What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-07-31 compared with 2025-08-05 · 328 added, 434 removed, 1351 unchanged (36% of the section changed)

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

Our financial statements include the consolidated accounts of CFC and NCSC.

Our principal operations are currently organized for management reporting purposes into two business segments, which ar e based on the accounts of each of the legal entities included in our consolidated financial statements:

CFC and NCSC.

We provide information on the business structure, mission, principal purpose and core business activities of each of these entities under “Item 1.

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

The following MD&A is intended to enhance the understanding of our consolidated financial statements by providing information that we believe is relevant in evaluating our results of operations, financial condition and liquidity and the potential impact of material known events or uncertainties that, based on management’s assessment, are reasonably likely to cause the financial information included in this Report not to be necessarily indicative of our future financial performance.

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NON-GAAP FINANCIAL MEASURES

Our reported financial results are determined in conformity with generally accepted accounting principles in the United States (“U.S.

Our reported financial results are determined in conformity with U.S.

GAAP and are subject to period-to-period volatility due to changes in market conditions and differences in the way our financial assets and liabilities are accounted for under U.S.

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Our key non-GAAP financial measures are adjusted net income, adjusted net interest income, adjusted interest expense, adjusted net interest yield, adjusted TIER, adjusted debt-to-equity ratio and members’ equity.

The most comparable

The most comparable U.S.

GAAP financial measures are net income, net interest income, interest expense, net interest yield, TIER, debt-to-equity ratio and CFC equity, respectively.

The primary adjustments we make to calculate these non-GAAP financial measures consist of (i) adjusting interest expense and net interest income to include the impact of net periodic derivative cash settlements income (expense) amounts;

The primary adjustments we make to calculate these non-GAAP financial measures consist of (i) adjusting interest expense and net interest income to include the impact of net periodic derivative cash

settlements income (expense) amounts;

(ii) adjusting net income and total equity to exclude the non-cash impact of the accounting for derivative financial instruments;

(iii) adjusting total debt outstanding to exclude members’ subordinated certificates and 50% of the subordinated deferrable debt;

(iv) adjusting total equity to include members’ subordinated certificates and 50% of the subordinated deferrable debt, and exclude cumulative derivative forward value gains (losses) and the amounts of accumulated other comprehensive income (loss) (“AOCI”);

and (v) adjusting CFC equity to exclude derivative forward value gains (losses) and AOCI.

(iv) adjusting total equity to include members’ subordinated certificates and 50% of the subordinated deferrable debt, and exclude cumulative derivative forward value gains (losses), historical foreign currency translation adjustments, and the amounts of accumulated other comprehensive income (loss) (“AOCI”);

and (v) adjusting CFC equity to exclude derivative forward value gains (losses), historical foreign currency

adjustments and AOCI.

We believe our non-GAAP financial measures, which should not be considered in isolation or as a substitute for measures determined in conformity with U.S.

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Year Ended May 31, Variance

(Dollars in thousands) 2025 2024 2023 2025 versus 2024

2024 versus 2023

(Dollars in thousands) 2026 2025 2024 2026 versus 2025 2025 versus 2024

$ 262,736 $ 140,014 $ 554,316 $ 122,722 $ (414,302)

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FY2026 versus FY2025— Key Highlights

• A shift to losses from gains was recorded on our derivatives portfolio of $398 million, as we recorded derivative losses of $6 million for FY2025, primarily attributable to decreases in interest rates across the swap curve, with the exception of the 30-year swap rate, which increased slightly during FY2025.

In comparison, we recorded derivative gains of $392 million for FY2024, primarily due to increases in the medium- and longer-term swap interest rates during FY2024.

• Operating and other expenses increased by $21 million for FY2025 compared with FY2024, primarily driven by higher expenses recorded for salaries and employee benefits, general and administrative, and an impairment loss of $8 million on an equity investment.

• Gains recorded on our investment securities decreased by $5 million, primarily due to period-to-period market fluctuations in fair value.

• Net interest income increased by $7 million, attributable to an increase in average interest-earning assets of $1,772 million, or 5%, partially offset by a decrease in the net interest yield of 2 basis points, or 3%, to 0.72%.

• We recorded a benefit for credit losses of $8 million for FY2025, resulting primarily from a decrease in the asset-specific allowance for a nonperforming loan attributable to higher actual than expected payments received on this loan during FY2025.

In comparison, we recorded a benefit for credit losses of $5 million for FY2024, resulting primarily from a decrease in the asset-specific allowance, partially offset by an increase in the collective allowance due to loan portfolio growth.

• The decrease in TIER for FY2025 compared with FY2024 was driven by the combined impact of a decrease in net income primarily attributable to our derivative portfolio forward value change as discussed above and an increase in interest expense during FY2025.

• A shift to gains from losses was recorded on our derivatives portfolio of $88 million, as we recorded derivative gains of $82 million for FY2026, primarily attributable to increases in the medium- and longer-term swap interest rates during FY2026.

In comparison, we recorded derivative losses of $6 million for FY2025, attributable to decreases in interest rates across the swap curve, with the exception of the 30-year swap rate, which increased slightly during FY2025.

• Net interest income increased by $41 million, attributable to an increase in average interest-earning assets of $1,960 million, or 5%, and an increase in the net interest yield of 7 basis points, or 10%, to 0.79%.

• We recorded a benefit for credit losses of $10 million and $8 million for FY2026 and FY2025, respectively, primarily driven by decreases in the asset-specific allowance for a nonaccrual CFC power supply loan due to higher-than-expected payments on this loan during both periods.

• Operating and other expenses increased by $9 million for FY2026 compared with FY2025, prima rily driven by higher expenses recorded for salaries and employee benefits, general and administrative, and losses on early extinguishment of debt, partially offset by lower impairment loss, as FY2025 included an $8 million impairment loss on an equity investment.

• Gains recorded on our investment securities decreased by $5 million, primarily due to period-to-period market fluctuations in fair value, including both realized and unrealized gains (losses), and lower balances of debt securities resulting from maturities.

• The increase in TIER for FY2026 compared with FY2025 was primarily driven by higher net income, reflecting changes in the forward value of our derivative portfolio and increased net interest income.

Debt-to-Equity Ratio

During FY2025 , we refined our methodology for calculating the debt-to-equity ratio to revise from total liabilities divided by total equity to total debt outstanding divided by total equity.

This change was driven by a change in our methodology for calculating the adjusted debt-to-equity ratio, which is discussed in more detail under the section “Non-GAAP Financial Measures and Reconciliations” in this Report.

The debt-to-equity ratio under the revised methodology was 11.20 and 10.86 as of May 31, 2025 and 2024, respectively.

The increase in the debt-to-equity ratio during FY2025 was due to an increase in debt to fund loan growth, partially offset by an increase in total equity.

The increase in total equity was primarily driven by our reported net income of $140 million for FY2025 , partially offset by the CFC Board of Directors’ authorized patronage capital retirement of $47 million in July 2024.

The debt-to-equity ratio was 10.85 and 11.20 as of May 31, 2026 and 2025, respectively.

The decrease in the debt-to-equity ratio during FY2026 was due to an increase in total equity, partially offset by an increase in debt to fund loan growth.

The increase in total equity was primarily due to our reported net income of $263 million for FY2026, partially offset by the CFC Board of Directors’ authorized patronage capital retirement of $53 million in July 2025.

Non-GAAP Adjusted Results

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We provide a more detailed discussion of our non-GAAP adjusted results under the section “Consolidated Results of Operations.” See “Item 7.

MD&A—Consolidated Results of Operations” in our 2024 Form 10-K for a comparative discussion of our consolidated results of operations between FY2024 and FY2023.

—Consolidated Results of Operations” in our 2025 Form 10-K for a comparative discussion of our consolidated results of operations between FY2025 and FY2024.

Adjusted Net Income and Adjusted TIER

Year Ended May 31, Variance

(Dollars in thousands) 2025 2024 2023 2025 versus 2024

2024 versus 2023

(Dollars in thousands) 2026 2025 2024 2026 versus 2025 2025 versus 2024

Adjusted net income

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FY2026 versus FY2025— Key Highlights

• Adjusted net interest income decreased by $21 million for FY2025 compared with FY2024, driven by a decrease in the adjusted net interest yield of 11 basis points, or 10%, to 1.00%, partially offset by an increase in average interest-earning assets of $1,772 million, or 5%.

• We discuss the variances in the other components above under our net income key highlights.

• The decrease in adjusted TIER for FY2025 compared with FY2024 was primarily driven by the increased adjusted interest expense and operating and other expenses during FY2025.

• Adjusted net interest income increased by $6 million for FY2026 compared with FY2025, driven by an increase in average interest-earning assets of $1,960 million, or 5%, partially offset by a decrease in the adjusted net interest yield of 4 basis points, or 4%, to 0.96%.

• We discuss the variances in the othe r components above under the section “Reported Results—Net Income and TIER— FY2026 versus FY2025 —Key Highlights.”

• The slight decrease in adjusted TIER for FY2026 compared with FY2025 was primarily driven by the slight decrease in adjusted net income during FY2026 driven by higher operating expense.

Adjusted Debt-to-Equity Ratio

During FY2025, we refined our methodology for calculating the adjusted debt-to-equity ratio.

Consequently, we revised our internally established adjusted debt-to-equity threshold from 6-to-1 to 8.5-to-1.

The adjusted debt-to-equity ratio under the revised methodology was 7.39 and 7.27 as of May 31, 2025 and 2024, respectively.

Our financial goals focus on maintaining an adjusted debt-to-equity ratio at approximately 8.5-to-1 or below.

The adjusted debt-to-equity ratio was 7.46 and 7.39 as of May 31, 2026 and 2025, respectively.

The increase in the adjusted debt-to-equity ratio during FY2026 was due to an increase in adjusted total debt outstanding, resulting from additional borrowings to fund growth in our loan portfolio, partially offset by an increase in adjusted total equity.

The increase in adjusted total equity was primarily due to a combined impact of our adjusted net income of $245 million for FY2025 and issuances of

subordinated deferrable debt during FY2025, partially offset by a decrease in equity of $47 million attributable to the CFC Board of Directors’ authorized patronage capital retirement in July 2024 , as discussed above.

We provide a more detailed discussion of the revised methodology for calculating the adjusted debt-to-equity ratio and a reconciliation of our non-GAAP adjusted measures to the most directly comparable U.S.

The increase in adjusted total equity was primarily driven by our adjusted net income of $245 million for FY2026, partially offset by net decreases in members’ subordinated certificates and subordinated deferrable debt, as well as a $53 million reduction in equity resulting from the CFC Board of Directors’ authorized patronage capital retirements in July 2025.

We provide a more detailed discussion of the methodology for calculating the adjusted debt-to-equity ratio and a reconciliation of our non-GAAP adjusted measures to the most directly comparable U.S.

GAAP measures under the section “Non-GAAP Financial Measures and Reconciliations” in this Report.

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We segregate our loan portfolio into segments based on the borrower member class, which consists of CFC distribution, CFC power supply, CFC statewide and associate, NCSC electric and NCSC telecom.

Loans to members totaled $37,080 million as of May 31, 2025, an increase of $2,538 million, or 7%, from May 31, 2024, reflecting net increases in long-term and line of credit loans o f $1,405 million an d $1,130 million, respectively.

Of the increase in line of credit loans, 78% was attributable to borrowings under emergency line of credit loans by our members primarily for recovery costs for Hurricane Helene, which impacted the Southeastern United States in September 2024.

The remaining 22% was primarily attributable to funding provided for member working capital and NCSC renewable project financing.

Our loan portfolio composition remained largely unchanged from May 31, 2024 with 79% of loans outstanding to CFC distrib ution borrowers, 16% to CFC power supply borrowers, 3% to NCSC electric borrowers and 2% to NCSC telecom borrowers as of May 31, 2025 .

Loans to members totaled $38,422 million as of May 31, 2026, an increase of $1,342 million, or 4%, from May 31, 2025, driven primarily by growth in long-term loans, which increased $1,310 million during FY2026 .

Our loan portfolio composition remained largely unchanged from May 31, 2025 with 78% of loans outstanding to CFC distribution borrowers, 17% to CFC power supply borrowers, 3% to NCSC electric borrowers and 2% to NCSC telecom borrowers as of May 31, 2026.

The overall credit quality of our loan portfolio remained strong as of May 31, 2026.

We had no loan charge-offs during FY2025 and FY2024.

We recorded $1 million in net loan recoveries to previously charged-off loan amounts during FY2024.

We had one loan totaling $26 million and $49 million classified as nonperforming as of May 31, 2025 and 2024, respectively.

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

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 decrease in the allowance for credit losses was attributable to a reduction in the asset-specific allowance due to higher actual than expected payments received on a nonperforming loan during FY2025.

We recorded an immaterial charge-off of $0.3 million related to a CFC electric power supply loan during FY2026.

We had no loan charge-offs during FY2025.

We had one loan that was on nonaccrual status totaling $8 million as of May 31, 2026, which decreased from $26 million as of May 31, 2025, primarily due to loan repayments.

Subsequent to FY2026, we received a $3 million payment on this loan, which reduced its outstanding balance to $5 million.

Our allowance for credit losses and allowance coverage ratio decreased to $30 million and 0.08%, respectively, as of May 31, 2026, from $41 million and 0.11%, respectively, as of May 31, 2025, primarily due to a reduction in the asset-specific allowance.

We provide additional information on our allowance for credit losses below under section “Credit Risk—Allowance for Credit Losses” and “Note 5—Allowance for Credit Losses” in this Report.

Financing and Liquidity

Total debt outstanding increased by $1,175 million, or 3%, to $35,944 million as of May 31, 2026, compared with May 31, 2025, primarily due to borrowings to fund the increase in loans to our members .

During FY2025, we issued:

• U nsecured long-term dealer medium-term notes totaling approximately $2,400 million, of which $1,800 million was at a weighted average fixed interest rate of 4.65% with an average term of four years, and $600 million was at floating interest rates with an average term of two years;

• Secured long-term debt totaling $1,450 million at a weighted average fixed interest rate of 4.94% with an average term of 16 years.

In addition, during FY2025, we issued a total of $44 million of 30-year subordinated deferrable interest notes (“subordinated notes”) under a new subordinated debt program that was launched in November 2024.

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

During FY2025, Moody’s Investors Service (“Moody’s”), Fitch Ratings (“Fitch”) and S&P Global Inc.(“S&P”) affirmed CFC’s credit ratings and stable outlook.

On June 2, 2025, at our request, S&P withdrew its “A-2” short-term issue ratings on CFC’s commercial paper program.

The “A-” long-term issuer credit rating, the stable outlook and the long-term issue ratings are unchanged as of the date of this Report.

Our available liquidity consists of cash and cash equivalents, investments in debt securities, availability under committed bank revolving line of credit agreements, committed loan facilities under the Guaranteed Underwriter Program of the United

States Department of Agriculture (“USDA”) (the “Guaranteed Underwriter Program”), and a revolving note purchase agreement with Federal Agricultural Mortgage Corporation (“Farmer Mac”).

