurring basis during YTD FY2024 or YTD FY2023.


NOTE 13—VARIABLE INTEREST ENTITIES

NCSC meets the definition of a VIE because it does not have sufficient equity investment at risk to finance its activities without financial support. CFC is the primary source of funding for NCSC. Under the terms of management agreements with NCSC, CFC manages the business operations of NCSC. CFC also unconditionally guarantees full indemnification for any loan losses of NCSC pursuant to guarantee agreements with NCSC. CFC earns management and ~~May 31, 2017~~guarantee fees from its agreements with NCSC. Previously, RTFC was a VIE that was required to be consolidated by CFC. Subsequent to December 1, 2023, in connection with the RTFC sale transaction, CFC is no longer a primary beneficiary of RTFC, and ~~there were no unrealized losses for the three and six months ended November 30, 2017 and 2016 related to these assets.~~

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

accordingly, deconsolidated RTFC from its consolidated financial statements. We provide additional information on the RTFC sale transaction under “Note 1—Summary of Significant Accounting Policies.”

~~Significant Unobservable Level 3 Inputs~~

All loans that require NCSC board approval also require CFC board approval. CFC is not a member of NCSC and does not elect directors to the NCSC board. If CFC becomes a member of NCSC, it would control the nomination process for one NCSC director. NCSC members elect directors to the NCSC board based on one vote for each member. NCSC is a Class C member of CFC.

~~Impaired Loans~~

We utilize the fair value of estimated cash flows or the collateral underlying the loan to determine the fair value and specific allowance for impaired loans. The valuation technique used to determine fair value of the impaired loans provided by both our internal staff and third-party specialists includes market multiples (i.e., comparable companies). The significant unobservable inputs usedNCSC creditors have no recourse against CFC in the ~~determination~~event of ~~fair value for individually impaired loans~~a default by NCSC, unless there is a ~~multiple~~guarantee agreement under which CFC has guaranteed NCSC debt obligations to a third party. The following table provides information on incremental consolidated assets and liabilities of earnings before interest, taxes, depreciation and amortization based on various factors (i.e., financial condition of the borrower). In estimating the fair value of the collateral, we may use third-party valuation specialists, internal estimates or a combination of both. The significant unobservable inputs for estimating the fair value of impaired collateral-dependent loans are reviewed by our Credit Risk Management group to assess the reasonableness of the assumptions used and the accuracy of the work performed. In cases where we rely on third-party inputs, we use the final unadjusted third-party valuation analysis as support for any adjustments to ourVIE included in CFC’s consolidated financial statements, after intercompany eliminations, which include NCSC’s consolidated assets and ~~disclosures.~~

~~Because of the limited amount of impaired loans~~liabilities as of ~~November 30, 2017~~February 29, 2024 and NCSC’s and RTFC’s assets and liabilities as of May 31, ~~2017, we do not believe that potential changes in the significant unobservable inputs used in the determination~~2023.

Table 13.1: Consolidated Assets and Liabilities of ~~the fair value for impaired loans will have a material impact on the fair value measurement of these assets or our results of operations.~~Variable Interest Entities


(Dollars in thousands)	February 29, 2024		May 31, 2023
Assets:
Loans outstanding	$	1,532,703	$	1,444,662
Other assets	15,293		12,612
Total assets	$	1,547,996	$	1,457,274

Liabilities:


Total liabilities	$	12,825	$	19,704

~~NOTE 12—BUSINESS SEGMENTS~~

The following ~~tables display segment results for the three~~table provides information on CFC’s credit commitments and ~~six months ended November 30, 2017 and 2016, and assets attributable~~potential exposure to ~~each segment~~loss under these commitments to NCSC as of ~~November 30, 2017~~February 29, 2024, and ~~November 30, 2016.~~to NCSC and RTFC as of May 31, 2023

Table 13.2: CFC Exposure Under Credit Commitments to NCSC and RTFC


	February 29, 2024		May 31, 2023
(Dollars in thousands)	NCSC		NCSC and RTFC
CFC credit commitments:
Total CFC credit commitments	$	5,000,000	$	5,500,000

Outstanding commitments:
Borrowings payable to CFC(1)	1,521,826		1,428,886
Credit enhancements:
CFC third-party guarantees	48,789		15,263
Other credit enhancements	1,138		2,038
Total credit enhancements(2)	49,927		17,301
Total outstanding commitments	1,571,753		1,446,187
CFC credit commitments available(3)	$	3,428,247	$	4,053,813

____________________________

(1) Intercompany borrowings payable by NCSC to CFC as of February 29, 2024 and intercompany borrowing payable by NCSC and RTFC to CFC as of May 31, 2023 are eliminated in consolidation.

(2) Excludes interest due on these instruments.

(3) Represents total CFC credit commitments less outstanding commitments as of each period end.

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Under a loan and security agreement with CFC, NCSC had access to a $1,500 million revolving line of credit and a $1,500 million revolving term loan from CFC as of May 31, 2023, maturing in 2067. Under a loan and security agreement with CFC, RTFC had access to a $1,000 million revolving line of credit and a $1,500 million revolving term loan from CFC as of May 31, 2023, maturing in 2067.

In connection with the RTFC sale transaction on December 1, 2023, the NCSC loan and security agreement with CFC was amended to assume the RTFC loan and security agreement with CFC and revise the amount available thereunder. As a result, as of February 29, 2024, NCSC had access to $2,000 million revolving line of credit and a $3,000 million revolving term loan from CFC which will mature in 2067.

CFC loans to NCSC are secured by all assets and revenue of NCSC. CFC’s maximum potential exposure, including interest due, for the credit enhancements totaled $50 million as of February 29, 2024. The maturities for obligations guaranteed by CFC extend through 2043.


