What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-08-05 compared with 2024-08-01 · 384 added, 470 removed, 1648 unchanged (34% of the section changed)

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(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Assessment of the allowance for credit losses of loans evaluated on a collective basis

As discussed in Notes 1 and 5 to the consolidated financial statements, the Company's allowance for credit losses for loans evaluated on a collective basis (the collective ACL ) was $31.3 million as of May 31, 2025.

The collective ACL includes the measure of expected credit losses on a collective (pool) basis for those loans that share similar risk characteristics.

The colle ctive ACL includes the measure of expected credit losses on a collective (pool) basis for those loans that share similar risk characteristics.

The Company estimates the collective ACL using a probability of default (PD) and loss given default (LGD) methodology.

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The Company estimates that, based on historical experience, expected credit losses will not be affected by changes in economic factors and therefore, the Company has not made adjustments to the historical rates for any economic forecasts.

The Company considers the need to adjust the historical loss information for differences in the specific characteristics of its existing loan portfolio based on an evaluation of relevant qualitative factors, such as differences in the composition of the loan portfolio, underwriting standards, problem loan trends, the quality of the Company's credit review functions, the regulatory environment and other pertinent external factors.

We identified the assessment of the collective ACL as a critical audit matter.

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The assessment also included an evaluation of the conceptual soundness of the collective ACL methodology.

In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.

The following are the primary procedures we performed to address this critical audit matter.

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development of the collective ACL methodology;

• continued use and appropriateness of the method and significant assumptions used to develop the PD and LGD

• analysis of credit quality trends and ratios.

use and appropriateness of the method and significant assumptions used to develop the PD and LGD;

and analysis of credit quality trends and ratios.

We evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data, factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors, and assumptions.

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generally accepted accounting principles.

• evaluating the conceptual soundness and the judgments made by the Company relative to the assessment of the PD and LGD by comparing them to relevant Company-specific metrics and trends and the applicable industry and regulatory practices

• determining whether the loan portfolio is segmented by similar risk characteristics by comparing to the Company’s business environment and relevant industry practices

• testing individual borrower risk ratings for a selection of borrowers by evaluating the financial performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral

• evaluating the appropriateness of mapping an alignment of internal borrower risk ratings to equivalent credit ratings provided in the third-party utility default table.

We also assessed sufficiency of the audit evidence obtained related to the collective ACL estimate by evaluating the:

• cumulative results of the audit procedures

• qualitative aspects of the Company’s accounting practices

• potential bias in the accounting estimates.

• evaluating the borrower risk ratings and the mapping of internal borrower risk ratings to equivalent credit ratings provided in the third-party utility default table.

We have served as the Company’s auditor since 2013.

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23,597 22,792 18,134

Derivative gains 392,037 285,844 456,482

Derivative gains (losses)

( 5,851 ) 392,037 285,844

Investment securities gains (losses)

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( 70,944 ) ( 58,970 ) ( 50,620 )

Losses on early extinguishment of debt ( 1,025 ) ( 117 ) ( 754 )

Other non-interest expense ( 9,168 ) ( 3,189 ) ( 1,604 )

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Retained equity 3,084,713 2,992,878

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

( 2,236 ) ( 1,416 )

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Net income 1,100 60,599 228,059 263,591 553,349 — 553,349 967 554,316

Other comprehensive income — — — — — 6,085 6,085 — 6,085

Other comprehensive loss

— — — — — ( 9,759 ) ( 9,759 ) — ( 9,759 )

Patronage capital retirement — ( 138,482 ) 25,353 — ( 113,129 ) — ( 113,129 ) — ( 113,129 )

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Balance as of May 31, 2024 $ 3,576 $ 928,232 $ 1,455,564 $ 605,506 $ 2,992,878 $ ( 1,416 ) $ 2,991,462 $ 20,707 $ 3,012,169

Net income 1,100 60,599 228,059 263,591 553,349 — 553,349 967 554,316

Net income (loss)

1,100 67,140 176,045 ( 104,552 ) 139,733 — 139,733 281 140,014

Other comprehensive loss

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Provision (benefit) for credit losses ( 8,111 ) ( 5,516 ) 603

Loss on early extinguishment of debt 1,025 117 754

Unrealized (gains) losses on equity and debt securities ( 8,241 ) ( 16,461 ) 1,090

Derivative forward value gains ( 264,871 ) ( 252,267 ) ( 557,867 )

Derivative forward value (gains) losses

105,070 ( 264,871 ) ( 252,267 )

Advances on loans held for sale ( 442,700 ) ( 326,500 ) ( 213,142 )

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173,997 202,903 201,849

Proceeds from redemption of equity securities

Cash impact of VIE deconsolidation — ( 10,341 ) —

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Proceeds from issuance of members’ subordinated certificates

103 6,133 1,364

Payments for retirement of members’ subordinated certificates

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( 46,846 ) ( 110,202 ) ( 59,189 )

Additions (repayments) for membership fees, net ( 436 ) — 2

Repayments for membership fees, net

Net cash provided by financing activities 1,969,613 1,579,260 2,166,152

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

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While management makes its best judgments, actual amounts or results could differ from these estimates.

Certain reclassifications and updates have been made to the presentation of information in prior periods to conform to the current-period presentation.

These reclassifications had no effect on prior years’ net income (loss) or equity.

Our fiscal year begins on June 1 and ends on May 31.

References to “FY2025,” “FY2024” and “FY2023” refer to the fiscal years ended May 31, 2025, 2024 and 2023, respectively.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Principles of Consolidation

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Unless stated otherwise, references to “we,” “our” or “us” relate to CFC and its consolidated entities.

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Variable Interest Entities

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We are considered the primary beneficiary holder if we have a controlling financial interest in the VIE that provides (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

NCSC meets the definition of a VIE because it does not have sufficient equity investment at risk to finance its activities with out additional financial support.

NCSC meets the definition of a VIE because it does not have sufficient equity investment at risk to finance its activities without additional financial support.

We consolidate the results of NCSC with CFC because CFC is the primary beneficiary holder.

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RTFC was a taxable Subchapter T cooperative association that 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, as discussed below, CFC is no longer a primary beneficiary of RTFC and therefore did not consolidate RTFC after this date in its consolidated financial statements.

RTFC Sale Transaction

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 R TFC ’s historical carrying amounts and therefore did not have an impact on CFC's 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 the CFC members ’ capital reserve.

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 it s 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.

Following the sale transaction, the RTFC entity was dissolved in April 2024.

Subsequent to December 1, 2023, in connection with the sale of RTFC’s business to NCSC, as discussed under “RTFC Sale Transaction” in “Note 1—Summary of Significant Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended May 31, 2024 (“2024 Form 10-K”), CFC is no longer a primary beneficiary of RTFC and therefore did not consolidate RTFC after this date in its consolidated financial statements.

Cash and Cash Equivalents

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The accounting and measurement framework for investment securities differs depending on the security type and the classification.

Equity securities are reported at fair value on our consolidated balance sheets with unrealized

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gains and losses recorded as a component of other non-interest income.

Equity securities are reported at fair value on our consolidated balance sheets with unrealized gains and losses recorded as a component of other non-interest income.

All of our debt securities were classified as trading as of May 31, 2025 and 2024.

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Interest income is generally recognized over the contractual life of the securities based on the effective yield method.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loans to Members

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Cooperative Securities is compensated through a placement agent fee for private placement of securities, which is recognized as an income at a point in time when the performance obligation is satisfied, typically the closing of the sale of securities of the nonpublic companies.

We recognized an immaterial amount of private placement fee income during FY2024, which was included in fee and other income on our consolidated statements of operations.

Cooperative Securities had not served as a placement agent for any transactions and accordingly had no placement agent fee income recognized during FY2023 and FY2022 .

We recognized an immaterial amount of private placement fee income during FY2025 and FY2024, which was included in fee and other income in our consolidated statements of operations.

Cooperative Securities had not served as a placement agent for any transactions and accordingly had no placement agent fee income recognized during FY2023 .

Loan Modifications to Borrowers Experiencing Financial Difficulty

On June 1, 2023, we adopted Accounting Standards Update ( “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 Troubled Debt Restructurings (“TDR”) and enhanced the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty, which are to be applied prospectively.

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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.

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Similarly, credit losses for anticipated modification to troubled borrowers are identified when there is a reasonable expectation that a modification will be executed and when we expect the modification to affect the timing or amount of payments and/or the payment term.

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We generally classify loans modified with borrowers experiencing financial difficulty as nonperforming and place the loan on nonaccrual status, although in many cases such loans were already classified as nonperforming prior to modification.

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We immediately recognize an allowance for expected credit losses upon origination of a loan.

Adjustments to the allowance each period for changes in our estimate of lifetime expected credit losses are recognized in earnings through the provision for credit losses presented on our consolidated statements of operations.

We estimate our allowance for lifetime expected credit losses for our loan portfolio using a probability of default/loss given default methodology.

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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

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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.

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.

Expected credit losses are estimated based on historical experience, current conditions and forecasts, if applicable, that affect the collectability of the reported amount.

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unemployment rates or gross domestic product (“GDP”) growth, we have not made adjustments to our historical loss rates for any economic forecast.

We consider the need, however, to adjust our historical loss information for differences in the specific characteristics of our existing loan portfolio based on an evaluation of relative qualitative factors, such as differences in the composition of our loan portfolio, our underwriting standards, problem loan trends, the quality of our credit review function, as well as changes in the regulatory environment and other pertinent external factors that may impact the amount of future credit losses.

We consider the need, however, to adjust our historical loss information for differences in the specific characteristics of our existing loan portfolio based on an evaluation of relative

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qualitative factors, such as differences in the composition of our loan portfolio, our underwriting standards, problem loan trends, the quality of our credit review function, as well as changes in the regulatory environment and other pertinent external factors that may impact the amount of future credit losses.

Collective Allowance

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While we utilize third-party default data, we utilize our lifetime historical loss experience to estimate loss given default, or the recovery rate, for each of our loan portfolio segments.

We believe our internal historical loss severity rates provide a more reliable estimate than third-party loss severity data due to

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the organizational structure and operating environment of rural utility cooperatives, our lending practice of generally requiring a senior security position on the assets and revenue of borrowers for long-term loans, the investment our member-borrowers have in CFC and therefore the collaborative approach we generally take in working with members in the event that a default occurs.

We believe our internal historical loss severity rates provide a more reliable estimate than third-party loss severity data due to the organizational structure and operating environment of rural utility cooperatives, our lending practice of generally requiring a senior security position on the assets and revenue of borrowers for long-term loans, the investment our member-borrowers have in CFC and the collaborative approach we generally take in working with members in the event that a default occurs.

In addition to the quantitative methodology used in our collective measurement of expected credit losses, management performs a qualitative evaluation and analyses of relevant factors, such as changes in risk-management practices, current and past underwriting standards, specific industry issues and trends and other subjective factors.

Based on our assessment, we did not make a qualitative adjustment to the collective allowance for credit losses measured under our quantitative methodology as of May 31, 2025 and 2024 .

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Asset-Specific Allowance

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We include the reserve for expected credit losses for our off-balance sheet credit exposures as a component of other liabilities on our consolidated balance sheets.