As of May 31, 2025, our available liquidity totaled $7,612 million and was $1,158 million less than our total scheduled debt obligations over the next 12 months of $8,770 million.

In addition to our existing available liquidity, we expect to re ceive $1,668 million from scheduled long-term loan principal payments over the next 12 months.

We believe we can continue to roll ove r our member short-term investments of $2,885 million based on our expectation that our members will continue to reinvest their excess cash primarily in short-term investment products offered by CFC.

Our members historically have maintained a relatively stable level of short-term investments in CFC.

Member short-term investments in CFC have averaged $3,363 million over the last 12 fiscal quarter-end reporting periods.

Our available liquidity as of May 31, 2025 was $1,727 million in excess of, or 1.3 tim es, our total scheduled debt obligations, excluding member short-term investments, over the next 12 months of $5,885 million.

Electric Cooperative Industry Trends and Developments

Emerging developments and trends in the electric cooperative sector continue to present opportunities as well as challenges for our electric cooperative members.

These trends include (i) changing federal government programs and policies for electric utilities;

(ii) increased electricity demand;

(iii) grid reliability risk;

and (iv) expanded investments by many electric cooperatives to deploy broadband services.

Changing Federal Government Programs and Policies

Following the 2024 election, the new Administration and Congress are changing policies related to the electric utility industry.

Congress previously created various funding opportunities that electric cooperatives may take advantage of when deploying renewable energy and other clean energy technologies through the 2022 Inflation Reduction Act (“IRA”), Congress recently passed the One Big Beautiful Bill Act, which significantly reduces federal incentives for renewable energy development.

These changes are expected to make it more challenging for electric cooperatives to affordably expand renewable energy generation within their portfolios.

In contrast, incentives for technologies such as battery storage and carbon capture remain largely unchanged.

Congress is also attempting to pass permitting reform, which will streamline the permitting process and reduce costs of grid infrastructure improvements.

The federal government is undergoing a deregulatory push that seeks to reduce the amount of federal review and other requirements for grid investments.

For example, the Environmental Protection Agency (“EPA”) is in the process of revising greenhouse gas emission requirements for new and existing coal and natural gas power plants.

This may impact coal plant retirement schedules and provide certainty surrounding building new natural gas plants to meet growing electricity demand.

The Administration is assessing the Federal Emergency Management Agency (“FEMA”), including how to improve efficiencies and the appropriate role of federal and state governments in the allocation and distribution of disaster relief.

Finally, the Administration is in the process of introducing tariffs on imported goods in order to improve the trade deficit and boost domestic manufacturing.

Certain utility assets, such as transformers, solar panels and batteries, are highly sensitive to global supply chain changes.

While tariffs may increase short-term costs and lead times for key assets, they may also catalyze long-term supply chain resilience and encourage domestic manufacturing of utility assets.

CFC and electric cooperative partners are monitoring the potential impact to cooperatives of these evolving changes in federal policy.

Increased Electricity Demand

According to S&P Global Inc., electricity demand is f orecasted to grow substantially in all U.S.

regions through 2040.

Demand growth is driven primarily by new data centers and new manufacturing facilities in the coming decade followed by electric vehicle growth and beneficial electrification trends.

The rapid expansion of artificial intelligence and cloud computing technologies is the primary driver of new data center construction, further accelerating electricity demand.

Rural electric cooperatives have become increasingly supportive of beneficial electrification, which refers to the replacement of fossil fuel-powered systems with electrical ones, such as electric vehicles and heat pumps, in a way that reduces overall emissions, while providing benefits to the environment and to households.

The increased support among electric cooperatives reflects an expectation that beneficial electrification will result in increased sales, while also saving money for members and reducing carbon emissions.

Certain areas of the country will experience more growth than others, but we can expect significant investments in new power supply, transmission and other related infrastructure in order to meet this expected demand.

Grid Reliability Risk

The 2024 Long-Term Reliability Assessment by the North American Electric Reliability Corporation (“NERC”) highlights the key risks to grid reliability.

The report emphasizes challenges such as increased electricity demand and retirements of baseload power plants.

It also highlights the risk of the transition to renewable energy sources, which presents reliability concerns due to their intermittent nature during a period of increased electricity demand.

Other grid reliability risks include extreme weather events, including hurricanes, winter storms and heat waves, which can strain grid infrastructure and cause widespread outages.

We have observed an increase in capital investments by electric cooperatives to proactively strengthen existing electric systems as well as replace systems in the aftermath of damage from weather-related incidents.

The adverse impact on electric systems from weather-related incidents has resulted in a heightened awareness by electric cooperatives of the need to focus attention on making infrastructure upgrades to improve both the resiliency and reliability of electric systems.

Cybersecurity threats also loom large, with increasing sophistication in attacks targeting critical infrastructure.

Electric cooperatives are investing in operational resilience, including workforce training, cybersecurity preparedness and enhanced situational awareness tools.

Expanded Investments to Deploy Broadband Services

Many rural electric distribution cooperatives have made or are making infrastructure investments that include building fiber optic lines to improve electric grid system reliability, efficiency and cost savings, as fiber operations offer enhanced communication to monitor electric systems, identify outages and speed restoration.

Some of these electric cooperatives are leveraging these fiber assets to offer access to broadband services to the communities they serve, either directly or by partnering with local telecommunication companies and others.

We are currently aware of 216 broadband projects by different CFC member cooperatives, and we have financed or are financing 130 of these 216 broadband projects.

Capital expenditures for the completion of these 216 broadband projects are expected to total approximately $13,680 million.

We believe that the capital expenditures for the completion of the broadband projects that we have financed or are financing will total approximately $5,537 million.

Our aggregate loans outstanding to CFC electric distribution cooperative members relating to broadband projects, which we started tracking in October 2017, increased to approximately $3,441 million as of May 31, 2025, from approximately $3,103 million as of May 31, 2024.

The three states with the largest CFC loans outstanding for broadband projects were Arkansas, Indiana and Missouri, and broadband loans outstanding for these states totaled $411 million, $373 million and $356 million, respectively, as of May 31, 2025.

Many of these broadband projects are also financially supported by various states and the federal government through grant programs, which reduces the investment risk for our electric cooperative members.

Although we expect our member electric cooperatives to continue in their efforts to expand broadband access to unserved and underserved communities, their investment in broadband projects has slowed down in the recent year and is expected to increase at a slower rate.

We believe the above trends and current investment priorities of our electric cooperative members will require funding and may result in an increased demand for capital from CFC.

During FY2026, substantially all of our new long-term debt issuances were unsecured as we continued to access diverse funding sources and strengthen our liquidity position, including:

• Issued approximately $4,425 million of long-term u nsecured dealer medium-term notes to institutional investors, $600 million of long-term unsecured subordinated notes in a private placement transaction, and $250 million of secured long-term notes under the Farmer Mac revolving note purchase agreement.

Additionally, s ubsequent to FY2026, we issued $300 million of dealer medium-term notes;

• Redeemed $650 million of high-cost subordinated deferrable debt and recognized $6 million of losses on early extinguishment of debt related to unamortized debt issuance costs in our consolidated statements of operations for FY2026;

• Expanded committed liquidity by increasing our bank revolving line of credit agreements by $200 million to $3,500 million while also extending maturities by one year and adding a new $450 million committed loan facility with the U.S.

Treasury Department’s Federal Financing Bank (“FFB”) under the USDA Guaranteed Underwriter Program (“Guaranteed Underwriter Program”), bringing available capacity under the Guaranteed Underwriter Program to $1,800 million.

During FY2026, Moody’s, Fitch and S&P each affirmed CFC’s credit ratings and stable outlook.

As of May 31, 2026, available liquidity totaled $8,161 million.

While this was $1,601 million less than our $9,762 million of scheduled debt obligations over the next 12 months, 29% of those obligations, or $2,821 million, represented member short-term investments, which historically remained stable and are expected to be reinvested with CFC.

Excluding member short-term investments, available liquidity exceeded by $1,220 million, or 1.2 times, our scheduled 12-month debt obligations.

We also expect to receive $2,184 million of scheduled long-term loan principal payments over the next 12 months.

We provide additional information on our available liquidity and financing activities under “Liquidity Risk” in this Report.

Industry Trends Affecting Outlook

Emerging developments and trends in the electric cooperative sector continue to present both opportunities and challenges for our electric cooperative members and influence the demand for capital and credit products we provide.

Key trends include the changing federal regulatory and financing landscape, increased electricity demand and large-load development, significant generation and transmission capital investment, supply chain and equipment constraints, and continued focus on grid reliability and resiliency.

These trends may affect the timing, size and type of financing our members require.

Federal financing programs, including traditional RUS electric loan programs and the New ERA and PACE programs, remain important sources of capital for electric cooperatives;

however, timing gaps between award, approval and disbursement are expected to continue to generate demand for interim and bridge financing from CFC.

In addition, continued investment in generation, transmission, system hardening and grid modernization may increase demand for capital from CFC.

Management does not believe data center-related development has, to date, materially contributed to recent loan growth, although successful large-load project development could drive significant future infrastructure investment and corresponding demand for capital from CFC.

For a more detailed discussion of these industry trends, see “ Item 1.

Business—Industry—Electric Cooperative Industry Trends and Developments.

Macroeconomic Outlook

Following its meeting held in June 2025, the Federal Open Market Committee (“FOMC”) of the Federal Reserve kept its target for the federal funds rate unchanged at a range of 4.25%–4.50%.

The FOMC reiterated that (i) the U.S.

economy continues to expand at a solid pace, (ii) the unemployment rate remains low and (iii) inflation remains somewhat elevated.

The Federal Reserve ’ s June 2025 median projection for gross domestic product (“GDP”) annual growth rate in 2025 is 1.4%, down from 1.7% in March 2025.

Its median projection for Personal Consumption Expenditures (“PCE”) inflation in 2025 is at 3.0%, up from 2.7% in March 2025, and for U.S.

unemployment in 2025 is 4.5%, up from 4.4% in March 2025.

As of June 2025, federal funds futures markets anticipated three 25 basis point rate cuts:

one in the fourth quarter of 2025,

another in the first quarter of 2026 and a final one in the second quarter of 2026.

This would bring the target rate range to 3.50%–3.75% by mid-2026.

Overall, the market expects interest rates to decline, with a steepening yield curve ahead.

Geopolitical tensions, including the ongoing conflict with Iran, have contributed to uncertainty in the broader macroeconomic environment, including volatility in energy markets and continued concerns regarding inflation and interest rates.

Although CFC has not identified a material direct impact of these developments on its financial condition, results of operations or liquidity as of the date of this report, a prolonged period of geopolitical instability could contribute to higher borrowing costs, increased operating and capital costs for CFC’s members, and broader market volatility.

CFC continues to monitor these developments and the potential effects on the interest rate environment, capital markets and member operating conditions.

Following its meeting held in June 2026, the Federal Open Market Committee of the Federal Reserve held the federal funds rate range unchanged at 3.50% to 3.75% and reaffirmed its commitment to maintaining an ample-reserves operating regime.

The Committee characterized economic activity as expanding at a solid pace, although uncertainty remained elevated.

Job gains have kept pace with labor force growth, and the unemployment rate has changed little.

Inflation remained elevated, reflecting, in part, supply shocks in certain sectors, including energy.

The Committee also cited developments in the Middle East as contributing to elevated uncertainty regarding the economic outlook.

The Federal Reserve’s June 2026 median projection for real gross domestic product (“GDP”) growth in 2026 is 2.2%, down from 2.4% in its March 2026 projection.

The median projection for Personal Consumption Expenditures inflation in 2026 increased to 3.6% from 2.7% in its March 2026 projection.

unemployment rate in 2026 is projected to average 4.3%, down slightly from 4.4% in its March 2026 projection.

The median projection for the federal funds rate at the end of 2026 is 3.8%.

In June 2026, fed funds futures no longer implied an easing path and instead market pricing implied a roughly flat to modestly higher rate trajectory.

Therefore, futures contracts implied the likelihood of a 25-basis-point increase in the federal funds rate over the following 12 months.

Overall, implied market forecasts point to an increase in short-term interest rates, while consensus forecasts indicate a slight decline in long-term interest rates through the first half of calendar year 2027.

Projected Reported Results

Based on our current forecast assumptions, including the yield curve forecast noted above, we project increases in our reported net interest income and net interest yield over the next 12 months compared with the 12-month period ended May 31, 2025.

Based on our current forecast assumptions, including the interest rates forecast noted above, we project increases in our reported net interest income and net interest yield over the next 12 months compared with the 12-month period ended May 31, 2026.

See “Market Risk—Interest Rate Risk Assessment” for an additional discussion.

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

• An increase in our adjusted net interest income over the next 12 months relative to the 12-month period ended May 31, 2025, primarily driven by an increase in interest-earning assets due to projected loan growth.

• A slight decrease in adjusted net interest yield over the next 12 month s, primarily due to the current shape of the yield curve, our baseline interest rates forecast and that our interest-earning assets, primarily lines of credit, are repricing faster than our interest-bearing liabilities.

Additionally, lower-cost debt maturing in the near term will need to be refinanced at a forecasted higher interest rate.

See “Market Risk—Interest Rate Risk Assessment” in this Report for an additional discussion.

• A decrease in our adjusted net income over the next 12 months, primarily due to an increase in projected operating expenses.

• A decrease in adjusted TIER over the next 12 months, primarily attributable to increases in projected adjusted interest expense and operating expenses.

• An increase in our adjusted debt-to-equity, primarily due to the projected increase in total debt outstanding to fund anticipated growth in our loan portfolio.

As stated above, we exclude the impact of unrealized derivative forward fair value gains and losses from our non-GAAP financial measures.

• An increase in our adjusted net interest income and a slight decline in the adjusted net interest yield over the next 12 months relative to the 12-month period ended May 31, 2026.

The projected increase in adjusted net interest income is primarily driven by an increase in interest-earning assets due to projected loan growth.

The projected slight decline in adjusted net interest yield is primarily due to the higher projected adjusted average cost of funding, attributable to changes in funding mix and the refinancing of maturing lower-cost long-term debt at forecasted higher interest rates, as well as lower expected interest rate swaps derivative cash settlement interest income.

See “Market Risk—Interest Rate Risk Assessment” in th is Report for an additional discussion.

• A decrease in our adjusted net income over the next 12 months, primarily driven by higher projected operating expenses.

• A decrease in adjusted TIER over the next 12 months, primarily attributable to projected higher operating expenses.

• Adjusted debt-to-equity to remain near current levels, as the projected increase in total debt outstanding to fund anticipated growth in our loan portfolio is offset by the projected increase in adjusted equity attributable to the forecasted adjusted net income over the next 12 months.

As stated above, we exclude the impact of unrealized derivative forward fair value gains (losses) from our non-GAAP financial measures.