NOTE 14—BUSINESS SEGMENTS

Our activities were previously conducted through three operating segments, which were based on each of the legal entities included in our consolidated financial statements: CFC, NCSC and RTFC. We reported segment information for CFC separately; however, we aggregated segment information for NCSC and RTFC into one reportable segment because neither entity met the quantitative materiality threshold for separate reporting under the accounting guidance governing segment reporting. As discussed above under “Note 1—Summary of Significant Accounting Policies,” on December 1, 2023, RTFC completed the sale of its business to NCSC. After the RTFC sale transaction, our operating segments currently consist of CFC and NCSC, which are based on each of the legal entities included in our consolidated financial statements. As we aggregated segment information for NCSC and RTFC into one reportable segment in prior periods, the RTFC sale transaction did not cause a change in the composition of our reportable segments. We present the results of our business segments on the basis in which management internally evaluates operating performance to establish short- and long-term performance goals, develop budgets and forecasts, identify potential trends, allocate resources and make compensation decisions.

Segment Results and Reconciliation

The following tables display segment results of operations for Q3 FY2024 and YTD FY2024, and Q3 FY2023 and YTD FY2023, assets attributable to each segment as of February 29, 2024 and February 28, 2023 and a reconciliation of total segment amounts to our consolidated total amounts.

Three Months Ended November 30, 2017
(Dollars in thousands) CFC Other Elimination Consolidated Total
Statement of operations:
Interest income $ 263,180
$ 12,257
$ (9,614 ) $ 265,823
Interest expense (194,943 ) (9,841 ) 9,614
(195,170 )
Net interest income 68,237
2,416
—
70,653
Benefit for loan losses 304
—
—
304
Net interest income after benefit for loan losses 68,541
2,416
—
70,957
Non-interest income:
Fee and other income 5,490
301
(249 ) 5,542
Derivative gains (losses):
Derivative cash settlements (18,990 ) (645 ) —
(19,635 )
Derivative forward value gains 143,452
1,776
—
145,228
Derivative gains 124,462
1,131
—
125,593
Results of operations of foreclosed assets (10 ) —
—
(10 )
Total non-interest income 129,942
1,432
(249 ) 131,125
Non-interest expense:
General and administrative expenses (20,292 ) (1,622 ) —
(21,914 )
Losses on early extinguishment of debt —
—
—
—
Other non-interest expense (618 ) (249 ) 249
(618 )
Total non-interest expense (20,910 ) (1,871 ) 249
(22,532 )
Income before income taxes 177,573
1,977
—
179,550
Income tax expense —
(827 ) —
(827 )
Net income $ 177,573
$ 1,150
$ —
$ 178,723

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Table 14.1: Business Segment Information


	Q3 FY2024
(Dollars in thousands)	CFC		NCSC		Segments Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated Total
Results of operations:
Interest income	$	409,514	$	21,417	$	430,931	$	—	$	(19,096)	$	411,835
Interest expense	(346,993)		(19,122)		(366,115)		—		19,096		(347,019)
Derivative cash settlements interest income	38,304		38		38,342		(38,342)		—		—
Interest expense	(308,689)		(19,084)		(327,773)		(38,342)		19,096		(347,019)
Net interest income	100,825		2,333		103,158		(38,342)		—		64,816
Benefit (provision) for credit losses	6,559		(537)		6,022		—		537		6,559
Net interest income after benefit (provision) for credit losses	107,384		1,796		109,180		(38,342)		537		71,375
Non-interest income:
Fee and other income	6,217		1,773		7,990		—		(2,965)		5,025
Derivative gains (losses):
Derivative cash settlements interest income	—		—		—		38,342		—		38,342
Derivative forward value losses	—		—		—		(56,817)		—		(56,817)
Derivative losses	—		—		—		(18,475)		—		(18,475)
Investment securities gains	4,140		—		4,140		—		—		4,140
Total non-interest income (loss)	10,357		1,773		12,130		(18,475)		(2,965)		(9,310)
Non-interest expense:
General and administrative expenses	(29,153)		(2,706)		(31,859)		—		1,870		(29,989)
Losses on early extinguishment of debt	(33)		—		(33)		—		—		(33)
Other non-interest expense	(250)		(595)		(845)		—		558		(287)
Total non-interest expense	(29,436)		(3,301)		(32,737)		—		2,428		(30,309)
Income before income taxes	88,305		268		88,573		(56,817)		—		31,756
Income tax provision	—		(567)		(567)		—		—		(567)
Net income (loss)	$	88,305	$	(299)	$	88,006	$	(56,817)	$	—	$	31,189

Three Months Ended November 30, 2016
(Dollars in thousands) CFC Other Elimination Consolidated Total
Statement of operations:
Interest income $ 254,689
$ 11,129
$ (8,662 ) $ 257,156
Interest expense (183,395 ) (8,934 ) 8,675
(183,654 )
Net interest income 71,294
2,195
13
73,502
Provision for loan losses (738 ) —
—
(738 )
Net interest income after provision for loan losses 70,556
2,195
13
72,764
Non-interest income:
Fee and other income 4,628
1,727
(1,258 ) 5,097
Derivative gains (losses):

Derivative cash settlements (20,821 ) (766 ) —
(21,587 )
Derivative forward value gains 358,423
3,824
—
362,247
Derivative gains 337,602
3,058
—
340,660
Results of operations of foreclosed assets (549 ) —
—
(549 )
Total non-interest income 341,681
4,785
(1,258 ) 345,208
Non-interest expense:
General and administrative expenses (18,991 ) (1,641 ) —
(20,632 )
Other non-interest expense (517 ) (1,245 ) 1,245
(517 )
Total non-interest expense (19,508 ) (2,886 ) 1,245
(21,149 )
Income before income taxes 392,729
4,094
—
396,823
Income tax expense —
(1,519 ) —
(1,519 )
Net income $ 392,729
$ 2,575
$ —
$ 395,304

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Q3 FY2023
(Dollars in thousands)	CFC		NCSC		Segments Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated Total
Results of operations:
Interest income	$	350,914	$	17,915	$	368,829	$	—	$	(15,537)	$	353,292
Interest expense	(281,706)		(15,540)		(297,246)		—		15,537		(281,709)
Derivative cash settlements interest income (expense)	18,680		(46)		18,634		(18,634)		—		—
Interest expense	(263,026)		(15,586)		(278,612)		(18,634)		15,537		(281,709)
Net interest income	87,888		2,329		90,217		(18,634)		—		71,583
Benefit (provision) for credit losses	11,318		(15)		11,303		—		15		11,318
Net interest income after benefit (provision) for credit losses	99,206		2,314		101,520		(18,634)		15		82,901
Non-interest income:
Fee and other income	7,004		828		7,832		—		(2,506)		5,326
Derivative gains:
Derivative cash settlements interest income	—		—		—		18,634		—		18,634
Derivative forward value gains	—		—		—		83,674		—		83,674
Derivative gains	—		—		—		102,308		—		102,308
Investment securities losses	(1,402)		—		(1,402)		—		—		(1,402)
Total non-interest income	5,602		828		6,430		102,308		(2,506)		106,232
Non-interest expense:
General and administrative expenses	(24,570)		(2,766)		(27,336)		—		2,021		(25,315)

