NRUC filing — read by section

Item 8. Financial Statements and Supplementary Data

Item 8. Financial Statements and Supplementary Data 
 
 Page 
 Report of Independent Registered Public Accounting Firm (PCAOB ID 185 ) 
 81 
 
 Consolidated Statements of Operations for the Years Ended May 31, 202 5 , 202 4 and 202 3 
 83 
 
 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended May 31, 202 5 , 202 4 and 202 3 
 84 
 
 Consolidated Balance Sheets as of May 31, 202 5 and 202 4 
 85 
 
 Consolidated Statements of Changes in Equity for the Years Ended May 31, 202 5 , 202 4 and 202 3 
 86 
 
 Consolidated Statements of Cash Flows for the Years Ended May 31, 202 5 , 202 4 and 202 3 
 87 
 
 Notes to Consolidated Financial Statements 
 89 
 
 Note 1 — Summary of Significant Accounting Policies 
 89 
 
 Note 2 — Interest Income and Interest Expense 
 100 
 
 Note 3 — Investment Securities 
 100 
 
 Note 4 — Loans 
 102 
 
 Note 5 — Allowance for Credit Losses 
 113 
 
 Note 6 — Short-Term Borrowings 
 115 
 
 Note 7 — Long-Term Debt 
 116 
 
 Note 8 — Subordinated Deferrable Debt 
 119 
 
 Note 9 — Members’ Subordinated Certificates 
 120 
 
 Note 10 — Derivative Instruments and Hedging Activities 
 122 
 
 Note 11 — Equity 
 126 
 
 Note 12 — Employee Benefits 
 129 
 
 Note 13 — Guarantees 
 131 
 
 Note 14 — Fair Value Measurement 
 133 
 
 Note 15 — Variable Interest Entities 
 137 
 
 Note 16 — Business Segments 
 139 
 
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 Report of Independent Registered Public Accounting Firm 
 
 To the Board of Directors and Members 
 National Rural Utilities Cooperative Finance Corporation: 
 
 Opinion on the Consolidated Financial Statements 
 We have audited the accompanying consolidated balance sheets of National Rural Utilities Cooperative Finance Corporation and subsidiaries (the Company) as of May 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the years in the three-year period ended May 31, 2025, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended May 31, 2025, in conformity with U.S. generally accepted accounting principles . 
 
 Basis for Opinion 
 These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 
 
 We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 
 
 Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 
 
 Critical Audit Matter 
 The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the Audit Committee and that: (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 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 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. The Company segments its loan portfolio into pools based on member-borrower type, which is 
 
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 based on the utility sector of the borrower, and further by internal borrower risk ratings. The Company then applies loss factors, consisting of the PD and LGD, to the scheduled loan-level amortization amounts over the life of the loans. Due to a limited history of defaults in the portfolio, the Company utilizes third-party default data tables for the utility sector as a proxy to estimate default rates for each of the pools. Based on the mapping of internal borrower risk rating to equivalent credit rating provided in the third-party utility default tables, the Company applies corresponding cumulative default rates to the scheduled loan amortization amounts over the remaining life of loan in each of the pools. For estimation of an LGD the Company utilizes its lifetime historical loss experience for each of the portfolio segments. 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. 
 
 We identified the assessment of the collective ACL as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the collective ACL due to significant measurement uncertainty. Specifically, the assessment encompassed the evaluation of the collective ACL methodology, portfolio segmentation, and the method used to estimate the PD and LGD and their significant assumptions, including third-party proxy default data for the utility sector, and borrower risk ratings. The assessment also included an evaluation of the conceptual soundness of the collective ACL methodology. 
 
 The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls related to the Company’s measurement of the collective ACL estimate, including controls over the: development of the collective ACL methodology; 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. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in: 
 
 • evaluating the Company’s collective ACL methodology for compliance with U.S. 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 portfolio segmentation. 
 
 • 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. 
 
 /s/ KPMG LLP 
 
 We have served as the Company’s auditor since 2013. 
 McLean, Virginia 
 August 5, 2025 
 
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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION 
 CONSOLIDATED STATEMENTS OF OPERATIONS 
 
 Year Ended May 31, 
 (Dollars in thousands) 2025 2024 2023 
 Interest income $ 1,703,233 $ 1,593,351 $ 1,351,729 
 Interest expense ( 1,442,279 ) ( 1,339,088 ) ( 1,036,508 ) 
 Net interest income 260,954 254,263 315,221 
 Benefit (provision) for credit losses 8,111 5,516 ( 603 ) 
 Net interest income after benefit (provision) for credit losses 269,065 259,779 314,618 
 Non-interest income: 
 Fee and other income 
 23,597 22,792 18,134 
 Derivative gains (losses) 
 ( 5,851 ) 392,037 285,844 
 
 Investment securities gains (losses) 
 5,674 10,772 ( 4,974 ) 
 Total non-interest income 23,420 425,601 299,004 
 Non-interest expense: 
 Salaries and employee benefits 
 ( 72,171 ) ( 67,401 ) ( 59,011 ) 
 Other general and administrative expenses 
 ( 70,944 ) ( 58,970 ) ( 50,620 ) 
 
 Other non-interest expense ( 9,168 ) ( 3,189 ) ( 1,604 ) 
 Total non-interest expense ( 152,283 ) ( 129,560 ) ( 111,235 ) 
 Income before income taxes 140,202 555,820 502,387 
 Income tax provision ( 188 ) ( 1,504 ) ( 800 ) 
 Net income 140,014 554,316 501,587 
 Less: Net income attributable to noncontrolling interests 
 ( 281 ) ( 967 ) ( 97 ) 
 Net income attributable to CFC $ 139,733 $ 553,349 $ 501,490 
 
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 

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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 
 
 Year Ended May 31, 
 (Dollars in thousands) 2025 2024 2023 
 Net income $ 140,014 $ 554,316 $ 501,587 
 Other comprehensive income (loss): 
 
 Changes in unrealized gains on derivative cash flow hedges 803 483 6,691 
 
 Reclassification to earnings of realized gains on derivatives ( 1,155 ) ( 8,298 ) ( 712 ) 
 Defined benefit plan adjustments ( 468 ) ( 1,944 ) 106 
 Other comprehensive income (loss) 
 ( 820 ) ( 9,759 ) 6,085 
 Total comprehensive income 139,194 544,557 507,672 
 Less: Total comprehensive income attributable to noncontrolling interests 
 ( 281 ) ( 967 ) ( 97 ) 
 Total comprehensive income attributable to CFC $ 138,913 $ 543,590 $ 507,575 
 
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 

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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION 
 CONSOLIDATED BALANCE SHEETS 
 
 May 31, 
 (Dollars in thousands) 2025 2024 
 Assets: 
 Cash and cash equivalents $ 134,712 $ 280,124 
 Restricted cash 8,410 8,217 
 Total cash, cash equivalents and restricted cash 143,122 288,341 
 
 Investment securities: 
 Debt securities trading, at fair value 113,663 281,351 
 Equity securities, at fair value 11,252 36,886 
 
 Total investment securities, at fair value 124,915 318,237 
 Loans to members 37,079,978 34,542,285 
 Less: Allowance for credit losses ( 40,615 ) ( 48,726 ) 
 Loans to members, net 37,039,363 34,493,559 
 Accrued interest receivable 270,222 190,247 
 Other receivables 24,377 29,240 
 Fixed assets, net 81,667 85,119 
 Derivative assets 555,855 691,249 
 Other assets 85,528 81,822 
 Total assets $ 38,325,049 $ 36,177,814 
 
 Liabilities: 
 Accrued interest payable $ 294,917 $ 263,372 
 Debt outstanding: 
 Short-term borrowings 5,091,416 4,332,690 
 Long-term debt 27,163,701 25,901,165 
 Subordinated deferrable debt 1,329,485 1,286,861 
 Members’ subordinated certificates: 
 Membership subordinated certificates 628,637 628,625 
 Loan and guarantee subordinated certificates 309,914 322,863 
 Member capital securities 246,163 246,163 
 Total members’ subordinated certificates 1,184,714 1,197,651 
 Total debt outstanding 34,769,316 32,718,367 
 Deferred income 31,596 33,356 
 Derivative liabilities 51,368 80,988 
 
 Other liabilities 74,386 69,562 
 Total liabilities 35,221,583 33,165,645 
 
 Equity: 
 CFC equity: 
 Retained equity 3,084,713 2,992,878 
 Accumulated other comprehensive loss 
 ( 2,236 ) ( 1,416 ) 
 Total CFC equity 3,082,477 2,991,462 
 Noncontrolling interests 20,989 20,707 
 Total equity 3,103,466 3,012,169 
 Total liabilities and equity $ 38,325,049 $ 36,177,814 
 
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 

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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION 
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 
 
 (Dollars in thousands) Membership
Fees and
Educational
Fund Patronage
Capital
Allocated Members’
Capital
Reserve Unallocated
Net Income
(Loss) CFC
Retained
Equity Accumulated
Other
Comprehensive
Income (Loss) Total
CFC
Equity Non-controlling
Interests Total
Equity 
 Balance as of May 31, 2022 $ 3,387 $ 954,988 $ 1,062,286 $ 91,654 $ 2,112,315 $ 2,258 $ 2,114,573 $ 27,396 $ 2,141,969 
 Net income 1,100 110,273 139,856 250,261 501,490 — 501,490 97 501,587 
 Other comprehensive income — — — — — 6,085 6,085 — 6,085 
 Patronage capital retirement — ( 59,136 ) — — ( 59,136 ) — ( 59,136 ) ( 2,704 ) ( 61,840 ) 
 Other ( 953 ) ( 10 ) 10 — ( 953 ) — ( 953 ) 2,401 1,448 
 Balance as of May 31, 2023 $ 3,534 $ 1,006,115 $ 1,202,152 $ 341,915 $ 2,553,716 $ 8,343 $ 2,562,059 $ 27,190 $ 2,589,249 
 Net income 1,100 60,599 228,059 263,591 553,349 — 553,349 967 554,316 
 Other comprehensive loss 
 — — — — — ( 9,759 ) ( 9,759 ) — ( 9,759 ) 
 Patronage capital retirement — ( 138,482 ) 25,353 — ( 113,129 ) — ( 113,129 ) — ( 113,129 ) 
 Other ( 1,058 ) — — — ( 1,058 ) — ( 1,058 ) ( 7,450 ) ( 8,508 ) 
 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 (loss) 
 1,100 67,140 176,045 ( 104,552 ) 139,733 — 139,733 281 140,014 
 Other comprehensive loss 
 — — — — — ( 820 ) ( 820 ) — ( 820 ) 
 Patronage capital retirement — ( 46,846 ) — — ( 46,846 ) — ( 46,846 ) — ( 46,846 ) 
 Other ( 1,052 ) — — — ( 1,052 ) — ( 1,052 ) 1 ( 1,051 ) 
 Balance as of May 31, 2025 $ 3,624 $ 948,526 $ 1,631,609 $ 500,954 $ 3,084,713 $ ( 2,236 ) $ 3,082,477 $ 20,989 $ 3,103,466 
 
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 

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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION 
 CONSOLIDATED STATEMENTS OF CASH FLOWS 
 
 Year Ended May 31, 
 (Dollars in thousands) 2025 2024 2023 
 Cash flows from operating activities: 
 Net income $ 140,014 $ 554,316 $ 501,587 
 Adjustments to reconcile net income to net cash provided by operating activities: 
 Amortization of deferred loan fees ( 2,978 ) ( 6,463 ) ( 7,500 ) 
 Amortization of debt issuance costs and discount 33,862 29,827 28,744 
 Amortization of guarantee fee 19,584 20,679 19,300 
 Depreciation and amortization 12,615 10,469 5,717 
 Provision (benefit) for credit losses ( 8,111 ) ( 5,516 ) 603 
 
 Unrealized (gains) losses on equity and debt securities ( 8,241 ) ( 16,461 ) 1,090 
 Derivative forward value (gains) losses 
 105,070 ( 264,871 ) ( 252,267 ) 
 Advances on loans held for sale ( 442,700 ) ( 326,500 ) ( 213,142 ) 
 Proceeds from sales of loans held for sale 424,000 324,000 256,942 
 Changes in operating assets and liabilities: 
 Accrued interest receivable ( 79,975 ) ( 17,524 ) ( 61,305 ) 
 Accrued interest payable 31,545 51,032 80,390 
 Deferred income 1,218 1,218 1,769 
 Other ( 18,371 ) ( 33,583 ) ( 24,155 ) 
 Net cash provided by operating activities 207,532 320,623 337,773 
 Cash flows from investing activities: 
 Advances on loans held for investment, net ( 2,516,664 ) ( 2,005,187 ) ( 2,534,642 ) 
 
 Investments in fixed assets, net ( 4,697 ) ( 6,154 ) ( 7,721 ) 
 
 Purchases of trading securities 
 — — ( 117,288 ) 
 Proceeds from sales and maturities of trading securities 
 173,997 202,903 201,849 
 
 Proceeds from redemption of equity securities 
 25,000 — — 
 
 Cash impact of VIE deconsolidation — ( 10,341 ) — 
 Net cash used in investing activities ( 2,322,364 ) ( 1,818,779 ) ( 2,457,802 ) 
 Cash flows from financing activities: 
 Proceeds from (repayments of) short-term borrowings ≤ 90 days, net 1,322,246 ( 536,592 ) ( 417,487 ) 
 Proceeds from short-term borrowings with original maturity > 90 days 2,174,997 3,062,591 2,864,699 
 Repayments of short-term borrowings with original maturity > 90 days ( 2,738,517 ) ( 2,739,584 ) ( 2,882,104 ) 
 Payments for issuance costs for revolving bank lines of credit 
 ( 5,737 ) ( 2,612 ) ( 2,108 ) 
 Proceeds from issuance of long-term debt, net of discount and issuance costs 
 4,044,549 4,520,730 4,293,185 
 Payments for retirement of long-term debt 
 ( 2,810,566 ) ( 2,591,494 ) ( 1,916,514 ) 
 
 Payments for issuance costs for subordinated deferrable debt 
 ( 1,387 ) ( 1,165 ) ( 3,295 ) 
 Proceeds from issuance of subordinated deferrable debt 43,811 103,500 300,000 
 Payments for retirement of subordinated deferrable debt 
 — ( 100,000 ) — 
 Proceeds from issuance of members’ subordinated certificates 
 12 103 6,133 
 Payments for retirement of members’ subordinated certificates 
 ( 12,949 ) ( 25,579 ) ( 17,168 ) 
 Payments for retirement of patronage capital 
 ( 46,846 ) ( 110,202 ) ( 59,189 ) 
 Repayments for membership fees, net 
 — ( 436 ) — 
 
 Net cash provided by financing activities 1,969,613 1,579,260 2,166,152 
 Net increase (decrease) in cash, cash equivalents and restricted cash ( 145,219 ) 81,104 46,123 
 Beginning cash, cash equivalents and restricted cash 288,341 207,237 161,114 
 Ending cash, cash equivalents and restricted cash $ 143,122 $ 288,341 $ 207,237 
 
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 

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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION 
 CONSOLIDATED STATEMENTS OF CASH FLOWS 
 
 Year Ended May 31, 
 (Dollars in thousands) 2025 2024 2023 
 Supplemental disclosure of cash flow information: 
 Cash paid for interest $ 1,373,281 $ 1,261,683 $ 934,602 
 Cash paid for income taxes 680 578 335 
 
 Noncash financing and investing activities: 
 Equity investment, at cost, obtained in exchange for loan held for investment $ — $ — $ 7,778 
 
 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 

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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
 
 The Company 
 
 National Rural Utilities Cooperative Finance Corporation (“CFC”) is a tax-exempt member-owned cooperative association incorporated under the laws of the District of Columbia in April 1969. CFC’s principal purpose is to provide its members with financing to supplement the loan programs of the Rural Utilities Service (“RUS”) of the United States Department of Agriculture (“USDA”). CFC makes loans to its rural electric members so they can acquire, construct and operate electric distribution systems, electric generation and transmission (“power supply”) systems and related facilities. CFC also provides its members and associates with credit enhancements in the form of letters of credit and guarantees of debt obligations. As a cooperative, CFC is owned by and exclusively serves its membership, which consists of not-for-profit entities or subsidiaries or affiliates of not-for-profit entities. 
 