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Our lease program is intended to provide equipment financing for leased assets, such as vehicles, to our members.

We determine whether an arrangement is a lease and the lease classification under ASC Topic 842, Leases at lease inception for all lease transactions with an initial term greater than one year.

During FY2023, NCSC began entering into lease agreements (“head lease agreements”) with a third party to lease vehicles.

NCSC began entering into lease agreements (“head lease agreements”) with a third party to lease vehicles in FY2023.

At the inception date of the head lease agreements, NCSC also entered into sublease agreements (“sublease agreements”) to sublease these vehicles to its members.

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In addition, these agreements include a residual value deficiency provision in the event the customer does not purchase the vehicle at the end of the lease.

The head lease and sublease have the same lease term ranging from three to eight years .

The head lease and

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sublease have the same lease term ranging from three to 10 years .

We classified the head leases as finance leases and subleases as sales-type leases.

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We use the rate implicit in the lease to determine the present value of the lease payments when the rate is readily determinable or we use our incremental borrowing rate.

The lease liabilities are included in other liabilities line item on the consolidated balance sheets.

Interest expense for finance lease liabilities is included in the interest expense on the consolidated statements of operations.

Variable lease costs for head leases, including property and sales taxes, are recognized as lease expenses when incurred, and are included in the other non-interest expense line item on the consolidated statements of operations.

Total finance lease liability was $ 3 million as of May 31, 2024 and less than $ 1 million as of May 31, 2023.

Interest expenses and variable lease cost from the finance leases were not material for FY2024 and FY2023.

The lease liabilities are included in the other liabilities line item on the consolidated balance sheets.

Interest expense for finance lease liabilities is included in the interest expense in the consolidated statements of operations.

Total finance lease liability w as $ 7 million and $ 3 million as of May 31, 2025 and 2024, respectively.

Interest expenses and variable lease cost from the finance leases were not mater ial for FY2025, FY2024 and FY2023.

Sublessor Arrangements

For the sales-type lease in which we are the sublessor, we derecognize the ROU asset of the head lease and record net investment in leases at the commencement date of the sublease, which is included in the other assets on the consolidated balance sheets.

Interest income from the net investment in leases is included in interest income on the consolidated statements of operations.

Variable lease payments including property and sales tax payments reimbursed by the subleasee are included in fee and other income on the consolidated statements of operations.

Total net investment in leases was $ 3 million as of May 31, 2024 and less than $ 1 million as of May 31, 2023.

Interest income and variable lease payment income from the sales-type leases were not material for FY2024 and FY2023.

Interest income from the net investment in leases is included in interest income in the consolidated statements of operations.

Variable lease payments, including property and sales tax payments reimbursed by the subleasee, are included in fee and other income in the consolidated statements of operations.

Total net investment in leases was $ 7 million and $ 3 million as of May 31, 2025 and 2024, respectively.

Interest income and variable lease payment income from the sales -type leases were not material for FY2025, FY2024 and FY2023.

Fixed assets are recorded at cost less accumulated depreciation.

We recognize depreciation expense for each category of our depreciable fixed assets on a straight-line basis over the estimated useful life, which ranges from three to 40 years.

We recognized depreciation expense of $ 7 million, $ 5 million a nd $ 8 million in FY2024, FY2023 and FY2022, respectively.

We recognized depreciation exp ense of $ 8 million, $ 7 million a nd $ 5 million in FY2025, FY2024 and FY2023, respectively.

We perform a fixed assets impairment assessment annually or more frequently, whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable.

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Our headquarters facility in Loudoun County, Virginia, which is owned by CFC, is included as a component of building and building equipment.

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Based on our annual impairment assessment for FY2025 and FY2024, management determined that there were no indicators of impairment of our capitalized implementation costs for cloud computing service contracts as of May 31, 2025 and 2024.

We had $ 41 million of unamortized capitalized implementation costs for cloud computing service contracts a s of May 31, 2024, which netted to accumulated amortization related to these costs of $ 4 million and we recognized amortization expense of $ 3 million in FY2024 for these costs.

In comparison, w e had $ 29 million of unamortized capitalized implementation costs for cloud computing service contracts a s of May 31, 2023, which netted to accumulated amortization related to these costs of $ 1 million and we recognized amortization expense of $ 1 million in FY2023 for these costs.

We had $ 48 million of net unamortized capitalized implementation costs for cloud computing service contracts, which are net of accumulated amortization of $ 9 million related to these costs a s of May 31, 2025.

In comparison, w e had $ 41 million of net unamortized capitalized implementation costs for cloud computing service contracts, which are net of accumulated amortization of $ 4 million related to these costs a s of May 31, 2024.

We recognized amortization exp ense of $ 5 million, $ 3 million and $ 1 million in FY2025, FY2024 and FY2023, respectively, for the capitalized implementation costs for cloud computing service contracts.

Securities Sold Under Repurchase Agreements

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Short-term borrowings consist of borrowings with an original

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The fees are deferred and amortized using the straight-line method into fee and other income over the term of the guarantee.

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We redeem outstanding debt early from time to time to manage liquidity and interest rate risk.

When we redeem outstanding debt early, we recognize a gain or loss related to the difference between the amount paid to redeem the debt and the net book value of the extinguished debt as a component of non-interest expense in the gain (loss).

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Substantially all of the income tax expense recorded in our consolidated statements of operations relates to NCSC.

Deferred tax liability was not material as of May 31, 2024.

We recorded deferred tax assets of $ 1 million from NCSC as of May 31, 2023, primarily from the differences in the accounting and tax treatment for derivatives.

We recorded an immaterial amount of d eferred tax asset as of May 31, 2025 and an immaterial amount of deferred tax liability as of May 31, 2024 from NCSC, primarily from the differences in the accounting and tax treatment for derivatives.

New Accounting Standards Adopted in Fiscal Year 2025

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

In March 2022, the Financial Accounting Standards Board (“FASB”) issued 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 CECL model.

The amendments eliminate the accounting guidance for 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, the adoption of this accounting standard did not have an impact on our consolidated results of operation, financial condition or liquidity.

New Accounting Standards Issued But Not Yet Adopted

Segment Reporting—Improvements to Reportable Segment Disclosures

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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.

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 r etrospective application to all prior periods presented in the financial statements.

We adopted the guidance effective May 31, 2025 on a ret rospective basis.

See “Note 16—Business Segments” for additional disclosures.

New Accounting Standards Issued But Not Yet Adopted

Income Statement — Expense Disaggregation Disclosures

In November 2024, the FASB issued Accounting Standards Update (“ASU”) 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) .

The amendments require public entities to disclose, in interim and annual reporting periods, additional information about certain expenses in notes to financial statements, including purchases of inventory, employee compensation, depreciation, intangible asset amortization and other specific expense categories.

ASU 2024-03 is effective for public business entities for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

Upon adoption, ASU 2024-03 should be applied on a prospective basis, while retrospective application is also permitted.

We expect to adopt the guidance in our annual report for the fiscal year ended May 31, 2028, and the interim disclosure requirements in the quarterly report for the quarter ended August 31, 2028.

We are currently in the process of reviewing the guidance and evaluating its impact on our consolidated financial statements and related disclosures.

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

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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.

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

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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.

We are currently in the process of evaluating the impact of the amendments on our consolidated financial statements and related disclosures.

NOTE 2—INTEREST INCOME AND INTEREST EXPENSE

The following table displays the components of interest income, by interest-earning asset type, and interest expense, by debt product type, presented on our consolidated statements of operations.

The following table displays the components of interest income, by interest-earning asset type, and interest expense, by debt product type, presented in our consolidated statements of operations.

Interest Income and Interest Expense

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Deferred income reported on our consolidated balance sheets of $ 32 million and $ 33 million as of May 31, 2025 and 2024, respectively, consists primarily of deferred loan conversion fees that totaled $ 21 million and $ 24 million as of each respective date.

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NOTE 3—INVESTMENT SECURITIES

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For additional information on our investments in debt securities, see “Note 1—Summary of Significant Accounting Policies.”

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Debt Securities

Our debt securities portfolio consists of certificates of deposit with maturities greater than 90 days, commercial paper, corporate debt securities, municipality debt securities, commercial mortgage-backed securities (“MBS”), foreign government debt securities and other asset-backed securities (“ABS”).

Our debt securities portfolio consists of corporate debt securities, municipality debt securities, commercial mortgage-backed securities (“MBS”) and other asset-backed securities (“ABS”).

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.

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state and municipality debt securities 1,049 8,179

Foreign government debt securities — 974

Other ABS (2)

20,468 37,997

Total debt securities trading, at fair value $ 113,663 $ 281,351

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

We recognized net unrealized gains of $ 15 million on our debt securities for FY2024 and net unrealized losses of $ 3 million and $ 27 million for FY2023 and FY2022, respectively.

We recognized net unrealized gains of $ 9 million and $ 15 million on our debt securities for FY2025 and FY2024, respectively, and net unrealized losses of $ 3 million for FY2023 .

We sold $ 14 million of debt securities during FY2025 and recorded realized gains on the sale of these securities of less than $ 1 million.

We did not sell any debt securities during FY2024.

therefore, no realized gains or losses were recorded during the period for sale of securities.

We sold $ 36 million of debt securities at fair value and recorded realized gains on the sale of these securities of less than $ 1 million during FY2023.

We sold $ 5 million of debt securities at fair value and recorded realized gains on the sale of these securities of less than $ 1 million during FY2022.

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Equity Securities

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Farmer Mac—Series C noncumulative preferred stock

$ 25,130 $ 25,750

Farmer Mac—Class A common stock 11,252 11,756

Total equity securities, at fair value $ 11,252 $ 36,886

We recognized net unrealized gains on our equity securities of $ 1 million and $ 2 million for FY2024 and FY2023 respectively, and net unrealized losses of $ 1 million for FY2022.

These unrealized amounts are reported as a component of non-interest income on our consolidated statements of operations.

On July 18, 2024, Farmer Mac redeemed its Series C noncumulative preferred stock at a redemption price of $ 25.00 per share, plus any declared and unpaid dividends through and including the redemption date.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 18, 2024, the Federal Agricultural Mortgage Corporation (“Farmer Mac”) redeemed its Series C noncumulative preferred stock at a redemption price of $ 25.00 per share, plus any declared and unpaid dividends through and including the redemption date.

We recorded an immaterial loss as part of this transaction.

We recognized net unrealized losses on our equity securities of $ 1 million for FY2025, and net unrealized gains of $ 1 million and $ 2 million for FY2024 and FY2023, respectively.

These unrealized amounts are reported as a component of non-interest income in our consolidated statements of operations.

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 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.

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The following table presents loans to members by legal entity, member class and loan type, as of May 31, 2025 and 2024.

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

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____________________________

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

(2) Deferred loan origination costs are recorded on the books of CFC.

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

(2) Deferred loan origination costs are recorded at CFC segment.

We may transfer whole loans and participating interests to third partie s.

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We recorded immaterial losses on the sale of these loans attributable to the unamortized deferred loan origination costs associated with the transferred loans.