Other non-interest expense	(297)		(471)		(768)		—		470		(298)
Total non-interest expense	(24,867)		(3,237)		(28,104)		—		2,491		(25,613)
Income (loss) before income taxes	79,941		(95)		79,846		83,674		—		163,520
Income tax provision	—		(303)		(303)		—		—		(303)
Net income (loss)	$	79,941	$	(398)	$	79,543	$	83,674	$	—	$	163,217

Six Months Ended November 30, 2017
(Dollars in thousands) CFC Other Elimination Consolidated Total
Statement of operations:
Interest income $ 526,591
$ 23,206
$ (18,059 ) $ 531,738
Interest expense (387,448 ) (18,512 ) 18,059
(387,901 )
Net interest income 139,143
4,694
—
143,837
Benefit for loan losses 602
—
—
602
Net interest income after benefit for loan losses 139,745
4,694
—
144,439
Non-interest income:
Fee and other income 9,378
701
(592 ) 9,487
Derivative gains (losses):
Derivative cash settlements (38,554 ) (1,303 ) —
(39,857 )
Derivative forward value gains 117,341
1,911
—
119,252
Derivative gains 78,787
608
—
79,395
Results of operations of foreclosed assets (34 ) —
—
(34 )
Total non-interest income 88,131
1,309
(592 ) 88,848
Non-interest expense:
General and administrative expenses (40,030 ) (3,520 ) —
(43,550 )
Other non-interest expense (1,140 ) (592 ) 592
(1,140 )
Total non-interest expense (41,170 ) (4,112 ) 592
(44,690 )
Income before income taxes 186,706
1,891
—
188,597
Income tax expense —
(859 ) —
(859 )
Net income $ 186,706
$ 1,032
$ —
$ 187,738

November 30, 2017
CFC Other Elimination Consolidated Total
Assets:
Loans to members $ 24,788,572
$ 1,111,438
$ (1,075,319 ) $ 24,824,691
Less: Allowance for loan losses (36,774 ) —
—
(36,774 )
Loans to members, net 24,751,798
1,111,438
(1,075,319 ) 24,787,917
Other assets 1,081,850
107,516
(97,040 ) 1,092,326
Total assets $ 25,833,648
$ 1,218,954
$ (1,172,359 ) $ 25,880,243

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	YTD FY2024
(Dollars in thousands)	CFC		NCSC		Segments Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated Total
Results of operations:
Interest income	$	1,174,803	$	60,465	$	1,235,268	$	—	$	(53,490)	$	1,181,778
Interest expense	(987,094)		(53,541)		(1,040,635)		—		53,490		(987,145)
Derivative cash settlements interest income	94,869		109		94,978		(94,978)		—		—
Interest expense	(892,225)		(53,432)		(945,657)		(94,978)		53,490		(987,145)
Net interest income	282,578		7,033		289,611		(94,978)		—		194,633
Benefit (provision) for credit losses	5,131		(1,801)		3,330		—		1,801		5,131
Net interest income after benefit (provision) for credit losses	287,709		5,232		292,941		(94,978)		1,801		199,764
Non-interest income:
Fee and other income	20,902		4,735		25,637		—		(9,464)		16,173
Derivative gains:
Derivative cash settlements interest income	—		—		—		94,978		—		94,978
Derivative forward value gains	—		—		—		183,372		—		183,372
Derivative gains	—		—		—		278,350		—		278,350
Investment securities gains	8,916		—		8,916		—		—		8,916
Total non-interest income	29,818		4,735		34,553		278,350		(9,464)		303,439
Non-interest expense:
General and administrative expenses	(90,556)		(8,753)		(99,309)		—		6,305		(93,004)
Losses on early extinguishment of debt	(998)		—		(998)		—		—		(998)
Other non-interest expense	(675)		(1,398)		(2,073)		—		1,358		(715)
Total non-interest expense	(92,229)		(10,151)		(102,380)		—		7,663		(94,717)
Income (loss) before income taxes	225,298		(184)		225,114		183,372		—		408,486
Income tax provision	—		(978)		(978)		—		—		(978)
Net income (loss)	$	225,298	$	(1,162)	$	224,136	$	183,372	$	—	$	407,508

	February 29, 2024
	CFC		NCSC		Segments Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated Total
Assets:
Total loans outstanding	$	34,387,835	$	1,532,703	$	35,920,538	$	—	$	(1,521,826)	$	34,398,712
Deferred loan origination costs	13,622		—		13,622		—		—		13,622
Loans to members	34,401,457		1,532,703		35,934,160		—		(1,521,826)		34,412,334
Less: Allowance for credit losses	(48,995)		(5,471)		(54,466)		—		5,471		(48,995)
Loans to members, net	34,352,462		1,527,232		35,879,694		—		(1,516,355)		34,363,339
Other assets	1,513,120		27,575		1,540,695		—		(12,281)		1,528,414
Total assets	$	35,865,582	$	1,554,807	$	37,420,389	$	—	$	(1,528,636)	$	35,891,753