 National Cooperative Services Corporation (“NCSC”) is a taxable cooperative incorporated in 1981 in the District of Columbia as a member-owned cooperative association. NCSC’s principal purpose is to provide financing to its members and associates, which consists of two classes: NCSC electric and NCSC telecommunications. NCSC electric members and associates consist of members of CFC, entities eligible to be members of CFC, government or quasi-government entities that own electric utility systems that meet the Rural Electrification Act definition of “rural,” and the for-profit and not-for-profit entities that are owned, operated or controlled by, or provide significant benefit to, certain members of CFC. NCSC telecommunication (“telecom”) members and associates consist of rural telecommunications members and their affiliates. CFC is the primary source of funding for NCSC and manages NCSC’s business operations under a management agreement that is automatically renewable on an annual basis unless terminated by either party. NCSC pays CFC a fee and, in exchange, CFC reimburses NCSC for loan losses under a guarantee agreement. As a taxable cooperative, NCSC pays income tax based on its reported taxable income and deductions. NCSC is headquartered with CFC in Dulles, Virginia. 
 
 Cooperative Securities LLC (“Cooperative Securities”) is a limited liability company organized and incorporated in 2021 in Delaware and a wholly owned subsidiary of NCSC. Cooperative Securities is a broker-dealer registered with the U.S. Securities and Exchange Commission (“SEC”), and is a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. Cooperative Securities provides institutional debt placement services, which may include advising, arranging and structuring private debt financing transactions, for NCSC’s members, and for-profit and not-for-profit entities that are owned, operated or controlled by, or provide a significant benefit to certain rural utility providers. 
 
 Basis of Presentation and Use of Estimates 
 
 The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and related disclosures during the period. Management ’ s most significant estimates and assumptions involve determining the allowance for credit losses. These estimates are based on information available as of the date of the consolidated financial statements. 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. 
 
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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 Principles of Consolidation 
 
 These consolidated financial statements include the accounts of CFC and variable interest entities (“VIEs”) where CFC is the primary beneficiary, which are discussed below. All inte rcompany balances and transactions have been eliminated. Unless stated otherwise, references to “we,” “our” or “us” relate to CFC and its consolidated entities. 
 
 Variable Interest Entities 
 
 A VIE is an entity that has a total equity investment at risk that is not sufficient to finance its activities without additional subordinated financial support provided by another party, or where the group of equity holders does not have (i) the ability to make decisions about the entity’s activities that most significantly impact its economic performance; (ii) the obligation to absorb the entity’s expected losses; or (iii) the right to receive the entity’s expected residual returns. When evaluating an entity for possible consolidation, we must determine whether or not we have a variable interest in the entity. If it is determined that we do not have a variable interest in the entity, no further analysis is required and we do not consolidate the entity. If we have a variable interest in the entity, we must evaluate whether we are the primary beneficiary based on an assessment of quantitative and qualitative factors. 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 without additional financial support. We consolidate the results of NCSC with CFC because CFC is the primary beneficiary holder. Prior to December 1, 2023, Rural Telephone Finance Cooperative (“RTFC”) qualified as a VIE that was required to be consolidated by CFC. 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 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 
 
 Cash, certificates of deposit due from banks and other investments with original maturities of less than 90 days are classified as cash and cash equivalents. 
 
 Restricted Cash 
 
 Restricted cash, which consists primarily of member funds held in escrow for certain specifically designed cooperative programs, totaled $ 8 million as of both May 31, 2025 and 2024. 
 
 Investment Securities 
 
 Our investment securities portfolio consists of equity and debt securities. We record purchases and sales of securities on a trade-date basis. 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 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. Accordingly, we also report our debt securities at fair value on our consolidated balance sheets and record unrealized gains and losses as a component of non-interest income. Interest income is generally recognized over the contractual life of the securities based on the effective yield method. 
 
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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 Loans to Members 
 
 We originate loans to members and classify loans as held for investment or held for sale based on management’s intent and ability to sell or hold the loan for the foreseeable future or until maturity or payoff. Loans that we have the ability and intent to hold for the foreseeable future are classified as held for investment a nd are reported based on the unpaid principal balance, net of principal charge-offs, and deferred loan origination costs. Loans that we intend to sell or for which we do not have the ability and intent to hold for the foreseeable future are classified as held for sale and are recorded at the lower of cost or fair value. These loan sales are made at par value, concurrently or within a short period of time with the closing of the loan or participation agreement. 
 
 Accrued Interest Receivable 
 
 Accrued interest receivable amounts generally represent three months or less of accrued interest on loans outstanding, investments and derivative instruments. As permitted by the Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments—Credit Losses , the current expected credit loss (“CECL”) model, we elected to continue reporting accrued interest on loans separately on our consolidated balance sheets as a component of the line item accrued interest receivable rather than as a component of loans to members. Because our policy is to write off past-due accrued interest receivable in a timely manner, we elected not to measure an allowance for credit losses for accrued interest receivable on loans outstanding, which totaled $ 237 million and $ 147 million as of May 31, 2025 and 2024, respectively. We also elected to exclude accrued interest receivable from the credit quality disclosures required under CECL. 
 
 Interest Income 
 
 Interest income on performing loans is accrued and recognized as interest income based on the contractual rate of interest. Deferred loan origination costs are amortized using the straight-line method, which approximates the effective interest method into interest income over the life of the loan. N onrefundable loan fees that meet the definition of loan origination fees are deferred and generally recognized in interest income as yield adjustments over the period to maturity of the loan using the effective interest method. 
 
 Placement Agent Fees 
 
 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 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 
 
 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. Loan modifications to a borrower experiencing financial difficulty include principal forgiveness, an interest rate reduction, payment deferrals or a term extension. As modifications offered to borrowers experiencing financial difficulty are typically not at market terms, such modifications are generally accounted for as a continuation of the existing loan. 
 
 As discussed below under “Allowance for Credit Losses—Loan Portfolio—Asset-Specific Allowance,” loans modified to troubled borrowers are evaluated on an individual basis in estimating expected credit losses. 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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 NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 
 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. These loans may be returned to performing status, and the accrual of interest resumed, if the borrower performs under the modified terms for an extended period of time, and we expect the borrower to continue to perform in accordance with the modified terms. In certain limited circumstances in which such loan is current at the modification date, the loan may remain on accrual status at the time of modification. 
 
 Nonperforming Loans 
 
 We classify loans as nonperforming when contractual principal or interest is 90 days past due or when we believe the collection of principal and interest in full is not reasonably assured. When a loan is classified as nonperforming, we generally place the loan on nonaccrual status. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed against current-period interest income. Interest income on nonaccrual loans is subsequently recognized only upon the receipt of cash payments. However, if we believe the ultimate collectability of the loan principal is in doubt, cash received is applied against the principal balance of the loan. Nonaccrual loans generally are returned to accrual status when principal and interest becomes and remains current for a specified period and repayment of the remaining contractual principal and interest is reasonably assured. 
 
 Charge-Offs 
 
 We charge off loans or a portion of a loan when we determine that the loan is uncollectible. The charge-off of uncollectible principal amounts results in a reduction to the allowance for credit losses for our loan portfolio. Recoveries of previously charged off principal amounts result in an increase to the allowance. 
 
 Allowance for Credit Losses—Loan Portfolio 
 
 Allowance Methodology 
 
 The allowance for credit losses is determined based on management’s current estimate of expected credit losses over the remaining contractual term, adjusted as appropriate for estimated prepayments, of loans in our loan portfolio as of each balance sheet date. The allowance for credit losses for our loan portfolio is reported on our consolidated balance sheet as a valuation account that is deducted from loans to members to present the net amount we expect to collect over the life of our loans. 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 in 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. Our allowance for credit losses consists of a collective allowance and an asset-specific allowance. The collective allowance is established for loans in our portfolio that share similar risk characteristics and are therefore evaluated on a collective, or pool, basis in measuring expected credit losses. The asset-specific allowance is established for loans in our portfolio that do not share similar risk characteristics with other loans in our portfolio and are therefore evaluated on an individual basis in measuring expected credit losses. Expected credit losses are estimated based on historical experience, current conditions and forecasts, if applicable, that affect the collectability of the reported amount. 
 
 Since inception in 1969, CFC has experienced limited defaults and losses as the utility sector generally tends to be less sensitive to changes in the economy than other sectors largely due to the essential nature of the service provided. The losses we have incurred were not tied to economic factors, but rather to distinct operating issues related to each borrower. Given that our borrowers’ creditworthiness, and accordingly our loss experience, has not correlated to specific underlying macroeconomic variables, such as U.S. 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 
 
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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 
 
 We employ a quantitative methodology and a qualitative framework to measure the collective component of our allowance for expected credit losses. The first element in our quantitative methodology involves the segmentation of our loan portfolio into loan pools that share similar risk characteristics. We disaggregate our loan portfolio into segments that reflect the member borrow er type, which is based on the utility sector of the borrower because the key operational, infrastructure, regulatory, environmental, customer and financial risks of each sector are similar in nature. Our primary member borrower types consist of CFC electric distribution, CFC electric power supply, CFC statewide and associate, NCSC electric and NCSC telecom. Our portfolio segments align with the sectors generally seen in the utilities industry. We further stratify each portfolio into loan pools based on our internal borrower risk ratings, as our borrower risk ratings provide important information on the collecta bility of each of our loan portfolio segments. We then apply loss factors, consisting of the probability of default and loss given default, to the scheduled loan-level amortization amounts over the life of the loans for each of our loan pools. Below we discuss the source and basis for the key inputs, which include borrower risk ratings and the loss factors, in measuring expected credit losses for our loan portfolio. 
 
 • Borrower Risk Ratings : We evaluate each borrower and loan facility in our loan portfolio and assign internal borrower and loan facility risk ratings based on consideration of a number of quantitative and qualitative factors. Each risk rating is reassessed annually following receipt of the borrower’s audited financial statements; however, interim risk-rating adjustments may occur as a result of updated information affecting a borrower’s ability to fulfill its obligations or other significant developments and trends. Our internally assigned borrower risk ratings are intended to assess the general creditworthiness of the borrower and probability of default. We use our internal borrower risk ratings, which we map to the equivalent credit ratings by external rating agencies, to differentiate risk within each of our portfolio segments and loan pools. We provide additional information on our borrower risk ratings below in “Note 4—Loans.” 
 
 • Probability of Default : The probability of default, or default rate, represents the likelihood that a borrower will default over a particular time horizon. Because of our limited default history, we utilize third-party default data for the utility sector as a proxy to estimate default rates for each of our loan pools. The third-party default data provide historical default rates, based on credit ratings and remaining maturities of outstanding bonds, for the utility sector. Based on the mapping and alignment of our internal borrower risk ratings to equivalent credit ratings provided in the third-party utility default table, we apply the corresponding cumulative default rates to the scheduled amortization amounts over the remaining term of the loans in each of our loan pools. 
 
 • Loss Given Default : The loss given default, or loss severity, represents the estimated loss, net of recoveries, on a loan that would be realized in the event of a borrower default. 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 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 
 
 We generally consider nonperforming loans as well as loans that have been modified to borrowers experiencing financial difficulty for individual evaluation given the risk characteristics of such loans. Factors we consider in measuring the extent of expected credit loss include the payment status, the collateral value, the borrower’s financial condition, guarantor support, the probability of collecting scheduled principal and interest payments when due, anticipated modifications of payment structure or term for troubled borrowers, and recoveries if they can be reasonably estimated. We generally measure the expected credit loss as the difference between the amortized cost basis in the loan and the present value of the expected future cash flows from the borrower, which is generally discounted at the loan’s effective interest rate, or the fair value of the collateral, if the loan is collateral dependent. 
 
 Unadvanced Loan Commitments 
 
 Unadvanced commitments represent amounts for which we have approved and executed loan contracts, but the funds have not been advanced. The majority of the unadvanced commitments reported represent amounts that are subject to material adverse change clauses at the time of the loan advance. Prior to making an advance on these facilities, we would confirm there has been no material adverse change in the business or condition, financial or otherwise, of the borrower since the time the loan was approved and confirm the borrower is currently in compliance with loan terms and conditions. The remaining unadvanced commitments relate to line of credit loans that are not subject to a material adverse change clause at the time of each loan advance. As such, we would be required to advance amounts on these committed facilities as long as the borrower is in compliance with the terms and conditions of the loan commitment. 
 
 Unadvanced loan commitments related to line of credit loans are typically for periods not to exceed five years and are generally revolving facilities used for working capital and backup liquidity purposes. Historically, we have experienced a very low utilization rate on line of credit loan facilities, whether or not there is a material adverse change clause. Since we generally do not charge a fee on the unadvanced portion of the majority of our loan facilities, our borrowers will typically request long-term facilities to fund construction work plans and other capital expenditures for periods of up to five years and draw down on the facility over that time. These factors contribute to our expectation that the majority of the unadvanced line of credit loan commitments will expire without being fully drawn upon and that the total unadvanced amount does not represent future cash funding requirements. 
 
 Reserve for Credit Losses—Off-Balance Sheet Credit Exposures 
 
 We also maintain a reserve for credit losses for our off-balance sheet credit exposures related to unadvanced loan commitments and financial guarantees. Because our business processes and credit risks associated with our off-balance sheet credit exposures are essentially the same as for our loans, we measure expected credit losses for our off-balance sheet exposures, after adjusting for the probability of funding these exposures, consistent with the methodology used for our funded outstanding exposures. 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. 
 
 Leases 
 
 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. 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. Both the head lease and sublease agreements provide customers the option to terminate the lease by buying the vehicle for a terminal rental adjustment clause (“TRAC”) value at the end of the lease term. 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 
 
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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. 
 
 Lessee Arrangements 
 
 For the finance leases in which we are the lessee, right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The lease term is estimated based on the economic life of the vehicles. 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 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. 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 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 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 
 
 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 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. Based on our annual impairment assessment for FY2025 and FY2024, management determined that there were no indicators of impairment of our fixed assets as of May 31, 2025 and 2024. 
 