We had loans held for sale totaling $ 3 million as of May 31, 2024.

We had no loans held for sale as of May 31, 2023.

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We had loans held for sale totaling $ 21 million and $ 3 million as of May 31, 2025 and 2024, respectively .

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

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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 $ 33,930 million and $ 32,032 million as of May 31, 2024 and 2023, respectively, accounted for 98 % and 99 % of total loans outstanding as of each respective date.

Loans outstanding to electric utility organizations of $ 36,488 million and $ 33,930 million as of May 31, 2025 and 2024, respectively, accounted for 98 % of total loans outstanding as of both dates.

The remaining loans outstanding in our portfolio were to members, affiliates and associates in the telecommunications industry.

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Single-Obligor Concentration

The outstanding loan exp osure for our 20 largest borrowers totaled $ 6,851 million and $ 6,588 million as of May 31, 2024 and 2023, respectively, representing 20 % of total loans outstanding as of each respective date.

Our 20 largest borrowers consisted of 13 distribution systems and seven p ower supply systems as of May 31, 2024, compared with 10 distribution systems and 10 power supply systems as of May 31, 2023.

The outstanding loan exp osure for our 20 largest borrowers totaled $ 7,149 million and $ 6,851 million as of May 31, 2025 and 2024, respectively, representing 19 % and 20 % of total loans outstanding as of each respective date.

Our 20 largest borrowers consisted o f 14 distribution systems and six power supply systems as of May 31, 2025, compared with 13 distribution systems and seven power supply systems as of May 31, 2024.

The largest total outstanding exposure to a single borrower or controlled group represented approximately 1 % of total loans outstanding as of both May 31, 2025 and 2024.

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The aggregate unpaid principal balance of designated and Farmer Mac-approved loan s was $ 346 million and $ 370 million as o f May 31, 2025 and 2024, respectively.

Loan exposure to our 20 largest borrowers covered under the Farmer Mac agreement totaled $ 226 million and $ 267 million as of May 31, 2024 and 2023, respectively, which reduced our exposure to the 20 largest borrowers to 19 % of our total loans outstanding as of each respective date.

Loan exposure to our 20 largest borrowers covered under the Farmer Mac agreement totaled $ 155 million and $ 226 million as of May 31, 2025 and 2024, respectively, which reduced our exposure to the 20 largest borrowers to $ 6,994 million and $ 6,625 million of our total loans outstanding as of each respective date.

We have had no loan defaults for loans covered under this agreement;

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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 885 and 884 as of May 31, 2024 and 2023, respectively, located in 49 states and the District of Columbia.

Of the 885 and 884 borrowers with loans outstanding as of May 31, 2024 and 2023, respectively, 50 and 52 were electric power supply borrowers as of May 31, 2024 and 2023, respectively.

The consolidated number of borrowers with loans outstanding totaled 899 , located in 49 states as of May 31, 2025, compared with 885 borrowers, located in 49 states and the District of Columbia as of May 31, 2024.

50 were electric power supply borrowers as of both May 31, 2025 and 2024.

Electric power supply borrowers generally require significantly more capital than electric distribution and telecommunications borrowers.

Texas accounted for the largest number of borrowers with loans outstanding in any one state as of both May 31, 2024 and 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 May 31, 2024 and 2023.

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Texas, which had 68 and 67 borrowers with loans outstanding as of May 31, 2025 and 2024, respectively, accounted for the largest number of borrowers with loans outstanding in any one state as of each respective date, as well as the largest concentration of loan exposure in any one state.

Loans outstanding to Texas-based borrowers totaled $ 6,105 million and $ 5,768 million as of May 31, 2025 and 2024, 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, $ 118 million and $ 126 million as

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loan Exposure to Texas-Based Borrowers

May 31, 2024 May 31, 2023

(Dollars in thousands) Number of Borrowers Amount % of Total Number of Borrowers Amount % of Total

Member class:

Distribution 57 $ 4,518,859 13 % 57 $ 4,319,937 13 %

Power supply 6 1,148,100 4 8 1,128,941 4

Statewide and associate 1 75,089 — 1 51,504 —

Total CFC 64 5,742,048 17 66 5,500,382 17

1 15,067 — 1 16,667 —

Telecom 2 11,426 — 2 11,755 —

3 26,493 — 3 28,422 —

Total loan exposure to Texas-based borrowers 67 5,768,541 17 69 5,528,804 17

Loans covered under Farmer Mac standby purchase commitment

( 126,185 ) — ( 155,409 ) —

Net loan exposure to Texas-based borrowers $ 5,642,356 17 % $ 5,373,395 17 %

of May 31, 2025 and 2024 , respectively, were covered by the Farmer Mac standby repurchase agreement, which reduced our credit risk exposure to Texas-based borrowers to $ 5,987 million and $ 5,642 million as of each respective date.

Credit Quality Indicators

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The following table presents the payment status, by legal entity and member class, of loans outstanding as of May 31, 2025 and 2024.

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Payment Status of Loans Outstanding

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Percentage of total loans 100.00 % — % — % — % 100.00 % 0.07 %

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands) Current 30-89 Days Past Due > 90 Days

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Percentage of total loans 100.00 % — % — % — % 100.00 % 0.14 %

We had no delinquent loans as of May 31, 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 borrower with a delinquent loan of $ 37 million as of May 31, 2023.

The decrease in loans on nonaccrual stat us of $ 63 million to $ 49 million as of May 31, 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 ” ), Brazos Sandy Creek and one CFC electric power supply borrower during 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 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.

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We had a CFC electric power supply loan outstanding of $ 26 million and $ 49 million on nonaccrual status as of May 31, 2025 and 2024, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty

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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 entered during FY2025.

We had one loan modification to an NCSC telecom borrower experiencing financial difficulty during FY2024.

This loan received a term extension and had an amortized cost of $ 3 million as of May 31, 2024, representing 1 % of the NCSC telecom loan portfolio.

Loans modified to borrowers experiencing financial difficulty totaled $ 3 million a s of May 31, 2024 , consisting of one NCSC telecom loan as discussed above, which was performing in accordance with the terms of 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 May 31, 2023.

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

(Dollars in thousands) Number of Borrowers Outstanding Amount (1)

% of Total Loans Outstanding

Member class:

CFC—Distribution 1 $ 4,638 0.02 %

CFC—Power Supply 1 22,875 0.07

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 the end of each period.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

There were no unadvanced commitments related to these loans as of May 31, 2023.

We had loans 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 May 31, 2023 .

The CFC distribution borrower with the performing TDR loan also had one line of credit as of May 31, 2023 .

The line of credit facility of $ 6 million as of May 31, 2023 is restricted for fuel purchases only.

Outstanding loans under this facility totaled $ 2 million as of May 31, 2023.

We had loans outstanding to Brazos totaling $ 23 million classified as nonperforming TDR loans, which were on non-accrual status as of May 31, 2023.

During FY2024, we received the 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 did not have any loan modifications that were required to be accounted for as TDRs since fiscal year 2016.

Nonperforming Loans

The following table presents the outstanding balance of nonperforming loans, by legal entity and member class, as of May 31, 2024 and 2023.

Loans classified as nonperforming are placed on nonaccrual status.

Nonperforming Loans

(Dollars in thousands) Number of Borrowers Outstanding Amount (1)

% of Total Loans Outstanding Number of Borrowers Outstanding Amount (1)

% of Total Loans Outstanding

This loan received a term extension and had an amortized cost of $ 3 million, representing 1 % of the NCSC telecom loan portfolio as of May 31, 2024.

The loan has been performing in accordance with the terms of the loan agreement after the modification .

Nonperforming Loans

Member class:

CFC—Power supply

1 $ 48,669 0.14 % 2 $ 89,334 0.27 %

Total nonperforming loans 1 $ 48,669 0.14 % 2 $ 89,334 0.27 %

_______________________

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

Nonperforming loan s totaled $ 49 million as of May 31, 2024, a decrease of $ 40 million from May 31, 2023, due to the receipts of of $ 4 million in loan payments from Brazos Sandy Creek to pay off its nonperforming loan outstanding and a $ 36 million payment on the outstanding nonperforming loan during FY2024 .

We had a loan to one CFC electric power supply borrower of $ 26 million and $ 49 million classified as nonperforming, which represented 0.07 % and 0.14 % of total loans outstanding as of May 31, 2025 and 2024, respectively.

The reduction in the nonperforming loan was due to payments received on this loan during FY2025 .

Net Charge-Offs

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We report charge-offs net of amounts recovered on previously charged-off loans.

We had no charge-offs during FY2024.

We recorded $ 1 million in net loan recoveries on the Brazos and Brazos Sandy Creek previously charged-off loan amounts during FY2024 .

I n comparison, we experienced charge-offs totaling $ 15 million for the CFC electric power supply loan portfolio related to Brazos and Brazos Sandy Creek loans during FY2023, which resulted in a net charge-off rate of 0.05 % for FY2023.

We had no loan charge-offs or recoveries during FY2022.

Prior to Brazos’ and Brazos Sandy Creek’s bankruptcy filings, we had no t experienced any defaults or charge-offs in our electric utility and telecommunications loan portfolios since fiscal year 2013 and 2017, respectively.

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We had no charge-offs during FY2025 and FY2024.

We recorded $ 1 million in net loan recoveries to previously charged-off loan amounts related to two CFC electric power supply loans during FY2024 .

Prior to the two CFC electric power

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

supply loan defaults in fiscal years 2021 and 2022, we had no t experienced any defaults or charge-offs in our electric utility and telecommunications loan portfolios since fiscal years 2013 and 2017, respectively.

Borrower Risk Ratings

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The borrower risk rating categories presented below correspond to the borrower risk-rating categories used in calculating our collective allowance for credit losses.

If a parent company provides a guarantee of full repayment of loans 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 May 31, 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.

If a parent company provides a guarantee of full repayment of loans of a subsidiary borrower and has a better risk rating, 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 May 31, 2025 and 2024, by fiscal year of origination for each year during the five-year annual reporting period beginning in fiscal year 2021 and 2020, and in the aggregate for periods prior to fiscal year 2021 and 2020, respectively.

The origination period represents the date CFC advances funds to a borrower, rather than the execution date of a loan facility for a borrower.

1 unchanged sentence

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 4.3 below, term loan advances made to borrowers prior to fiscal year 2021 totaled $ 18,537 million, representing 50 % of our total loans outstanding as of May 31, 2025.

The average remaining maturity of our long-term loans, which accounted for 90 % of total loans outstanding as of May 31, 2024, was 19 years.

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In comparison, term loan advances made to borrowers prior to fiscal year 2020 totaled $ 17,519 million, representing 51 % of our total loans outstanding as of May 31, 2024.