As the majority of our swaps are long-term with an average remaining life of approximately 15 years as of May 31, 2026 , the unrealized periodic derivative forward value gains (losses) are largely based on future expected changes in l onger-term interest rates, which we are unable to accurately predict for each reporting period over the next 12 months.

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Projected Loan Portfolio

Based on our current forecast assumptions, we anticipate net loan growth of $2,059 million over the next 12 months.

Based on our current forecast assumptions, we anticipate net loan growth of $1,253 million over t he next 12 months.

Historically, line of credit loans activity has been fairly unpredictable due to the short-term and dynamic usage patterns of these facilities.

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This section provides a comparative discussion of our consolidated results of operations betwe en FY2026 and FY2025.

Following this section, we provide a discussion and analysis of material changes in amounts reported on our consolidated balance sheet as of May 31, 2025 and 2024.

Following this section, we provide a discussion and analysis of material changes between amounts reported on our consolidated balance sheet as of May 31, 2026 and 2025.

You should read these sections together with our “Executive Summary—Outlook” where we discuss trends and other factors that we expect will affect our future results of operations.

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Net interest income, which is our largest source of revenue, represents the difference between the interest income earned on our interest-earning assets and the interest expense on our interest-bearing liabilities.

Our net interest yield represents the

difference between the yield on our interest-earning assets and the cost of our interest-bearing liabilities plus the impact of non-interest-bearing funding.

We expect net interest income and our net interest yield to fluctuate based on changes in interest rates and changes in the amount and composition of our interest-earning assets and interest-bearing liabilities.

Our net interest yield represents the difference between the yield on our interest-earning assets and the cost of our interest-bearing liabilities plus the impact of non-interest-bearing funding.

We do not fund each individual loan with specific debt.

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Table 5 presents average balances for FY2026, FY2025 and FY2024, and for each major category of our interest-earning assets and interest-bearing liabilities, the interest income earned or interest expense incurred, and the average yield or cost.

Table 5 also presents non-GAAP adjusted interest expense, adjusted net interest income and adjusted net interest yield, which reflect the inclusion of net accrued periodic derivative cash settlements expense in interest expense.

We provide reconciliations of our non-GAAP financial measures to the most comparable U.S.

GAAP financial measures under “Non-GAAP Financial Measures and Reconciliations.”

GAAP financial measures under the section “Non-GAAP Financial Measures and Reconciliations.”

Average Balances, Interest Income/Interest Expense and Average Yield/Cost

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Farmer Mac notes payable 3,837,186 150,458 3.92 3,657,598 149,380 4.08 3,694,975 158,627 4.29

Other notes payable 4,610 253 5.47 2,219 106 4.78 3,424 88 2.57

7,199 368 5.11 4,610 253 5.47 2,219 106 4.78

Subordinated deferrable debt (7)

1,250,835 79,417 6.35 1,303,900 86,354 6.62 1,222,951 82,611 6.76

Subordinated certificates 1,148,409 51,825 4.51 1,191,593 53,016 4.45 1,209,490 53,502 4.42

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Interest expense 1,494,894 4.22 1,442,279 4.28 1,339,088 4.17

Net periodic derivative cash settlements interest (income) expense (9)

Net periodic derivative cash settlements interest income (11)

(63,953) (0.95) (99,219) (1.36) (127,166) (1.67)

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Short-term borrowings presented on our consolidated balance sheets related to medium-term notes, Farmer Mac notes payable and other notes payable are reported in the respective category for presentation purposes in Table 5.

The period-end amounts reported as short-term borrowings on our consolidated balances sheets, which are excluded from the calculation of average short-term borrowings presented in Table 5, totaled $451 million, $1,021 million and $367 million as of May 31, 2025, 2024 and 2023, respectively.

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

(6) Net interest spread represents the difference between the average yield on total average interest-earning assets and the average cost of total average interest-bearing liabilities.

The period-end amounts reported as short-term borrowings on our consolidated balance sheets, which are excluded from the calculation of average short-term borrowings presented in Table 5, totaled $324 million, $451 million and $1,021 million as of May 31, 2026, 2025 and 2024, respectively.

(5) Collateral trust bonds represent secured obligations sold to investors in the capital markets, including those issued through both public offerings and private placement transactions.

(6) Other includes the average balance of lease liabilities and the interest expense for our finance leases.

(7) Subordinated deferrable debt represents unsecured obligation issued to investors in the capital markets, including those issued through both public offerings and private placement transactions.

(8) Net interest spread represen ts the difference between the average yield on total average interest-earning assets and the average cost of total average interest-bearing liabilities.

Adjusted net interest spread represents the difference between the average yield on total average interest-earning assets and the adjusted average cost of total average interest-bearing liabilities.

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Rate/Volume Analysis of Changes in Interest Income/Interest Expense

2025 versus 2024

2024 versus 2023

2026 versus 2025 2025 versus 2024

Total Variance Due To:

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Farmer Mac notes payable 1,078 7,335 (6,257) (9,247) (1,605) (7,642)

Other notes payable 147 114 33 18 (31) 49

Other 115 142 (27) 147 114 33

Subordinated deferrable debt (6,937) (3,514) (3,423) 3,743 5,468 (1,725)

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Reported Net Interest Income

Reported net interest income of $261 million for FY2025 increased by $7 million, or 3%, from FY2024, driven by an increase in average interest-earning assets of $1,772 million, or 5%, partially offset by a decrease in the net interest yield of 2 basis points, or 3%, to 0.72%.

Reported net interest income of $302 million for FY2026 increased by $41 million, or 16%, from FY2025, driven by a combined impact of an increase in average interest-earning assets of $1,960 million, or 5%, and an increase in the net interest yield of 7 basis points, or 10%, to 0.79%.

• Average Interest-Earning Assets :

The increase in average interest-earning assets of 5% during FY2025 was primarily attributable to growth in average total loans of $2,082 million, or 6%, partially offset by a decrease of $310 million in our average total investments, which include cash, time deposits and investment securities.

The average loans increase was driven primarily by an increase in average long-term fixed-rate loans of $1,407 million and an increase in average line of credit loans of $624 million, as members continued to advance loans to fund capital expenditures and for working capital purposes.

In addition, the increase in line of credit loans during FY2025 was also attributable to borrowings under emergency line of credit loans by our members primarily for Hurricane Helene recovery costs.

The increase in average interest-earning assets of $1,960 million, or 5%, during FY2026 was primarily attributable to growth in average total loans of $2,111 million, or 6%, partially offset by a decrease of $150 million in our average total investments, which include cash and investment securities.

The increase in average loans was driven by increases in average long‑term fixed‑rate loans, line of credit loans, and long-term variable-rate loans of $998 million, $743 million, and $370 million, respectively, as members continued to advance loans to fund capital expenditures and for working capital purposes.

In addition, the increase in average line of credit loans was also attributable to higher average borrowings under emergency line of credit loans by our members in FY2026 compared with FY2025.

• Net Interest Yield:

The decrease in the net interest yield of 2 basis points, or 3% , was primarily attributable to the combined impact of an increase in our average cost of borrowings of 11 basis points to 4.28%, which was partially offset by an increase in the average yield on interest-earning assets of 7 basis points to 4.71% and an increase in the benefit from non-interest-bearing funding of 2 basis point to 0.29%.

The increase in average yields on long-term fixed-rate loans was the primary driver for the increase in the average yield on interest-earning assets, while the interest rates for variable-rate and line of credit loans decreased due to the federal funds rate cuts during FY2025 .

Meanwhile, our average cost of borrowings increased due to the long-term debt issued at higher interest rates after May 31, 2024 .

The increase in the net interest yield of 7 basis points, or 10% , was primarily attributable to a decrease in our average cost of borrowings of 6 basis points to 4.22% and an increase in the benefit from non-interest-bearing funding of 1 basis point to 0.30%.

The decrease in our average cost of borrowings was driven by the lower average cost of short-term borrowings and variable-rate long-term debt due to the federal funds rate cuts during FY2026.

The average yield on our interest-earning assets remained unchanged at 4.71%, as higher average yields on long‑term fixed‑rate loans were offset by lower interest rates on variable‑rate and line‑of‑credit loans, reflecting federal funds rate cuts during FY2026 .

Adjusted Net Interest Income

Adjusted net interest income of $360 million for FY2025 decreased by $21 million , or 6%, from FY2024, driven by a decrease in the adjusted net interest yield of 11 basis points, or 10%, to 1.00%, partially offset by an increase in average interest-earning assets of $1,772 million, or 5%.

Adjusted net interest income of $366 million for FY2026 increased by $6 million , or 2%, from FY2025, driven by an increase in average interest-earning assets of $1,960 million, or 5%, partially offset by a decrease in the adjusted net interest yield of 4 basis points, or 4%, to 0.96%.

• Average Interest-Earning Assets:

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• Adjusted Net Interest Yield:

The decrease in the adjusted net interest yield of 11 basis points, or 10%, was attributable to an increase in our adjusted average cost of borrowings of 22 basis points to 3.99%, which was partially offset by the combined impact of an increase in the average yield on interest-earning assets of 7 basis points to 4.71% and an increase in the benefit from non-interest-bearing funding of 4 basis points to 0.28%.

The increase in adjusted average cost of borrowings was attributable to the long-term debt issued at higher interest rates after May 31, 2024, and a lower average yield earned on our interest rate swaps as discussed below under the “Derivatives Cash Settlements” section.

We discussed above the primary drivers for the increases in the average yield on interest-earning assets.

The decrease in the adjusted net interest yield of 4 basis points, or 4%, was attributable to an increase in our adjusted average cost of borrowings of 5 basis points to 4.04%, partially offset by an increase in the benefit from non-interest-bearing funding of 1 basis point to 0.29%.

T he average yield on our interest-earning assets remained unchanged at 4.71%, as discussed above.

Also, we discussed above the primary drivers for the decrease in the average cost of borrowings.

However, the primary driver of the increase in adjusted average cost of borrowings in FY2026 compared with FY2025 was the lower average yield earned on our interest rate swaps derivative cash settlements in FY2026 , as discussed below.

Derivative Cash Settlements

We include the net periodic derivative cash settlements interest income (expense) amounts on our interest rate swaps in the calculation of our adjusted average cost of borrowings, which, as a result, also impacts the calculation of adjusted net interest income and adjusted net interest yield.

Because our derivative portfolio consists of a higher proportion of pay-fixed swaps than receive-fixed swaps, the net periodic derivative cash settlements interest income (expense) amounts generally change based on changes in the floating interest rates, as the benchmark variable rate for the floating rate payments is based on the daily compounded Secured Overnight Financing Rate (“SOFR”).

When floating rates increase during the period, the floating interest amounts received on our pay-fixed swaps increase and, conversely, when floating rates decrease, the floating interest amounts received on our pay-fixed swaps decrease.

We recorded net periodic derivative cash settlements interest income of $64 million, $99 million and $127 million for FY2026, FY2025 and FY2024, respectively.

The decrease in derivative cash settlements interest income between FY2025 and FY2024 was due to the lower net interest rates received on our pay-fixed swaps in FY2025 , compared with FY2024, due to the federal funds rate cuts during FY2025 and an $8 million gain related to treasury locks recorded in FY2024.

The decrease in derivative cash settlements interest income between FY2026 and FY2025 was due to the lower net interest rates received on our pay-fixed swaps in FY2026 , compared with FY2025, due to the federal funds rate cuts during FY2026 .

See “Note 10—Derivative Instruments and Hedging Activities” in this Report for additional information on our treasury locks activity.

See “Non-GAAP Financial Measures and Reconciliations” for additional information on our non-GAAP financial measures, including a reconciliation of these measures to the most comparable U.S.

See “Non-GAAP Financial Measures and Reconciliations” in this Report for additional information on our non-GAAP financial measures, including a reconciliation of these measures to the most comparable U.S.

GAAP financial measures.

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Our p rovision (benefit) for credit losses for each period is driven by changes in our measurement of lifetime expected credit losses for our loan portfolio recorded in the allowance for credit losses.

Our allowance for credit losses and allowance coverage ratio was $41 million and 0.11%, respectively, as of May 31, 2025.

In comparison, our allowance for credit losses and allowance coverage ratio was $49 million and 0.14%, respectively, as of May 31, 2024.

We recorded a benefit for credit losses of $8 million f or FY2025, resulting from a reduction in the asset-specific allowance for a nonperforming loan attributable to higher actual than expected payments received on this loan during FY2025.

Our allowance for credit losses and allowance coverage ratio decreased to $30 million and 0.08%, respectively, as of May 31, 2026, compared with $41 million and 0.11%, respectively, as of May 31, 2025.

We recorded a benefit for credit losses of $10 million f or FY2026, driven by a $9 million reduction in the asset-specific allowance resulting from higher-than-expected payments received on a nonaccrual CFC power supply loan , and an approximately $2 million decrease in collective allowance, primarily reflecting improved borrower credit quality and refinements to our borrower risk rating methodology in FY2026.

In comparison, we recorded a benefit for credit losses of $8 million for FY2025, resulting from a reduction in the asset specific allowance for a nonaccrual CFC power supply loan attributable to higher-than-expected payments received on the loan.

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.

In comparison, we recorded a benefit for credit losses of $5 million for FY2024, resulting from a decrease of $8 million in the asset-specific allowance for a nonperforming CFC power supply loan and a recovery of $1 million attributable to additional loan payments received on the previously charged-off loans, partially offset by an increase of $4 million in the collective allowance.

The increase in the collective allowance for FY2024 was due to the growth in our loan portfolio, a slight decline in the overall credit quality of our loan portfolio and slightly higher expected default rates derived from third-party utility sector default data used in estimating the allowance for credit losses.

We discuss our methodology for estimating the allowance for credit losses in “Note 1—Summary of Significant Accounting Policies—Allowance for Credit Losses—Loan Portfolio.” We also provide additional information on our allowance for credit losses below under section “Credit Risk—Allowance for Credit Losses” and “Note 5—Allowance for Credit Losses” in this Report.

Non-Interest Income

Non-interest income consists of fee and other income, gains and losses on derivatives not accounted for in hedge accounting relationships, and gains and losses on equity and debt investment securities, which consist of both unrealized and realized gains and losses.

Table 7 presents the components of non-interest income recorded in our consolidated statements of operations.

Non-Interest Income

Non-Interest Income (Loss)

Non-interest income (loss) consists of fee and other income, gains and losses on derivatives not accounted for in hedge accounting relationships, and gains and losses on equity and debt investment securities, which consist of both unrealized and realized gains and losses.

Table 7 presents the components of non-interest income (loss) recorded in our consolidated statements of operations.