 The following table displays the components of our fixed assets. 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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 Table 1.1: Fixed Assets 
 
 May 31, 
 (Dollars in thousands) 2025 2024 
 Building and building equipment $ 52,340 $ 50,491 
 Furniture and fixtures 7,796 7,175 
 Computer software and hardware 87,122 81,225 
 Other 1,302 1,213 
 Depreciable fixed assets 148,560 140,104 
 Less: Accumulated depreciation ( 91,211 ) ( 83,706 ) 
 Net depreciable fixed assets 57,349 56,398 
 Land 23,796 23,796 
 Software development in progress 522 4,925 
 Fixed assets, net $ 81,667 $ 85,119 

 Cloud Computing Arrangements — Implementation Costs 
 
 Eligible implementation costs associated with cloud computing arrangements that are service contracts are capitalized and amortized over future periods. These costs are recorded at cost less accumulated amortization and are included in other assets on the consolidated balance sheets. We recognize amortization expense for these capitalized implementation costs on a straight-line basis over the term of the hosting arrangements related to the cloud computing service contracts when ready for the intended use, and we include it in other general and administrative expenses in the consolidated statements of operations. We perform an impairment assessment annually or more frequently, whenever events or circumstances indicate that the carrying amount for the capitalized implementation costs for cloud computing service contracts may not be recoverable. 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 $ 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 
 
 We enter into repurchase agreements to sell investment securities. These transactions are accounted for as collateralized financing transactions and are recorded on our consolidated balance sheets as part of short-term borrowings at the amounts at which the securities were sold. We had no securities sold under repurchase agreements outstanding as of May 31, 2025 and 2024. 
 
 Debt 
 
 We report debt at cost net of unamortized issuance costs and discounts or premiums. Issuance costs, discounts and premiums are deferred and amortized into interest expense using the effective interest method or a method approximating the effective interest method over the legal maturity of each bond issue. Short-term borrowings consist of borrowings with an original 
 
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 contractual maturity of one year or less and do not include the current portion of long-term debt. Borrowings with an original contractual maturity of greater than one year are classified as long-term debt. 
 
 Derivative Instruments 
 
 We are an end user of derivative financial instruments and do not engage in derivative trading. We use derivatives, primarily interest rate swaps and Treasury rate locks, to manage interest rate risk. Derivatives may be privately negotiated contracts, which are often referred to as over-the-counter (“OTC”) derivatives, or they may be listed and traded on an exchange. We generally engage in OTC derivative transactions. 
 
 In accordance with the accounting standards for derivatives and hedging activities, we record derivative instruments at fair value as either a derivative asset or derivative liability on our consolidated balance sheets. We report derivative asset and liability amounts on a gross basis based on individual contracts, which does not take into consideration the effects of master netting agreements or collateral netting. Derivatives in a gain position are reported as derivative assets on our consolidated balance sheets, while derivatives in a loss position are reported as derivative liabilities. Accrued interest related to derivatives is reported on our consolidated balance sheets as a component of either accrued interest receivable or accrued interest payable. 
 
 If we do not elect hedge accounting treatment, changes in the fair value of derivative instruments, which consist of net accrued periodic derivative cash settlements income or expense and derivative forward value amounts, are recognized in our consolidated statements of operations under derivative gains (losses). If we elect hedge accounting treatment for derivatives, we formally document, designate and assess the effectiveness of t he hedge relationship. Changes in the fair value of derivatives designated as qualifying cash flow hedges are recorded as a component of other comprehensive income (“OCI”) and reclassified from accumulated other comprehensive income (“AOCI”) to earnings using the effective interest method over the term of the forecasted transaction. 
 
 We generally do not designate interest rate swaps, which represent the substantial majority of our derivatives, for hedge accounting. Accordingly, changes in the fair value of interest rate swaps are reported in our consolidated statements of operations under derivative gains (losses). Net periodic cash settlements expense related to interest rate swaps are classified as an operating activity in our consolidated statements of cash flows. 
 
 We typically designate treasury rate locks as cash flow hedges of forecasted debt issuances or repricings. Changes in the fair value of treasury locks designated as cash flow hedges are recorded as a component of OCI an d reclassified from AOCI into interest expense when the forecasted transaction occurs. 
 
 Guarantee Liability 
 
 We maintain a guarantee liability that represents our contingent and noncontingent exposure related to guarantees and standby liquidity obligations associated with our members’ debt. The guarantee liability is included in the other liabilities line item on the consolidated balance sheet, and the provision for guarantee liability is reported in non-interest expense as a separate line item on the consolidated statement of operations. 
 
 The contingent portion of the guarantee liability represents management’s estimate of our exposure to losses within the guarantee portfolio. The methodology used to estimate the contingent guarantee liability is consistent with the methodology used to determine the allowance for credit losses under the CECL model. 
 
 We record a noncontingent guarantee liability for all new or modified guarantees. Our noncontingent guarantee liability represents our obligation to stand ready to perform over the term of our guarantees and liquidity obligations that we have entered into or modified. Our noncontingent obligation is estimated based on guarantee and liquidity fees charged for guarantees issued and represents management’s estimate of the fair value of our obligation to stand ready to perform. 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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 Fair Value Valuation Processes 
 
 We present certain financial instruments at fair value, including equity and debt securities, and derivatives. Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date (also referred to as an exit price). We consider observable prices in the principal market in our valuations where possible. Fair value estimates were developed at the reporting date and may not necessarily be indicative of amounts that could ultimately be realized in a market transaction at a future date. With the exception of redeeming debt under early redemption provisions, terminating derivative instruments under early-termination provisions and allowing borrowers to prepay their loans, we held and intend to hold all financial instruments to maturity, excluding common stock and preferred stock investments that have no stated maturity and our trading debt securities. 
 
 Fair Value Hierarchy 
 
 The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. 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. 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 three levels of the fair value hierarchy are summarized below: 
 
 Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities 
 Level 2: Observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities 
 Level 3: Unobservable inputs 
 
 The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted prices in active markets or observable market parameters. When quoted prices and observable data in active markets are not fully available, management’s judgment is necessary to estimate fair value. Changes in market conditions, such as reduced liquidity in the capital markets or changes in secondary market activities, may reduce the availability and reliability of quoted prices or observable data used to determine fair value. 
 
 Membership Fees 
 
 Members are charged a one-time membership fee based on member class. CFC distribution system members, power supply system members and national associations of cooperatives pay a $ 1,000 membership fee. CFC service organization members pay a $ 200 membership fee and CFC associates pay a $ 1,000 fee. NCSC members pay a $ 100 membership fee. Membership fees are accounted for as members’ equity. 
 
 Financial Instruments with Off-Balance Sheet Risk 
 
 In the normal course of business, we are a party to financial instruments with off-balance sheet risk to meet the financing needs of our member-borrowers. These financial instruments include committed lines of credit, standby letters of credit and guarantees of members’ obligations. 
 
 Early Extinguishment of Debt 
 
 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 other non-interest expense in the consolidated statements of operations. 
 
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 Income Taxes 
 
 While CFC is exempt under Section 501(c)(4) of the Internal Revenue Code, it is subject to tax on unrelated business taxable income. NCSC is a taxable cooperative that pays income tax on the full amount of its reportable taxable income and allowable deductions. 
 
 The income tax benefit (expense) recorded in the consolidated statement of operations represents the income tax benefit (expense) at the applicable combined federal and state income tax rates resulting from a statutory tax rate. The federal statutory tax rate for FY2025, FY2024 and FY2023 was 21 %. Substantially all of the income tax expense recorded in our consolidated statements of operations relates to NCSC. 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 
 
 Segment Reporting—Improvements to Reportable Segment Disclosures 
 
 In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which introduced key amendments to enhance disclosures for public entities’ reportable segments. The amendments require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments also expand the interim segment disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, and requires 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. 
 
 Disclosure Improvements—Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative 
 
 In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements—Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative . The amendments in this update modify the disclosure or presentation requirements of a variety of topics in the ASC in response to the SEC’s Release No. 33-10532, Disclosure Update and Simplification Initiative , and align the ASC’s requirements with the SEC’s regulations. For entities subject to the SEC’s existing disclosure requirements, the effective date for each amendment will be the date on which the SEC’s removal of that 
 
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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 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 in our consolidated statements of operations. 
 
 Table 2.1: Interest Income and Interest Expense 
 
 Year Ended May 31, 
 (Dollars in thousands) 2025 2024 2023 
 Interest income: 
 
 Loans (1) 
 $ 1,691,343 $ 1,566,449 $ 1,330,144 
 Cash, time deposits and investment securities 
 11,890 26,902 21,585 
 Total interest income 1,703,233 1,593,351 1,351,729 
 
 Interest expense: (2)(3) 
 
 Short-term borrowings 
 189,429 250,316 165,961 
 
 Long-term debt 
 1,113,480 952,659 763,700 
 Subordinated debt 139,370 136,113 106,847 
 
 Total interest expense 1,442,279 1,339,088 1,036,508 
 
 Net interest income $ 260,954 $ 254,263 $ 315,221 

 ____________________________ 
 (1) Includes loan conversion fees, which are generally deferred and recognized in interest income over the period to maturity using the effective interest method, late payment fees, commitment fees and net amortization of deferred loan fees and loan origination costs. 
 (2) Includes amortization of debt discounts and premiums, and debt issuance costs, which are generally deferred and recognized as interest expense over the period to maturity using the effective interest method. Issuance costs related to dealer commercial paper, however, are recognized in interest expense immediately as incurred. 
 (3 ) Includes fees related to funding arrangements, such as up-front fees paid to banks participating in our committed bank revolving line of credit agreements. Based on the nature of the fees, the amount is either recognized immediately as incurred or deferred and recognized in interest expense ratably over the term of the arrangement. 
 
 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. 
 
 NOTE 3—INVESTMENT SECURITIES 
 
 Our investment securities portfolio consists of debt securities classified as trading and equity securities with readily determinable fair values. We therefore record changes in the fair value of our debt and equity securities in earnings and report these unrealized changes together with realized gains and losses from the sale of securities as a component of non-interest income in our consolidated statements of operations. 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 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. Securities rated investment grade, that is those rated Baa3 or higher by Moody’s Investors Service (“Moody’s”) or BBB- or higher by S&P Global Inc. (“S&P”) or BBB- or higher by Fitch Ratings Inc. (“Fitch”), are generally considered by the rating agencies to be of lower credit risk than non-investment-grade securities. 
 
 The following table presents the composition of our investment debt securities portfolio and the fair value as of May 31, 2025 and 2024. 
 
 Table 3.1: Investments in Debt Securities, at Fair Value 
 
 May 31, 
 (Dollars in thousands) 2025 2024 
 Debt securities, at fair value: 
 
 Corporate debt securities $ 107,957 $ 246,041 
 
 Commercial agency MBS (1) 
 525 6,663 
 
 U.S. state and municipality debt securities 1,049 8,179 
 
 Other ABS (2) 
 4,132 20,468 
 Total debt securities trading, at fair value $ 113,663 $ 281,351 

 ____________________________ 
 (1) Consists of securities backed by the Federal National Mortgage Association (“ Fannie Mae ”) and the Federal Home Loan Mortgage Corporation (“ Freddie Mac ”). 
 (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 $ 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. 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. 
 
 Equity Securities 
 
 The following table presents the composition of our equity security holdings and the fair value as of May 31, 2025 and 2024. 
 
 Table 3.2: Investments in Equity Securities, at Fair Value 
 
 May 31, 
 (Dollars in thousands) 2025 2024 
 Equity securities, at fair value: 
 
 Farmer Mac—Series C noncumulative preferred stock 
 $ — $ 25,130 
 Farmer Mac—Class A common stock 11,252 11,756 
 Total equity securities, at fair value $ 11,252 $ 36,886 

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 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. 
 
 NOTE 4—LOANS 
 
 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. We offer both long-term and line of credit loans to our borrowers. Under our long-term loan facilities, a borrower may select a fixed interest rate or a variable interest rate at the time of each loan advance. Line of credit loans are generally revolving loan facilities and have a variable interest rate. 
 
 We offer loans under secured long-term facilities with terms generally up to 35 years a nd line of credit loans. Under secured long-term facilities, borrowers have the option of selecting a fixed or variable rate for a period of one to 35 years for each long-term loan advance. When a selected fixed interest rate term expires, the borrower may select another fixed-rate term or a variable rate. Line of credit loans are revolving loan facilities that typically have a variable interest rate and are generally unsecured. Collateral and security requirements for advances on loan commitments are identical to those required at the time of the initial loan approval. 
 
 Loans to Members 
 
 Loans to members consist of loans held for investment and loans held for sale. The outstanding amount of loans held for investment is recorded based on the unpaid principal balance, net of discounts, net charge-offs and recoveries, of loans and deferred loan origination costs. The outstanding amount of loans held for sale is recorded based on the lower of cost or fair value. 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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 Table 4.1: Loans to Members by Member Class and Loan Type 
 
 May 31, 
 2025 2024 
 (Dollars in thousands) Amount % of Total Amount % of Total 
 Member class: 
 CFC: 
 Distribution $ 29,262,495 79 % $ 27,104,463 78 % 
 Power supply 5,895,500 16 5,641,898 16 
 Statewide and associate 251,325 — 237,346 1 
 Total CFC 35,409,320 95 32,983,707 95 
 NCSC: 
 
 Electric 
 1,078,763 3 945,880 3 
 Telecom 
 575,465 2 598,597 2 
 Total NCSC 
 1,654,228 5 1,544,477 5 
 Total loans outstanding (1) 
 37,063,548 100 34,528,184 100 
 Deferred loan origination costs—CFC (2) 
 16,430 — 14,101 — 
 Loans to members $ 37,079,978 100 % $ 34,542,285 100 % 
 
 Loan type: 
 Long-term loans: 
 Fixed rate $ 31,388,313 85 % $ 30,266,043 88 % 
 Variable rate 1,122,250 3 839,458 2 
 Total long-term loans 32,510,563 88 31,105,501 90 
 Lines of credit 4,552,985 12 3,422,683 10 
 Total loans outstanding (1) 
 37,063,548 100 34,528,184 100 
 Deferred loan origination costs—CFC (2) 
 16,430 — 14,101 — 
 Loans to members $ 37,079,978 100 % $ 34,542,285 100 % 

 ____________________________ 
 (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. 
 
 Loan Sales 
 
 We may transfer whole loans and participating interests to third partie s. These transfers are typically made concurrently or within a short period of time with the closing of the loan sale or participation agreement at par value and meet the accounting criteria required for sale accounting. Therefore, we remove the transferred loans or participating interests from our consolidated balance sheets when control has been surrendered and recognize a gain or loss on the sale, if any. We retain a servicing performance obligation on the transferred loans and recognize related servicing fees on an accrual basis over the period for which servicing is provided, as we believe the servicing fee represents adequate compensation. Other than the servicing performance obligation, we have not retained any interest in the loans sold to date. In addition, we have no obligation to repurchase loans that are sold, except in the case of breaches of representations and warranties. 
 