The average remaining maturity of our long-term loans, which accounted for 88 % and 90 % of total loans outstanding as of May 31, 2025 and 2024, was 19 years, as of each respective date.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

2 unchanged sentences

Term Loans by Fiscal Year of Origination

(Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Total May 31, 2023

(Dollars in thousands) 2025 2024 2023 2022 2021 Prior Revolving Loans Total

Distribution $ 2,301,736 $ 2,471,765 $ 2,323,781 $ 2,256,706 $ 1,541,206 $ 15,022,726 $ 3,163,495 $ 29,081,415

11 unchanged sentences

— 361 4,126 — 4,568 26,677 156,332 192,064

NCSC electric

— — — — — — 600 600

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Total loans outstanding $ 2,885,664 $ 3,257,380 $ 3,118,244 $ 2,637,319 $ 2,075,297 $ 18,536,659 $ 4,552,985 $ 37,063,548

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Term Loans by Fiscal Year of Origination

(Dollars in thousands)

2024 2023 2022 2021 2020 Prior Revolving Loans Total

Distribution $ 2,523,296 $ 2,370,847 $ 2,328,295 $ 1,589,581 $ 1,766,002 $ 14,117,758 $ 2,223,311 $ 26,919,090

Power supply 509,948 454,010 321,289 536,052 170,017 2,866,848 735,065 5,593,229

Statewide and associate

36,794 59,348 13,174 1,684 11,123 16,534 86,796 225,453

Total CFC 3,070,038 2,884,205 2,662,758 2,127,317 1,947,142 17,001,140 3,045,172 32,737,772

Electric 76,061 256,974 17,606 4,914 183,510 249,338 157,477 945,880

Telecom 139,732 46,632 74,222 63,580 22,730 188,462 60,209 595,567

Total NCSC 215,793 303,606 91,828 68,494 206,240 437,800 217,686 1,541,447

Total pass $ 3,285,831 $ 3,187,811 $ 2,754,586 $ 2,195,811 $ 2,153,382 $ 17,438,940 $ 3,262,858 $ 34,279,219

Special mention

Distribution $ 364 $ 4,170 $ — $ 4,658 $ — $ 16,356 $ 159,825 $ 185,373

Statewide and associate

— — — — — 11,893 — 11,893

Total CFC 364 4,170 — 4,658 — 28,249 159,825 197,266

NCSC telecom — — — — — 3,030 — 3,030

Total special mention $ 364 $ 4,170 $ — $ 4,658 $ — $ 31,279 $ 159,825 $ 200,296

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

CFC Power supply $ — $ — $ — $ — $ — $ 48,669 $ — $ 48,669

Total doubtful $ — $ — $ — $ — $ — $ 48,669 $ — $ 48,669

Total criticized loans $ 364 $ 4,170 $ — $ 4,658 $ — $ 79,948 $ 159,825 $ 248,965

Total loans outstanding $ 3,286,195 $ 3,191,981 $ 2,754,586 $ 2,200,469 $ 2,153,382 $ 17,518,888 $ 3,422,683 $ 34,528,184

Criticized loans totaled $ 219 million and $ 249 million as of May 31, 2025 and 2024, respectively, and represented approximately 1 % of total loans outstanding as of each respective date.

The decrease of $ 30 million in criticized loans was driven primarily by decreases of loans outstanding in the special mention and doubtful categories, as discussed below.

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 May 31, 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.

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 May 31, 2025 and 2024.

Special Mention

One CFC electric distribution borrower with loans out standing of $ 181 million and $ 185 million as of May 31, 2025 and 2024, respectively, accounted for the substantial majority of loans in the special mention loan category amount of $ 193 million and $ 200 million as of each respective date.

This borrower experienced an adverse financial impact from

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

restoration costs incurred to repair damage caused by two successive hurricanes.

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.

We did not have any loans classified as sub standard as of May 31, 2025 and 2024.

We had one loan outstanding classified as doubtful totaling $ 49 million to a CFC electric power supply borrower as of May 31, 2024.

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.

The decrease in doubtful loans was due to the receipt of loan principal payments from Brazos, Brazos Sandy Creek and the CFC electric power supply borrower during FY2024.

See “Troubled Debt Restructurings—Prior to the Adoption of ASU 2022-02” and “Nonperforming Loans” above for additional information on these loans.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We had one loan outstanding classified as doubtful totaling $ 26 million and $ 49 million to a CFC electric power supply borrower as of May 31, 2025 and 2024, respectively.

The reduction in its loan outstanding was due to payments received on the loan during FY2025 .

Unadvanced Loan Commitments

18 unchanged sentences

Total unadvanced commitments $ 18,219,009 $ 16,993,362

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

____________________________

5 unchanged sentences

The following table displays, by loan type, the available balance under unadvanced loan commitments as of May 31, 2025 and the related maturities in each fiscal year during the five-year period ende d May 31, 2030, and thereafter.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unadvanced Loan Commitments

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The following table summarizes the available balance under unconditional committed lines of credit as of May 31, 2025, and the related maturity amounts in each fiscal year during the five-year period ending May 31, 2030.

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Unconditional Committed Lines of Credit—Available Balance

2 unchanged sentences

Committed lines of credit $ 3,590,262 $ 246,671 $ 791,765 $ 786,133 $ 874,620 $ 891,073

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pledged Collateral— Loans

1 unchanged sentence

Table 4.7 displays the borrowing amount under each of our secured borrowing agreements and the corresponding loans outstanding pledged as collateral as of May 31, 2025 and 2024.

See “Note 6—Short-Term Borrowings” and “Note 7—Long-Term Debt” for information on our secured borrowings and other borrowings.

See “Note 6—Short-Term Borrowings” and “Note 7—Long-Term Debt” in this Report for information on our secured borrowings and other borrowings.

Pledged Loans

19 unchanged sentences

Distribution and power supply system mortgage notes pledged 4,648,691 4,449,650

Clean Renewable Energy Bonds Series 2009A:

Notes payable outstanding $ — $ 1,098

Pledged collateral:

Distribution and power supply system mortgage notes pledged — 1,029

Total pledged collateral — 1,420

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12 unchanged sentences

Provision (benefit) for credit losses 2,519 ( 10,127 ) ( 89 ) ( 7,697 ) ( 119 ) ( 295 ) ( 414 ) ( 8,111 )

Recoveries — 1,148 — 1,148 — — — 1,148

Balance as of May 31, 2025 $ 18,473 $ 15,456 $ 1,100 $ 35,029 $ 3,818 $ 1,768 $ 5,586 $ 40,615

4 unchanged sentences

Provision (benefit) for credit losses 1,030 ( 8,871 ) ( 5 ) ( 7,846 ) 1,473 857 2,330 ( 5,516 )

Charge-offs — ( 15,069 ) — ( 15,069 ) — — — ( 15,069 )

— 1,148 — 1,148 — — — 1,148

Balance as of May 31, 2024 $ 15,954 $ 25,583 $ 1,189 $ 42,726 $ 3,937 $ 2,063 $ 6,000 $ 48,726

4 unchanged sentences

Provision (benefit) for credit losses ( 857 ) 582 ( 57 ) ( 332 ) 1,015 ( 80 ) 935 603

Charge-offs — ( 15,069 ) — ( 15,069 ) — — — ( 15,069 )

Balance as of May 31, 2023 $ 14,924 $ 33,306 $ 1,194 $ 49,424 $ 2,464 $ 1,206 $ 3,670 $ 53,094

The following tables present, by legal entity and member class, the components of our allowance for credit losses as of May 31, 2025 and 2024.

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

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Our allowance for credit losses and allowance coverage ratio decreased to $ 41 million and 0.11 %, respectively, as of May 31, 2025, from $ 49 million and 0.14 %, respectively, as of May 31, 2024.

The $ 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 actual and expected payments on a nonperforming CFC power supply loan.

The increase in the collective allowance was primarily due to loan portfolio growth, a slight decline in the overall credit quality of our loan portfolio, and slightly higher expected default rates derived from a third-party utility sector default data used in estimating the allowance for credit losses.

The $ 8 million de crease in the allowance for credit loss was attributable to a reduction in the asset-specific allowance due to higher actual than expected payments received on a nonperforming loan during FY2025.

Our collective allowance decreased slightly during FY2025, primarily due to an improved recovery rate on our power supply loan portfolio, partially offset by an increase attributable to loan portfolio growth.

Reserve for Credit Losses—Unadvanced Loan Commitments

6 unchanged sentences

The following table provides information on our short-term borrowings and weighted-average interest rates as of May 31, 2025 and 2024.

Short-Term Borrowings Sources and Weighted-Average Interest Rates

Short-Term Borrowing Sources and Weighted-Average Interest Rates

(Dollars in thousands) Amount Weighted- Average

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____________________________

(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.

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Advanced under the revolving note purchase agreement with Farmer Mac dated March 24, 2011.

See “Note 7—Long-Term Debt” in this Report for additional information on this revolving note purchase agreement with Farmer Mac.

We issue commercial paper for periods of one to 270 days.

1 unchanged sentence

Select notes are unsecured obligations that do not require backup bank lines of credit for liquidity purposes.

These notes require a larger minimum investment than our commercial paper sold to members and, as a result, offer a higher interest rate than our commercial paper to members.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

notes also require a larger minimum investment than our commercial paper sold to members.

Daily liquidity fund notes are unsecured obligations that do not require backup bank lines of credit for liquidity purposes.

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The following table presents the amount available for access under our bank revolving line of credit agreements as of May 31, 2025.

Committed Bank Revolving Line of Credit Agreements Available Amounts

Committed Bank Revolving Line of Credit Agreement Available Amounts

(Dollars in millions) Total Commitment Letters of Credit Outstanding Available Amount Maturity Annual Facility Fee (1)

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$ 1,595 $ — $ 1,595 November 28, 2027 7.5 bps

3 -year agreement

1,195 — 1,195 November 28, 2026 7.5 bps

Total 3 -year agreement

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(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.

On December 5, 2024, we amended our three-year and four-year committed bank revolving line of credit agreements to extend the maturity dates to November 28, 2027 and November 28, 2028, respectively, and to increase commitments by $ 250 million (excluding the $ 150 million commitment termination described below) under each of the three-year and four-year revolving credit agreements.

Commitments of $ 150 million that were scheduled to mature on November 28, 2025 were terminated under the three-year revolving credit agreement, and commitments of $ 150 million will continue to expire at the prior maturity date of November 28, 2026 under the four-year revolving credit agreement.

The total commitment amount under the three-year facility and the four-year facility was $ 1,595 million and $ 1,705 million, respectively, resulting in a combined total commitment amount under the two facilities of $ 3,300 million as of May 31, 2025.

We did not have any outstanding borrowings under our committed bank revolving line of credit agreements as of May 31, 2025;

however, we had letters of credit outstanding of $ 7 million under the four-year committed bank revolving agreement as of this date.

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 May 31, 2025.

NOTE 7—LONG-TERM DEBT

The following table displays, by debt product type, long-term debt outstanding, and the weighted-average interest rates and the maturity date as of May 31, 2024 and 2023.

The following table displays, by debt product type, long-term debt outstanding, the weighted-average interest rates and the maturity date as of May 31, 2025 and 2024.

Long-term debt outstanding totaled $ 27,164 million and accounted for 78 % of total debt outstanding as of May 31, 2025, compared with $ 25,901 million and 79 % of total debt outstanding as of May 31, 2024.

Long-term debt with fixed- and variable-interest rates accounted for 93 % and 7 %, respectively, of our total long-term debt outstanding as of both May 31, 2024 and May 31, 2023.