Table of Contents

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


	Six Months Ended November 30, 2016													YTD FY2023
(Dollars in thousands)	CFC			Other			Elimination			Consolidated Total			(Dollars in thousands)	CFC		NCSC		Segments Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated Total
Statement of operations:
Results of operations:
Interest income
Interest income
Interest income	$	508,706		$	22,351		$	(17,066	)	$	513,991
Interest expense	(364,227		)	(17,610		)	17,103			(364,734		)
Derivative cash settlements interest income (expense)
Interest expense
Net interest income	144,479			4,741			37			149,257
Provision for loan losses	(2,666		)	—			—			(2,666		)
Net interest income after provision for loan losses	141,813			4,741			37			146,591
Provision for credit losses
Net interest income after provision for credit losses
Non-interest income:
Fee and other income	8,956			2,624			(1,953		)	9,627
Derivative gains (losses):
Derivative cash settlements	(43,430		)	(1,547		)	—			(44,977		)
Fee and other income
Fee and other income
Derivative gains:
Derivative cash settlements interest income
Derivative cash settlements interest income
Derivative cash settlements interest income
Derivative forward value gains	194,210			3,134			—			197,344
Derivative gains	150,780			1,587			—			152,367
Results of operations of foreclosed assets	(1,661		)	—			—			(1,661		)
Investment securities losses
Total non-interest income	158,075			4,211			(1,953		)	160,333
Non-interest expense:
General and administrative expenses	(37,770		)	(3,721		)	—			(41,491		)
General and administrative expenses
General and administrative expenses

Other non-interest expense
Other non-interest expense
Other non-interest expense	(960		)	(1,916		)	1,916			(960		)
Total non-interest expense	(38,730		)	(5,637		)	1,916			(42,451		)
Income before income taxes	261,158			3,315			—			264,473
Income tax expense	—			(1,430		)	—			(1,430		)
Net income	$	261,158		$	1,885		$	—		$	263,043
Income (loss) before income taxes
Income tax provision
Net income (loss)

	November 30, 2016
	CFC			Other			Elimination			Consolidated Total
				February 28, 2023
				February 28, 2023
				February 28, 2023
			CFC												CFC		NCSC		Segment Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated Total
Assets:													Assets:
Total loans outstanding
Deferred loan origination costs
Loans to members	$	23,813,591		$	1,037,545		$	(1,000,424	)	$	23,850,712
Less: Allowance for loan losses	(33,911		)	—			—			(33,911		)
Less: Allowance for credit losses
Loans to members, net	23,779,680			1,037,545			(1,000,424		)	23,816,801
Other assets	1,318,908			112,264			(100,252		)	1,330,920
Total assets	$	25,098,588		$	1,149,809		$	(1,100,676	)	$	25,147,721

____________________________

(1)Consists of (i) the reclassification of net periodic derivative settlement interest expense amounts, which we report as a component of interest expense for business segment reporting purposes but is included in derivatives gains (losses) in our consolidated total results and (ii) derivative forward value gains and losses, which we exclude from our business segment results but is included in derivatives gains (losses) in our consolidated total results.


~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~

(2)Consists of intercompany borrowings payable by NCSC to CFC and the interest related to those borrowings, management fees paid by NCSC to CFC and other intercompany amounts, all of which are eliminated in consolidation.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk, see “Part I—Item 2. MD&A—Market Risk” and “Note 8—9—Derivative Instruments and Hedging Activities.”


~~Item 4.~~	~~Controls and Procedures~~

Item 4. Controls and Procedures

As of the end of the period covered by this report, senior management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on this evaluation process, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting that occurred during the three months ended ~~November 30, 2017~~February 29, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION


~~Item 1.~~	~~Legal Proceedings~~

Item 1. Legal Proceedings

From time to time, CFC is subject to certain legal proceedings and claims in the ordinary course of business, including litigation with borrowers related to enforcement or collection actions. Management presently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, liquidity or results of operations. 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 1A.~~	~~Risk Factors~~

~~Refer~~Item 1A. Risk Factors

Our financial condition, results of operations and liquidity are subject to various risks and uncertainties, some of which are inherent in the financial services industry and others of which are more specific to our own business. We identify and discuss the most significant risk factors of which we are currently aware that could have a material adverse impact on our business, results of operations, financial condition or liquidity in the section “Part I—Item 1A. Risk Factors” in our ~~2017~~2023 Form 10-K, ~~for information regarding factors that could affect our results of operations, financial condition and liquidity.~~as filed with the SEC on August 2, 2023. We are not aware of any material changes in the risk factors ~~set forth under “Part I— Item 1A. Risk Factors”~~identified in our ~~2017~~2023 Form 10-K. However, other risks and uncertainties, including those not currently known to us, could also negatively impact our business, results of operations, financial condition and liquidity. Therefore, the risk factors identified and discussed in our 2023 Form 10-K 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” in our 2023 Form 10-K.


~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.


~~Item 3.~~	~~Defaults Upon Senior Securities~~

Item 3. Defaults Upon Senior Securities

Not applicable.


~~Item 4.~~	~~Mine Safety Disclosures~~

Item 4. Mine Safety Disclosures

Not applicable.


~~Item 5.~~	~~Other Information~~

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits

The following exhibits are incorporated by reference or filed as part of this Report.

EXHIBIT INDEX


Exhibit No.				Description

~~Exhibit No.~~				~~Description~~
10.1*			—	~~Amendment No. 2 dated as of November 20, 2017 to the Amended and Restated Revolving Credit Agreement dated as of November 19, 2015 maturing on November 20, 2020.~~
10.2*			—	~~Amendment No. 2 dated as of November 20, 2017 to the Amended and Restated Revolving Credit Agreement dated as of November 19, 2015 maturing on November 20, 2022.~~
10.3*			—	~~Series M Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural Utilities Service dated as of November 9, 2017 for up to $750,000,000.~~
10.4*			—	~~Series M Future Advance Bond from the Registrant to the Federal Financing Bank dated as of November 9, 2017 for up to $750,000,000 maturing on July 15, 2042.~~
10.5*	—	~~Fourth Amended, Restated and Consolidated Pledge Agreement dated as of November 9, 2017 between the Registrant, the Rural Utilities Service and U.S. Bank National Association.~~
10.6*	—	~~Fourth Amended, Restated and Consolidated Bond Guarantee Agreement dated as of November 9, 2017 between the Registrant and the Rural Utilities Service.~~
12*	—	~~Computation of Ratio of Earnings to Fixed Charges~~
31.1*			—	Certification of the Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
31.2*			—	Certification of the Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
32.1†			—	Certification of the Chief Executive Officer required by Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002.
32.2†			—	Certification of the Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002.
101.INS*101.INS			—	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*			—	Inline XBRL Taxonomy Extension Schema Document
101.CAL*			—	Inline XBRL Taxonomy Calculation Linkbase Document
101.LAB*			—	Inline XBRL Taxonomy Label Linkbase Document
101.PRE*			—	Inline XBRL Taxonomy Presentation Linkbase Document
101.DEF*			—	Inline XBRL Taxonomy Definition Linkbase Document
104			—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

^{____________________________}

*~~Indicates a document being filed with~~Filed herewith this Report.