Non-Interest Income (Loss)

Year Ended May 31,

(Dollars in thousands) 2026 2025 2024

Non-interest income components:

Non-interest income (loss) components:

Fee and other income $ 28,719 $ 23,597 $ 22,792

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82,166 (5,851) 392,037

Investment securities gains (losses)

5,674 10,772 (4,974)

Investment securities gains 1,128 5,674 10,772

Total non-interest income $ 112,013 $ 23,420 $ 425,601

The significant variance in non-interest income between fiscal years was primarily attributable to changes in the derivative gains (losses) recognized in our consolidated statements of operations.

In addition, we experienced a decrease in gains recorded on our debt and equity investment securities of $5 million for FY2025 compared with FY2024.

We expect period-to-period market fluctuations in the fair value of our equity and debt investment securities, which we report together with realized gains and losses from the sale of investment securities in our consolidated statements of operations.

The variance in non-interest income (loss) between fiscal years was primarily attributable to changes in the derivative gains (losses) recognized in our consolidated statements of operations.

In addition, we experienced a decrease in gains recorded on our debt and equity investment securities of $5 million for FY2026 compared with FY2025, driven by period-to-period market fluctuations in fair value, including both realized and unrealized gains (losses), and lower balances of debt securities resulting from maturities.

Derivative Gains (Losses)

As of May 31, 2025 and 2024 , our derivatives portfolio included interest rate swap agreements not designated for hedge accounting, composed of pay-fixed swaps and receive-fixed swaps, with a majority of the benchmark variable rate for the floating-rate payments based on daily compounded Secured Overnight Financing Rate (“SOFR”) as of May 31, 2025 .

As of May 31, 2026 and 2025 , our derivatives portfolio included interest rate swap agreements not designated for hedge accounting, composed of pay-fixed swaps and receive-fixed swaps, with the benchmark variable rate for the floating-rate payments based on daily compounded SOFR as of May 31, 2026 .

Additionally, treasury locks may be used to manage the interest rate risk associated with future debt issuance or repricing and are typically designated as cash flow hedges.

We did not have any derivatives designated as accounting hedges as of May 31, 2026 and 2025 .

See “Note 10—Derivative Instruments and Hedging Activities” in this Report for detailed information on our cash flow hedge activities during FY2025, FY2024 and FY2023.

See “Note 10—Derivative

Instruments and Hedging Activities” in this Report for detailed information on our cash flow hedge activities during FY2026, FY2025 and FY2024.

The total notional amount for our interest rate swaps was $6,566 million and $7,252 million as of May 31, 2026 and 2025, respectively.

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Consequently, changes in medium- and longer-term swap rates generally have a more pronounced impact on the net fair value o f our swap portfolio.

A s of May 31, 2025, the a verage remaining maturity of our pay-fixed and recei ve-fixed swaps w as 16 years and two years, respectively, compared with 18 years and two years, respectively, as of May 31, 2024 .

A s of May 31, 2026, the a verage remaining maturity of our pay-fixed and recei ve-fixed swaps w as 17 years and four years, respectively, compared with 16 years and two years, respectively, as of May 31, 2025 .

Table 8 presents the components of net derivative gains (losses) recorded in our consolidated statements of operations.

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$ 82,166 $ (5,851) $ 392,037

We recorded derivative losses of $6 million for FY2025, attributable to decreases in interest rates across the swap curve, with the exception of the 30-year swap rate, which increased slightly during FY2025.

In comparison, we recorded derivative gains of $392 million for FY2024, primarily attributable to increases in the medium- and longer-term swap interest rates during FY2024.

____________________________

(1) During FY2026, in connection with the redemption of our subordinated deferrable debt due 2043 (the “2043 Notes”), we terminated $300 million in notional amount of our pay-fixed interest rate swaps hedging the 2043 Notes.

The termination resulted in an immaterial amount of settlement gains recorded in derivative gains (losses) in our consolidated statements of operations.

See “Note 8—Subordinated Deferrable Debt” for details on the redemption of the 2043 Notes.

We recorded derivative gains of $82 million for FY2026, primarily attributable to increases in the medium- and longer-term swap interest rates during FY2026.

We present comparative swap curves, which depict the relationship between swap rates at varying maturities, for our reported periods in Table 9 below.

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Total non-interest expense $ (161,071) $ (152,283) $ (129,560)

Non-interest expense of $152 million for FY2025, increased by $23 million, or 18%, from FY2024, primarily attributable to an increase in operating expenses, driven by higher expenses recorded for salaries and employee benefits, consulting, depreciation and amortization, member relations and board expenses.

In addition, during FY2025, we recorded an $8 million

non-interest expense from an impairment loss on our equity investment in Riesel HoldCo, LLC obtained in FY2023 as part of the Brazos Sandy Creek Electric Cooperative Inc.

Non-interest expense of $161 million for FY2026 increased by $9 million, or 6%, from FY2025, primarily due to higher operating expenses, partially offset by lower other non-interest expense.

The increase in operating expenses was primarily driven by higher expenses for salaries and employee benefits, member relations, information technology, and depreciation

and amortization, partially offset by lower consulting e xpense.

We recorded $7 million of other non-interest expense in FY2026, including $6 million of losses on early extinguishment of our subordinated deferrable debt.

In comparison, we recorded $9 million of other non-interest expense in FY2025, including an $8 million impairment loss on our equity investment in Riesel HoldCo, LLC obtained in the fiscal year ended May 31, 2023 as part of the Brazos Sandy Creek Electric Cooperative Inc.

bankruptcy filing.

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Net Income (Loss) Attributable to Noncontrolling Interests

We recorded a net income attributable to noncontrolling interests of less than $1 million for FY2025, which represented 100% of the results of operations of NCSC, as the members of NCSC own or control 100% of the interest in its company during FY2025.

In comparison, we recorded a net income attributable to noncontrolling interests of $1 million for FY2024 and less than $1 million for FY2023, which represented 100% of the results of operations of NCSC and RTFC, as the members of NCSC and RTFC own or control 100% of the interest in their respective companies during FY2024 and FY2023.

On December 1, 2023, we completed the RTFC sale transaction and RTFC was subsequently dissolved.

We recorded a net income attributable to noncontrolling interests of $1 million and less than $1 million for FY2026 and FY2025, respectively, which represented 100% of the results of operations of NCSC, as the members of NCSC owned or controlled 100% of the interest in the company during FY2026 and FY2025.

We recorded a net income attributable to noncontrolling interests of $1 million for FY2024, which represented 100% of the results of operations of NCSC and Rural Telephone Finance Cooperative (“RTFC”), as the members of NCSC and RTFC owned or controlled 100% of the interest in their respective companies during FY2024 .

RTFC was consolidated into our financial statements prior to the sale of its business to NCSC in December 2023 and was subsequently dissolved.

The fluctuations in net income (loss) attributable to noncontrolling interests are primarily due to changes in the fair value of NCSC’s derivative instruments recognized in NCSC’s earnings.

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Total assets increased by $1,379 million, or 4%, in FY2026 to $39,704 million as of May 31, 2026, primarily due to growth in our loan portfolio.

We experienced an increase in total liabilities of $2,056 million, or 6%, to $35,222 million as of May 31, 2025, largely due to issuances of debt to fund the growth in our loan portfolio.

We experienced an increase in total liabilities of approximately $1,170 million, or 3%, to $36,392 million as of May 31, 2026, largely due to issuances of debt to fund the growth in our loan portfolio.

Total equity increased by $209 million to $3,312 million as of May 31, 2026, primarily attributable to our reported net income of $263 million for FY2026, partially offset by the CFC Board of Directors’ authorized patronage capital retirement of $53 million during FY2026.

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

The increase in loans to members of $2,538 million, or 7%, from May 31, 2024, was primarily attributable to net increases in long-term and line of credit loans of $1,405 million and $1,130 million, respectively.

Of the increase in line of credit loans, 78% was attributable to borrowings under emergency line of credit loans by our members primarily for Hurricane Helene recovery costs.

The remaining 22% was primarily attributable to funding provided for member working capital and NCSC renewable project financing.

Long-term loan advances totaled $3,109 million during FY2025 , of which approximately 90% was provided to members for capital expenditures, 7% was provided for bridge financing, 2% was provided for the refinancing of loans made by other lenders and 1% was provided for other purposes.

In com parison, long-term loan advances totaled $3,371 million during FY2024, of which approximately 93% was provided to members for capital expenditures, 1% was provided for the refinancing of loans made by other lenders and 6% was provided for other purposes, primarily business acquisitions.

The increase in loans to members of $1,342 million, or 4%, from May 31, 2025, was primarily attributable to the growth in long-term loans, which increased $1,310 million during FY2026.

Long-term loan advances totaled $3,197 million during FY2026 , of which approximately 87% was provided to members for capital expenditures, 5% was provided for business acquisitions, 1% was provided for bridge financing, 1% was provided for the refinancing of loans made by other lenders and 6% was provided for other purposes, primarily for wholesale power supply contract buyout payments.

In com parison, long-term loan advances totaled $3,109 million during FY2025, of which approximately 90% was provided to members for capital expenditures, 7% was provided for bridge financing, 2% was provided for the refinancing of loans made by other lenders and 1% was provided for other purposes.

Of the $3,197 million total long-term loans advanced during FY2026, $2,745 million were fixed-rate loan advances with a weighted average fixed-rate term of eight years.

In comparison, of the $3,371 million total long-term loans advanced during FY2024 , $3,155 million were fixed-rate loan advances with a weighted average fixed-rate term of 11 years.

The weighted average term selected by our members on the long-term fixed-rate loans has continued to decline due to the elevated interest rate environment.

In comparison, of the $3,109 million total long-term loans advanced during FY2025 , $2,635 million were fixed-rate loan advances with a weighted average fixed-rate term of eight years.

The weighted average rate term selected by our members on the long-term fixed-rate loans has continued to be shorter due to the elevated interest rate environment.

Long-term fixed-rate loans that repriced during FY2026 totaled approximately $1,189 million, compared with $562 million during FY2025.

As a result of these shorter rate term selections, the amount of long-term fixed-rate loans coming up for repricing has increased significantly, and we expect this amount to increase further over the next 12 months.

Our aggregate loans outstanding to CFC electric distribution cooperative members relating to broadband projects, which we started tracking in October 2017, increased to an estimated $3,455 million as of FY2026, from approximately $3,441 million

as of May 31, 2025.

Although we expect our member electric cooperatives to continue in their efforts to expand broadband access to unserved and underserved communities, their investment in broadband projects has slowed down in recent years and is expected to increase at a slower rate.

As a result, we expect broadband related loan advances to moderate.

We provide information on the credit performance and risk profile of our loan portfolio below under the section “Credit Risk—Loan Portfolio Credit Risk” in this Report.

Also refer to “Item 1.

Business—Loan and Guarantee Programs” and “Note 4—Loans” in this Report for addition information on our loans to members.”

Business—Loan and Guarantee Programs” and “Note 4—Loans” in this Report for additional information on our loans to members.

We utilize both secured and unsecured short-term borrowings and long-term debt as part of our funding strategy and asset/liability interest rate risk management.

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We offer various short- and long-term unsecured debt securities to our members and their affiliates, including commercial paper, select notes, daily liquidity fund notes, medium-term notes and subordinated certificates.

We also issue commercial paper, medium-term notes and collateral trust bonds in the capital markets.

We also issue commercial paper, medium-term notes, subordinated deferrable debt and collateral trust bonds in the capital markets.

Additionally, we have access to funds under borrowing arrangements with banks, other noncapital markets and U.S.

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Daily liquidity fund notes Demand note Members and affiliates Unsecured

Securities sold under repurchase agreements 1 to 90 days Capital markets Secured

Other funding programs:

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(1) Collateral trust bonds are secured by the pledge of permitted investments and eligibl e mortgage notes from distribution system borrowers in an amount at least equal to the outstanding principal amount of collateral trust bonds.

Collateral trust bonds also include those issued in a private placement transaction.

Collateral trust bonds are sold to investors in the capital markets, including those issued through both public offerings and private placement transactions.

(2) Represents notes payable under the Guaranteed Underwriter Program, which supports the Rural Economic Development Loan and Grant program.

The Federal Financing Bank provides the financing for these notes, and Rural Utilities Service (“RUS”) provides a guarantee of repayment.

The Federal Financing Bank provides the financing for these notes, and RUS provides a guarantee of repayment.

We are required to pledge eligible mortgage notes from distribution and power supply system borrowers in an amount at least equal to the outstanding principal amount of the notes payable.

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The specific terms are detailed in each respective subordinated deferrable debt’s prospectus supplement.

Subordinated deferrable debt is issued to investors in the capital markets through both public offerings and private placement transactions.

(5) Members’ subordinated certificates consist of membership subordinated certificates, loan and guarantee certificates and member capital securities, and are subordinated and junior to senior debt, subordinated debt and debt obligations we guarantee.

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Members, at par 700,916 4.08 870,849 4.61 (169,933)

Dealer, net of discounts 9,611,038 4.64 8,947,076 4.38 663,962

Dealer (1)(2)

12,216,090 4.44 9,611,038 4.64 2,605,052

Total medium-term notes 12,917,006 4.42 10,481,887 4.64 2,435,119

Collateral trust bonds (1)

6,502,403 3.70 6,895,702 3.68 (393,299)

Guaranteed Underwriter Program notes payable 5,338,722 3.38 6,456,852 3.31 (1,118,130)

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Subordinated deferrable debt (1)

1,310,282 6.19 1,329,485 6.36 (19,203)

Members’ subordinated certificates:

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____________________________

(1) Amount is presented net of unamortized discounts, premiums and issuance costs as applicable.

(2) Amount includes medium-term notes issued to both institutional and retail investors in the capital markets.

(3) Includes variable-rate debt that has been swapped to a fixed rate, net of any fixed-rate debt that has been swapped to a variable rate.

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Borrowings with an original contractual maturity of greater than one year are classified as long-term debt.

(4) Consists of long-term debt, subordinated deferrable debt and total members’ subordinated debt reported on our consolidated balance sheets.

(6) Consists of long-term debt, subordinated deferrable debt and total members’ subordinated certificates reported on our consolidated balance sheets.

Maturity classification is based on the original contractual maturity as of the date of issuance of the debt.

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Member investm ents accounted for 12% and 13% of total debt outstanding as of May 31, 2026 and 2025, respectively.

The decrease in member investments of $395 million as of May 31, 2025 compared with the prior year, was primarily due to a reduction in member commercial paper investments as our members used funds from these investments to finance capital expenditure programs and operating needs.

Over the last three fiscal years, our member investments, including both short-term and long-term investments, have averaged $4,743 million, calc ulated based on outstanding member investments as of the end of each fiscal quarter during the period.

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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.

Short-term borrowings increased to $5,091 million as of May 31, 2025, from $4,333 million as of May 31, 2024, primarily driven by an increase in outstanding dealer commercial paper of $1,702 million, partially offset by a repayment of $500 million in short-term notes payable under the Farmer Mac revolving note purchase agreement and a decrease in short-term member investments of $444 million during FY2025.