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Long-term debt with fixed and variable interest rates accounted for 94 % and 6 %, respectively, of our total long-term debt outstanding as of May 31, 2025, compared with 93 % and 7 %, respectively, of our total long-term debt outstanding as of May 31, 2024.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

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Collateral trust bonds (2)

$ 7,082,711 3.68 % 2025-2049 $ 6,937,711 3.49 % 2025-2049

Unamortized discount, net ( 155,393 ) ( 166,458 )

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Farmer Mac notes payable 3,780,461 4.00 2025-2049 3,363,510 4.11 2025-2049

Other secured notes payable — — 1,098 3.06 2023

Debt issuance costs — ( 2 )

Total other secured notes payable — 1,096

Total secured notes payable 10,237,313 9,855,324

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Debt issuance costs ( 29,180 ) ( 31,228 )

Total unsecured medium-term notes 9,305,920 6,496,868

Unsecured notes payable — — 71 — 2023

Unamortized discount — ( 1 )

Total unsecured notes payable — 70

Total unsecured long-term debt 10,030,686 4.64 9,305,920 4.39

2 unchanged sentences

(1) Maturity is presented based on calendar year.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) Collateral trust bonds represent secured obligations sold to investors in the capital markets, including also those issued in a private placement transaction.

The following table presents the principal amount of long-term debt maturing in each of the five fiscal years subsequent to May 31, 2025 and thereafter.

Long-Term Debt—Maturities and Weighted-Average Interest Rates

(Dollars in thousands) Maturity Amount Weighted-Average

(Dollars in thousands) Maturity Amount (1)

Weighted-Average

Interest Rate

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Total $ 27,377,249 3.99

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

___________________________

(1) Amounts presented are based on the face amount of debt outstanding as of May 31, 2025, and therefore do not include debt issuance costs

and unamortized premium or discount.

Long-term secured debt of $ 17,133 million and $ 16,595 million as of May 31, 2025 and 2024, respectively, represented 63 % and 64 % of total long-term debt outstanding as of each respective date.

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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.

See “Note 4—Loans” in this Report for information on pledged collateral under our secured debt agreements.

Collateral Trust Bonds

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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 FY2024.

We issued $ 350 million of 5.00 % fixed-rate collateral trust bonds due August 15, 2034 and repaid $ 505 million in principal amount of collateral trust bonds that matured during FY2025.

In addition, we issued an aggregate amount of $ 300 million in collateral trust bonds at a fixed rate of 5.23 % with a weighted average term of 13.3 years in a private placement transaction during FY2025.

Guaranteed Underwriter Program Notes Payable

We borrowed $ 275 million and repaid $ 504 million of notes payable outstanding under the Guaranteed Underwriter Program during FY2024 .

We borrowed $ 300 million and repaid $ 335 million of notes payable outstanding under the Guaranteed Underwriter Program of the USDA (the “Guaranteed Underwriter Program”) during FY2025 .

We had up to $ 1,350 million available for access under the Guaranteed Underwriter Program as of May 31, 2025.

On December 19, 2023, we closed on a $ 450 million Series U committed loan facility from the U.S.

Treasury Department ’ s Federal Financing Bank under the Guar anteed Underwriter Program.

On December 18, 2024, we closed on a $ 450 million Series V committed loan facility from the U.S.

Treasury Department ’ s Federal Financing Bank (“FFB”) under the Guar anteed Underwriter Program.

Pursuant to this facility, we may borrow any time before July 15, 2029.

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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.

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Farmer Mac Notes Payable

We have a revolving note purchase agreement with Farmer Mac that allows us to borrow, repay and re-borrow funds at any time through maturity, provided the outstanding principal does not exceed the agreement limit.

Each borrowing is documented with a pricing agreement setting forth the interest rate, maturity date and other terms.

We may select a fixed or variable rate for each advance.

On January 14, 2025, we amended our revolving note purchase agreement with Farmer Mac to increase the maximum borrowing availability to $ 6,500 million from $ 6,000 million, and extend the draw period from June 30, 2027 to January 14, 2030, with successive one-year renewals upon 60 days’ notice by CFC, subject to approval by Farmer Mac and Farmer Mac Mortgage Securities Corporation.

We borrowed an aggregate principal amount of $ 500 million and repaid $ 83 million in long-term notes under the Farmer Mac note purchase agreement during FY2025.

As of May 31, 2025, $ 3,780 million was outstanding with $ 2,720 million available for borrowing.

We are required to pledge

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Farmer Mac Notes Payable

We have a revolving note purchase agreement with Farmer Mac, under which we can borrow up to $ 6,000 million from Farmer Mac, at any time, subject to market conditions through June 30, 2027.

The agreement has successive automatic one-year renewals beginning June 30, 2026, unless Farmer Mac provides 425 days’ written notice of nonrenewal.

Pursuant to this revolving note purchase agreement, 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 agreement.

We borrowed a total of $ 300 million in principal amount of long-term notes payable under the Farmer Mac note purchase agreement during FY2024.

The amount outstanding under this agreement included $ 500 million of short-term borrowings and $ 3,364 million of long-term debt as of May 31, 2024.

The amount available for borrowing totaled $ 2,136 million as of May 31, 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.

Subsequent to the fiscal year ended May 31, 2024, we borrowed $ 200 million in long-term notes payable under the Farmer Mac note purchase agreement.

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

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Medium-term notes represent unsecured obligations that may be issued through dealers in the capital markets or directly to our members.

During FY2024, w e issued an aggregate principal amount of dealer medium-term notes totaling $ 3,150 million with an average fixed interest rate of 5.05 % and an average term of four 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 .

During FY2025, w e issued an aggregate principal amount of dealer medium-term notes totaling $ 1,800 million at an average fixed interest rate of 4.65 % with an average term of four years , and an aggregate principal amount of dealer medium-term notes totaling $ 600 million at floating interest rates with an average term of two years .

We repaid $ 1,753 million in principal amount of dealer medium-term notes that matured during FY2025.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to FY2025, we issued $ 525 million of dealer medium-term notes at a floating interest rate with a term of 18 months.

NOTE 8—SUBORDINATED DEFERRABLE DEBT

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June 15, 2028

Subordinated notes

43,811 5.75 — — 30 2054-2055

Total aggregate principal amount 1,343,811 1,300,000

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(2) Maturity is presented based on calendar year.

(3) The subordinated notes may be called, in whole or in part, at par on or after five years from the date of the issuances.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our subordinated deferrable debt due 2043 is based on 3-month Term Secured Overnight Financing Rate (“SOFR”) plus the Alternative Reference Rates Committee (“ARRC”) recommended credit spread adjustment of 26.161 basis points plus 2.91 % as of May 31, 2025.

The interest on the debt is paid quarterly, and the payment of interest can be deferred fo r one or more consecutive interest periods not exceeding five consecutive years.

On June 26, 2023, we redeemed $ 100 million in principal amount of our $ 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 FY2024.

Our 5.25 % subordinated deferrable debt due 2046 pays interest semi-annually, may be called at par 10 years after the issuance, will convert to a variable rate in April 2026 based on 3-month Term SOFR plus the ARRC recommended credit spread adjustment of 26.161 basis points plus 3.63 %, and allows us to defer the payment of interest for one or more consecutive interest periods not exceeding five consecutive years.

Our 5.25 % subordinated deferrable debt due 2046 pays interest semiannually, may be called at par 10 years after the issuance, will convert to a variable rate in April 2026 based on 3-month Term SOFR plus the ARRC recommended credit spread adjustment of 26.161 basis points plus 3.63 %, and allows us to defer the payment of interest for one or more consecutive interest periods not exceeding five consecutive years.

Our 5.50 % subordinated deferrable debt due 2064 pays interest quarterly, may be called at par five years after the issuance and allows us to defer the payment of interest for one or more consecutive interest periods not exceeding 40 consecutive quarterly periods.

Our 7.125 % subordinated deferrable debt due 2053 pays interest semi-annually, may be called at par every five years after the issuance, 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 semiannual periods.

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 after the issuance, 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.

Our two issuances of 7.125 % subordinated deferrable debt due 2053 pay interest semiannually, may be called at par every five years after the issuances, reset to a new fixed rate every five years based on the five-year U.S.

Treasury rate plus a spread of 3.533 % and allow us to defer the payment of interest for one or more consecutive interest periods not exceeding 20 consecutive semiannual periods.

Subordinated Notes

On November 1, 2024, we entered into an agency agreement with InspereX LLC, Citigroup Global Markets Inc., RBC Capital Markets, LLC and Wells Fargo Clearing Services, LLC, as agents, to launch a program through which we may offer and sell, from time to time, an unlimited aggregate principal amount of our subordinated deferrable interest notes (“subordinated notes”).

On November 1, 2024, we filed a prospectus supplement with the SEC related to these subordinated notes, which are issued under our effective shelf registration statement filed with the SEC in October 2023.

The subordinated notes are unsecured and rank subordinate in right of payment to all of our current and future senior indebtedness.

The subor dinated notes are senior to our members’ subordinated certificates and rank equal in right of payment and upon liquidation to our outstanding subordinated deferrable debt and any other equally ranked subordinated notes we may issue.

The subordinated notes may be called, in whole or in part, at par on or after five years from the date of the issuance and allow us to defer the payment of interest for one or more consecutive interest periods not exceeding 20 consecutive semiannual periods, or 40 consecutive quarterly periods.

During FY2025, w e issued an aggregate principal amount of $ 44 million in subordinated notes that mature in 30 years under this new program.

To date, we have not exercised our right to defer interest payments on any of our subordinated deferrable debt.

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Loan and Guarantee Subordinated Certificates

Members obtaining long-term loans, certain line of credit loans or guarantees may be required to purchase additional loan or guarantee subordinated certificates with each such loan or guarantee based on the borrower’s debt-to-equity ratio with CFC.

Members obtaining long-term loans, certain line of credit loans or guarantees may be required to purchase additional loan or

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

guarantee subordinated certificates with each such loan or guarantee based on the borrower’s debt-to-equity ratio with CFC.

These certificates are unsecured, subordinated debt and may be interest bearing or non-interest bearing.

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The following table displays members’ subordinated certificates and the weighted-average interest rates as of May 31, 2025 and 2024.

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Members’ Subordinated Certificates Outstanding and Weighted-Average Interest Rates

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Non-interest-bearing loan subordinated certificates maturing through 2047 90,378 94,911

Subscribed and unissued (1)

Total loan subordinated certificates 283,157 2.74 295,928 2.76

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___________________________

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) The subscribed and unissued subordinated certificates represent subordinated certificates that members are required to purchase.

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Amortization payments on these certificates totaled $ 8 million in FY2025 and represented 6 % of amortizing loan subordinated certificates outstanding.

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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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 typically designate the treasury locks as cash flow hedges.