†~~Indicates a document that is furnished~~Furnished with this Report, which shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that Section.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION

Date: ~~January 11, 2018~~ April 12, 2024


By:		/s/ YU LING WANG
		Yu Ling Wang
~~By:~~		~~/s/ J. ANDREW DON~~
	~~J. Andrew Don~~
	Senior Vice President and Chief Financial Officer

By:

/s/ PANKAJ SHAH

Pankaj Shah

~~By:~~

~~/s/ ROBERT E. GEIER~~

~~Robert E. Geier~~

Vice President and Controller ~~(Principal~~
(Principal Accounting Officer)



District of Columbia	52-0891669
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



20701 Cooperative Way,	Dulles,	Virginia,	20166
(Address of principal executive offices) (Zip Code)


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
7.35% Collateral Trust Bonds, due 2026	NRUC 26	New York Stock Exchange
5.50% Subordinated Notes, due 2064	NRUC	New York Stock Exchange



	Three Months Ended November 30,									Six Months Ended November 30,
	2017 versus 2016									2017 versus 2016
				Variance due to:⁽¹⁾									Variance due to:⁽¹⁾
(Dollars in thousands)	Total Variance			Volume			Rate			Total Variance			Volume			Rate
Interest income:
Long-term fixed-rate loans	$	5,109		$	7,680		$	(2,571	)	$	10,345		$	16,100		$	(5,755	)
Long-term variable-rate loans	1,110			895			215			2,446			1,592			854
Line of credit loans	3,035			1,506			1,529			5,776			3,271			2,505
Restructured loans	(9		)	(10		)	1			(1		)	(69		)	68
Other income, net	(25		)	—			(25		)	27			—			27
Total loans	9,220			10,071			(851		)	18,593			20,894			(2,301		)
Cash, time deposits and investment securities	(553		)	(873		)	320			(846		)	(1,806		)	960
Interest income	8,667			9,198			(531		)	17,747			19,088			(1,341		)

Interest expense:
Short-term borrowings	4,707			(70		)	4,777			10,364			451			9,913
Medium-term notes	2,839			(178		)	3,017			4,370			(2,153		)	6,523
Collateral trust bonds	370			4,464			(4,094		)	598			8,931			(8,333		)
Guaranteed Underwriter Program notes payable	(528		)	1,518			(2,046		)	(698		)	3,174			(3,872		)
Farmer Mac notes payable	4,360			692			3,668			8,951			1,322			7,629
Other notes payable	(67		)	(64		)	(3		)	(135		)	(128		)	(7		)
Subordinated deferrable debt	6			2			4			(4		)	3			(7		)
Subordinated certificates	(171		)	(285		)	114			(279		)	(542		)	263
Interest expense	11,516			6,079			5,437			23,167			11,058			12,109
Net interest income	$	(2,849	)	$	3,119		$	(5,968	)	$	(5,420	)	$	8,030		$	(13,450	)

Adjusted net interest income:
Interest income	$	8,667		$	9,198		$	(531	)	$	17,747		$	19,088		$	(1,341	)
Interest expense	11,516			6,079			5,437			23,167			11,058			12,109
Net accrued periodic derivative cash settlements⁽²⁾	(1,952		)	508			(2,460		)	(5,120		)	1,276			(6,396		)
Adjusted interest expense⁽³⁾	9,564			6,587			2,977			18,047			12,334			5,713
Adjusted net interest income	$	(897	)	$	2,611		$	(3,508	)	$	(300	)	$	6,754		$	(7,054	)



	Q3 FY2024		versus		Q3 FY2023		YTD FY2024		versus		YTD FY2023
	Total		Variance Due To:(1)				Total		Variance Due To:(1)
(Dollars in thousands)	Variance		Volume		Rate		Variance		Volume		Rate
Interest income:
Long-term fixed-rate loans	$	36,328	$	21,599	$	14,729	$	92,046	$	49,152	$	42,894
Long-term variable-rate loans	1,648		(735)		2,383		19,152		3,335		15,817
Line of credit loans	16,645		6,149		10,496		79,556		21,408		58,148


Other, net	(42)		—		(42)		(114)		—		(114)
Total loans	54,579		27,013		27,566		190,640		73,895		116,745
Cash, time deposits and investment securities	3,964		631		3,333		6,674		(762)		7,436
Total interest income	58,543		27,644		30,899		197,314		73,133		124,181

Interest expense:
Commercial paper	10,405		1,933		8,472		33,188		(8,812)		42,000
Other short-term borrowings	2,986		(3,618)		6,604		25,757		(7,100)		32,857
Short-term borrowings	13,391		(1,685)		15,076		58,945		(15,912)		74,857
Medium-term notes	27,168		14,318		12,850		87,618		31,128		56,490
Collateral trust bonds	(3,298)		(4,523)		1,225		11,490		2,690		8,800
Guaranteed Underwriter Program notes payable	8,485		3,994		4,491		28,755		12,199		16,556
Farmer Mac notes payable	12,028		6,619		5,409		41,658		13,324		28,334
Other notes payable	13		(3)		16		—		(34)		34
Subordinated deferrable debt	7,530		3,036		4,494		22,175		8,464		13,711
Subordinated certificates	(7)		(183)		176		(117)		(607)		490
Total interest expense	65,310		21,573		43,737		250,524		51,252		199,272
Net interest income (expense)	$	(6,767)	$	6,071	$	(12,838)	$	(53,210)	$	21,881	$	(75,091)