 We sold CFC and NCSC loans, at par for cash, totaling $ 424 million, $ 324 million and $ 257 million in FY2025, FY2024 and FY2023, respectively. 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 $ 21 million and $ 3 million as of May 31, 2025 and 2024, respectively . 
 
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 Credit Concentration 
 
 Concentrations of credit may exist when a lender has large credit exposures to single borrowers, large credit exposures to borrowers in the same industry sector or engaged in similar activities, or large credit exposures to borrowers in a geographic region that would cause the borrowers to be similarly impacted by economic or other conditions in the region. As a tax-exempt, member-owned finance cooperative, CFC’s principal focus is to provide funding to its rural electric utility cooperative members to assist them in acquiring, constructing and operating electric distribution systems, power supply systems and related facilities. 
 
 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 $ 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. Our credit exposure is partially mitigated by long-term loans guaranteed by RUS, which totaled $ 105 million and $ 114 million as of May 31, 2025 and 2024, respectivel y. 
 
 Single-Obligor Concentration 
 
 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. 
 
 We entered into a long-term standby purchase commitment agreement with Farmer Mac during fiscal year 2016. Under this agreement, we may designate certain long-term loans to be covered under the commitment, subject to approval by Farmer Mac, and in the event any such loan later goes into payment default for at least 90 days, upon request by us, Farmer Mac must purchase such loan at par value. We are required to pay Farmer Mac a monthly fee based on the unpaid principal balance of loans covered under the purchase commitment. 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 $ 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; therefore, no loans have been put to Farmer Mac for purchase pursuant to the standby purchase agreement as of May 31, 2025. 
 
 Geographic Concentration 
 
 Although our organizational structure and mission result in single-industry concentration, we serve a geographically diverse group of electric and telecommunications borrowers throughout the U.S. The consolidated number of borrowers with loans outstanding totaled 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, 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 
 
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 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 
 
 Assessing the overall credit quality of our loan portfolio and measuring our credit risk is an ongoing process that involves tracking payment status, modifications to borrowers experiencing financial difficulty, nonperforming loans, charge-offs, the internal risk ratings of our borrowers and other indicators of credit risk. We monitor and subject each borrower and loan facility in our loan portfolio to an individual risk assessment based on quantitative and qualitative factors. Payment status trends and internal risk ratings are indicators, among others, of the probability of borrower default and overall credit quality of our loan portfolio. 
 
 Payment Status of Loans 
 
 Loans are considered delinquent when contractual principal or interest amounts become past due 30 days or more following the scheduled payment due date. Loans are placed on nonaccrual status when payment of principal or interest is 90 days or more past due or management determines that the full collection of principal and interest is doubtful. The following table presents the payment status, by legal entity and member class, of loans outstanding as of May 31, 2025 and 2024. 
 
 Table 4.2: Payment Status of Loans Outstanding 
 May 31, 2025 
 (Dollars in thousands) Current 30-89 Days Past Due > 90 Days 
Past Due Total
Past Due Total Loans Outstanding Nonaccrual Loans 
 Member class: 
 CFC: 
 Distribution $ 29,262,495 $ — $ — $ — $ 29,262,495 $ — 
 Power supply 5,895,500 — — — 5,895,500 26,099 
 Statewide and associate 251,325 — — — 251,325 — 
 Total CFC 
 35,409,320 — — — 35,409,320 26,099 
 NCSC: 
 
 Electric 
 1,078,763 — — — 1,078,763 — 
 Telecom 
 575,465 — — — 575,465 — 
 Total NCSC 
 1,654,228 — — — 1,654,228 — 
 Total loans outstanding $ 37,063,548 $ — $ — $ — $ 37,063,548 $ 26,099 
 
 Percentage of total loans 100.00 % — % — % — % 100.00 % 0.07 % 

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 May 31, 2024 
 (Dollars in thousands) Current 30-89 Days Past Due > 90 Days 
Past Due Total
Past Due Total Loans Outstanding Nonaccrual Loans 
 Member class: 
 CFC: 
 Distribution $ 27,104,463 $ — $ — $ — $ 27,104,463 $ — 
 Power supply 5,641,898 — — — 5,641,898 48,669 
 Statewide and associate 237,346 — — — 237,346 — 
 Total CFC 
 32,983,707 — — — 32,983,707 48,669 
 NCSC: 
 
 Electric 
 945,880 — — — 945,880 — 
 Telecom 
 598,597 — — — 598,597 — 
 Total NCSC 
 1,544,477 — — — 1,544,477 — 
 Total loans outstanding $ 34,528,184 $ — $ — $ — $ 34,528,184 $ 48,669 
 
 Percentage of total loans 100.00 % — % — % — % 100.00 % 0.14 % 

 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 
 
 We actively monitor problem loans and, from time to time, attempt to work with borrowers to manage such exposures through loan workouts or modifications that better align with the borrower’s current ability to pay. Therefore, as part of our loss-mitigation efforts, we may provide modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for exercising remedies. We consider the impact of all loan modifications when estimating the credit quality of our loan portfolio and establishing the allowance for credit losses. 
 
 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, 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 
 
 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 
 
 Charge-offs represent the amount of a loan that has been removed from our consolidated balance sheet when the loan is deemed uncollectible. Generally the amount of a charge-off is the recorded investment in excess of the discounted expected cash flows from the loan or, if the loan is collateral dependent, the fair value of the underlying collateral securing the loan. We report charge-offs net of amounts recovered on previously charged-off loans. 
 
 We had no charge-offs during FY2025 and FY2024. 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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 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 
 
 As part of our management of credit risk, we maintain a credit risk-rating framework under which we employ a consistent process for assessing the credit quality of our loan portfolio. We evaluate each borrower and loan facility in our loan portfolio and assign internal borrower and loan facility risk ratings based on the consideration of a number of quantitative and qualitative factors. Each risk rating is reassessed annually following the receipt of the borrower’s audited financial statements; however, interim risk-rating adjustments may occur as a result of updated information affecting a borrower’s ability to fulfill its obligations or other significant developments and trends. We categorize loans in our portfolio based on our internally assigned borrower risk ratings, which are intended to assess the general creditworthiness of the borrower and probability of default. Our borrower risk ratings align with the U.S. federal banking regulatory agencies’ credit risk definitions of pass and criticized categories, with the criticized category further segmented among special mention, substandard and doubtful. Pass ratings reflect relatively low probability of default, while criticized ratings have a higher probability of default. 
 
 The following is a description of the borrower risk-rating categories. 
 
 • Pass : Borrowers that are not included in the categories of special mention, substandard or doubtful. 
 • Special Mention : Borrowers that may be characterized by a potential credit weakness or deteriorating financial condition that is not sufficiently serious to warrant a classification of substandard or doubtful. 
 • Substandard : Borrowers that display a well-defined credit weakness that may jeopardize the full collection of principal and interest. 
 • Doubtful : Borrowers that have a well-defined credit weakness or weaknesses that make full collection of principal and interest, on the basis of currently known facts, conditions and collateral values, highly questionable and improbable. 
 
 Our internally assigned borrower risk ratings serve as the primary credit quality indicator for our loan portfolio. Because our internal borrower risk ratings provide important information on the probability of default, they are a key input in determining our allowance for credit losses. 
 
 Table 4.3 displays total loans outstanding, by borrower risk rating category and by legal entity and member class, as of May 31, 2025 and 2024. 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 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. Revolving loans are presented separately. 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. 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. 
 
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 Table 4.3: Loans Outstanding by Borrower Risk Ratings and Origination Year 
 
 May 31, 2025 
 Term Loans by Fiscal Year of Origination 
 (Dollars in thousands) 2025 2024 2023 2022 2021 Prior Revolving Loans Total 
 Pass 
 CFC: 
 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 
 Power supply 442,972 496,642 441,984 296,948 474,074 2,857,029 859,752 5,869,401 
 Statewide and associate 
 7,125 36,294 57,101 2,806 1,420 22,257 113,338 240,341 
 Total CFC 
 2,751,833 3,004,701 2,822,866 2,556,460 2,016,700 17,902,012 4,136,585 35,191,157 
 NCSC: 
 
 Electric 
 81,315 122,354 250,610 16,773 4,131 385,564 217,416 1,078,163 
 Telecom 
 52,516 129,964 40,642 64,086 49,898 196,307 42,052 575,465 
 Total NCSC 
 133,831 252,318 291,252 80,859 54,029 581,871 259,468 1,653,628 
 Total pass $ 2,885,664 $ 3,257,019 $ 3,114,118 $ 2,637,319 $ 2,070,729 $ 18,483,883 $ 4,396,053 $ 36,844,785 
 
 Special mention 
 CFC: 
 Distribution $ — $ 361 $ 4,126 $ — $ 4,568 $ 15,693 $ 156,332 $ 181,080 
 
 Statewide and associate — — — — — 10,984 — 10,984 
 Total CFC 
 — 361 4,126 — 4,568 26,677 156,332 192,064 
 NCSC electric 
 — — — — — — 600 600 
 
 Total special mention $ — $ 361 $ 4,126 $ — $ 4,568 $ 26,677 $ 156,932 $ 192,664 
 
 Substandard 
 
 Total substandard $ — $ — $ — $ — $ — $ — $ — $ — 
 
 Doubtful 
 CFC: 
 CFC Power supply 
 $ — $ — $ — $ — $ — $ 26,099 $ — $ 26,099 
 
 Total doubtful $ — $ — $ — $ — $ — $ 26,099 $ — $ 26,099 
 Total criticized loans $ — $ 361 $ 4,126 $ — $ 4,568 $ 52,776 $ 156,932 $ 218,763 
 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 
 
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 May 31, 2024 
 Term Loans by Fiscal Year of Origination 
 (Dollars in thousands) 
 2024 2023 2022 2021 2020 Prior Revolving Loans Total 
 Pass 
 CFC: 
 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 
 NCSC: 
 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 
 CFC: 
 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 
 
 Substandard 
 
 Total substandard $ — $ — $ — $ — $ — $ — $ — $ — 
 
 Doubtful 
 CFC: 
 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, 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 restoration costs incurred to repair damage caused by two successive hurricanes. We expect that the borrower will continue to receive grant funds from the Federal Emergency Management Agency and the state where it is located for the full reimbursement of the hurricane damage-related restoration costs. 
 
 Substandard 
 
 We did not have any loans classified as sub standard as of May 31, 2025 and 2024. 
 
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 Doubtful 
 
 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 
 
 Unadvanced loan commitments represent approved and executed loan contracts for which funds have not been advanced to borrowers. The following table presents unadvanced loan commitments, by member class and by loan type, as of May 31, 2025 and 2024. 
 
 Table 4.4: Unadvanced Commitments by Member Class and Loan Type (1) 
 
 May 31, 
 (Dollars in thousands) 2025 2024 
 Member class: 
 CFC: 
 Distribution $ 11,948,516 $ 11,174,041 
 Power supply 5,097,398 4,519,150 
 Statewide and associate 215,768 254,250 
 Total CFC 17,261,682 15,947,441 
 NCSC: 
 
 Electric 
 520,312 622,125 
 Telecom 
 437,015 423,796 
 Total NCSC 
 957,327 $ 1,045,921 
 Total unadvanced commitments $ 18,219,009 $ 16,993,362 
 
 Loan type: (2) 
 
 Long-term loans: 
 Fixed rate $ — $ — 
 Variable rate 7,471,266 6,880,295 
 
 Total long-term loans 7,471,266 6,880,295 
 Lines of credit 10,747,743 10,113,067 
 Total unadvanced commitments $ 18,219,009 $ 16,993,362 

 ____________________________ 
 (1) Excludes the portion of any commitment to advance funds under swingline loan facilities in excess of CFC’s total commitment amount in a syndicated credit facility. Other syndicate lenders have an absolute obligation to acquire participations in such swingline loans upon CFC’s election, including during a default by the borrower. 
 (2) The interest rate on unadvanced loan commitments is not set until an advance is made; therefore, all unadvanced long-term loan commitments are reported as variable rate. However, the borrower may select either a fixed or a variable rate when an advance is drawn under a loan commitment. 
 
 The following table displays, by loan type, the available balance under unadvanced loan commitments as of May 31, 2025 and the related maturities in each fiscal year during the five-year period ende d May 31, 2030, and thereafter. 
 
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 Table 4.5: Unadvanced Loan Commitments 
 
 Available
Balance Notional Maturities of Unadvanced Loan Commitments 
 (Dollars in thousands) 2026 2027 2028 2029 2030 Thereafter 
 Line of credit loans $ 10,747,743 $ 4,793,228 $ 1,402,601 $ 1,662,338 $ 1,389,342 $ 1,457,280 $ 42,954 
 Long-term loans 7,471,266 533,387 1,212,138 1,272,850 2,469,334 1,882,764 100,793 
 Total $ 18,219,009 $ 5,326,615 $ 2,614,739 $ 2,935,188 $ 3,858,676 $ 3,340,044 $ 143,747 

 Unadvanced line of credit commitments accounted for 59 % of total unadvanced loan commitments as of May 31, 2025. Unadvanced line of credit commitments are typically revolving facilities for periods not to ex ceed five years and generally serve as supplemental back-up liquidity to our borrowers. Historically, borrowers have not drawn the full commitment amount for line of credit facilities, and we have experienced a very low utilization rate on line of credit loan facilities regardless of whether or not we are obligated to fund the facility when a material adverse change has occurred. 
 
 Because we historically have experienced a very low utilization rate on line of credit loan facilities, which account for the majority of our total unadvanced loan commitments, we believe the unadvanced loan commitment total of $ 18,219 million as of May 31, 2025 is not necessarily representative of our future funding requirements. 
 
 Our unadvanced long-term loan commitments typically have a five-year draw period under which a borrower may draw funds prior to the expiration of the commitment. We expect that the majority of the long-term unadvanced loan commitments of $ 7,471 million will be advanced prior to the expiration of the commitment. 
 
 Unadvanced Loan Commitments—Conditional 
 
 The substantial majority of our line of credit commitments and all of our unadvanced long-term loan commitments include material adverse change clauses. Unadvanced loan commitments subject to material adverse change clauses totaled $ 14,629 million and $ 13,379 million as of May 31, 2025 and 2024, respectively. Prior to making an advance on these facilities, we confirm that there has been no material adverse change in the business or condition, financial or otherwise, of the borrower since the time the loan was approved and confirm that the borrower is currently in compliance with loan terms and conditions. In some cases, the borrower’s access to the full amount of the facility is further constrained by the designated purpose, imposition of borrower-specific restrictions or by additional conditions that must be met prior to advancing funds. 
 
 Unadvanced Loan Commitments—Unconditional 
 
 Unadvanced loan commitments not subject to material adverse change clauses at the time of each advance consisted of unadvanced committed lines of credit totaling $ 3,590 million and $ 3,614 million as of May 31, 2025 and 2024, respectively. We are required to advance amounts on these committed facilities as long as the borrower is in compliance with the terms and conditions of the facility. The following table summarizes the available balance under unconditional committed lines of credit as of May 31, 2025, and the related maturity amounts in each fiscal year during the five-year period ending May 31, 2030. 
 