Notional Amount and Maturities of Derivatives Not Designated as Accounting Hedges

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For the substantial majority of interest rate swap agreements, SOFR is used as the basis for determining variable interest payment amounts each period.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative Notional Amount and Weighted-Average Rates

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Receive-fixed swaps 1,418,777 5.08 3.39 1,523,396 6.08 3.33

Subtotal 7,365,936 3.46 5.10 7,620,269 3.49 4.75

Forward pay-fixed swaps — 195,845

Total interest rate swaps $ 7,252,235 3.28 4.32 $ 7,365,936 3.46 5.10

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Cash Flow Hedges

During FY2024, we executed two Treasury lock agreements with an 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 as cash flow hedges.

We terminated the Treasury locks upon the pricing of the $ 300 million of notes payable under our Farmer Mac revolving note purchase agreement and recorded a net

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

settlement gain of less than $ 1 million in AOCI, which is reclassified into interest expense over the term of the related Farmer Mac borrowings.

During FY2025, we executed five treasury lock agreements with an aggregate notional amount of $ 700 million to hedge interest rate risk on anticipated debt issuances.

We terminated the treasury locks upon the pricing of the debt issuances and recorded a net gain of $ 1 million in AOCI, which is reclassified into interest expense over the terms of the related debt.

During FY2024, we executed two treasury lock agreements with an aggregate notional amount of $ 300 million to hedge interest rate risk on anticipated debt issuances.

The Treasury locks were designated as a cash flow hedge of a forecasted transaction.

We terminated the treasury locks upon the pricing of the anticipated debt and recorded a net settlement gain of less than $ 1 million in AOCI during FY2024, which is reclassified into interest expense over the term of the related debt.

During FY2023, we executed two treasury lock agreements with an aggregate notional amount of $ 300 million to hedge interest rate risk on anticipated debt issuances.

We recorded a settlement gain of $ 8 million in AOCI upon the termination of the treasury locks during FY2023.

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) in our consolidated statements of operations in FY2024.

We did no t have any derivatives designated as accounting hedges as of May 31, 2024 or May 31, 2023 .

We did not have any derivatives designated as accounting hedges as of May 31, 2025 and 2024.

Impact of Derivatives on Consolidated Balance Sheets

The following table displays the fair value of the derivative assets and derivative liabilities, by derivatives type, recorded on our consolidated balance sheets and the related outstanding notional amount as of May 31, 2025 and 2024.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative Assets and Liabilities at Fair Value

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Total derivative liabilities $ 51,368 $ 1,557,400 $ 80,988 $ 1,595,245

____________________________

(1) The notional amount as of May 31, 2023 included $ 196 million notional amount of forward starting swaps, as shown above in Table 10.1:

Derivative Notional Amount and Weighted-Average Rates, with an effective start date in FY2024.

The fair value of these swaps as of May 31, 2023 is included in the above table and in our consolidated financial statements.

All of our master swap agreements include netting provisions that allow for offsetting of all contracts with a given counterparty in the event of default by one of the two parties.

1 unchanged sentence

The following table presents the gross fair value of derivative assets and liabilities reported on our consolidated balance sheets as of May 31, 2025 and 2024, and provides information on the impact of netting provisions under our master swap agreements and collateral pledged, if any.

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative Gross and Net Amounts

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Impact of Derivatives on Consolidated Statements of Operations

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.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 consolidated statements of operations.

Derivative cash settlements interest expense represents the net periodic contractual interest amount for our interest rate swaps during the reporting period.

Derivative cash settlements interest income (expense) represents the net periodic contractual interest amount for our interest rate swaps during the reporting period.

Derivative forward value gains (losses) represent 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.

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(Dollars in thousands) 2025 2024 2023

Derivative gains attributable to:

Derivative cash settlements interest income (expense) $ 127,166 $ 33,577 $ ( 101,385 )

Derivative forward value gains 264,871 252,267 557,867

Derivative gains $ 392,037 $ 285,844 $ 456,482

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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative gains (losses) attributable to:

Derivative cash settlements interest income

$ 99,219 $ 127,166 $ 33,577

Derivative forward value gains (losses)

( 105,070 ) 264,871 252,267

Derivative gains (losses)

$ ( 5,851 ) $ 392,037 $ 285,844

Credit Risk-Related Contingent Features

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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.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivative Credit Rating Trigger Exposure

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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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

analysis and maintain enforceable master netting arrangements, allowing us to net derivative assets and liabilities with the same counterparty.

To manage this risk, we diversify our derivative positions among counterparties with investment-grade credit ratings, perform an internal credit risk 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.

We had 12 active derivative counterparties with credit ratings ranging from Aa1 to Baa1 by Moody’s as of both May 31, 2024 and 2023, and from AA- to BBB+ and AA- to A- by S&P as of May 31, 2024 and 2023, respectively.

We had 12 active derivative counterparties with credit ratings ranging from Aa1 to Baa1 by Moody’s as of both May 31, 2025 and 2024, and from AA- to BBB+ by S&P as of both May 31, 2025 and 2024.

Our largest counterparty exposure, based on the outstanding notional amount, accounted for approximately 25 % and 24 % of the total outstanding notional amount of our derivatives as of May 31, 2025 and 2024, respectively.

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NOTE 11—EQUITY

Total equity increased $ 423 million to $ 3,012 million as of May 31, 2024 compared with May 31, 2023.

The increase was attributable primarily to our reported net income of $ 554 million for 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 period, as discussed below.

Total equity increased by $ 91 million to $ 3,103 million as of May 31, 2025 compared with May 31, 2024.

The increase was attributable primarily to our reported net income of $ 140 million for FY2025, partially offset by a decrease in equity of $ 47 million from the CFC Board of Directors’ authorized patronage capital retirements during the period, as discussed below.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands) 2025 2024

8 unchanged sentences

606,215 342,624

Current fiscal year derivative forward value gains (1)

Current fiscal year derivative forward value gains (losses) (1)

( 104,552 ) 263,591

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CFC retained equity 3,084,713 2,992,878

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

( 2,236 ) ( 1,416 )

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See “Note 16—Business Segments” for the statements of operations for CFC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Allocation of Net Earnings and Retirement of Patronage Capital—CFC

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The net earnings held in the members’ capital reserve have not been specifically allocated to members, but may be allocated to individual members in the future as patronage capital if authorized by the CFC Board of Directors.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All remaining net earnings are allocated to CFC’s members in the form of patronage capital.

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CFC’s total equity is reduced by the amount of patronage capital retired to its members and by amounts disbursed from board-approved reserves.

CFC’s net earnings for determining allocations are based on CFC’s non-GAAP adjusted net income, which excludes the impact of derivative forward value gains and losses.

CFC’s net earnings for determining allocations are based on CFC’s non-GAAP adjusted net income, which excludes the impact of derivative forward value gains (losses).

The current policy of the CFC Board of Directors is to retire 50 % of the prior year’s allocated patronage capital and hold the remaining 50 % for 25 years.

The retirement amount and timing is subject to annual approval by the CFC Board of Directors.

In May 2024, the CFC Board of Directors authorized the allocation of $ 1 million of net earnings for FY2024 to the cooperative educational fund.

In May 2025, the CFC Board of Directors authorized the allocation of $ 1 million of net earnings for FY2025 to the cooperative educational fun d.

In July 2025, the CFC Board of Directors authorized the allocation of net earnings for FY2025 as follows:

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MD&A—Non-GAAP Financial Measures” for information on adjusted net income.

In July 2024, the CFC Board of Directors also authorized the retirement of allocated net earnings totaling $ 47 million , of which $ 30 million represented 50 % of the patronage capital allocation for FY2024 and $ 17 million rep resented the portion of the allocation from net earnings for fiscal year 1999 that had been held for 25 years pursuant to the CFC Board of Directors’ policy.

We expect to return the authorized patronage capital retirement amount o f $ 47 million to members in cash in the second quarter of fiscal year 2025.

In July 2025, the CFC Board of Directors also authorized the retirement of allocated net earnings totaling $ 53 million, of which $ 34 million represented 50 % of the patronage capital allocation for FY2025 and $ 19 million represen ted the portion of the allocation from net earnings for fiscal year 2000 that had been held for 25 years pursuant to the CFC Board of Directors’ policy.

We expect to return the authorized patronage capital retirement amount of $ 53 million to members in cash in the second quarter of fiscal year 2026.

The remaining portion of the patronage capital allocation for FY2025 will be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC Board of Directors in June 2009.

In connection with the RTFC sale transaction, the CFC Board of Directors approved the early retirement of $ 66 million of allocated but unretired CFC patronage capital to RTFC at a discounted amount of $ 41 million, which was paid from CFC to RTFC in December 2023 and the remaining $ 25 million was allocated to the CFC members’ capital reserve during FY2024.

Following the closing of the RTFC sale transaction on December 1, 2023, CFC concluded that it is no longer a primary

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beneficiary of RTFC, and 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.”

In May 2024, the CFC Board of Directors authorized the allocation of $ 1 million of net earnings for FY2024 to the cooperative educational fund.

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The remaining portion of the amount allocated for FY2024 will be retained by CFC for 25 years under current guidelines adopted by the CFC Board of Directors in June 2009.

In connection with the RTFC sale transaction, the CFC Board of Directors approved the early retirement of $ 66 million of allocated but unretired CFC patronage capital to RTFC at a discounted amount of $ 41 million, which was paid from CFC to RTFC in December 2023 and the remaining $ 25 million was allocated to the CFC members’ capital reserve during FY2024.

Following the closing of the RTFC sale transaction on December 1, 2023, CFC concluded that it is no longer a primary beneficiary of RTFC, and accordingly, deconsolidated RTFC from its consolidated financial statements.

Future allocations and retirements of net earnings may be made annually as determined by the CFC Board of Directors with due regard for its financial condition.

1 unchanged sentence

During FY2024, the CFC Board of Directors approved a change in the allocation of net earnings that would allow us to retain additional earnings and help in effectively managing our debt-to-equity ratio.

As a result of this change, we retained a higher percentage of net earnings for FY2024 in members’ capital reserve, compared with FY2023.

As a result of this change, we retained a higher percentage of net earnings for FY2024 in the members’ capital reserve, compared with FY2023.

CFC’s total equity includes noncontrolling interest s, which consists of 100 % of the equity of NCSC, as the members of NCSC own or control 100 % of the interest s in NCSC .

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however, the cash disbursements from board-approved reserves results in a reduction to noncontrolling interests.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Allocation of Net Earnings—NCSC

13 unchanged sentences

Ending balance $ 2,935 $ ( 5,171 ) $ ( 2,236 ) $ 3,287 $ ( 4,703 ) $ ( 1,416 )

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____________________________

(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.

We expect to reclassify reali zed net gains of $ 1 million attributa ble to derivative cash flow hedges from AOCI into earnings over the next 12 months.

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

We expect to reclassify reali zed net gains of less than $ 1 million attributa ble to derivative cash flow hedges from AOCI into earnings over the next 12 months.

NOTE 12—EMPLOYEE BENEFITS

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• Assets contributed to the multiple-employer plan by one participating employer may be used to provide benefits to employees of other participating employers.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

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Because of the current funding status of the Retirement Security Plan, it is not subject to a certified zone status determination under the Pension Protection Act of 2006 (“PPA”).

Based on the PPA target and PPA actuarial value of the pl an assets, it was more than 90 % funded as of January 1, 2024, and more than 80 % funded as of both 2023 and 2022.