Short-term borrowings increased to $5,160 million as of May 31, 2026, from $5,091 million as of May 31, 2025, primarily due to a $132 million increase in outstanding dealer commercial paper, partially offset by an approximately $63 million decrease in short-term member investments during FY2026.

Short-term borrowings accounted for 14% and 15% of total debt outstanding as of May 31, 2026 and 2025, respectively.

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Long-term debt, defined as debt with an original contractual maturity term of greater than one year, primarily consists of medium-term notes, collateral trust bonds, notes payable under the Guaranteed Underwriter Program and notes payable under the Farmer Mac revolving note purchase agreement.

Subordinated debt consists of subordinated deferrable debt and members’ subordinated certificates.

Subordinated debt consists of subordinated deferrable debt and

members’ subordinated certificates.

Our subordinated deferrable debt and members’ subordinated certificates have original contractual maturity terms of greater than one year.

Long-term and subordinated debt increased to $29,678 million as of May 31, 2025, from $28,386 million as of May 31, 2024 , primarily due to net increases of $724 million in dealer and member medium-term notes, $417 million in notes payable under the Farmer Mac revolving note purchase agreement, $156 million in collateral trust bonds, $43 million in subordinated deferrable debt, partially offset by decreases of $35 million in notes payable under the Guaranteed Underwriter Program and $13 million in members’ subordinated certificates during FY2025.

Long-term and subordinated debt increased to $30,784 million as of May 31, 2026, from $29,678 million as of May 31, 2025.

The increase of $1,106 million reflects primarily the net issuances of $2,605 million and $132 million in dealer medium-term notes and long-term notes payable under the Farmer Mac revolving note purchase agreement, respectively.

These were partially offset by net repayments of $1,118 million, $413 million, $56 million, $43 million, and $21 million in notes payable under the Guaranteed Underwriter Program, collateral trust bonds, members’ subordinated certificates, member medium-term notes, and subordinated deferrable debt, respectively .

The remaining variance was related to the amortization of debt premium, discount and issuance costs.

Long-term and subordinated debt accounted for 86% and 85% of total debt outstanding as of May 31, 2026 and 2025, respectively.

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(1) Represents derivative forward value gains (losses) for CFC only, as total CFC equity does not include the noncontrolling interests of the variable interest entities, which we are required to consolidate.

The cumulative amounts also include CFC historical foreign currency translation adjustments recorded in net income.

We present the consolidated total derivative forward value gains (losses) in Table 35 in the “Non-GAAP Financial Measures and Reconciliations” section below.

Also, see “Note 16—Business Segments” in this Report for the statements of operations for CFC.

The increase in total equity of $91 million to $3,103 million as of May 31, 2025 compared with May 31, 2024 was attributable to our reported net income of $140 million for FY2025, partially offset by the CFC Board of Directors’ authorized patronage capital retirements of $47 million during FY2025.

Total equity increased $209 million to $3,312 million as of May 31, 2026, compared with May 31, 2025, attributable to our reported net income of $263 million for FY2026, partially offset by the CFC Board of Directors’ authorized patronage capital retirements of $53 million during FY2026.

Allocation and Retirement of Patronage Capital

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$72 million to members in the form of patronage capital and $172 million to the members’ capital reserve.

In July 2025, the CFC Board of Directors also authorized the retirement of patronage capital totalin g $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 fiscal year 2000 net earnings that had been held for 25 years pursuant to the CFC Board of Directors’ policy.

In July 2026, the CFC Board of Directors also authorized the retirement of patronage capital totalin g $62 million, of which $36 million represented 50% of the patronage capital allocation for FY2026 and $26 million represented the portion of the allocation from fiscal year 2001 net earnings 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 $62 million to members in cash in the second quarter of fiscal year 2027.

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

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

The CFC Board of Directors is required to make annual allocations of adjusted net income, if any.

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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.

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 adjusted debt-to-equity ratio.

As a result of this change, we retained 79% of adjusted net income for FY2024 in members’ capital reserve, compared with 56% for FY2023.

ENTERPRISE RISK MANAGEMENT

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• Market risk is the risk that changes in market variables, such as movements in interest rates, may adversely affect the match between the timing of the contractual maturities, repricing and prepayments of our financial assets and the related financial liabilities funding those assets.

• Operational risk is the risk of loss resulting from inadequate or failed internal controls, processes, systems, human error or external events, including natural disasters or public health emergencies, such as the COVID-19 pandemic.

Operational risk also includes cybersecurity risk, compliance risk, fiduciary risk, reputational risk and litigation risk.

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The board of directors has responsibility for the oversight and strategic direction of the ERM framework and has adopted a comprehensive risk-management policy that describes the roles and responsibilities of the board and management within this framework for identifying and managing risks.

In fulfilling its risk-management oversight duties, the board of directors receives periodic reports on business activities and risk-management activities from management, and periodically reviews important trends and emerging developments across key risks determined by management at its meetings.

In fulfilling its risk-management oversight duties, the board of directors receives periodic reports from management on business and risk-management activities, and periodically reviews important trends and emerging developments across key risks, including topics identified by management and those selected by the board for review at its meetings.

The CFC board also establishes CFC’s loan policies and has established a Loan Committee of the board comprising no fewer than six directors that reviews the performance of the loan portfolio in accordance with those policies.

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The Chief Risk Officer provides reports to the CFC Board of Directors at each regularly scheduled board meeting, and more frequently as requested by the board of directors, relating to, among other things, the ongoing progress of managing key risks at CFC given the ERM framework;

management’s responses and mitigation plan for any critical business risk trending negatively or

exceeding prevailing risk limits and guidelines as identified during the risk assessment process;

management’s responses and mitigation plan for any critical business risk trending negatively or exceeding prevailing risk limits and guidelines as identified during the risk assessment process;

the status of any gaps or deficiencies in the ERM process;

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Our loan portfolio, which represents the largest component of assets on our balance sheet, accounts for the substantial majority of our credit risk exposure.

We also engage in certain nonlending activities that may give rise to counterparty credit risk, such as entering into derivative transactions to manage interest rate risk and investment in debt and equity securities.

We also engage in certain non-lending activities that may give rise to counterparty credit risk, such as entering into derivative transactions to manage interest rate risk and investment in debt and equity securities.

Credit Risk Management

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Second, electric cooperatives face limited competition, as they tend to operate in exclusive territories not serviced by public investor-owned utilities.

Third, electric cooperatives typically are consumer-owned, not-for-profit entities that provide an essential service to end-users, the majority of which are residential customers.

Third, electric cooperatives typically are consumer-owned, not-for-profit entities that provide an essential service to end-users, the majority of which are residential custome rs.

As not-for-profit entities, rural electric cooperatives, unlike investor-owned utilities, generally are eligible to apply for assistance from federal and/or state agencies to help recover from major disasters or emergencies.

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Line of credit loans are generally unsecured.

In addition to the collateral pledged to secure our loans, distribution and power supply borrowers also are required to set rates charged to customers to

achieve certain specified financial ratios.

In addition to the collateral pledged to secure our loans, distribution and power supply borrowers also are required to set rates charged to customers to achieve certain specified financial ratios.

Table 16 presents, by legal entity and member class and by loan type, secured and unsecured loans in our loan portfolio as of May 31, 2026 and 2025.

Of our total loans outstanding, 89% and 92% were secured as of May 31, 2025 and 2024, respectively.

Of our total loans outstanding, 89% were secured as of both May 31, 2026 and 2025.

Loans—Loan Portfolio Security Profile

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Table 17 displays the outstanding loan exposure for our 20 largest borrowers, by legal entity and member class, as of May 31, 2026 and 2025.

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

Our 20 largest borrowers consisted of 12 distribution systems and eight po wer supply systems as of May 31, 2026, compared with 14 distribution systems and six power supply systems as of May 31, 2025.

The largest total exposure to a single borrower or controlled group represented approximat ely 1% of tot al loans outstanding as of both May 31, 2026 and 2025.

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Net loan exposure to 20 largest borrowers $ 7,159,896 19 % $ 6,993,778 19 %

____________________________

(1) We entered into a long-term standby purchase commitment agreement with Farmer Mac during fiscal year 2016.

Under this agreement, we may designate certain long-term loans to be covered under the commitment, subject to approval by Farmer Mac, and in the event any such loan later goes into payment default for at least 90 days, upon request by us, Farmer Mac must purchase such loan at par value.

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

Loan exposure to our 20 largest borrowers covered under the Farm er Mac agreement tota led $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.

No loans have been put to Farmer Mac for purchase pursuant to this agreement.

Geographic Concentration

Although our organizational structure and mission result in single-industry concentration, we serve a geographically diverse group of electric and telecommunications borrowers throughout the U.S.

The consolidated number of borrowers with loans outstanding totaled 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 .

Of the 899 and 885 borrowers with loans outstanding as of May 31, 2025 and

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

Although our organizational structure and mission result in single-industry concentration, we serve a geographically diverse group of electric and telecommunications borrowers throughout the United States.

The consolidated number of borrowers with loans outstanding totaled 903 and 899 borrowers as of May 31, 2026 and 2025 , respectively, located in 49 states.

Of the 903 and 899 borrowers with loans outstanding as of May 31, 2026 and 2025, respectively, 50 were electric power supply borrowers as of both May 31, 2026 and 2025 .

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 approx imately 16% a nd 17% of total loans outstanding as of each respective date.

Of the loans outstanding to Texas-based borrowers, $118 million and $126 million as 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.

Texas had 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 with loans totaling $6,294 million and $5,987 million, net of the loans covered by the Farmer Mac standby repurchase agreement as of May 31, 2026 and 2025, respectively, which represented approx imately 17% a nd 16% of total loans outstanding as of each respective date.

See “Note 4—Loans” in this Report for additional information on the Texas-based number of borrowers and loans outstanding.

Table 18 provides a breakdown, by state or U.S.

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Delaware 3 0.11 3 0.14

District of Columbia — — 1 0.03

Florida 19 4.88 21 5.40

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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.

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, nonaccrual 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.

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L oan Modifications to Borrowers Experiencing Financial Difficulty

We had no loan modifications to borrowers experiencing financial difficulty entered during FY2025.

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

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 classify loans as nonperforming at the earlier of the date when we determine:

(i) interest or principal payments on the loan are past due 90 days or more;

(ii) as a result of court proceedings, the collection of interest or principal payments based on the original contractual terms is not expected;

or (iii) the full and timely collection of interest or principal is otherwise uncertain.

Once a loan is classified as nonperforming, we generally place the loan on nonaccrual status.

Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed against earnings.

We had 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 nonperforming loan during FY2025.

We had no loan modifications to borrowers experiencing financial difficulty entered during FY2026 and FY2025.

Loans on Nonaccrual Status

We had one loan to a CFC electric power supply borrower of $8 million and $26 million that was on nonaccrual status, which represented 0.02% and 0.07% of total loans outstanding as of May 31, 2026 and 2025, respectively.

The decrease in this outstanding loan balance primarily reflected $18 million of payments received during FY2026.

Subsequent to FY2026, we received a $3 million payment on this loan, which reduced its outstanding balance to $5 million.

We discuss our policy for when a loan is placed on nonaccrual status under “Note 1—Summary of Significant Accounting Policies.”

Net Charge-Offs

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

We had no charge-offs during 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 supply loan defaults in fiscal years 2021 and 2022, we had not experienced any defaults or charge-offs in our electric utility and telecommunications loan portfolios since fiscal years 2013 and 2017, respectively.

We recorded an immaterial charge-off of $0.3 million related to a CFC electric power supply loan during FY2026.

We had no charge-offs in FY2025.

Over the past five years, we had three borrower defaults resulting in $14 million of charge-offs.

Our electric utility loan portfolio has historically experienced low levels of credit losses, as discussed below.

In our 57-year history, we have experienced only 18 defaults in our electric utility loan portfolio.

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This can be attributed to several factors:

(i) the unique organizational structure and operating environment of rural electric utility cooperatives, (ii) our lending policy that typically mandates a senior security position on borrowers’ assets and revenue for long-term loans, (iii) the significant investment our member-borrowers have in CFC and (iv) our collaborative approach when working with members in the event of a default.

(i) the unique organizational structure and operating environment of rural electric utility cooperatives, (ii) our lending policy that typically mandates a senior security position on borrowers’ assets and revenue for long-term loans, (iii) the significant investment our member-borrowers have in CFC and (iv) our collaborative and supportive approach when working with members in the event of a default.

We cite the factors that have historically contributed to the relatively low risk of default by our electric utility cooperatives, our principal lending market, above under “Credit Risk—Loan Portfolio Credit Risk.”

In comparison, since inception in 1987, we have experienced 17 defaults and cumulative net charge-offs of $427 million in our telecommunications loan portfolio, the most significant of which was a charge-off of $354 million in fiscal year 2011.

Since inception in 1987, we have experienced 17 defaults and cumulative net charge-offs of $427 million in our telecommunications loan portfolio, the majority of which relates to a $354 million charge-off in fiscal year 2011.

Since then, we have significantly reduced our exposure to the telecommunications sector, with telecommunications loans comprising approximately 2% of our total loan portfolio as of May 31, 2026.

Borrower Risk Ratings

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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.

During FY2026 , we enhanced our borrower risk rating methodology to increase the weighting of quantitative factors and to refine the qualitative factors framework, resulting in improved consistency and comparability of borrower credit risk assessments across portfolios, while maintaining alignment with evolving industry practices and internal credit risk assessment objectives.

We categorize loans in our portfolio based on our internally assigned borrower risk ratings, which are intended to assess the general creditwort hiness of the borrower and probability of default.

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Criticized loans totaled $207 million and $219 million as of May 31, 2026 and 2025, respectively, and represented approximatel y 1% of total loans outstanding as of each respective date.

The decrease of $30 million in criticized loans was due primarily to $23 million of payments received from a CFC electric power supply borrower in the doubtful category and a $4 million decrease in loans outstanding to one CFC electric distribution borrower in the special mention category.

The decrease of $12 million in criticized loans was primarily driven by $18 million in payments received from a CFC electric power supply borrower in the doubtful category, partially offset by a $6 million increase in loans outstanding in the special mention category.

Each of the borrowers with loans outst anding in the criticized category was current with regard to all principal and interest amounts due to us as of May 31, 2026 and 2025.

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We provide additional information on our nonaccrual loans in “Note 4—Loans” in this Report.

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

Th e $8 million dec rease in the allowance for credit losses was attributable to a reduction in the asset-specific allowanc e due to higher actual than expected payments received on a nonperforming loan during FY2025.

We discuss our methodology for estimating the allowance for credit losses under the current expected credit loss (“CECL”) model in “Note 1—Summary of Significant Accounting Policies—Allowance for Credit Losses —Loan Portfolio ” and provide information on management ’s judgment and the uncertainties involved in our determination of the allowance for credit losses in the below section “Critical Accounting Estimates” of this Report.