Adjusted net interest income:
Interest income	$	58,543	$	27,644	$	30,899	$	197,314	$	73,133	$	124,181
Interest expense	65,310		21,573		43,737		250,524		51,252		199,272
Net periodic derivative cash settlements interest expense (income)(2)	(19,708)		(188)		(19,520)		(82,328)		130		(82,458)
Adjusted interest expense(3)	45,602		21,385		24,217		168,196		51,382		116,814
Adjusted net interest income	$	12,941	$	6,259	$	6,682	$	29,118	$	21,751	$	7,367


☒
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


¨
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



		Page
PART ~~I —~~ I—FINANCIAL INFORMATION					1
Item 1.			Financial Statements		4446
			~~Condensed~~ Consolidated Statements of Operations (Unaudited)		4547
			~~Condensed~~ Consolidated Statements of Comprehensive Income (Loss) (Unaudited)		4648
			~~Condensed~~ Consolidated Balance Sheets (Unaudited)		4749
			~~Condensed~~ Consolidated Statements of Changes in Equity (Unaudited)		4850
			~~Condensed~~ Consolidated Statements of Cash Flows (Unaudited)		4951
			Notes to ~~Condensed~~ Consolidated Financial Statements (Unaudited)		5053
			Note 1 — Summary of Significant Accounting Policies		5053
			Note 2 — ~~Variable~~ Interest ~~Entities~~Income and Interest Expense		5455
			Note 3 — Investment Securities		5556
			Note 4 — Loans ~~and Commitments~~		5857
			Note 5 — ~~Short-Term Borrowings~~Allowance for Credit Losses		6770
			Note 6 — ~~Long-Term Debt~~Short-Term Borrowings		6972
			Note 7 — Long-Term Debt		73
			Note 8 — Subordinated Deferrable Debt		7076
			Note 89 — Derivative Instruments and Hedging Activities		7076
			~~Note 9 — Equity~~	73
	Note 10 — ~~Guarantees~~Equity		7680
			Note 11 — Guarantees		81
			Note 12 — Fair Value Measurement		7783
			Note 1213 — Variable Interest Entities		85
			Note 14 — Business Segments		8087

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)		1
			Forward-Looking Statements		1
			Introduction		1

			Executive Summary ~~of Selected Financial Data~~		23
			~~Executive Summary~~Consolidated Results of Operations		47
			Consolidated Balance Sheet Analysis		16
			Enterprise Risk Management		21
			Credit Risk		22
			Liquidity Risk		29
			Market Risk		39
			Critical Accounting ~~Policies and~~ Estimates		641
			Recent Accounting Changes and Other Developments		742
			~~Consolidated Results of Operations~~	7
	~~Consolidated Balance Sheet Analysis~~	17
	~~Off-Balance Sheet Arrangements~~	23
	~~Risk Management~~	26
	~~Credit Risk~~	26
	~~Liquidity Risk~~	33
	~~Market Risk~~	39
	Non-GAAP Financial ~~Measures~~Meas ures and Reconciliations		4142
Item 3.			Quantitative and Qualitative Disclosures about Market Risk		8592
Item 4.			Controls and Procedures		8592

PART II—OTHER INFORMATION					8592
Item 1.			Legal Proceedings		8592
Item 1A.			Risk Factors		8592
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		8592
Item 3.			Defaults Upon Senior Securities		8592
Item 4.			Mine Safety Disclosures		8592
Item 5.			Other Information		8592
Item 6.			Exhibits		8693

SIGNATURES					8794


Table	Description	Page	Table	Description	Page
—	MD&A Tables:

1
1
1	Summary of Selected Financial Data	2
2	Average Balances, Interest Income/Interest Expense and Average Yield/Cost	8
3	Rate/Volume Analysis of Changes in Interest Income/Interest Expense	11
4	Non-Interest Income	13
5	Derivative Average Notional Amounts and Average Interest Rates	14
6	Derivative Gains (Losses)	15
7	Non-Interest Expense	16
8	Loans Outstanding by Type and Member Class	17
9	Historical Retention Rate and Repricing Selection	18
10	Total Debt Outstanding	19
11	Member Investments	20
12	Collateral Pledged	21
13	Unencumbered Loans	22
14	Guarantees Outstanding	23
15	Maturities of Guarantee Obligations	24
16	Unadvanced Loan Commitments	24
17	Notional Maturities of Unadvanced Loan Commitments	24
18	Maturities of Notional Amount of Unconditional Committed Lines of Credit	25
19	Loan Portfolio Security Profile	27
20	Credit Exposure to 20 Largest Borrowers	29
21	TDR Loans	30
22	Net Charge-Offs (Recoveries)	30
23	Allowance for Loan Losses	31
24	Rating Triggers for Derivatives	32
25	Liquidity Reserve	33
26	Committed Bank Revolving Line of Credit Agreements	34
27	Short-Term Borrowings	35
28	Issuances and Maturities of Long-Term and Subordinated Debt	36
29	Principal Maturity of Long-Term and Subordinated Debt	36
30	Projected Sources and Uses of Liquidity	38
31	Credit Ratings	38
32	Interest Rate Gap Analysis	40
33	Adjusted Financial Measures — Income Statement	41
34	TIER and Adjusted TIER	42
35	Adjusted Financial Measures — Balance Sheet	42
36	Debt-to-Equity Ratio	43



	November 30, 2017				May 31, 2017				Increase/
(Dollars in thousands)	Amount		% of Total		Amount		% of Total		(Decrease)
Loans by type:
Long-term loans:
Fixed-rate	$	22,415,833	90	%	$	22,136,690	91	%	$	279,143
Variable-rate	906,453		4		847,419		3		59,034
Total long-term loans	23,322,286		94		22,984,109		94		338,177
Lines of credit	1,491,256		6		1,372,221		6		119,035
Total loans outstanding	24,813,542		100		24,356,330		100		457,212
Deferred loan origination costs	11,149		—		10,714		—		435
Loans to members	$	24,824,691	100	%	$	24,367,044	100	%	$	457,647

Loans by member class:
CFC:
Distribution	$	19,230,740	78	%	$	18,825,366	77	%	$	405,374
Power supply	4,414,257		18		4,504,791		19		(90,534		)
Statewide and associate	57,107		—		57,830		—		(723		)
CFC total	23,702,104		96		23,387,987		96		314,117
NCSC	739,707		3		613,924		3		125,783
RTFC	371,731		1		354,419		1		17,312
Total loans outstanding	24,813,542		100		24,356,330		100		457,212
Deferred loan origination costs	11,149		—		10,714		—		435
Loans to members	$	24,824,691	100	%	$	24,367,044	100	%	$	457,647