In April 2025, the Department of Labor issued guidance under the Setting Every Community Up for Retirement Enhancement (“SECURE”) Act of 2022, which revised the methodology for reporting annual funding information for defined benefit pension plans.

These changes became effective for plan years beginning after December 31, 2023.

As a result, prior-year plan funding information has been restated to agree to the updated reporting requirements.

Under the market-based reporting of plan assets and liabilities, the plan was more than 90 %, 80 % and 70 % funded as of December 31, 2024, 2023 and 2022, respectively.

We made contributions to the Retirement Security Plan of $ 7 million, $ 6 million and $ 5 million in FY2025, FY2024 and FY2023 , respectively.

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There is a risk of forfeiture if participants leave the company prior to becoming fully vested in the EBR Plan.

This plan included seven participants as of both May 31, 2024 and 2023.

This plan included nine and seven participants as of May 31, 2025 and 2024, respectively.

We recognized net periodic pension expense for this plan of approximately $ 1 million in each of FY2025, FY2024 and FY2023 .

The unfunded projected benefit obligation of this plan, which is included on our consolidated balance sheets as a

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component of other liabilities, was $ 7 million and $ 5 million as of May 31, 2024 and 2023, respectively.

CFC made contributions to the plan of $ 1 million, $ 1 million and $ 2 million in FY2024, FY2023 and FY2022 respectively, for lump-sum settlement payments to fully vested participants of $ 1 million, $ 1 million and $ 2 million in each respective year.

Unrecognized pension costs recorded in accumulated other comprehensive income were $ 5 million and $ 3 million as of May 31, 2024 and 2023, respectively.

The unfunded projected benefit obligation of this plan, which is included on our consolidated balance sheets as a component of other liabilities, was $ 8 million and $ 7 million as of May 31, 2025 and 2024, respectively.

CFC made contributions to the plan of $ 1 million in each of FY2025, FY2024 and FY2023 , for lump-sum settlement payments to fully vested participants of $ 1 million in each respective year.

Unrecognized pension costs recorded in accumulated other comprehensive loss were $ 5 million as of both May 31, 2025 and 2024.

We expect to amortize less than $ 1 million of the unrecognized pension costs as a component of our net periodic pension benefit expense in the fiscal year ended May 31, 2026.

As a result of the settlement payments in FY2025, FY2024 and FY2023 , we recognized a settlement loss of less than $ 1 million in each of FY2025, FY2024 and FY2023.

The settlement losses are recorded as a component of non-interest expense on our consolidated statements of operations.

The settlement losses are recorded as a component of non-interest expense in our consolidated statements of operations.

Defined Contribution Plan

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We contributed approximately $ 1 million to the plan in each of FY2025, FY2024 and FY2023 .

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13—GUARANTEES

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The following table displays the notional amount of our outstanding guarantee obligations, by guarantee type and by member class, as of May 31, 2025 and 2024.

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Guarantees Outstanding by Type and Member Class

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CFC total 1,150,042 966,295

NCSC 43,621 15,263

NCSC electric

60,564 43,621

Total $ 1,210,606 $ 1,009,916

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

(2) Reflects our maximum potential exposure for letters of credit.

(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 May 31, 2024.

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

(3) Under a hybrid letter of credit facility, we had no commitment available t hat may be used for the issuance of letters of credit as of May 31, 2025 .

We had $ 30 million of commitments that may be used for the issuance of letters of credit as of May 31, 2024.

(4) Includes CFC guarantees to NCSC telecom members totaling $ 42 million and $ 41 million as of May 31, 2025 and 2024, respectively.

We had guarantees outstanding totaling $ 1,211 million and $ 1,010 million as of May 31, 2025 and 2024 , respectively.

Gu arantees under which our right of recovery from our members was not secured totaled $ 718 million and $ 535 million and represented 71 % and 67 % of total guarantees as of May 31, 2024 and 2023, respectively.

Gu arantees under which our right of recovery from our members was not secured totaled $ 781 million a nd $ 718 million and represented 65 % and 71 % of total guarantees as of May 31, 2025 and 2024, respectively.

We were not required to perform pursuant to any of our guarantee obligations during FY2025 or FY2024.

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We unconditionally guarantee to the holders or to trustees for the benefit of holders of these bonds the full principal, interest and in most cases, premium, if any, on each bond when due.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-term tax-exempt bonds of $ 48 million and $ 74 million as of May 31, 2025 and 2024, 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.

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The maturities for long-term tax-exempt bonds and the related guarantees extend through calendar year 2037 .

Of the outstanding letters of credit of $ 752 million and $ 538 million as of May 31, 2024 and 2023, respectively, $ 194 million and $ 138 million were secured as of each respective date.

Of the outstanding letters of credit of $ 978 million and $ 752 million as of May 31, 2025 and 2024, respective ly, $ 356 million and $ 194 million were secured as of each respective date.

The maturities for the outstanding letters of credit as of May 31, 2025 extend through calenda r yea r 2044 .

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In addition to the outstanding letters of credit listed in the table above, under master letter of credit facilities in place as of May 31, 2025, we may be required to issue up to an additional $ 124 million in letters of credit to third parties for the benefit of our members.

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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 master letter of credit facility was approved and confirm that the borrower is currently in compliance with the terms and conditions of the agreement governing the facility.

The maximum potential exposure for other guarantees was $ 184 million and $ 160 million as of May 31, 2024 and 2023, respectively, of which $ 25 million was secured as of both May 31, 2024 and 2023 .

The maximum potential exposure for other guarantees was $ 184 million as of both May 31, 2025 and 2024, of which $ 25 million was secured as of both May 31, 2025 and 2024 .

The maturities for these other guarantees listed in the table above extend through calendar year 2025.

1 unchanged sentence

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 rem arketing agents are unable to sell such bonds to other investors.

We were no t required to perform as liquidity provider pursuant to these obligations during FY2024, FY2023 or FY2022.

We were not required to perform as liquidity provider pursuant to these obligations during FY2025, FY2024 or FY2023.

Guarantee Liability

3 unchanged sentences

The following table details the scheduled maturities of our outstanding guarantees in each of the five fiscal years following May 31, 2025 and thereafter:

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Guarantees Outstanding Maturities

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This hierarchy is based on the 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 a financial asset or liability is assigned a level based on the

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lowest level of any input that is significant to the fair value measurement in its entirety.

The fair value measurement of 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 Level 3.

3 unchanged sentences

The table also displays the classification level within the fair value hierarchy based on the degree of observability of the inputs used in the valuation technique for estimating fair value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial Instruments

18 unchanged sentences

Total financial liabilities $ 35,129,997 $ 34,398,695 $ 238,620 $ 23,281,945 $ 10,878,130

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Observable market data include but

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The following table presents the carrying value and fair value of financial instruments reported in our consolidated financial statements at fair value on a recurring basis as of May 31, 2025 and 2024, and the classification of the valuation technique within the fair value hierarchy.

We did no t have any assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs during the years ended May 31, 2024 and 2023.

We did not have any assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs during the years ended May 31, 2025 and 2024.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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Debt Securities Trading

As discussed above in “Note 1—Summary of Significant Accounting Policies” our debt securities consist of investments in certificates of deposit with maturities greater than 90 days, commercial paper, corporate debt securities, municipality debt securities, commercial MBS, foreign government debt securities and other ABS and were classified as trading as of May 31, 2024.

As discussed above in “Note 1—Summary of Significant Accounting Policies” our debt securities consist of investments in corporate debt securities, municipality debt securities, commercial MBS and other ABS and were classified as trading as of May 31, 2025.

Management estimates the fair value of our debt securities utilizing the assistance of third-party pricing services.

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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

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significant observable market inputs where available or a combination of multiple valuation techniques for which all significant assumptions are observable in the market.

using significant observable market inputs where available or a combination of multiple valuation techniques for which all significant assumptions are observable in the market.

Deferred Compensation Investments

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CFC earns management and 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 accordingly, deconsolidated RTFC from it s consolidated financial statements.

We provide additional information on the RTFC sale transaction under “Note 1—Summary of Significant Accounting Policies.”

All loans that require NCSC board approval also require CFC board approval.

3 unchanged sentences

NCSC is a Class C member of CFC.

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NCSC creditors have no recourse against CFC in the event of a default by NCSC, unless there is a 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 VIE included in CFC’s consolidated financial statements, after intercompany eliminations, which include NCSC’s consolidated assets and liabilities as of May 31, 2025 and 2024.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NCSC creditors have no recourse against CFC in the event of a default by NCSC, unless there is a guarantee agreement under which CFC has guaranteed NCSC debt obligations to a third party.

Consolidated Assets and Liabilities of Variable Interest Entities

4 unchanged sentences

Total liabilities $ 15,114 $ 9,824

The following table provides information on CFC’s credit commitments and potential exposure to loss under these commitments to NCSC as of May 31, 2024 and to NCSC and RTFC as of May 31, 2023.

CFC Exposure Under Credit Commitments to NCSC and RTFC

(Dollars in thousands) NCSC

NCSC and RTFC

The following table provides information on CFC’s credit commitments and potential exposure to loss under these commitments to NCSC as of May 31, 2025 and 2024.

CFC Exposure Under Credit Commitments to NCSC

(Dollars in thousands) 2025 2024

CFC credit commitments:

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____________________________

(1) Intercompany borrowings payable by NCSC to CFC as of May 31, 2024 and intercompany borrowings payable by NCSC and RTFC to CFC as of May 31, 2023 are eliminated in consolidation.

(1) Intercompany borrowings payable by NCSC to CFC as of May 31, 2025 and 2024 are eliminated in consolidation.

(2) Excludes interest due on these instruments.

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.

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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 May 31, 2024, NCSC had access to a $ 2,000 million revolving line of credit and a $ 3,000 million revolving term loan from CFC, which will mature in 2067.

Under a loan and security agreement with CFC, NCSC has access to a $ 2,000 million revolving line of credit and a $ 3,000 million revolving term loan from CFC as of May 31, 2025 which will mature in 2067.

CFC loans to NCSC are secured by all assets and revenue of NCSC.

1 unchanged sentence

The maturities for obligations guaranteed by CFC extend through 2043.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16—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.

The following disclosures reflect the adoption of ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which was adopted retrospectively for our annual consolidated financial statements for the fiscal year ended May 31, 2025.

The adoption of this guidance requires additional reportable segment disclosures, primarily relating to significant segment expenses and the CODM.

Adoption of this guidance did not result in changes to the identification of our reportable business segments.

See “Note 1—Summary of Significant Accounting Policies” for additional information related to our adoption of this new accounting standard.

Our operating segments consist of CFC and NCSC for both FY2025 and FY2024, which also represent our reportable segments.

Our activities were previously conducted through three operating segments:

CFC, NCSC and RTFC for FY2023.

On December 1, 2023, RTFC completed the sale of its business to NCSC, as discussed under “Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K.

As we aggregated segment information for NCSC and RTFC into one reportable segment prior to the RTFC sale transaction, the sale of RTFC did not cause a change in the composition of our reportable segments.

A description of each of our segments and the products and services they provide to their respective members and associates is presented below.