Our allowance for credit losses and allowance coverage ratio decreased to $30 million and 0.08%, respectively, as of May 31, 2026, from $41 million and 0.11%, respectively, as of May 31, 2025.

Th e $11 million dec rease in the allowance for credit losses was attributable to a $9 million reduction in the asset-specific allowanc e due to higher-than-expected payments received on a nonaccrual CFC power supply loan during FY2026, and an approximately $2 million decrease in the collective allowance, driven primarily by improved borrower credit quality and a refinement in our borrower risk rating methodology during FY2026.

We discuss our methodology for estimating the allowance for credit losses under the current expected credit loss model in “Note 1—Summary of Significant Accounting Policies—Allowance for Credit Losses —Loan Portfolio ” and provide information on management ’s judgment and the uncertainties involved in our determination of the allowance for credit losses in the below section “Critical Accounting Estimates” of this Report.

We provide additional information on our loans and allowance for credit losses under “Note 4—Loans” and “Note 5—Allowance for Credit Losses” of this Report.

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This replacement may be at a higher cost, or we may be unable to find a suitable replacement.

We manage our derivative counterparty credit exposure through diversification of our derivative positions among various counterparties and by executing derivative transactions with financial institutions that have investment-grade credit ratings and maintaining enforceable master netting arrangements with these counterparties, which allow us to n et derivative assets and liabilities with the same counterparty.

We manage our derivative counterparty credit exposure through diversification of our derivative positions among various counterparties and by executing derivative transactions with financial institutions that have investment-grade credit ratings, as well as by maintaining enforceable master netting arrangements that allow us to n et derivative assets and liabilities with the same counterparty.

We also manage the credit risk associated with our derivative counterparties by using internal credit risk analysis, limits and a monitoring process.

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The total outstanding notional amount of derivatives with these counterparties was $6,566 million and $7,252 million as of May 31, 2026 and 2025, respectively.

The highest single derivative counterparty concentration, by 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.

The highest single derivative counterparty concentration, by outstanding notional amount, accounted for approximately 25% of the total outstanding notional amount of our derivatives as of both May 31, 2026 and 2025.

While our derivative 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, we report the fair value of our derivatives on a gross basis by individual contract as either a derivative asset or derivative liability on our consolidated balance sheets.

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We define liquidity as the ability to convert assets into cash quickly and efficiently, maintain access to available funding and roll over or issue new debt under normal operating conditions and periods of CFC-specific and/or market stress, to ensure that we can meet borrower loan requests, pay current and future obligations and fund our operations in a cost-effective manner.

In addition to cash on hand and investment securities, our primary sources of funds include member loan principal repayments, committed bank revolving lines of credit, committed loan facilities under the Guaranteed Underwriter Program, a revolving note purchase agreement with Farmer Mac and proceeds from debt issuances to members and in the public capital markets.

In addition to cash on hand and investment securities, our primary sources of funds include member loan principal and interest repayments, committed bank revolving lines of credit, committed loan facilities under the Guaranteed Underwriter Program, a revolving note purchase agreement with Farmer Mac and proceeds from debt issuances to members and in the public capital markets.

Our primary uses of funds include loan advances to members, principal and interest payments on borrowings, periodic interest settlement payments related to our derivative contracts and operating expenses.

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(1) Represents the aggregate fair value of our portfolio of debt securities as of period end.

Our portfolio of equity securities consists primarily of preferred stock securities that are not as readily redeemable;

therefore, we exclude our portfolio of equity securities from our available liquidity.

Our portfolio of equity securities consists of Farmer Mac Class A common stock, which we exclude from our available liquidity.

(2) The committed bank revolving line of credit agreements consist of a three-year and a four-year revolving line of credit agreement.

The accessed amount of $7 million and $2 million as of May 31, 2025 and 2024, respectively, relates to letters of credit issued pursuant to the four-year revolving line of credit agreement.

The accessed amount of $7 million as of both May 31, 2026 and 2025, relates to letters of credit issued pursuant to the four-year revolving line of credit agreement.

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

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Total debt scheduled to mature over next 12 months 9,762 8,770

Excess (deficit) in available liquidity over debt scheduled to mature over next 12 months $ (1,158) $ (314)

Deficit in available liquidity over debt scheduled to mature over next 12 months $ (1,601) $ (1,158)

Liquidity coverage ratio 0.84 0.87

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(2) Total available liquidity is presented above in Table 20.

(3) The short-term borrowings scheduled maturity amount consists of member investments of $2,821 million and dealer commercial paper of approximately $2,339 million as of May 31, 2026 , and member investments of $2,885 million and dealer commercial paper of $2,206 million as of May 31, 2025, respectively.

(4) The long-term and subordinated scheduled debt obligations over the next 12 months consist of debt maturities and scheduled debt payment amounts, of which, $109 million and $206 million was from member investments as of May 31, 2026 and 2025, respectively.

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

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Short-Term Borrowings—Outstanding Amount and Weighted-Average Interest Rates below for additional information.

As presented in Table 21 above, our available liquidity of $7,612 million as of May 31, 2025 was $1,158 million less than our total scheduled debt obligations over the next 12 months of $8,770 million, consisting of short-term borrowings and long-term and subordinated debt.

The short-term borrowings scheduled maturity amount consists of member investments of $2,885 million and dealer commercial paper of $2,206 million.

The long-term and subordinated scheduled debt obligations over the next 12 months of $3,679 million consist of debt maturities and scheduled debt payment amounts, of whic h, $206 million was from member investments.

As presented in Table 20 and 21 above, our available liquidity increased by $549 million, or 7%, compared with May 31, 2025.

The increase was driven by a $450 million increase in Guaranteed Underwriter Program committed facilities, a $200 million increase resulting from amendments to our committed bank revolving line of credit agreements, a $31 million net increase in cash and investment debt securities balances, partially offset by a $132 million decrease in available amount under the Farmer Mac revolving note purchase agreement.

However, the increase in available liquidity was outweighed by a larger increase in debt scheduled to mature within the next 12 months, resulting in a decline in our liquidity coverage ratio from 0.87 as of May 31, 2025 to 0.84 as of May 31, 2026 .

We believe we can continue to roll over our member short-term investments of $2,821 million as of May 31, 2026, based on our expectation that our members will continue to reinvest their excess cash in short-term investment products offered by CFC.

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Member short-te rm investments in CFC have aver aged $3,191 million ov er the last 12 fiscal quarter-end reporting periods.

Our avai lable liquidity as of May 31, 2025 was $1,727 million in excess of, or 1.3 times over, our total $5,885 million scheduled debt obligations over the next 12 months, excluding member short-term investments.

Our avai lable liquidity as of May 31, 2026 was $1,220 million in excess of, or 1.18 times, our total $6,941 million scheduled debt obligations over the next 12 months, excluding member short-term investments.

In addition, we expect to receive $2,184 million from scheduled long-term loan principal payments over the next 12 months.

While our available liquidity increased by $917 million, or 14% as of May 31, 2025 compared to the prior year, the decline in the liquidity coverage ratio was primarily driven by an increase in debt scheduled to mature over the next 12 months.

This was largely due to increased dealer commercial paper issuances to support substantial growth in line of credit loans activity, as well as higher volume of upcoming long-term debt maturities over the next 12 months.

We expect to continue accessing the dealer commercial paper market as a cost-effective means of satisfying our incremental short-term liquidity needs.

To mitigate commercial paper rollover risk, we expect to continue to maintain our committed bank revolving line of credit agreements and be in compliance with the covenants of these agreements so we can draw on these facilities, if necessary, to repay commercial paper that cannot be refinanced with similar debt.

Under master repurchase agreements we have with our bank counter parties, we can obtain short-term funding in secured borrowing transactions by selling investment-grade corporate debt securities from our investment securities portfolio subject to an obligation to repurchase the same or similar securities at an agreed-upon price and date.

The issuance of long-term debt, which represents the most significant component of our funding, allows us to reduce our reliance on short-term borrowings, as well as effectively manage our refinancing and interest rate risk.

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We have an investment portfolio of debt securities classified as trading and equity securities, both of which are reported on our consolidated balance sheets at fair value.

Our debt securities investment portfolio totaled $114 million and $281 million as of May 31, 2025 and 2024, respectively, and is intended to serve as an additional source of liquidity.

Under master repurchase agreements that we have with counterparties, we can obtain short-term funding by selling investment-grade corporate debt securities from our investment portfolio subject to an obligation to repurchase the same or similar securities at an agreed-upon price and date.

Because we retain effective control over the transferred securities, transactions under these repurchase agreements are accounted for as collateralized financing agreements (i.e., secured borrowings) and not as a sale and subsequent repurchase of securities.

The obligation to repurchase the securities is reflected as a component of our short-term borrowings on our consolidated balance sheets.

The aggregate fair value of debt securities underlying repurchase transactions is parenthetically disclosed on our consolidated balance sheets.

We had no borrowings under repurchase agreements outstanding as of both May 31, 2025 and 2024;

therefore, we had no debt securities in our investment portfolio pledged as collateral as of each respective date.

Our investment portfolio also included equity securities with a fair value of $11 million as of May 31, 2025, consisting of common stock, and $37 million as of May 31, 2024, c onsisting primarily of preferred stock securities that are not as readily

therefore, we excluded the equity securities from our available liquidity.

This portfolio was initially intended to provide an additional source of liquidity.

Our debt securities investment portfolio totaled $31 million and $114 million as of May 31, 2026 and 2025, respectively, reflecting the continued wind-down of this portfolio as we reduce our holdings over time.

Our investment portfolio also included equity securities with a fair value of $11 million as of both May 31, 2026 and 2025, c onsisting of Farmer Mac Class A common stock, which we exclude from our available liquidity.

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

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however, we generally rely on them as a backup source of liquidity for our commercial paper.

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.

On November 12, 2025, we amended our three-year and four-year committed bank revolving line of credit agreements to (i) extend the maturity dates to November 28, 2028 and November 28, 2029, respectively, (ii) remove the credit spread adjustment in Term SOFR tenors as described in each agreement and (iii) increase commitments by $150 million under the three-year revolving credit agreement and $50 million under the four-year revolving credit agreement.

Under the three -year revolving credit agreement, commitments of $50 million will continue to expire at the prior maturity date of November 28, 2027.

As of May 31, 2026, t he total commitment amount under the three-year facility and the four-year facility was $1,745 million and $1,755 million, respectively, resulting in a combined total commitment amount under the two facilities of $3,500 million.

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$ 50 $ — $ 50 November 28, 2027 7.5 bps

Total 3-year agreement

1,595 — 1,595

3-year agreement

1,695 — 1,695 November 28, 2028 7.5 bps

4-year agreement

1,555 7 1,548 November 28, 2028 10.0 bps

Total 3-year agreement

1,745 — 1,745

4-year agreement

1,755 7 1,748 November 28, 2029 10.0 bps

Total $ 3,500 $ 7 $ 3,493

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Guaranteed Underwriter Program Committed Facilities—Secured

Under the Guaranteed Underwriter Program, we can borrow from the U.S.

Treasury Department’s Federal Financing Bank (“FFB”) and use the proceeds to extend new loans to our members and refinance existing member debt.

Under the Guaranteed Underwriter Program, we can borrow from the FFB and use the proceeds to extend new loans to our members and refinance existing member debt.

As part of the program, we pay fees based on our outstanding borrowings that are intended to help fund the USDA Rural Economic Development Loan and Grant program and thereby support additional investment in rural economic development projects.

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Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the advance.

On December 18, 2024, we closed on a $450 million Series V committed loan facility from the FFB under the Guaranteed Underwriter Program.

On January 29, 2026, we closed on a $450 million Series W committed loan facility from the FFB under the Guaranteed Underwriter Program.

Pursuant to this facility, we may borrow any time before July 15, 2030.

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As displayed in Table 20, we had accessed $9,023 million under the Guaranteed Underwriter Program and up to $1,800 million was available for borrowing as of May 31, 2026.

Of the $1,350 million available borrowing amount, $450 million is available for advance through July 15, 2027, $450 million is available for advance through July 15, 2028 and $450 million is available for advance through July 15, 2029.

Of the $1,800 million available borrowing amount, $450 million is available for advance through July 15, 2027, $450 million is available for advance through July 15, 2028, $450 million is available for advance through July 15, 2029, and $450 million is available for advance through July 15, 2030.

We are required to pledge eligible distribution system loans or power supply system loans as collateral in an amount at least equal to our total outstanding borrowings under the Guaranteed Underwriter Program committed loan facilities, which totaled $5,339 million as of May 31, 2026.

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Farmer Mac Revolving Note Purchase Agreement—Secured

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.

On January 14, 2025, we amended the 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 have a revolving note purchase agreement with Farmer Mac, under which we can borrow up to $6,500 million from Farmer Mac at any time, subject to market conditions, through January 14, 2030, after which the agreement allows successive one-year renewals of the draw period upon sixty days’ notice by CFC, subject to approval by Farmer Mac and Farmer Mac Mortgage Securities Corporation.

Pursuant to this revolving note purchase agreement, we can borrow, repay and re-borrow funds at any time through maturity, as market conditions permit, provided the outstanding principal does not exceed the total available under the agreement.

Under this agreement, we had outstanding secured notes payable totaling $3,912 million and $3,780 million as of May 31, 2026 and 2025, respectively.

We borrowed $500 million in long-term notes payable, and repaid $500 million in short-term and $83 million in long-term notes payable under this note purchase agreement with Farmer Mac during FY2025.

As displayed in Table 20, the amount available for borrowing under this agreement was $2,588 million as of May 31, 2026.

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Short-Term Borrowings

Our short-term borrowings, which we rely on to meet our daily, near-term funding needs, consist of commercial paper, which we offer to members and dealers, select notes and daily liquidity fund notes offered to members, medium-term notes offered to members and dealers, and funds from repurchase secured borrowing transactions.

Our short-term borrowings, which we rely on to meet our daily, near-term funding needs, consist of commercial paper, which we offer to members and dealers, select notes and daily liquidity fund notes offered to members, and medium-term notes offered to members and dealers.

Short-Term Borrowings—Outstanding Amount and Weighted-Average Interest Rates

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Medium-term notes sold to members 324,190 3.81 451,201 4.62

Farmer Mac notes payable (1)

— — 500,000 5.87

Total short-term borrowings outstanding $ 5,159,771 3.62 $ 5,091,416 4.30

____________________________

(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.

Short-term borrowings increased by $758 million to $5,091 million as of May 31, 2025, from $4,333 million as of May 31, 2024, and accounted for 15% and 13% of total debt outstanding as of each respective date.

The weighted-average cost of our outstanding short-term borrowings decreased to 4.30% as of May 31, 2025, from 5.34% as of May 31, 2024 due to the federal funds rate cuts during FY2025.

Short-term borrowings increased to $5,160 million as of May 31, 2026, from $5,091 million as of May 31, 2025, and accounted for 14% and 15% of total debt outstanding as of each respective date.