	Six Months Ended				Fiscal Year Ended
	November 30, 2017				May 31, 2017
(Dollars in thousands)	Amount		% of Total		Amount		% of Total
Loans retained:
Long-term fixed rate selected	$	440,556	85	%	$	824,415	84	%
Long-term variable rate selected	77,746		15		137,835		14
Loans repriced and sold by CFC	—		—		1,401		—
Total loans retained by CFC	518,302		100		963,651		98
Total loans repaid	1,165		—		23,675		2
Total	$	519,467	100	%	$	987,326	100	%


Security type:
Secured debt	54	%	56	%
Unsecured debt	46		44
Total	100	%	100	%

Funding source:
Members	15	%	16	%
Other non-capital market:
Guaranteed Underwriter Program notes payable	21		22
Farmer Mac notes payable	12		10

Total other non-capital market	33		32
Capital markets	52		52
Total	100	%	100	%

Interest rate type:
Fixed-rate debt	81	%	80	%
Variable-rate debt	19		20
Total	100	%	100	%

Interest rate type, including the impact of swaps:
Fixed-rate debt(1)	95	%	94	%
Variable-rate debt(2)	5		6
Total	100	%	100	%

Maturity classification:(3)
Short-term borrowings	14	%	15	%
Long-term and subordinated debt(4)	86		85
Total	100	%	100	%



	November 30, 2017					May 31, 2017					Increase/ (Decrease)
(Dollars in thousands)	Amount			% of Total ⁽¹⁾		Amount			% of Total ⁽¹⁾		Increase/ (Decrease)
Commercial paper	$	1,133,057		66	%	$	928,158		48	%	$	204,899
Select notes	770,376			100		696,889			100		73,487
Daily liquidity fund notes	866,065			100		527,990			100		338,075
Medium-term notes	612,402			18		612,951			20		(549		)
Members’ subordinated certificates	1,399,675			100		1,419,025			100		(19,350		)
Total outstanding member debt	$	4,781,575				$	4,185,013				$	596,562

Percentage of total debt outstanding	20		%			18		%



	Requirement/Limit
	Debt Indenture Minimum		Committed Bank Revolving Line of Credit Agreements Maximum		Actual⁽¹⁾
Debt Agreement	Debt Indenture Minimum		Committed Bank Revolving Line of Credit Agreements Maximum		November 30, 2017		May 31, 2017
Collateral trust bonds 1994 indenture	100	%	150	%	115	%	117	%
Collateral trust bonds 2007 indenture	100		150		113		115
Guaranteed Underwriter Program notes payable	100		150		116		117
Farmer Mac notes payable	100		150		115		117
Clean Renewable Energy Bonds Series 2009A	100		150		106		113



~~OFF-BALANCE SHEET ARRANGEMENTS~~ENTERPRISE RISK MANAGEMENT



	Outstanding Amount		Maturities of Guaranteed Obligations
(Dollars in thousands)	Outstanding Amount		2018		2019		2020		2021		2022		Thereafter
Guarantees	$	662,496	$	168,729	$	108,460	$	52,057	$	109,486	$	31,613	$	192,151


	February 29, 2024
(Dollars in thousands)	Secured		% of Total		Unsecured		% of Total		Total
Member class:
CFC:
Distribution	$	24,765,366	92	%	$	2,110,942	8	%	$	26,876,308
Power supply	4,930,256		86		801,264		14		5,731,520
Statewide and associate	225,824		87		32,357		13		258,181
Total CFC	29,921,446		91		2,944,563		9		32,866,009
NCSC:
Electric	965,114		98		19,068		2		984,182
Telecom	509,756		93		38,765		7		548,521
Total NCSC	1,474,870		96		57,833		4		1,532,703
Total loans outstanding(1)	$	31,396,316	91		$	3,002,396	9		$	34,398,712

Loan type:
Long-term loans:
Fixed rate	$	29,897,431	99	%	$	161,802	1	%	$	30,059,233
Variable rate	808,112		100		1,473		—		809,585
Total long-term loans	30,705,543		99		163,275		1		30,868,818
Line of credit loans	690,773		20		2,839,121		80		3,529,894
Total loans outstanding(1)	$	31,396,316	91		$	3,002,396	9		$	34,398,712



	Six Months Ended November 30, 2017
(Dollars in thousands)	Issuances		Maturities		Increase/Decrease
Long-term and subordinated debt activity:⁽¹⁾
Collateral trust bonds	$	—	$	5,000	$	(5,000	)
Guaranteed Underwriter Program notes payable	100,000		25,556		74,444
Farmer Mac notes payable	—		21,925		(21,925		)
Medium-term notes sold to members	125,335		143,547		(18,212		)
Medium-term notes sold to dealers	402,592		7,791		394,801
Members’ subordinated certificates	3,989		23,340		(19,351		)
Total	$	631,916	$	227,159	$	404,757



(Dollars in thousands)	Amount Maturing ⁽¹⁾		% of Total
Fiscal year ending:
May 31, 2018	$	1,065,619	5	%
May 31, 2019	2,672,139		13
May 31, 2020	1,428,928		7
May 31, 2021	1,323,843		6
May 31, 2022	1,573,604		8
Thereafter	12,463,802		61
Total	$	20,527,935	100	%



	Projected Sources of Liquidity								Projected Uses of Liquidity
(Dollars in millions)	Long-Term Debt Issuance		Anticipated Long-Term Loan Repayments⁽²⁾		Other Loan Repayments⁽³⁾		Total Projected Sources of Liquidity		Long-Term Debt Maturities⁽⁴⁾		Long-Term Loan Advances		Other Loan Advances⁽⁵⁾		Total Projected Uses of Liquidity		Other Sources/ (Uses) of Liquidity⁽⁶⁾