 Table 4.6: Unconditional Committed Lines of Credit—Available Balance 
 
 Available
Balance Notional Maturities of Unconditional Committed Lines of Credit 
 (Dollars in thousands) 2026 2027 2028 2029 2030 
 Committed lines of credit $ 3,590,262 $ 246,671 $ 791,765 $ 786,133 $ 874,620 $ 891,073 

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 Pledged Collateral— Loans 
 
 We are required to pledge eligible mortgage notes or other collateral in an amount at least equal to the outstanding balance of our secured debt. Table 4.7 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” in this Report for information on our secured borrowings and other borrowings. 
 
 Table 4.7: Pledged Loans 
 
 May 31, 
 (Dollars in thousands) 2025 2024 
 Collateral trust bonds: 
 2007 indenture: 
 Collateral trust bonds outstanding $ 7,072,711 $ 6,922,711 
 Pledged collateral: 
 Distribution system mortgage notes pledged 8,107,921 8,799,864 
 RUS-guaranteed loans qualifying as permitted investments pledged 
 104,628 113,890 
 Total pledged collateral 8,212,549 8,913,754 
 
 1994 indenture: 
 Collateral trust bonds outstanding $ 10,000 $ 15,000 
 Pledged collateral: 
 Distribution system mortgage notes pledged 14,575 19,174 
 
 Guaranteed Underwriter Program: 
 Notes payable outstanding $ 6,456,852 $ 6,491,814 
 Pledged collateral: 
 Distribution and power supply system mortgage notes pledged 7,640,203 8,020,508 
 
 Farmer Mac: 
 Notes payable outstanding $ 3,780,461 $ 3,863,510 
 Pledged collateral: 
 Distribution and power supply system mortgage notes pledged 4,648,691 4,449,650 
 
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 NOTE 5—ALLOWANCE FOR CREDIT LOSSES 

 We are required to maintain an allowance based on a current estimate of credit losses that are expected to occur over the remaining term of the loans in our portfolio. Our allowance for credit losses consists of a collective allowance and an asset-specific allowance. Additional information on our current CECL allowance methodology is provided in “Note 1—Summary of Significant Accounting Policies.” 
 
 Allowance for Credit Losses—Loan Portfolio 
 
 The following tables summarize, by legal entity and member class, changes in the allowance for credit losses for our loan portfolio and present the allowance components for the periods presented. 
 
 Table 5.1: Changes in Allowance for Credit Losses 
 
 Year Ended May 31, 2025 
 (Dollars in thousands) CFC Distribution CFC Power Supply CFC Statewide & Associate CFC Total 
 NCSC Electric 
 NCSC Telecom 
 NCSC Total 
 Total 
 
 Balance as of May 31, 2024 $ 15,954 $ 25,583 $ 1,189 $ 42,726 $ 3,937 $ 2,063 $ 6,000 $ 48,726 
 
 Provision (benefit) for credit losses 2,519 ( 10,127 ) ( 89 ) ( 7,697 ) ( 119 ) ( 295 ) ( 414 ) ( 8,111 ) 
 
 Balance as of May 31, 2025 $ 18,473 $ 15,456 $ 1,100 $ 35,029 $ 3,818 $ 1,768 $ 5,586 $ 40,615 
 
 Year Ended May 31, 2024 
 (Dollars in thousands) CFC Distribution CFC Power Supply CFC Statewide & Associate CFC Total 
 NCSC Electric 
 NCSC Telecom 
 NCSC Total 
 Total 
 
 Balance as of May 31, 2023 $ 14,924 $ 33,306 $ 1,194 $ 49,424 $ 2,464 $ 1,206 $ 3,670 $ 53,094 
 
 Provision (benefit) for credit losses 1,030 ( 8,871 ) ( 5 ) ( 7,846 ) 1,473 857 2,330 ( 5,516 ) 
 Recoveries 
 — 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 

 Year Ended May 31, 2023 
 (Dollars in thousands) CFC Distribution CFC Power Supply CFC Statewide & Associate CFC Total 
 NCSC Electric 
 NCSC Telecom 
 NCSC Total 
 Total 
 
 Balance as of May 31, 2022 $ 15,781 $ 47,793 $ 1,251 $ 64,825 $ 1,449 $ 1,286 $ 2,735 $ 67,560 
 
 Provision (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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 Table 5.2: Allowance for Credit Losses Components 
 
 May 31, 2025 
 (Dollars in thousands) CFC Distribution CFC Power Supply CFC Statewide & Associate CFC 
 Total 
 NCSC Electric NCSC Telecom NCSC Total 
 Total 
 Allowance components: 
 Collective allowance $ 18,473 $ 6,200 $ 1,100 $ 25,773 $ 3,818 $ 1,722 $ 5,540 $ 31,313 
 Asset-specific allowance — 9,256 — 9,256 — 46 46 9,302 
 Total allowance for credit losses $ 18,473 $ 15,456 $ 1,100 $ 35,029 $ 3,818 $ 1,768 $ 5,586 $ 40,615 
 
 Loans outstanding: (1) 
 
 Collectively evaluated loans $ 29,258,741 $ 5,869,401 $ 251,325 $ 35,379,467 $ 1,078,763 $ 573,008 $ 1,651,771 $ 37,031,238 
 Individually evaluated loans 3,754 26,099 — 29,853 — 2,457 2,457 32,310 
 Total loans outstanding $ 29,262,495 $ 5,895,500 $ 251,325 $ 35,409,320 $ 1,078,763 $ 575,465 $ 1,654,228 $ 37,063,548 
 
 Allowance coverage ratios: 
 Collective allowance coverage ratio (2) 
 0.06 % 0.11 % 0.44 % 0.07 % 0.35 % 0.30 % 0.34 % 0.08 % 
 Asset-specific allowance coverage ratio (3) 
 — 35.46 — 31.01 — 1.87 1.87 28.79 
 Total allowance coverage ratio (4) 
 0.06 0.26 0.44 0.10 0.35 0.31 0.34 0.11 
 
 May 31, 2024 
 (Dollars in thousands) CFC Distribution CFC Power Supply CFC Statewide & Associate CFC 
 Total 
 NCSC Electric NCSC Telecom NCSC Total 
 Total 
 Allowance components: 
 Collective allowance $ 15,954 $ 8,676 $ 1,189 $ 25,819 $ 3,937 $ 1,800 $ 5,737 $ 31,556 
 Asset-specific allowance — 16,907 — 16,907 — 263 263 17,170 
 Total allowance for credit losses $ 15,954 $ 25,583 $ 1,189 $ 42,726 $ 3,937 $ 2,063 $ 6,000 $ 48,726 
 
 Loans outstanding: (1) 
 
 Collectively evaluated loans $ 27,100,254 $ 5,593,229 $ 237,346 $ 32,930,829 $ 945,880 $ 595,567 $ 1,541,447 $ 34,472,276 
 Individually evaluated loans 4,209 48,669 — 52,878 — 3,030 3,030 55,908 
 Total loans outstanding $ 27,104,463 $ 5,641,898 $ 237,346 $ 32,983,707 $ 945,880 $ 598,597 $ 1,544,477 $ 34,528,184 
 
 Allowance coverage ratios: 
 Collective allowance coverage ratio (2) 
 0.06 % 0.16 % 0.50 % 0.08 % 0.42 % 0.30 % 0.37 % 0.09 % 
 Asset-specific allowance coverage ratio (3) 
 — 34.74 — 31.97 — 8.68 8.68 30.71 
 Total allowance coverage ratio (4) 
 0.06 0.45 0.50 0.13 0.42 0.34 0.39 0.14 
 
 ___________________________ 
 (1) Represents the unpaid principal amount of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $ 16 million and $ 14 million as of May 31, 2025 and 2024, respectively. 
 (2) Calculated based on the collective allowance component at period-end divided by collectively evaluated loans outstanding at period-end. 
 (3) Calculated based on the asset-specific allowance component at period-end divided by individually evaluated loans outstanding at period-end. 
 (4) Calculated based on the total allowance for credit losses at period-end divided by total loans outstanding at period-end. 
 
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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 $ 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 
 
 In addition to the allowance for credit losses f or our loan portfolio, we maintain an allowance for credit losses for unadvanced loan commitments, which we refer to as our “reserve for credit losses” bec ause this amount is reported as a component of other liabilities on our consolidated balance sheets. We measure the reserve for credit losses for unadvanced loan commitments based on expected credit losses over the contractual period of our exposure to credit risk arising from our obligation to extend credit, unless that obligation is unconditionally cancellable by us. The reserve for credit losses related to our off-balance sheet exposure for unadvanced loan commitments was less than $ 1 million as of both May 31, 2025 and 2024. 
 
 NOTE 6—SHORT-TERM BORROWINGS 
 
 Short-term borrowings consist of borrowings with an original contractual maturity of one year or less and do not include the current portion of long-term debt. Our short-term borrowings totaled $ 5,091 million and accounted for 15 % of total debt outstanding as of May 31, 2025, compared with $ 4,333 million, or 13 % of total debt outstanding, as of May 31, 2024. The following table provides information on our short-term borrowings and weighted-average interest rates as of May 31, 2025 and 2024. 
 
 Table 6.1: Short-Term Borrowing Sources and Weighted-Average Interest Rates 
 
 May 31, 
 2025 2024 
 (Dollars in thousands) Amount Weighted- Average
Interest Rate Amount Weighted-Average
Interest Rate 
 Short-term borrowings: 
 Commercial paper: 
 Commercial paper sold through dealers, net of discounts $ 2,206,451 4.47 % $ 504,631 5.41 % 
 Commercial paper sold directly to members, at par 785,608 3.98 1,158,020 5.08 
 Total commercial paper 2,992,059 4.34 1,662,651 5.18 
 Select notes to members 1,304,240 4.22 1,274,066 5.36 
 Daily liquidity fund notes to members 343,916 3.75 375,191 4.60 
 
 Medium-term notes sold to members 
 451,201 4.62 520,782 5.79 
 Farmer Mac notes payable (1) 
 — — 500,000 5.87 
 
 Total short-term borrowings 
 $ 5,091,416 4.30 $ 4,332,690 5.34 

 ____________________________ 
 (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. We also issue select notes for periods ranging from 30 to 270 days. Select notes are unsecured obligations that do not require backup bank lines of credit for liquidity purposes. These 
 
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 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. Medium-term notes represent unsecured obligations that may be issued through dealers in the capital markets or directly to our members. 
 
 Committed Bank Revolving Line of Credit Agreements 
 
 The following table presents the amount available for access under our bank revolving line of credit agreements as of May 31, 2025. 
 
 Table 6.2: Committed Bank Revolving Line of Credit Agreement Available Amounts 
 
 May 31, 2025 
 (Dollars in millions) Total Commitment Letters of Credit Outstanding Available Amount Maturity Annual Facility Fee (1) 
 
 Bank revolving agreements: 
 3 -year agreement 
 $ 1,595 $ — $ 1,595 November 28, 2027 7.5 bps 
 
 Total 3 -year agreement 
 1,595 — 1,595 
 
 4 -year agreement 
 150 — 150 November 28, 2026 10.0 bps 
 
 4 -year agreement 
 1,555 7 1,548 November 28, 2028 10.0 bps 
 
 Total 4 -year agreement 
 1,705 7 1,698 
 Total $ 3,300 $ 7 $ 3,293 

 ___________________________ 
 (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 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, 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 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. 
 
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 Table 7.1: Long-Term Debt—Debt Product Types and Weighted-Average Interest Rates 
 
 May 31, 
 2025 2024 
 (Dollars in thousands) Amount Weighted- Average
Interest Rate Maturity (1) 
 
 Amount Weighted- Average
Interest Rate Maturity (1) 
 
 Secured long-term debt: 
 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 ) 
 Debt issuance costs ( 31,616 ) ( 31,332 ) 
 Total collateral trust bonds 6,895,702 6,739,921 
 Guaranteed Underwriter Program notes payable 6,456,852 3.31 2025-2055 6,491,814 3.27 2025-2053 
 Farmer Mac notes payable 3,780,461 4.00 2025-2049 3,363,510 4.11 2025-2049 
 
 Total secured notes payable 10,237,313 9,855,324 
 Total secured long-term debt 17,133,015 3.61 16,595,245 3.53 
 Unsecured long-term debt: 
 Medium-term notes sold through dealers 9,637,577 4.64 2025-2037 8,980,513 4.38 2024-2037 
 Medium-term notes sold to members 419,648 4.61 2025-2037 358,844 4.80 2024-2037 
 Medium-term notes sold through dealers and to members 10,057,225 4.64 9,339,357 4.39 
 Unamortized premium (discount), net 2,641 ( 2,209 ) 
 Debt issuance costs ( 29,180 ) ( 31,228 ) 
 
 Total unsecured long-term debt 10,030,686 4.64 9,305,920 4.39 
 Total long-term debt $ 27,163,701 3.99 $ 25,901,165 3.84 

 ___________________________ 
 (1) Maturity is presented based on calendar year. 
 (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. 
 
 Table 7.2: Long-Term Debt—Maturities and Weighted-Average Interest Rates 
 
 (Dollars in thousands) Maturity Amount (1) 
 Weighted-Average
Interest Rate 
 2026 $ 3,618,102 3.95 % 
 2027 3,551,556 3.71 
 2028 3,697,251 4.10 
 2029 2,831,978 4.08 
 2030 2,608,140 4.01 
 Thereafter 11,070,222 4.03 
 Total $ 27,377,249 3.99 

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 ___________________________ 
 (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. 
 
 Secured Debt 
 
 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. We were in compliance with all covenants and conditions under our secured debt indentures as of May 31, 2025 and 2024. 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” in this Report for information on pledged collateral under our secured debt agreements. 
 
 Collateral Trust Bonds 
 
 Collateral trust bonds represent secured obligations sold to investors in the capital markets. Collateral trust bonds are secured by the pledge of mortgage notes or eligible securities in an amount at least equal to the principal balance of the bonds outstanding. We 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 $ 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 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. Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the a dvance. 
 
 The notes outstanding under the Guaranteed Underwriter Program contain a provision that if during any portion of the fiscal year, our senior secured credit ratings do not have at least two of the following ratings: (i) A3 or higher from Moody’s, (ii) A- or higher from S&P, (iii) A- or higher from Fitch or (iv) an equivalent rating from a successor rating agency to any of the above rating agencies, we may not make cash patronage capital distributions in excess of 5 % of total patronage capital. 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. 
 
 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 
 
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 eligible electric distribution system or electric power supply system loans as collateral in an amount at least equal to the total principal amount of notes outstanding under this agreement. 
 
 Unsecured Debt 
 
 Long-term unsecured debt of $ 10,031 million and $ 9,306 million as of May 31, 2025 and 2024, respectively, represented 37 % and 36 % of total long-term debt outstanding as of each respective date. 
 
 Medium-Term Notes 
 
 Medium-term notes represent unsecured obligations that may be issued through dealers in the capital markets or directly to our members. During 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. 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 
 
 Subordinated deferrable debt represents long-term debt that is subordinated to all debt other than subordinated certificates held by our members. The following table presents, by issuance, subordinated deferrable debt outstanding and the weighted-average interest rates as of May 31, 2025 and 2024. 
 