The weighted-average cost of our outstanding short-term borrowing s decreased to 3.62% as of May 31, 2026, from 4.30% as of May 31, 2025 due to the federal funds rate cuts during FY2026 .

The weighted-average maturity of our short-term borrowings decreased to 34 days as of May 31, 2026, from 41 days as of May 31, 2025.

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As indicated in Table 24, members’ investments represented 55% and 57% of our outstanding short-term borrowings as of May 31, 2026 and 2025, respectively.

Member investments have historically been our primary source of short-term borrowings.

See “Note 6—Short-Term Borrowings” in this Report for additional information on our short-term borrowings.

Short-Term Borrowings—Funding Sources

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$ 2,821,360 55 % $ 2,884,965 57 %

Farmer Mac notes payable — — 500,000 11

Capital markets 2,338,411 45 2,206,451 43

$ 5,159,771 100 % $ 5,091,416 100 %

Member investments have historically been our primary source of short-term borrowings.

The decrease in short-term member investments of $443 million as of May 31, 2025 compared with the prior year, was primarily due to a reduction in member commercial paper investments as our members used funds from these investments to finance capital expenditure programs and operating needs.

Dealer commercial paper outstanding increased to $2,206 million as of May 31, 2025 from $505 million as of May 31, 2024, due to issuances to fund our loan portfolio growth.

See “Note 6—Short-Term Borrowings” in this Report for additional information on our short-term borrowings.

Long-Term and Subordinated Debt

Long-term and subordinated debt, which represents the most significant source of our funding, totaled $29,678 million and $28,386 million as of May 31, 2025 and 2024, respectively, and accounted for 85% and 87% of total debt outstanding as of

each respective date.

Long-term and subordinated debt, which represents the most significant source of our funding, totaled $30,784 million and $29,678 million as of May 31, 2026 and 2025, respectively, and accounted for 86% and 85% of total debt outstanding as of each respective date.

See Table 25 below for a summary of our long-term and subordinated debt issuances and repayments during FY2026.

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

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.

On November 1, 2024, we filed a prospectus supplement with the U.S.

Securities and Exchange Commission (“SEC”) related to these subordinated notes, which are issued under our effective shelf registration statement filed with the SEC in October 2023.

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

The subordinated 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.

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

During FY2026, we redeemed $650 million in aggregate principal amount of our subordinated deferrable debt, including $300 million of notes due 2043 and $350 million of notes due 2046.

The notes were redeemed at par plus accrued interest.

As a result, we recognized $6 million of losses on early extinguishment of debt related to unamortized debt issuance costs for these notes in our consolidated statements of operations for FY2026.

Subsequent to FY2026, we settled $300 million of dealer medium-term notes at a floating interest rate with a term of 18 months.

The issuance of long-term debt allows us to reduce our reliance on short-term borrowings and effectively manage our refinancing and interest rate risk, due in part to the multi-year contractual maturity structure of long-term deb t.

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Notwithstanding the foregoing, we have contractual limitations with respect to the amount of senior indebtedness we may incur.

In addition to issuances of unlimited debt in the public capital markets under our shelf registrations discussed above, we also have access to private debt facilities.

In January 2025, we settled $300 million of collateral trust bonds at a fixed rate of 5.23% with a weighted average term of 13.3 years in a private placement transaction, which is an unregistered debt offering.

In addition to issuances of unlimited debt in the public capital markets under our shelf registrations discussed above, we also have access to private debt facilities in private placement transactions through unregistered debt offerings.

During FY2026 , we issued $600 million in a private placement of fixed-to-fixed reset rate subordinated notes due 2056, consisting of two tranches:

$150 million notes at a fixed rate of 5.75% that are noncallable for five years and $450 million notes at a fixed rate of 5.95% that are noncallable for 10 years.

Long-Term Debt and Subordinated Debt—Issuances and Repayments

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Medium-term notes sold to dealers (3)

4,443,405 1,838,506

Subordinated deferrable debt (4)

629,381 650,236

Members’ subordinated certificates 1,146 57,620

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(1) Repayments include principal maturities, scheduled amortization payments, repurchases and redemptions.

(2) Amount also includes the collateral trust bonds issued in a private placement transaction.

(2) Amount includes the collateral trust bonds issued to investors through both public offerings and private placement transactions.

(3) Amount includes medium-term notes issued to both institutional and retail investors in the capital markets.

(4) Amount includes the subordinated deferrable debt issued to investors through both public offerings and private placement transactions.

We provide additional information on our financing activities under the above section “Consolidated Balance Sheet Analysis—Debt” and on the weighted-average interest rates on our long-term debt and subordinated certificates in “Note 7—Long-Term Debt,” “Note 8—Subordinated Deferrable Debt” and “Note 9—Members’ Subordinated Certificates” in this Report.

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Of our total debt outstanding of $35,944 million as of May 31, 2026, $15,753 million, or 44%, was secured by pledged loans totaling $19,282 million.

In comparison, of our total debt outstanding of $32,718 million as of May 31, 2024, $17,095 million, or 52%, was secured by pledged loans totaling $21,403 million.

In comparison, of our total debt

outstanding of $34,769 million as of May 31, 2025, $17,133 million, or 49%, was secured by pledged loans totaling $20,516 million.

The following provides additional information on the collateral pledging requirements for our secured borrowing agreements.

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We are required to pledge loans or other collateral in transactions under our collateral trust bond indentures, bond agreements under the Guaranteed Underwriter Program and note purchase agreement with Farmer Mac.

Total debt outstanding is presented on our consolidated balance sheets net of unamortized discounts and issuance costs.

Our collateral pledging requirements are based, however, on the face amount of secured outstanding debt, which excludes net unamortized discounts and issuance costs.

However, as discussed below, we typically maintain pledged collateral in excess of the required percentage.

Under the provisions of our committed bank revolving line of credit agreements, the excess collateral that we are allowed to pledge cannot exceed 150% of the outstanding borrowings under our collateral trust bond 2007 indentures, the Guaranteed Underwriter Program or the Farmer Mac note purchase agreements as of May 31, 2025.

Our collateral pledging requirements are based on the face amount of secured outstanding debt, which excludes net unamortized discounts, premiums and issuance costs.

As discussed below, we typically maintain pledged collateral in excess of the required percentage.

Under the provisions of our committed bank revolving line of credit agreements, the excess collateral that we are allowed to pledge cannot exceed 150% of the outstanding borrowings under our collateral trust bond 2007 indenture, the Guaranteed Underwriter Program or the Farmer Mac note purchase agreements as of May 31, 2026.

Table 26 displays the collateral coverage ratios pursuant to these secured borrowing agreements as of May 31, 2026 and 2025.

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Secured borrowing agreement type:

Collateral trust bonds 1994 indenture (2)

100 % N/A 146 % 128 %

Collateral trust bonds 1994 indenture 100 % N/A 143 % 146 %

Collateral trust bonds 2007 indenture 100 150 115 116

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

(2) In December 2024, our committed bank revolving line of credit agreements were amended to exclude collateral pledged under the collateral trust bonds 1994 indenture from the maximum coverage ratio required under the agreements.

The required maximum coverage ratio was 150% prior to the amendments.

Table 27 displays the unpaid principal balance of loans pledged for secured debt, the excess collateral pledged and unencumbered loans as of May 31, 2026 and 2025.

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To ensure that we do not fall below the minimum collateral coverage ratio requirement, we typically pledge loans in excess of the required amount for the following reasons:

(i) our distribution and power supply loans are typically amortizing loans that require scheduled principal payments over the life of the loan, whereas the debt securities issued under secured indentures and agreements typically have bullet maturities;

(i) our distribution and

power supply loans are typically amortizing loans that require scheduled principal payments over the life of the loan, whereas the debt securities issued under secured indentures and agreements typically have bullet maturities;

(ii) distribution and power supply borrowers have the option to prepay their loans;

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1Q FY 2027 $ 600 $ 641 $ 1,241 $ 725 $ 662 $ 1,387

$ 1,525 $ 405 $ 1,930 $ 440 $ 661 $ 1,101

1,500 418 1,918 1,131 674 1,805

1,200 432 1,632 945 929 1,874

1,180 413 1,593 1,031 877 1,908

950 485 1,435 721 835 1,556

780 549 1,329 1,133 899 2,032

2Q FY 2027 1,286 576 1,862 1,630 724 2,354

3Q FY 2027 2,190 477 2,667 1,247 1,011 2,258

4Q FY 2027 880 490 1,370 911 854 1,765

1Q FY 2028 1,464 486 1,950 1,220 836 2,056

2Q FY 2028 1,096 504 1,600 949 854 1,803

Total $ 7,516 $ 3,174 $ 10,690 $ 6,682 $ 4,941 $ 11,623

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(1) The dates presented represent the end of each quarterly period through the quarter ended November 30, 2027.

(2) The projected long-term debt issuance for the period includes $525 million of dealer medium-term notes issued in June 2025.

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

(4) Long-term debt maturities also include expected early redemptions of debt and exclude long-term member medium-term notes maturing over the next 12 months totaling $145 million, as we expect we can continue to roll over our member medium-term notes investments based on our expectation that our members will continue to reinvest their excess cash with us.

(3) Long-term debt maturities also include expected early redemptions of debt and exclude $148 million of maturing long-term member medium-term notes, as we expect we can continue to roll over our member medium-term notes investments based on our expectation that our members will continue to reinvest their excess cash with us.

As displayed in Table 30, we currently project long-term advances of $3,251 million over the next 12 months, which we project will exceed anticipated long-term loan repayments over the same period of $2,184 million , resulting in net long-term loan growth of approximately $1,067 million over the next 12 months.

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Our actual results and future estimates may vary, perhaps significantly, from the current projections, as a result of changes in market conditions, management actions or other factors.

In addition to the long-term sources of funds, we have access to short-term funding sources such as member and dealer commercial paper, select notes and daily liquidity fund notes offered to members, and medium-term notes offered to members and dealers, as discussed above.

Credit Ratings

Our funding and liquidity, borrowing capacity, ability to access capital markets and other sources of funds and the cost of these funds are partially dependent on our credit ratings.

On June 2, 2025, at our request, S&P withdrew its “A-2” short-term issuer rating on CFC.

During FY2026, Moody’s, S&P and Fitch affirmed CFC’s credit ratings and stable outlook.

Table 31 displays our credit ratings as of May 31, 2025.

On June 2, 2025, at our request, S&P withdrew its “A-2” short-term issue ratings on CFC’s commercial paper program.

The “A-” long-term issuer credit rating, the stable outlook and the long-term issue ratings are unchanged as of the date of this Report.

Table 31 displays our credit ratings as of May 31, 2026, which remain unchanged as of the date of this Report.

Credit Ratings

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Subordinated debt A3 BBB BBB+

Commercial paper P-1 A-2 F1

Short-term issuer credit rating P-1 N/A F1

Outlook Stable Stable Stable

Ratings and outlook confirmation date February 21, 2025

November 14, 2024

September 19, 2024

Rating agency credit opinion/report date February 24, 2026 November 24, 2025 September 23, 2025

___________________________

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Financial Ratios

During FY2025, we refined our methodology for calculating the debt-to-equity ratio and adjusted debt-to-equity ratio.

We provide a more detailed discussion of the revised debt-to-equity ratio and adjusted debt-to-equity ratio under the section “Non-GAAP Financial Measures and Reconciliations” in this Report.

Our debt-to-equity ratio under the revised methodology was 11.20 and 10.86 as of May 31, 2025 and 2024, respectively.

The increase in the debt-to-equity ratio during FY2025 was due to an increase in debt to fund loan growth, partially offset by an increase in total equity.

Our debt-to-equity ratio was 10.85 and 11.20 as of May 31, 2026 and 2025, respectively.

The decrease in the debt-to-equity ratio during FY2026 was due to an increase in total equity, partially offset by an increase in debt to fund loan growth.

Our adjusted debt-to-equity ratio under the revised methodology w as 7.39 and 7.27 as of May 31, 2025 and 2024, respectively.

Our adjusted debt-to-equity ratio w as 7.46 and 7.39 as of May 31, 2026 and 2025, respectively.

The increase in adjusted total equity was primarily due to a combined impact of our adjusted net income of $245 million for FY2025 and issuances of subordinated deferrable debt during FY2025, partially offset by a decrease in equity of $47 million from CFC Board of Directors’ authorized patronage capital retirements in July 2024.

We provide a more detailed discussion of the debt-to-equity ratio and adjusted debt-to-equity ratio under the section “Non-GAAP Financial Measures and Reconciliations” in this Report.

Debt Covenants

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Interest Rate Risk Management

Our interest rate risk-management objective is to prudently manage the timing of cash flows between interest-earning assets and interest-bearing liabilities in order to mitigate interest rate risk in accordance with CFC’s board policy and risk limits and guidelines established by the Asset Liability Committee (“ALCO”).

ALCO provides oversight of our exposure to interest rate risk and ensures that our exposure is compliant with established risk limits and guidelines.

We seek to generate stable adjusted net interest income on a sustained and long-term basis by minimizing the mismatch between the cash flows from our interest rate-sensitive financial assets and our financial liabilities.

We use derivatives as a tool in matching the duration and repricing characteristics of our assets and liabilities, which we discuss above in “Consolidated Results of Operations—Non-Interest Income—Derivative Gains (Losses)” and “Note 10—Derivative Instruments and Hedging Activities.”

Our Asset Liability Committee provides oversight of our exposure to interest rate risk and ensures that our exposure is compliant with established risk limits and guidelines.

We seek to generate stable adjusted net interest yield on a sustained and long-term basis by minimizing the mismatch between the cash flows from our interest rate-sensitive financial assets and our financial liabilities.

We use derivatives as a tool in matching the duration and repricing characteristics of our interest rate-sensitive assets and liabilities, which we discuss above in “Consolidated Results of Operations—Non-Interest Income—Derivative Gains (Losses)” and “Note 10—Derivative Instruments and Hedging Activities.”

Interest Rate Risk Assessment

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As discussed under “Non-GAAP Financial Measures,” we derive adjusted net interest income by adjusting our reported interest expense and net interest income to include the impact of net derivative cash settlement amounts.

Our interest rate sensitivity analyses take into consideration existing interest rate-sensitive assets and liabilities as of the reported balance sheet date and forecasted changes to the balance sheet over the next 12 months under management’s baseline p rojection.

As discussed in the “Executive Summary—Outlook” section, we currently anticipate net loan growth of $2,059 million over the next 12 months and overall, the market expects interest rates to decline, with a steepening yield curve ahead.

Based on our current baseline forecast assumptions, which include a total of 75 basis points of federal funds rate cuts from May 2025 through May 2026, we project increases in our reported net interest income and net interest yield over the next 12 months compared with the 12- month period ended May 31, 2025.

We also project an increase in our adjusted net interest income over the next 12 months relative to the 12-month period ended May 31, 2025, primarily driven by projected loan growth.