CFC’s principal purpose is to provide its members with financing to supplement the loan programs of RUS.

CFC makes loans to its rural electric members so they can acquire, construct and operate electric distribution systems, electric 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.

NCSC’s principal purpose is to provide financing to its members and associates.

NCSC makes loans to electric cooperatives and their subsidiaries that provide non-electric services in the energy and telecommunication industries as well as to entities that provide substantial benefit to CFC members, including eligible solar energy providers and investor-owned utilities.

NCSC also provides its members and associates with equipment financing for leased assets, institutional debt placement services thought its wholly owned subsidiary Cooperative Securities and credit enhancements in the form of letters of credit.

Basis of Presentation

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.

This presentation is aligned with how results are reviewed internally by our Chief Executive Officer (“CEO”), which we determined to be our CODM.

The primary measure used regularly by our CODM to evaluate segment financial performance and allocate resources accordingly between segments is the net income adjusted to exclude derivative forward value gains (losses), which represent the effects of fair value fluctuations in our interest rate swaps.

The CODM reviews and analyzes on a monthly basis the budget-to-actual variances for the adjusted net income and its components, to inform his decisions regarding the business segment allocation of capital and resources, in order to ensure alignment with our performance goals.

The CODM also looks at changes in our total loans outstanding to assess the performance of the segments.

Business Segment Reporting Methodology

The results of our business segments are intended to present the separate results for each of the legal entities included in our consolidated financial statements.

The results of our business segments are intended to present the separate results for each of the reportable segments included in our consolidated financial statements.

As discussed in “Note 15—Variable Interest Entities,” all of NCSC’s funding is either provided by CFC or guaranteed by CFC, the terms and conditions of which are stipulated in a loan and security agreement and a guarantee agreement between CFC and NCSC.

1 unchanged sentence

In addition, CFC manages the business operations of NCSC under a management agreement that automatically renews on an annual basis unless the agreement is terminated by either party.

We report loans and interest and fees earned on loans based on the legal entity that holds the loans.

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We report loans, and interest and fees earned on loans, based on the entity that holds the loans.

CFC borrows from various sources to fund the operations of CFC and NCSC, the cost of which is reflected in CFC’s interest expense.

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Because we generally do not elect to apply hedge accounting to our interest rate swaps, changes in the fair value of our interest rate swaps are recorded in earnings in our consolidated total results of operations.

However, management excludes the impact of derivative forward value gains and losses and includes the net periodic derivative cash settlement interest income or expense amounts as a component of interest expense in reporting our segment results of operations, which represents the only difference between the accounting and reporting for our business segment results of operations and our consolidated total results of operations.

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However, management excludes the impact of derivative forward value gains (losses) and includes the net periodic derivative cash settlement interest income or expense amounts as a component of interest expense in reporting our segment results of operations, which represents the only difference between the accounting and reporting for our business segment results of operations and our consolidated total results of operations.

Segment Results and Reconciliation

The following tables display segment results of operations for the years ended May 31, 2025, 2024 and 2023, assets attributable to each segment as of May 31, 2025 and 2024 and a reconciliation of total segment amounts to our consolidated total amounts.

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Interest expense ( 1,442,027 ) ( 78,236 ) ( 1,520,263 ) — 77,984 ( 1,442,279 )

Derivative cash settlements interest income

Derivative cash settlements interest income (expense)

99,237 ( 18 ) 99,219 ( 99,219 ) — —

Interest expense (3) (4)

( 1,342,790 ) ( 78,254 ) ( 1,421,044 ) ( 99,219 ) 77,984 ( 1,442,279 )

Net interest income 350,717 9,456 360,173 ( 99,219 ) — 260,954

Benefit (provision) for credit losses

Benefit for credit losses

8,111 414 8,525 — ( 414 ) 8,111

Net interest income after benefit (provision) for credit losses

Net interest income after benefit for credit losses

358,828 9,870 368,698 ( 99,219 ) ( 414 ) 269,065

3 unchanged sentences

Derivative cash settlements interest income — — — 99,219 — 99,219

Derivative forward value gains — — — 264,871 — 264,871

Derivative gains — — — 392,037 — 392,037

Derivative forward value losses

— — — ( 105,070 ) — ( 105,070 )

Derivative losses

— — — ( 5,851 ) — ( 5,851 )

Investment securities gains

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Non-interest expense:

General and administrative expenses ( 123,336 ) ( 11,286 ) ( 134,622 ) — 8,251 ( 126,371 )

Losses on early extinguishment of debt ( 1,025 ) — ( 1,025 ) — — ( 1,025 )

Salaries and employee benefits (3)

( 71,920 ) ( 251 ) ( 72,171 ) — — ( 72,171 )

Consulting (3)

( 14,828 ) ( 249 ) ( 15,077 ) — — ( 15,077 )

Depreciation and amortization (3)

( 12,615 ) — ( 12,615 ) — — ( 12,615 )

Other non-interest expense (5)

( 50,016 ) ( 12,090 ) ( 62,106 ) — 9,686 ( 52,420 )

Total non-interest expense ( 149,379 ) ( 12,590 ) ( 161,969 ) — 9,686 ( 152,283 )

2 unchanged sentences

Income tax provision — ( 188 ) ( 188 ) — — ( 188 )

Net income (loss) $ 289,757 $ ( 312 ) $ 289,445 $ 264,871 $ — $ 554,316

Net income (6)

$ 244,285 $ 799 $ 245,084 $ ( 105,070 ) $ — $ 140,014

Segments Total Reclasses and Adjustments (1)

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Total assets $ 38,295,082 $ 1,682,710 $ 39,977,792 $ — $ ( 1,652,743 ) $ 38,325,049

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Interest expense ( 1,339,003 ) ( 72,909 ) ( 1,411,912 ) — 72,824 ( 1,339,088 )

Derivative cash settlements interest income (expense)

Derivative cash settlements interest income

127,017 149 127,166 ( 127,166 ) — —

Interest expense (3) (4)

( 1,211,986 ) ( 72,760 ) ( 1,284,746 ) ( 127,166 ) 72,824 ( 1,339,088 )

Net interest income 372,085 9,344 381,429 ( 127,166 ) — 254,263

Provision for credit losses

Benefit (provision) for credit losses

5,516 ( 2,330 ) 3,186 — 2,330 5,516

Net interest income after provision for credit losses

Net interest income after benefit (provision) for credit losses

377,601 7,014 384,615 ( 127,166 ) 2,330 259,779

6 unchanged sentences

Derivative gains — — — 392,037 — 392,037

Investment securities losses ( 4,974 ) — ( 4,974 ) — — ( 4,974 )

Investment securities gains

10,772 — 10,772 — — 10,772

Total non-interest income 38,629 7,448 46,077 392,037 ( 12,513 ) 425,601

Non-interest expense:

General and administrative expenses ( 107,209 ) ( 10,522 ) ( 117,731 ) — 8,100 ( 109,631 )

Losses on early extinguishment of debt ( 117 ) — ( 117 ) — — ( 117 )

Salaries and employee benefits (3)

( 66,382 ) ( 1,019 ) ( 67,401 ) — — ( 67,401 )

Consulting (3)

( 9,668 ) ( 168 ) ( 9,836 ) — — ( 9,836 )

Depreciation and amortization (3)

( 10,469 ) — ( 10,469 ) — — ( 10,469 )

Other non-interest expense (5)

( 39,954 ) ( 12,083 ) ( 52,037 ) — 10,183 ( 41,854 )

Total non-interest expense ( 126,473 ) ( 13,270 ) ( 139,743 ) — 10,183 ( 129,560 )

Income (loss) before income taxes 251,230 ( 1,110 ) 250,120 252,267 — 502,387

Income before income taxes

289,757 1,192 290,949 264,871 — 555,820

Income tax provision — ( 1,504 ) ( 1,504 ) — — ( 1,504 )

Net income (loss) (6)

$ 289,757 $ ( 312 ) $ 289,445 $ 264,871 $ — $ 554,316

Segments Total Reclasses and Adjustments (1)

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Total assets $ 36,153,418 $ 1,566,866 $ 37,720,284 $ — $ ( 1,542,470 ) $ 36,177,814

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Interest expense ( 1,036,499 ) ( 53,211 ) ( 1,089,710 ) — 53,202 ( 1,036,508 )

Derivative cash settlements interest expense ( 99,768 ) ( 1,617 ) ( 101,385 ) 101,385 — —

Derivative cash settlements interest income (expense)

34,021 ( 444 ) 33,577 ( 33,577 ) — —

Interest expense (3) (4)

( 1,002,478 ) ( 53,655 ) ( 1,056,133 ) ( 33,577 ) 53,202 ( 1,036,508 )

Net interest income 340,737 8,061 348,798 ( 33,577 ) — 315,221

Benefit for credit losses

Provision for credit losses

( 603 ) ( 935 ) ( 1,538 ) — 935 ( 603 )

Net interest income after benefit for credit losses

Net interest income after provision for credit losses

340,134 7,126 347,260 ( 33,577 ) 935 314,618

2 unchanged sentences

Derivative gains:

Derivative cash settlements interest expense — — — ( 101,385 ) — ( 101,385 )

Derivative cash settlements interest income

— — — 33,577 — 33,577

Derivative forward value gains — — — 252,267 — 252,267

5 unchanged sentences

Non-interest expense:

General and administrative expenses ( 93,465 ) ( 8,102 ) ( 101,567 ) — 6,381 ( 95,186 )

Losses on early extinguishment of debt ( 754 ) — ( 754 ) — — ( 754 )

Salaries and employee benefits (3)

( 58,164 ) ( 847 ) ( 59,011 ) — — ( 59,011 )

Consulting (3)

( 8,201 ) ( 218 ) ( 8,419 ) — — ( 8,419 )

Depreciation and amortization (3)

( 5,717 ) — ( 5,717 ) — — ( 5,717 )

Other non-interest expense (5)

( 36,728 ) ( 11,093 ) ( 47,821 ) — 9,733 ( 38,088 )

Total non-interest expense ( 108,810 ) ( 12,158 ) ( 120,968 ) — 9,733 ( 111,235 )

3 unchanged sentences

$ 251,230 $ ( 1,910 ) $ 249,320 $ 252,267 $ — $ 501,587

(1) Consists of (i) the reclassification of net periodic derivative settlement interest income (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.

____________________________

(1) Consists of (i) the reclassification of net periodic derivative settlement interest income (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 (losses), which we exclude from our business segment results but is included in derivatives gains (losses) in our consolidated total results.

(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.

(3) The significant expense categories and amounts align with the segment level information that is regularly provided to the CODM.

(4) Interest expense presented at the segment level is adjusted to include the effects of derivative cash settlement interest income or expense as provided to the CODM.

(5) Other non-interest expense for each segment includes information technology, member relations, board, and other general and administrative expenses.

For the NCSC segment, the other non-interest expense also includes the management fee expense paid to CFC pursuant to the management agreement.

(6) Net income (loss) presented at the segment level is adjusted to exclude derivative forward value gains (losses) and is the primary measure used regularly by our CODM to evaluate segment financial performance and allocate resources between segments.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data