 Table 8.1: Subordinated Deferrable Debt Outstanding and Weighted-Average Interest Rates 
 
 May 31, 
 2025 2024 Maturity and Call Dates 
 (Dollars in thousands) Outstanding Amount Weighted- Average
Interest Rate Outstanding Amount Weighted-Average
Interest Rate Term 
 in Years 
 Maturity (2) 
 
 Call Date 
 Issuances of subordinated notes: 
 Variable rate issuance 2013 
 $ 300,000 7.45 % $ 300,000 8.50 % 30 2043 April 30, 2023 (1) 
 
 5.25 % issuance 2016 
 350,000 5.25 350,000 5.25 30 2046 April 20, 2026 (1) 
 
 5.50 % issuance 2019 
 250,000 5.50 250,000 5.50 45 2064 May 15, 2024 (1) 
 
 7.125 % issuance 2023 
 300,000 7.13 300,000 7.13 30 2053 June 15, 2028 
 7.125 % issuance 2024 
 100,000 7.13 100,000 7.13 29 2053 
 June 15, 2028 
 Subordinated notes 
 43,811 5.75 — — 30 2054-2055 
 Various (3) 
 
 Total aggregate principal amount 1,343,811 1,300,000 
 Unamortized premium 
 3,450 3,488 
 Debt issuance costs 
 ( 17,776 ) ( 16,627 ) 
 Total subordinated deferrable debt $ 1,329,485 6.36 $ 1,286,861 6.63 

 ___________________________ 
 (1) At any time on or after the call date, the subordinated deferrable debt is redeemable, in whole or in part, at par. 
 (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. 
 
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 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. 
 
 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 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. 
 
 NOTE 9—MEMBERS’ SUBORDINATED CERTIFICATES 
 
 Membership Subordinated Certificates 
 
 Prior to June 2009, CFC members were required to purchase membership subordinated certificates as a condition of membership. Such certificates are interest-bearing, unsecured, subordinated debt. Membership certificates typically have an original maturity of 100 years and pay interest at 5 % semiannually. No requ irement to purchase membership certificates has existed for NCSC. 
 
 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 
 
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 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. 
 
 Under our current policy, most borrowers requesting standard loans are not required to buy subordinated certificates or guarantee subordinated certificates as a condition of a loan or guarantee. Borrowers meeting certain criteria, including but not limited to, high leverage ratios, or borrowers requesting large facilities, may be required to purchase loan or guarantee subordinated certificates or member capital securities (described below) as a condition of the loan. Loan subordinated certificates have the same maturity as the related long-term loan. Some certificates may amortize annually based on the outstanding loan balance. 
 
 The interest rates payable on guarantee subordinated certificates purchased in conjunction with our guarantee program vary in accordance with applicable CFC policy. Guarantee subordinated certificates have the same maturity as the related guarantee. 
 
 Member Capital Securities 
 
 CFC offers member capital securities to its voting members. Member capital securities are interest-bearing, unsecured obligations of CFC, which are subordinate to all existing and future senior and subordinated indebtedness of CFC held by nonmembers of CFC, but rank proportionally to our member subordinated certificates. Member capital securities mature 30 years from the date of issuance and are callable at par at our option five years from the date of issuance and anytime thereafter. The interest rate for new member capital securities issuance is set at the time of issuance. These securities represent voluntary investments in CFC by the members. Member capital securities issued prior to FY2023 have a call option of 10 years from the date of issuance and anytime thereafter. The following table displays members’ subordinated certificates and the weighted-average interest rates as of May 31, 2025 and 2024. 
 
 Table 9.1: Members’ Subordinated Certificates Outstanding and Weighted-Average Interest Rates 
 
 May 31, 
 2025 2024 
 (Dollars in thousands) Amounts
Outstanding Weighted-
Average
Interest Rate Amounts
Outstanding Weighted-
Average
Interest Rate 
 Membership subordinated certificates: 
 Certificates maturing 2025 through 2119 $ 628,617 $ 628,617 
 Subscribed and unissued (1) 
 20 8 
 Total membership subordinated certificates 628,637 4.96 % 628,625 4.96 % 
 Loan and guarantee subordinated certificates: 
 Interest-bearing loan subordinated certificates maturing through 2045 192,779 201,017 
 Non-interest-bearing loan subordinated certificates maturing through 2047 90,378 94,911 
 
 Total loan subordinated certificates 283,157 2.74 295,928 2.76 
 Interest-bearing guarantee subordinated certificates maturing through 2044 26,757 5.93 26,935 5.92 
 
 Total loan and guarantee subordinated certificates 309,914 3.02 322,863 3.02 
 Member capital securities: 
 Securities maturing through 2052 246,163 5.01 246,163 5.01 
 Total members’ subordinated certificates $ 1,184,714 4.46 $ 1,197,651 4.44 

 ___________________________ 
 
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 (1) The subscribed and unissued subordinated certificates represent subordinated certificates that members are required to purchase. Upon collection of full payment of the subordinated certificate amount, the certificate will be reclassified from subscribed and unissued to outstanding. 
 
 The weighted-average maturity for all membership subordinated certificates outstan ding was 52 and 53 yea rs as of May 31, 2025 and 2024, respectively . The following table presents the amount of members’ subordinated certificates maturing in each of the five fiscal years subsequent to May 31, 2025 and thereafter. 
 
 Table 9.2: Members’ Subordinated Certificate Maturities and Weighted-Average Interest Rates 
 
 (Dollars in thousands) Amount 
 Maturing (1) 
 Weighted-Average
Interest Rate 
 2026 $ 60,782 3.26 % 
 2027 4,642 3.39 
 2028 4,752 3.41 
 2029 6,392 2.44 
 2030 4,303 3.78 
 Thereafter 1,103,823 4.55 
 Total $ 1,184,694 4.46 

 ___________________________ 
 (1) E xcludes $ 0.02 million in subscribed and unissued member subordinated certificates for which a payment has been received, but no certificate has been issued. Amortizing member loan subordinated certificates totaling $ 124 million are amortizing annually based on the unpaid principal balance of the related loan. Amortization payments on these certificates totaled $ 8 million in FY2025 and represented 6 % of amortizing loan subordinated certificates outstanding. 
 
 NOTE 10—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES 
 
 We are an end user of derivative financial instruments and do not engage in derivative trading. Derivatives may be privately negotiated contracts, which are often referred to as OTC derivatives, or they may be listed and traded on an exchange. We generally engage in OTC derivative transactions. Our derivative instruments are an integral part of our interest rate risk-management strategy. Our principal purpose in using derivatives is to manage our aggregate interest rate risk profile within prescribed risk parameters. The derivative instruments we use primarily consist of interest rate swaps, which we typically hold to maturity. In addition, we may use treasury locks to manage the interest rate risk associated with future debt issuance or debt that is scheduled to reprice in the future. We typically designate the treasury locks as cash flow hedges. 
 
 Notional Amount and Maturities of Derivatives Not Designated as Accounting Hedges 
 
 The notional amount is used only as the basis on which interest payments are determined and is not the amount exchanged, nor recorded on our consolidated balance sheets. The following table shows, by derivative instrument type, the notional amount, the weighted-average rate paid and the weighted-average interest rate received for our interest rate swaps as of May 31, 2025 and 2024. For the substantial majority of interest rate swap agreements, SOFR is used as the basis for determining variable interest payment amounts each period. 
 
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 Table 10.1: Derivative Notional Amount and Weighted-Average Rates 
 
 May 31, 
 2025 2024 
 (Dollars in thousands) Notional
Amount Weighted-
Average
Rate Paid Weighted-
Average
Rate Received Notional
Amount Weighted-
Average
Rate Paid Weighted-
Average
Rate Received 
 Pay-fixed swaps $ 5,833,458 2.84 % 4.54 % $ 5,842,540 2.77 % 5.57 % 
 Receive-fixed swaps 1,418,777 5.08 3.39 1,523,396 6.08 3.33 
 Total interest rate swaps $ 7,252,235 3.28 4.32 $ 7,365,936 3.46 5.10 
 
 The following table presents the notional amount of our interest rate swaps maturing in each of the five fiscal years subsequent to May 31, 2025 and thereafter. 
 
 Table 10.2: Derivative Notional Amount Maturities 
 
 Notional Amount Notional Amortization and Maturities 
 (Dollars in thousands) 2026 2027 2028 2029 2030 Thereafter 
 Interest rate swaps $ 7,252,235 $ 1,075,091 $ 611,427 $ 607,997 $ 700,907 $ 339,338 $ 3,917,475 

 Cash Flow Hedges 
 
 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. 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 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. 
 
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 Table 10.3: Derivative Assets and Liabilities at Fair Value 
 
 May 31, 
 2025 2024 
 (Dollars in thousands) Fair Value Notional Amount 
 Fair Value Notional Amount 
 
 Derivative assets: 
 Interest rate swaps $ 555,855 $ 5,694,835 $ 691,249 $ 5,770,691 
 Total derivative assets $ 555,855 $ 5,694,835 $ 691,249 $ 5,770,691 
 
 Derivative liabilities: 
 
 Interest rate swaps $ 51,368 $ 1,557,400 $ 80,988 $ 1,595,245 
 Total derivative liabilities $ 51,368 $ 1,557,400 $ 80,988 $ 1,595,245 
 
 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. However, we report derivative asset and liability amounts on a gross basis by individual contract. 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. 
 
 Table 10.4: Derivative Gross and Net Amounts 
 
 May 31, 2025 
 Gross Amount
of Recognized
Assets/ Liabilities Gross Amount
Offset in the
Balance Sheet Net Amount of Assets/ Liabilities
Presented 
in the 
Balance Sheet Gross Amount
Not Offset in the 
Balance Sheet 
 (Dollars in thousands) Financial
Instruments Cash
Collateral
Pledged Net
Amount 
 Derivative assets: 
 Interest rate swaps $ 555,855 $ — $ 555,855 $ 49,806 $ — $ 506,049 
 Derivative liabilities: 
 
 Interest rate swaps 51,368 — 51,368 49,806 — 1,562 

 May 31, 2024 
 Gross Amount
of Recognized
Assets/ Liabilities Gross Amount
Offset in the
Balance Sheet Net Amount of Assets/ Liabilities
Presented 
in the 
Balance Sheet Gross Amount
Not Offset in the 
Balance Sheet 
 (Dollars in thousands) Financial
Instruments Cash
Collateral
Pledged Net
Amount 
 Derivative assets: 
 Interest rate swaps $ 691,249 $ — $ 691,249 $ 80,026 $ — $ 611,223 
 Derivative liabilities: 
 
 Interest rate swaps 80,988 — 80,988 80,026 — 962 

 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 
 
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 portfolio. We generally record derivative losses when interest rates decline and derivative gains when interest rates rise, as our derivative portfolio consists of a higher proportion of pay-fixed swaps than receive-fixed swaps. 
 
 The following table presents the components of the derivative gains (losses) reported in our consolidated statements of operations. 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. We classify the derivative cash settlement amounts for the net periodic contractual interest expense on our interest rate swaps as an operating activity in our consolidated statements of cash flows. 
 
 Table 10.5: Derivative Gains (Losses) 
 
 Year Ended May 31, 
 (Dollars in thousands) 2025 2024 2023 
 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 
 
 Our derivative contracts typically contain mutual early-termination provisions, generally in the form of a credit rating trigger. Under the mutual credit rating trigger provisions, either counterparty may, but is not obligated to, terminate and settle the agreement if the credit rating of the other counterparty falls below a level specified in the agreement. If a derivative contract is terminated, the amount to be received or paid by us would be equal to the prevailing fair value, as defined in the agreement, as of the termination date. 
 
 During FY2025, Moody’s, S&P and Fitch affirmed CFC’s credit ratings and stable outlook. Our senior unsecured credit ratings from Moody’s, S&P and Fitch were A2, A- and A, respectively, as of May 31, 2025. Moody’s, S&P and Fitch had our ratings on stable outlook as of May 31, 2025. Our credit ratings and outlook remain unchanged as of the date of this Report. 
 
 The following table displays the notional amounts of our derivative contracts with rating triggers as of May 31, 2025, and the payments that would be required if the contracts were terminated as of that date because of a downgrade of our unsecured credit ratings or the counterparty’s unsecured credit ratings below A3/A-, below Baa1/BBB+, to or below Baa2/BBB, or to or below Ba2/BB+ by Moody’s or S&P, respectively. In calculating the payment amounts that would be required upon termination of the derivative contracts, we assume that amounts for each counterparty would be netted in accordance with the provisions of the master netting agreements with the counterparty. The net payment amounts are based on the fair value of the underlying derivative instrument, excluding the credit risk valuation adjustment, plus any unpaid accrued interest amounts. 
 
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 Table 10.6: Derivative Credit Rating Trigger Exposure 
 
 (Dollars in thousands) Notional
Amount Payable Due from CFC Receivable Due to CFC Net Receivable (Payable) 
 Impact of rating downgrade trigger: 
 Falls below A3/A- (1) 
 $ 19,890 $ ( 663 ) $ — $ ( 663 ) 
 Falls below Baa1/BBB+ 4,808,258 ( 969 ) 334,307 333,338 
 Falls to or below Baa2/BBB (2) 
 334,723 — 22,257 22,257 
 
 Total $ 5,162,871 $ ( 1,632 ) $ 356,564 $ 354,932 

 ___________________________ 
 (1) Rating trigger for CFC falls below A3/A-, while rating trigger for counterparty falls below Baa1/BBB+ by Moody’s or S&P, respectively. 
 (2) Rating trigger for CFC falls to or below Baa2/BBB, while rating trigger for counterparty falls to or below Ba2/BB+ by Moody’s or S&P, respectively. 
 
 We have interest rate swaps with one counterparty that are subject to a ratings trigger and early termination provision in the event of a downgrade of CFC’s senior unsecured credit ratings below Baa3, BBB- or BBB- by Moody’s, S&P or Fitch, respectively. The outstanding notional amount of these swaps, which is not included in the above table , totaled $ 383 million as of May 31, 2025. These swaps were in an unrealized gain position of $ 38 million as of May 31, 2025. 
 
 The aggregate fair value amount, including the credit valuation adjustment, of all interest rate swaps with rating triggers that were in a net liability position was $ 2 million as of May 31, 2025. 
 
 Derivative Counterparty Credit Exposure 
 
 Our interest rate swap contracts are subject to credit risk associated with counterparties to these derivative contracts. As mentioned above, we generally engage in OTC derivative transactions, which expose us to individual counterparty credit risk because these transactions are executed and settled directly between us and each counterparty. To manage this risk, we diversify our derivative positions among counterparties with investment-grade credit ratings, perform an internal credit risk 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, 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. We believe our exposure to derivative counterparty risk, at any point in time, is equal to the amount of our outstanding derivatives in a net gain position, at the individual counterparty level based on the legally enforceable netting provisions under our master swap agreements, which totaled $ 506 million and $ 611 million as of May 31, 2025 and 2024, respectively, as presented in Table 10.4 above. 
 