3Q FY 2018	$	1,070	$	309	$	36	$	1,415	$	1,141	$	741	$	62	$	1,944	$	463
4Q FY 2018	490		286		—		776		333		307		—		640		(141		)
1Q FY 2019	385		305		52		742		162		313		—		475		(262		)
2Q FY 2019	1,335		323		—		1,658		1,569		290		13		1,872		227
3Q FY 2019	845		291		—		1,136		696		493		—		1,189		28
4Q FY 2019	585		272		—		857		398		485		—		883		40
Total	$	4,710	$	1,786	$	88	$	6,584	$	4,299	$	2,629	$	75	$	7,003	$	355



(Dollars in millions)	Prior to 5/31/18			Two Years 6/1/18 to 5/31/20			Two Years 6/1/20 to 5/31/22			Five Years 6/1/22 to 5/31/27			10 Years 6/1/27 to 5/31/37			6/1/37 and Thereafter			Total
Asset amortization and repricing	$	987		$	3,409		$	2,847		$	5,551		$	6,652		$	2,970		$	22,416
Liabilities and members’ equity:
Long-term debt	$	1,909		$	3,687		$	2,249		$	5,331		$	4,206		$	1,298		$	18,680
Subordinated certificates	11			36			69			946			162			665			1,889
Members’ equity ⁽¹⁾	—			23			24			108			297			856			1,308
Total liabilities and members’ equity⁽²⁾	$	1,920		$	3,746		$	2,342		$	6,385		$	4,665		$	2,819		$	21,877
Gap ⁽³⁾	$	(933	)	$	(337	)	$	505		$	(834	)	$	1,987		$	151		$	539

Cumulative gap	(933		)	(1,270		)	(765		)	(1,599		)	388			539
Cumulative gap as a % of total assets	(3.61		)%	(4.91		)%	(2.96		)%	(6.18		)%	1.50		%	2.08		%
Cumulative gap as a % of adjusted total assets⁽⁴⁾	(3.62		)	(4.92		)	(2.97		)	(6.20		)	1.50			2.09



	November 30, 2017
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for sale:
Farmer Mac—Series A Non-Cumulative Preferred Stock	$	30,000	$	1,032	$	—		$	31,032
Farmer Mac—Series B Non-Cumulative Preferred Stock	25,000		1,924		—			26,924
Farmer Mac—Series C Non-Cumulative Preferred Stock	25,000		2,750		—			27,750
Farmer Mac—Class A Common Stock	538		5,167		—			5,705
Total investment securities, available-for-sale	80,538		10,873		—			91,411

Held to maturity:
Certificates of deposit	4,146		1		(1		)	4,146
Commercial paper	7,196		1		(1		)	7,196
Corporate bonds	210,099		5		(872		)	209,232
Commercial MBS, non-agency	4,041		—		(3		)	4,038
Other ABS⁽¹⁾	22,673		—		(28		)	22,645
Total investment securities, held-to-maturity	248,155		7		(905		)	247,257

Total investment securities	$	328,693	$	10,880	$	(905	)	$	338,668



	November 30, 2017
	Unrealized Loss Position Less than 12 Months					Unrealized Loss Position 12 Months or Longer				Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Held to maturity:
Certificates of deposit	$	1,898	$	(1	)	$	—	$	—	$	1,898	$	(1	)
Commercial paper	5,594		(1		)	—		—		5,594		(1		)
Corporate bonds	200,170		(872		)	—		—		200,170		(872		)
Commercial MBS, non-agency	4,038		(3		)	—		—		4,038		(3		)
Other asset-backed securities⁽¹⁾	22,645		(28		)	—		—		22,645		(28		)
Total	$	234,345	$	(905	)	$	—	$	—	$	234,345	$	(905	)



	November 30, 2017
(Dollars in thousands)	Due in 1 Year or Less			Due > 1 Year through 5 Years			Due > 5 Years through 10 Years			Due >10 Years			Total
Amortized cost:
Certificates of deposit	$	4,146		$	—		$	—		$	—		$	4,146
Commercial paper	7,196			—			—			—			7,196
Corporate bonds	—			193,477			16,622			—			210,099
Commercial MBS, non-agency	—			—			—			4,041			4,041
Other asset-backed securities⁽¹⁾	—			20,681			1,992			—			22,673
Total	$	11,342		$	214,158		$	18,614		$	4,041		$	248,155

Fair value:
Certificates of deposit	$	4,146		$	—		$	—		$	—		$	4,146
Commercial paper	7,196			—			—			—			7,196
Corporate bonds	—			192,677			16,555			—			209,232
Commercial MBS, non-agency	—			—			—			4,038			4,038
Other ABS⁽¹⁾	—			20,653			1,992			—			22,645
Total	$	11,342		$	213,330		$	18,547		$	4,038		$	247,257

Weighted average coupon⁽²⁾	0.60		%	2.68		%	2.95		%	2.20		%	2.60		%



	Three Months Ended November 30, 2017
(Dollars in thousands)	CFC			NCSC		RTFC		Total
Balance as of August 31, 2017	$	29,521		$	2,736	$	4,821	$	37,078
Provision (benefit) for loan losses	(722		)	381		37		(304		)
Balance as of November 30, 2017	$	28,799		$	3,117	$	4,858	$	36,774



	Three Months Ended November 30, 2016
(Dollars in thousands)	CFC		NCSC		RTFC			Total
Balance as of August 31, 2016	$	25,062	$	3,281	$	4,777		$	33,120
Provision (benefit) for loan losses	742		383		(387		)	738
Recoveries	53		—		—			53
Balance as of November 30, 2016	$	25,857	$	3,664	$	4,390		$	33,911



	Three Months Ended November 30, 2017
(Dollars in thousands)	Unrealized Gains (Losses) AFS Securities		Unrealized Gains Derivatives			Unrealized Losses Foreclosed Assets		Unrealized Losses Defined Benefit Plan			Total
Beginning balance	$	10,865	$	3,510		$	—	$	(2,416	)	$	11,959
Unrealized gains	8		—			—		—			8
Losses reclassified into earnings	—		—			—		126			126
Gains reclassified into earnings	—		(194		)	—		—			(194		)
Other comprehensive income (loss)	8		(194		)	—		126			(60		)
Ending balance	$	10,873	$	3,316		$	—	$	(2,290	)	$	11,899