 NOTE 11—EQUITY 
 
 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. 
 
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 Table 11.1: Equity 
 May 31, 
 (Dollars in thousands) 2025 2024 
 Membership fees and educational fund: 
 
 Membership fees $ 966 $ 968 
 Educational fund 2,658 2,608 
 Total membership fees and educational fund 3,624 3,576 
 Patronage capital allocated 948,526 928,232 
 Members’ capital reserve 1,631,609 1,455,564 
 Unallocated net income: 
 
 Prior fiscal year-end cumulative derivative forward value gains (1) 
 606,215 342,624 
 Current fiscal year derivative forward value gains (losses) (1) 
 ( 104,552 ) 263,591 
 Current fiscal year-end cumulative derivative forward value gains (1) 
 501,663 606,215 
 Other unallocated net loss ( 709 ) ( 709 ) 
 Unallocated net income 
 500,954 605,506 
 CFC retained equity 3,084,713 2,992,878 
 Accumulated other comprehensive loss 
 ( 2,236 ) ( 1,416 ) 
 Total CFC equity 3,082,477 2,991,462 
 Noncontrolling interests 20,989 20,707 
 Total equity $ 3,103,466 $ 3,012,169 

 ____________________________ 
 (1) Represents derivative forward value gains (losses) for CFC only, as total CFC equity does not include the noncontrolling interests of the consolidated variable interest entities. See “Note 16—Business Segments” for the statements of operations for CFC. 
 
 Allocation of Net Earnings and Retirement of Patronage Capital—CFC 
 
 District of Columbia cooperative law requires cooperatives to allocate net earnings to patrons, to a general reserve in an amount sufficient to maintain a balance of at least 50 % of paid-in capital and to a cooperative educational fund, as well as permits additional allocations to board-approved reserves. District of Columbia cooperative law also requires that a cooperative’s net earnings be allocated to all patrons in proportion to their individual patronage, and each patron’s allocation be distributed to the patron unless the patron agrees that the cooperative may retain its share as additional capital. 
 
 Annually, the CFC Board of Directors allocates its net earnings to its patrons in the form of patronage capital, to a cooperative educational fund, to a general reserve, if necessary, and to board-approved reserves. An allocation to the general reserve is made, if necessary, to maintain the balance of the general reserve at 50 % of the membership fees c ollected. The general reserve is included in the patronage capital allocated component of CFC’s retained equity. CFC’s bylaws require the allocation to the cooperative educational fund to be at least 0.25 % of its net earnings. Funds from the coopera tive educational fund are disbursed annually to statewide cooperative organizations to fund the teaching of cooperative principles and for other cooperative education programs. 
 
 Currently, CFC has one additional board-approved reserve, the members’ capital reserve. The CFC Board of Directors determines the amount of net earnings that is allocated to the members’ capital reserve, if any. The members’ capital reserve represents net earnings that CFC holds to increase equity retention. 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. 
 
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 All remaining net earnings are allocated to CFC’s members in the form of patronage capital. The amount of net earnings allocated to each member is based on the member’s patronage of CFC’s lending programs during the year. No interest is earned by members on allocated patronage capital. There is no effect on CFC’s total equity as a result of allocating net earnings to members in the form of patronage capital or to board-approved reserves. The CFC Board of Directors has voted annually to retire a portion of the patronage capital allocation. Upon retirement, patronage capital is paid out in cash to the members to whom it was allocated. 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 (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 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: $ 67 million to members in the form of patronage capital and $ 176 million to the members’ capital reserve. See “Item 7. MD&A—Non-GAAP Financial Measures” for information on adjusted net income. 
 
 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 May 2024, the CFC Board of Directors authorized the allocation of $ 1 million of net earnings for FY2024 to the cooperative educational fund. In July 2024 the CFC Board of Directors authorized the allocation of net earnings for FY2024 as follows: $ 61 million to members in the form of patronage capital and $ 228 million to the members’ capital reserve. 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 represented 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. The authorized patronage capital retirement amount of $ 47 million was returned to members in cash in September 2024. 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. The CFC Board of Directors has the authority to change the current practice for allocating and retiring net earnings at any time, subject to applicable laws and regulations. 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 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 . NCSC also allocates annual net earnings, subject to approval by its board of directors . The allocation of net earnings by NCSC to board-approved reserves does not affect noncontrolling interest s ; however, the cash disbursements from board-approved reserves results in a reduction to noncontrolling interests. 
 
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 Allocation of Net Earnings—NCSC 
 
 NCSC’s bylaws require that it allocate at least 0.25 % of its net earnings to a cooperative educational fund and an amount to the general reserve required to maintain the general reserve balance at 50 % of membership fees collected. Funds from the cooperative educational fund are disbursed annually to fund the teaching of cooperative principles and for other cooperative education programs. 
 
 Accumulated Other Comprehensive Income (Loss) 
 
 The following table presents, by component, changes in AOCI for the years ended May 31, 2025 and 2024 and the balance of each component as of the end of each respective period. 
 
 Table 11.2: Changes in Accumulated Other Comprehensive Income (Loss) 
 
 Year Ended May 31, 
 2025 2024 
 (Dollars in thousands) Unrealized Gains on Derivative Hedges (1) 
 Unrealized Losses on Defined Benefit Plans (2) 
 Total Unrealized Gains on Derivative Hedges (1) 
 Unrealized Losses on Defined Benefit Plans (2) 
 Total 
 Beginning balance $ 3,287 $ ( 4,703 ) $ ( 1,416 ) $ 11,102 $ ( 2,759 ) $ 8,343 
 
 Changes in unrealized gains (losses) 803 ( 850 ) ( 47 ) 483 ( 2,156 ) ( 1,673 ) 
 
 Realized (gains) losses reclassified to earnings ( 1,155 ) 382 ( 773 ) ( 8,298 ) 212 ( 8,086 ) 
 
 Ending balance $ 2,935 $ ( 5,171 ) $ ( 2,236 ) $ 3,287 $ ( 4,703 ) $ ( 1,416 ) 

 ____________________________ 
 (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 in our consolidated statements of operations. 
 (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 
 
 National Rural Electric Cooperative Association (“NRECA”) Retirement Security Plan 
 
 CFC is a participant in the NRECA Retirement Security Plan (“the Retirement Security Plan”), a multiple-employer defined benefit pension plan. The employer identification number of the Retirement Security Plan is 53-0116145, and the plan number is 333. Plan information is available publicly through the annual Form 5500, including attachments. The Retirement Security Plan is a qualified plan in which all employees are eligible to participate upon completion of one year of service. Under this plan, participating employees are entitled to receive annually, under a 50 % joint and surviving spouse annuity, 1.70 % of the average of their five highest base salaries during their participation in the plan, multiplied by the number of years of participation in the plan. 
 
 The risks of participating in the multiple-employer plan are different from the risks of single-employer plans due to the following characteristics of the plan: 
 
 • 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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 • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. 
 • If CFC chooses to stop participating in the plan, CFC may be required to pay a withdrawal liability representing an amount based on the underfunded status of the plan. 
 
 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”). 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. In each of these years, our contribution represented less than 5 % of total contributions made to the plan by all participating employers. Our contribution did not include a surcharge. CFC’s expense is limited to the annual premium to participate in the Retirement Security Plan. Because it is a multiple-employer plan, there is no funding liability for CFC for the plan. There were no funding improvement plans, rehabilitation plans implemented or pending, and no required minimum contributions. There are no collective bargaining agreements in place that cover CFC’s employees. 
 
 Executive Benefit Restoration Plan 
 
 We adopted a supplemental top-hat Executive Benefit Restoration (“EBR”) Plan, effective January 1, 2015. The EBR Plan is a nonqualified, unfunded plan maintained by CFC to provide retirement benefits to a select group of executive officers whose compensation exceeds Internal Revenue Service limits for qualified defined benefit plans. There is a risk of forfeiture if participants leave the company prior to becoming fully vested in the EBR Plan. 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 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 in our consolidated statements of operations. 
 
 Defined Contribution Plan 
 
 CFC offers a 401(k) defined contribution savings program, the 401(k) Pension Plan, to all employees who have completed a minimum of 1,000 hours of service in either the first 12 consecutive months or first full calendar year of employment. We contribute an amount up to 2 % of an employee’s salary each year for all employees participating in the program with a minimum 2 % employee contribution. We contributed approximately $ 1 million to the plan in each of FY2025, FY2024 and FY2023 . 
 
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 NOTE 13—GUARANTEES 
 
 We guarantee certain contractual obligations of our members so they may obtain various forms of financing. We use the same credit policies and monitoring procedures in providing guarantees as we do for loans and commitments. If a member system defaults on its obligation to pay debt service, then we are obligated to pay any required amounts under our guarantees. Meeting our guarantee obligations satisfies the underlying obligation of our member systems and prevents the exercise of remedies by the guarantee beneficiary based upon a payment default by a member system. In general, the member system is required to repay any amount advanced by us with interest, pursuant to the documents evidencing the member system’s reimbursement obligation. 
 
 The following table displays the notional amount of our outstanding guarantee obligations, by guarantee type and by member class, as of May 31, 2025 and 2024. 
 
 Table 13.1: Guarantees Outstanding by Type and Member Class 
 
 May 31, 
 (Dollars in thousands) 2025 2024 
 Guarantee type: 
 Long-term tax-exempt bonds (1) 
 $ 48,455 $ 73,755 
 Letters of credit (2)(3) 
 978,492 752,019 
 Other guarantees 183,659 184,142 
 Total $ 1,210,606 $ 1,009,916 
 
 Member class: 
 CFC: 
 Distribution $ 506,834 $ 472,210 
 Power supply 599,766 451,828 
 Statewide and associate (4) 
 43,442 42,257 
 CFC total 1,150,042 966,295 
 NCSC electric 
 60,564 43,621 
 
 Total $ 1,210,606 $ 1,009,916 

 ____________________________ 
 (1) Represents the outstanding principal amount of long-term variable-rate guaranteed bonds. 
 (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 $ 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. 
 
 We guarantee debt issued in connection with the construction or acquisition of pollution control, solid waste disposal, industrial development and electric distribution facilities, classified as long-term tax-exempt bonds in the table above. 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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 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. We are unable to determine the maximum amount of interest that we may be required to pay related to the remaining adjustable and variable-rate bonds. Many of these bonds have a call provision that allows us to call the bond in the event of a default, which would limit our exposure to future interest payments on these bonds. Our maximum potential exposure generally is secured by mortgage liens on the members’ assets and future revenue. If a member’s debt is accelerated because of a determination that the interest thereon is not tax-exempt, the member’s obligation to reimburse us for any guarantee payments will be treated a s a long-term loan. The maturities for long-term tax-exempt bonds and the related guarantees extend through calendar year 2037 . 
 
 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 . 
 
 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. All of our master letter of credit facilities were subject to material adverse change clauses at the time of issuance as of May 31, 2025. 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 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. 
 
 In addition to the guarantees described above, we were also the liquidity provide r for $ 48 million of variable-rate tax-exempt bonds as of May 31, 2025, issued for our member cooperatives. While the bonds are in variable-rate mode, in return for a fee, we have unconditionally agreed to purchase bonds tendered or put for redemption if the rem arketing agents are unable to sell such bonds to other investors. We were not required to perform as liquidity provider pursuant to these obligations during FY2025, FY2024 or FY2023. 
 
 Guarantee Liability 
 
 We recorded a total guarantee liability for noncontingent and contingent exposures related to guarantees and liquidity obligations of $ 14 million and $ 16 million as of May 31, 2025 and 2024, respectively. The noncontingent guarantee liability, which pertains to our obligation to stand ready to perform over the term of our guarantees and liquidity obligations we have entered into or modified and accounts for the substantial majority of our guarantee liability, totaled $ 13 million and $ 15 million as of May 31, 2025 and 2024, respectively. The remaining amount pertains to our contingent guarantee exposures. 
 
 The following table details the scheduled maturities of our outstanding guarantees in each of the five fiscal years following May 31, 2025 and thereafter: 
 
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 Table 13.2: Guarantees Outstanding Maturities 
 
 (Dollars in thousands) Amount
Maturing 
 2026 $ 711,398 
 2027 115,113 
 2028 172,505 
 2029 28,846 
 2030 7,054 
 Thereafter 175,690 
 Total $ 1,210,606 

 NOTE 14—FAIR VALUE MEASUREMENT 
 
 Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. 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 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. The accounting guidance for fair value measurements requires that we maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. We describe the valuation technique for each level in “Note 1—Summary of Significant Accounting Policies.” 
 
 The following table presents the carrying value and estimated fair value of all of our financial instruments, including those carried at amortized cost, as of May 31, 2025 and 2024. 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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 Table 14.1: Fair Value of Financial Instruments 
 
 May 31, 2025 Fair Value Measurement Level 
 (Dollars in thousands) Carrying Value Fair Value Level 1 Level 2 Level 3 
 Assets: 
 Cash and cash equivalents $ 134,712 $ 134,712 $ 134,712 $ — $ — 
 Restricted cash 8,410 8,410 8,410 — — 
 
 Equity securities, at fair value 11,252 11,252 11,252 — — 
 Debt securities trading, at fair value 113,663 113,663 — 113,663 — 
 Deferred compensation investments 8,019 8,019 8,019 — — 
 Loans to members, net 37,039,363 34,113,178 — — 34,113,178 
 Accrued interest receivable 270,222 270,222 — 270,222 — 
 
 Derivative assets 555,855 555,855 — 555,855 — 
 Total financial assets $ 38,141,496 $ 35,215,311 $ 162,393 $ 939,740 $ 34,113,178 
 
 Liabilities: 
 Short-term borrowings $ 5,091,416 $ 5,094,451 $ — $ 5,094,451 $ — 
 Long-term debt 27,163,701 26,415,950 — 16,737,855 9,678,095 
 Accrued interest payable 294,917 294,917 — 294,917 — 
 Guarantee liability 14,396 15,321 — — 15,321 
 Derivative liabilities 51,368 51,368 — 51,368 — 
 Subordinated deferrable debt 1,329,485 1,341,974 238,620 1,103,354 — 
 Members’ subordinated certificates 1,184,714 1,184,714 — — 1,184,714 
 Total financial liabilities $ 35,129,997 $ 34,398,695 $ 238,620 $ 23,281,945 $ 10,878,130 

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 May 31, 2024 Fair Value Measurement Level 
 (Dollars in thousands) Carrying Value Fair Value Level 1 Level 2 Level 3 
 Assets: 
 Cash and cash equivalents $ 280,124 $ 280,124 $ 280,124 $ — $ — 
 Restricted cash 8,217 8,217 8,217 — — 
 
 Equity securities, at fair value 36,886 36,886 36,886 — — 
 Debt securities trading, at fair value 281,351 281,351 — 281,351 — 
 Deferred compensation investments 7,763 7,763 7,763 — — 
 Loans to members, net 34,493,559 30,884,906 — — 30,884,906 
 Accrued interest receivable 190,247 190,247 — 190,247 — 
 
 Derivative assets 691,249 691,249 — 691,249 — 
 Total financial assets $ 35,989,396 $ 32,380,743 $ 332,990 $ 1,162,847 $ 30,884,906 
 
 Liabilities: 
 Short-term borrowings $ 4,332,690 $ 4,333,635 $ — $ 3,833,635 $ 500,000 
 Long-term debt 25,901,165 24,470,693 — 15,529,041 8,941,652 
 Accrued interest payable 263,372 263,372 — 263,372 — 
 Guarantee liability 15,896 16,477 — — 16,477 
 Derivative liabilities 80,988 80,988 — 80,988 — 
 Subordinated deferrable debt 1,286,861 1,295,729 244,636 1,051,093 — 
 Members’ subordinated certificates 1,197,651 1,197,651 — — 1,197,651 
 Total financial liabilities $ 33,078,623 $ 31,658,545 $ 244,636 $ 20,758,129 $ 10,655,780 

 Loans to Members, Net 
 
 Because of the interest rate repricing options we provide to borrowers on loan advances and other characteristics of our loans, there is no ready market from which to obtain fair value quotes or observable inputs for similar loans. As a result, we are unable to use the exit price to estimate the fair value of loans to members. We therefore estimate fair value for fixed-rate loans by discounting the expected future cash flows based on the current rate at which we would make a similar new loan for the same remaining maturity to a borrower. The assumed maturity date used in estimating the fair value of loans with a fixed rate for a selected rate term is the next repricing date because at the repricing date, the loan will reprice at the current market rate. The carrying value of our variable-rate loans adjusted for credit risk approximates fair value since variable-rate loans are eligible to be reset at least monthly. 
 
 The fair value of loans with different risk characteristics, specifically nonperforming and restructured loans, is estimated using collateral valuations or by adjusting cash flows for credit risk and discounting those cash flows using the current rates at which similar loans would be made by us to borrowers for the same remaining maturities. The fair value of loans held for sale is determined based on the cost, which approximates the fair value, as we sell these loans at par value, concurrently or within a short period of time with the closing of the loan or participation agreement. See below for information on how we estimate the fair value of certain individually evaluated loans. 
 
 Transfers Between Levels 
 
 We monitor the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy and transfer between Level 1, Level 2 and Level 3 accordingly. Observable market data include but 
 
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 are not limited to quoted prices and market transactions. Changes in economic conditions or market liquidity generally will drive changes in availability of observable market data. Changes in availability of observable market data, which also may result in changes in the valuation technique used, are generally the cause of transfers between levels. We did not have any transfers into or out of Level 3 of the fair value hierarchy during fiscal years ended May 31, 2025 and 2024. 
 
 Assets and Liabilities Measured at Fair Value on a Recurring Basis 
 
 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 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. 
 
 Table 14.2: Assets and Liabilities Measured at Fair Value on a Recurring Basis 
 
 May 31, 
 2025 2024 
 (Dollars in thousands) Level 1 Level 2 Total Level 1 Level 2 Total 
 Assets: 
 
 Equity securities, at fair value $ 11,252 $ — $ 11,252 $ 36,886 $ — $ 36,886 
 Debt securities trading, at fair value — 113,663 113,663 — 281,351 281,351 
 Deferred compensation investments 8,019 — 8,019 7,763 — 7,763 
 Derivative assets — 555,855 555,855 — 691,249 691,249 
 
 Liabilities: 
 Derivative liabilities — 51,368 51,368 — 80,988 80,988 

 Below is a description of the valuation techniques we use to estimate fair value of our financial assets and liabilities recorded at fair value on a recurring basis, the significant inputs used in those techniques, if applicable, and the classification within the fair value hierarchy. 
 
 Equity Securities 
 
 Our investments in equity securities consist of investments in Farmer Mac Class A common stock and Series C preferred stock. These securities are reported at fair value in our consolidated balance sheets. We determine the fair value based on quoted prices on the stock exchange where the stock is traded. Because quoted market prices are the key input in deriving fair value for these securities, the valuation methodology is classified as Level 1. 
 
 Debt Securities Trading 
 
 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. Methodologies employed, controls relied upon and inputs used by third-party pricing vendors are subject to management review when such services are provided. This review may consist of, in part, obtaining and evaluating control reports issued and pricing methodology materials distributed. We review the pricing methodologies provided by the vendors in order to determine if observable market information is being used to determine the fair value versus unobservable inputs. Investment securities traded in secondary markets are typically valued using unadjusted vendor prices. These investment securities, which include those measured using unadjusted vendor prices, are generally classified as Level 2 because the valuation typically involves using quoted market prices for similar securities, pricing models, discounted cash flow analyses 
 
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 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 
 
 CFC offers a nonqualified 457(b) deferred compensation plan to highly compensated employees and board members. Such amounts deferred by employees are invested by the company. The deferred compensation investments are presented as other assets in the consolidated balance sheets in the other assets category at fair value. We calculate fair value based on the daily published and quoted net asset value. Because quoted market prices are the key input in deriving fair value for this plan, the valuation methodology is classified as Level 1. 
 
 Derivative Instruments 
 
 Our derivatives primarily consist of OTC interest rate swaps executed under master netting swap agreements that do not have readily available quoted market prices. We derive the fair value of our derivatives using a vendor-provided derivative system, which is based on industry-standard discounted cash flow models. We rely primarily on market-observable inputs for these models, including market interest rates and forward swap yield curves, as well as the contractual terms of the derivative instrument, as of the valuation date. We include a credit risk valuation adjustment in our valuation of derivatives, which takes into consideration the effect of nonperformance credit risk of the counterparty or our own nonperformance risk and depends on whether the derivative instrument is in a gain, or asset, financial position or in a loss, or liability, financial position. We corroborate our derivative valuations by comparing the amounts to counterparty valuations and third-party pricing sources. We analyze and validate pricing variances, if material, among different external pricing sources. Because observable market data serve as the key inputs in valuing our interest rate swaps, the valuation methodology is classified as Level 2. 
 
 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis 
 
 We may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis on our consolidated balance sheets. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, such as in the application of the lower of cost or fair value accounting or when we evaluate assets for impairment. We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of May 31, 2025 or May 31, 2024. 
 
 NOTE 15—VARIABLE INTEREST ENTITIES 

 NCSC meets the definition of a VIE because it does not have sufficient equity investment at risk to finance its activities without financial support. CFC is the primary source of funding for NCSC. Under the terms of the management agreement with NCSC, CFC manages the business operations of NCSC. CFC also unconditionally guarantees full indemnification for any loan losses of NCSC pursuant to a guarantee agreement with NCSC. CFC earns management and guarantee fees from its agreements with NCSC. 
 
 All loans that require NCSC board approval also require CFC board approval. CFC is not a member of NCSC and does not elect directors to the NCSC board. If CFC becomes a member of NCSC, it would control the nomination process for one NCSC director. NCSC members elect directors to the NCSC board based on one vote for each member. NCSC is a Class C member of CFC. 
 
 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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 Table 15.1: Consolidated Assets and Liabilities of Variable Interest Entities 
 
 May 31, 
 (Dollars in thousands) 2025 2024 
 Assets: 
 Loans outstanding $ 1,654,228 $ 1,544,477 
 Other assets 16,111 12,700 
 Total assets $ 1,670,339 $ 1,557,177 
 
 Liabilities: 
 
 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, 2025 and 2024. 
 
 Table 15.2: CFC Exposure Under Credit Commitments to NCSC 
 
 May 31, 
 
 (Dollars in thousands) 2025 2024 
 CFC credit commitments: 
 
 Total CFC credit commitments $ 5,000,000 $ 5,000,000 
 
 Outstanding commitments: 
 Borrowings payable to CFC (1) 
 1,640,372 1,532,781 
 Credit enhancements: 
 CFC third-party guarantees 60,564 43,621 
 Other credit enhancements 1,275 757 
 Total credit enhancements (2) 
 61,839 44,378 
 Total outstanding commitments 1,702,211 1,577,159 
 CFC credit commitments available 
 $ 3,297,789 $ 3,422,841 

 ____________________________ 
 (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 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. CFC’s maximum potential exposure, including interest due, for the credit enhancements totaled $ 62 million as of May 31, 2025. The maturities for obligations guaranteed by CFC extend through 2043. 
 
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 NOTE 16—BUSINESS 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 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. Pursuant to the guarantee agreement, CFC unconditionally guarantees full indemnification to NCSC for any credit losses. 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. 
 
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 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. NCSC borrows from CFC to fund loans to its members, the cost of which is reported as interest expense by NCSC. CFC charges NCSC a management fee, which CFC reports as a component of fee and other income. NCSC reports the management fee charged by CFC as a component of non-interest expense. CFC and NCSC use derivatives, primarily interest rate sw aps, to manage interest rate risk. 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 (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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 Table 16.1: Business Segment Information 
 Year Ended May 31, 2025 
 (Dollars in thousands) CFC NCSC 
 Segments Total Reclasses and Adjustments (1) 
 Intersegment Eliminations (2) 
 Consolidated 
 Results of operations: 
 Interest income $ 1,693,507 $ 87,710 $ 1,781,217 $ — $ ( 77,984 ) $ 1,703,233 
 Interest expense ( 1,442,027 ) ( 78,236 ) ( 1,520,263 ) — 77,984 ( 1,442,279 ) 
 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 for credit losses 
 8,111 414 8,525 — ( 414 ) 8,111 
 Net interest income after benefit for credit losses 
 358,828 9,870 368,698 ( 99,219 ) ( 414 ) 269,065 
 Non-interest income: 
 Fee and other income 29,162 3,707 32,869 — ( 9,272 ) 23,597 
 Derivative gains: 
 Derivative cash settlements interest income — — — 99,219 — 99,219 
 Derivative forward value losses 
 — — — ( 105,070 ) — ( 105,070 ) 
 Derivative losses 
 — — — ( 5,851 ) — ( 5,851 ) 
 Investment securities gains 
 5,674 — 5,674 — — 5,674 
 Total non-interest income 34,836 3,707 38,543 ( 5,851 ) ( 9,272 ) 23,420 
 Non-interest expense: 
 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 ) 
 Income before income taxes 
 244,285 987 245,272 ( 105,070 ) — 140,202 
 Income tax provision — ( 188 ) ( 188 ) — — ( 188 ) 
 Net income (6) 
 $ 244,285 $ 799 $ 245,084 $ ( 105,070 ) $ — $ 140,014 
 
 May 31, 2025 
 CFC NCSC 
 Segments Total Reclasses and Adjustments (1) 
 Intersegment Eliminations (2) 
 Consolidated Total 
 Assets: 
 Total loans outstanding $ 37,049,692 $ 1,654,228 $ 38,703,920 $ — $ ( 1,640,372 ) $ 37,063,548 
 Deferred loan origination costs 16,430 — 16,430 — — 16,430 
 Loans to members 37,066,122 1,654,228 38,720,350 — ( 1,640,372 ) 37,079,978 
 Less: Allowance for credit losses ( 40,615 ) ( 5,586 ) ( 46,201 ) — 5,586 ( 40,615 ) 
 Loans to members, net 37,025,507 1,648,642 38,674,149 — ( 1,634,786 ) 37,039,363 
 Other assets 1,269,575 34,068 1,303,643 — ( 17,957 ) 1,285,686 
 Total assets $ 38,295,082 $ 1,682,710 $ 39,977,792 $ — $ ( 1,652,743 ) $ 38,325,049 

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 Year Ended May 31, 2024 
 (Dollars in thousands) CFC NCSC 
 Segments Total Reclasses and Adjustments (1) 
 Intersegment Eliminations (2) 
 Consolidated Total 
 Results of operations: 
 Interest income $ 1,584,071 $ 82,104 $ 1,666,175 $ — $ ( 72,824 ) $ 1,593,351 
 Interest expense ( 1,339,003 ) ( 72,909 ) ( 1,411,912 ) — 72,824 ( 1,339,088 ) 
 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 
 Benefit (provision) for credit losses 
 5,516 ( 2,330 ) 3,186 — 2,330 5,516 
 Net interest income after benefit (provision) for credit losses 
 377,601 7,014 384,615 ( 127,166 ) 2,330 259,779 
 Non-interest income: 
 Fee and other income 27,857 7,448 35,305 — ( 12,513 ) 22,792 
 Derivative gains: 
 Derivative cash settlements interest income 
 — — — 127,166 — 127,166 
 Derivative forward value gains — — — 264,871 — 264,871 
 Derivative gains — — — 392,037 — 392,037 
 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: 
 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 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 
 
 May 31, 2024 
 CFC NCSC 
 Segments Total Reclasses and Adjustments (1) 
 Intersegment Eliminations (2) 
 Consolidated Total 
 Assets: 
 Total loans outstanding $ 34,516,488 $ 1,544,477 $ 36,060,965 $ — $ ( 1,532,781 ) $ 34,528,184 
 Deferred loan origination costs 14,101 — 14,101 — — 14,101 
 Loans to members 34,530,589 1,544,477 36,075,066 — ( 1,532,781 ) 34,542,285 
 Less: Allowance for credit losses ( 48,726 ) ( 6,000 ) ( 54,726 ) — 6,000 ( 48,726 ) 
 Loans to members, net 34,481,863 1,538,477 36,020,340 — ( 1,526,781 ) 34,493,559 
 Other assets 1,671,555 28,389 1,699,944 — ( 15,689 ) 1,684,255 
 Total assets $ 36,153,418 $ 1,566,866 $ 37,720,284 $ — $ ( 1,542,470 ) $ 36,177,814 

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 Year Ended May 31, 2023 
 (Dollars in thousands) CFC NCSC 
 Segments Total Reclasses and Adjustments (1) 
 Intersegment Eliminations (2) 
 Consolidated Total 
 Results of operations: 
 Interest income $ 1,343,215 $ 61,716 $ 1,404,931 $ — $ ( 53,202 ) $ 1,351,729 
 Interest expense ( 1,036,499 ) ( 53,211 ) ( 1,089,710 ) — 53,202 ( 1,036,508 ) 
 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 
 Provision for credit losses 
 ( 603 ) ( 935 ) ( 1,538 ) — 935 ( 603 ) 
 Net interest income after provision for credit losses 
 340,134 7,126 347,260 ( 33,577 ) 935 314,618 
 Non-interest income: 
 Fee and other income 24,880 3,922 28,802 — ( 10,668 ) 18,134 
 Derivative gains: 
 Derivative cash settlements interest income 
 — — — 33,577 — 33,577 
 Derivative forward value gains — — — 252,267 — 252,267 
 Derivative gains — — — 285,844 — 285,844 
 Investment securities losses 
 ( 4,974 ) — ( 4,974 ) — — ( 4,974 ) 
 Total non-interest income (expense) 
 19,906 3,922 23,828 285,844 ( 10,668 ) 299,004 
 Non-interest expense: 
 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 ) 
 Income (loss) before income taxes 251,230 ( 1,110 ) 250,120 252,267 — 502,387 
 Income tax provision — ( 800 ) ( 800 ) — — ( 800 ) 
 Net income (loss) (6) 
 $ 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 (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. 
 
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 Table of Contents 

 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
 
 None.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/ 10-K

Item 8. Financial Statements and Supplementary Data