We project a slight decrease in adjusted net interest yield over the next 12 months, primarily due to the current shape of the yield curve, our baseline interest rate forecast and that our interest-earning assets, primarily lines of credit, are repricing faster than interest-bearing liabilities.

Additionally, lower-cost debt maturing in the near term will need to be refinanced at a forecasted higher interest rate.

Table 32 presents the estimated percentage impact that a hypothetical instantaneous parallel shift of additional plus or minus 100 basis points in the interest rate yield curve, relative to our base case forecast yield curve that includes 75 basis points of federal funds rate cuts , would have on our projected baseline 12-month net interest income and adjusted net interest income as of May 31, 2025 and 2024.

As discussed in the “Executive Summary—Outlook” section, we currently anticipate net loan growth of $1,253 million o ver the next 12 months and overall, the market expects the yield curve to flatten as short-term interest rates are forecasted to increase and longer-term rates are expected to decrease.

Based on our current baseline forecast assumptions, which includes a 25-basis-point increase in the federal funds rate from June 2026 through May 2027, we project:

• An increase in both our reported net interest income and net interest yield over the next 12 months compared with the 12-month period ended May 31, 2026;

• An increase in our adjusted net interest income over the next 12 months relative to the 12-month period ended May 31, 2026, driven by an increase in interest-earning assets due to projected loan growth ;

• A slight decline in the adjusted net interest yield over the next 12 months relative to the 12-month period ended May 31, 2026, primarily due to the higher projected adjusted average cost of funding, attributable to changes in funding mix and the refinancing of maturing lower-cost long-term debt at forecasted higher interest rates, as well as lower expected interest rate swaps derivative cash settlement interest income.

Table 32 presents the estimated percentage impact that a hypothetical instantaneous parallel shift of additional plus or minus 100 basis points in the interest rate yield curve, relative to our base case forecast yield curve that includes a 25-basis-point increase in the federal funds rate , would have on our projected baseline 12-month net interest income and adjusted net interest income as of May 31, 2026 and 2025.

We also present the estimated percentage impact on our projected baseline 12-month net interest income and adjusted net interest income assuming a hypothetical inverted yield curve under which shorter-term interest rates increase by an instantaneous 75 basis points and longer-term interest rates decrease by an instantaneous 75 basis points.

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Conversely, a negative duration gap indicates that the duration of our interest-earning assets is less than the duration of our debt and derivatives, and therefore denotes an increased exposure to declining interest rates over the long term.

While the duration gap provides a relatively concise and simple measure of the interest rate risk inherent

on our consolidated balance sheet as of the reported date, it does not incorporate projected changes in our consolidated balance sheet.

The duration gap narrowed to positive 0.27 months as of May 31, 2025, from negative 1.13 months as of May 31, 2024 and was within the risk limits and guidelines established by CFC’s Asset Liability Committee as of each respective date.

The shift to a positive duration gap is primarily due to shorter duration liabilities funding interest-earning assets.

While the duration gap provides a relatively concise and simple measure of the interest rate risk inherent on our consolidated balance sheet as of the reported date, it does not incorporate projected changes on our consolidated balance sheets.

The duration gap widened to positive 2.11 months as of May 31, 2026, from positive 0.27 months as of May 31, 2025 and was within the risk limits and guidelines established by CFC’s Asset Liability Committee as of each respective date.

The widening of the positive duration gap is primarily due to shorter duration liabilities funding interest-earning assets.

Limitations of Interest Rate Risk Measures

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OPERATIONAL RISK

Operational risk represents the risk of loss resulting from certain risk classifications, including, but not limited to, the execution of unauthorized transactions by employees;

Operational risk is the risk of loss arising from inadequate or failed internal processes, people, systems or external events.

This risk includes, among other things, unauthorized transactions by employees;

reputation risk;

talent management (e.g., the inability to retain or attract sufficiently qualified employees);

errors relating to loan documentation, transaction processing and technology;

the inability to perfect liens on collateral;

breaches of internal control and information systems;

and the risk of fraud by employees or persons outside the company.

Potential legal actions that could arise as a result of operational deficiencies, noncompliance with covenants in our revolving credit agreements and indentures, employee misconduct or adverse business decisions are also considered part of operational risk.

In the event of a breakdown in internal controls, improper access to or operation of systems or improper employee actions, we could incur financial loss.

Operational risk also includes breaches of technology and information systems resulting from unauthorized access to confidential or sensitive information or from internal or external threats, such as cyberattacks, whether on our technology infrastructure or in relation to third-party vendors that store confidential or sensitive internal data.

Furthermore, third-party risk is another important component of our operational risk focus requiring identification, assessment and mitigation of critical risks arising from relationships with third-party vendors, suppliers, partners, service providers and contractors.

talent management risks, including the inability to attract or retain sufficiently qualified employees;

errors in loan documentation, transaction processing or technology;

failure to perfect liens on collateral;

breaches of internal controls or information systems;

and fraud by employees or third parties.

Operational risk also includes potential legal actions arising from operational deficiencies, noncompliance with covenants in our revolving credit agreements or indentures, employee misconduct or adverse business decisions.

A breakdown in internal controls, improper access to or operation of systems, or improper employee conduct could result in financial loss.

Operational risk further includes risks associated with technology and information systems, including unauthorized access to confidential or sensitive information and internal or external threats, such as cyberattacks, whether directed at our technology infrastructure or at third-party vendors that store or process confidential or sensitive internal data.

In addition, third-party risk is an important component of our operational risk framework and requires the identification, assessment and mitigation of critical risks arising from our relationships with vendors, suppliers, partners, service providers and contractors.

Operational risk is inherent in all business activities.

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Internal Audit examines the design and operating effectiveness of our operational, compliance and financial reporting internal controls on an ongoing basis.

Our business continuity and disaster recovery plan is monitored by our Business Technology Services Group and establishes the basic principles necessary to ensure emergency response, resumption, restoration and permanent recovery of CFC’s operations and business activities during a business interruption event.

Our business continuity and disaster recovery plan establishes the basic principles necessary to ensure emergency response, resumption, restoration and permanent recovery of CFC’s operations and business activities during a business interruption event.

Each of our de partments is require d to develop, exercise, test and maintain business resumption plans for the recovery of business functions and processing resources to minimize disruption for our members and other parties with whom we do business.

We conduct disaster recovery exercises

periodically that include both the Business Technology Services Group and business areas.

We periodically conduct disaster recovery exercises.

The business resumption plans are based on a risk assessment that considers potential losses due to unavailability of service versus the cost of resumption.

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We perform an annual comprehensive review of each of our borrowers, following the receipt of the borrower’s annual audited financial statements, to reassess the borrower’s risk rating.

In addition, interim risk-rating adjustments may occur as a result of

updated information affecting a borrower’s ability to fulfill its obligations or other significant developments and trends.

Our Enterprise Risk Group and Corporate Credit Committee review and provide rigorous oversight and governance around our internally assigned risk ratings to ensure the ratings process is consistent.

In addition, we engage third-party credit risk management experts to conduct an independent annual review of our risk rating system to validate its overall integrity.

In addition, interim risk-rating adjustments may occur as a result of updated information affecting a borrower’s ability to fulfill its obligations or other significant developments and trends.

Our Enterprise Risk Group and Corporate Credit Committee review and provide rigorous oversight and governance around our internally assigned risk ratings to ensure the ratings process is consis tent.

This review involves an evaluation of the accuracy and timeliness of individual risk ratings and the overall effectiveness of our risk-rating framework relative to the risk profile of our credit exposures.

While we have a robust risk-rating process, changes in our borrower risk ratings may not always directly coincide with changes in the risk profile of an individual borrower due to the timing of the rating process and a potential lag in the receipt of information necessary to evaluate the impact of emerging developments and current conditions on the risk ratings of our borrower.

While we have a robust risk-rating process, changes in our borrower risk ratings may not always directly coincide with changes in the risk profile of an individual borrower du e to the timing of the rating process and a potential lag in the receipt of information necessary to evaluate the impact of emerging developments and current conditions on the risk ratings of our borrower.

Although our allowance for credit losses is sensitive to each key input, shifts in the credit risk ratings of our borrowers generally have the most notable impact on our allowance for credit losses.

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We believe our internal historical loss experience serves as a more reliable estimate of loss severity than third-party data due to the organizational structure and operating environment of rural utility cooperatives, our lending practice of generally requiring a senior security position on the assets and revenue of borrowers for long-term loans, the approach we take in working w ith borrowers that may be experiencing operational or financial issues and other factors discussed in “Credit Risk—Loan Portfolio Credit Risk.”

We generally consider nonperforming loans as well as loans that have been modified with borrowers experiencing financial difficulty for individual evaluation given the risk characteristics of such loans and establish an asset-specific allowan ce for these loans.

We generally consider nonaccrual loans as well as loans that have been modified with borrowers experiencing financial difficulty for individual evaluation given the risk characteristics of such loans and establish an asset-specific allowan ce for these loans.

The key assumptions in determining our asset-specific allowance that require significant management judgment and may have a material impact on the amount of the allowance include measuring the amount and timing of future cash flows for individually evaluated loans that are not collateral-dependent and estimating the value of the underlying collateral for individually evaluated loans that are collateral-dependent.

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As noted above, our allowance for credit losses is sensitive to a variety of factors.

While management uses its best judgment to assess loss data and other factors to determine the allowance for credit losses, changes in our loss assumptions, adjustments to assigned borrower risk ratings, the use of alternate external data sources or other factors could affect our estimate of probable credit losses inherent in the portfolio as of each balance sheet date, which would also impact the related

provision for credit losses recognized in our consolidated statements of operations.

For example, changes in the inputs below, without taking into consideration the impact of other potential offsetting or correlated inputs, would have the following effect on our allowance for credit losses as of May 31, 2026.

• A 10% increase or decrea se in the default rates for all of our portfolio segments would result in a corresponding increase or decrease of approximately $3 million.

• A 10% increase or decrease in the default rates for all of our portfolio segments would result in a corresponding increase or decrease of approximately $3 million.

• A 1% increase or decrease in the recovery rates for all of our portfolio segments would result in a corresponding decrease or increase of approximately $10 million.

• A one-notch downgrade in the internal borr ower risk ratings for our entire loan portfolio would result in an increase of approximately $37 million, while a one-notch upgrade would result in a decrease of approximately $19 million.

• A one-notch downgrade in the internal borrower risk ratings for our entire loan portfolio would result in an increase of approximately $38 million, while a one-notch upgrade would result in a decrease of approximately $17 million.

These sensitivity analyses are intended to provide an indication of the isolated impact of hypothetical alternative assumptions on our allowance for credit losses.

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It is possible that others performing the analyses, given the same information, may at any point in time reach different reasonable conclusions that could be significant to our consolidated financial statements.

We discuss the risks and uncertainties related to management’s judgments and estimates in applying accounting policies that have been identified as a critical accounting estimates under “Item 1A.

Risk Factors—Regulatory and Compliance Risks” in this Report.

We discuss the risks and uncertainties related to management’s judgments and estimates in applying accounting policies that have been identified as critical accounting estimates under “Item 1A.

Risk Factors—Regulatory and Compliance Risks” in

We provide additional information on the allowance for credit losses under the sections “Credit Risk—Allowance for Credit Losses” and “Note 5—Allowance for Credit Losses” in this Report.

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GAAP financial measures.

During FY2025, we have refined our methodology for calculating the adjusted debt-to-equity ratio, which we explain in more detail below.

Statements of Operations Non-GAAP Financial Measures

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TIER is calculated by adding the interest expense to net income and dividing that total by the interest expense.

We adjust the TIER calculation to add the derivative cash settlements income (expense) to the interest

expense and to remove the derivative forward value gains (losses) and foreign currency adjustments from total net income.

We adjust the TIER calculation to add the derivative cash settlements income (expense) to the interest expense and to remove the derivative forward value gains (losses) from total net income.

Adding the cash settlements income (expense) back to interest expense also has a corresponding effect on our adjusted net interest income.

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TIER, calculated by adding the derivative cash settlements income (expense) to the interest expense, reflects management’s perspective on our operations and, therefore, we believe that it represents a useful financial measure for investors.

The derivative forward value gains (losses) and foreign currency adjustments do not represent our cash inflows or outflows during the current period and, therefore, do not affect our current ability to cover our debt service obligations.

The derivative forward value gains (losses) do not represent our cash inflows or outflows during the current period and, therefore, do not affect our current ability to cover our debt service obligations.

The derivative forward value gains (losses) included in the derivative gains (losses) line of the statement of operations represents a present-value estimate of the future cash inflows or outflows that will be recognized as net cash settlements income (expense) for all periods through the maturity of our derivatives that do not qualify for hedge accounting.

We have not issued foreign-denominated debt since 2007, and as of May 31, 2025 and 2024, there were no foreign currency derivative instruments outstanding.

For operational management and decision-making purposes, we subtract derivative forward value gains (losses) and foreign currency adjustments from our net income when calculating TIER and for other net income presentation purposes.

In addition, since the derivative forward value gains (losses) and foreign currency adjustments do not represent current-period cash flows, we do not allocate such funds to our members and, therefore, exclude the derivative forward value gains (losses) and foreign currency adjustments from net income in calculating the amount of net income to be allocated to our members.

TIER, calculated by excluding the derivative forward value gains (losses) and foreign currency adjustments from net income, reflects management’s perspective on our operations and, therefore, we believe that it represents a useful financial measure for investors.

For operational management and decision-making purposes, we subtract derivative forward value gains (losses) from our net income when calculating TIER and for other net income presentation purposes.

In addition, since the derivative forward value gains (losses) do not represent current-period cash flows, we do not allocate such funds to our members.

Net Income and Adjusted Net Income

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(1) Represents the net periodic contractual interest income amount on our interest rate swaps during the reporting period.

(1) Represents primarily the net periodic contractual interest income amount on our interest rate swaps during the reporting period.

(2) Represents the change in fair value of our interest rate swaps during the reporting period due to changes in expected future interest rates over the remaining life of our derivative contracts.

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GAAP financial measure, is useful to investors in evaluating our financial condition.

During FY2025, we refined our methodology for calculating the adjusted debt-to-equity ratio and revised our internally established adjusted debt-to-equity threshold from 6-to-1 to 8.5-to-1.

These changes aim to provide a more accurate representation of our financial condition given the continued growth in our loan portfolio, align our methodology more closely with rating agency methodologies and provide a ratio that is consistent with our business objectives.

We will continue to assess the appropriateness of our non-GAAP financial measures, which could be subject to change for a variety of reasons, including changes to our strategy or business operations.

Key changes to our methodology included replacing total liabilities with total debt outstanding, which includes our interest-bearing debt and excludes non-interest-bearing liabilities, and reducing equity credit for subordinated deferrable debt from 100% to 50%.

Table 35 summarizes our prior methodology and revised methodology.

Adjusted Total Debt Outstanding and Equity—Prior Versus Revised Methodology

Prior Methodology

Revised Methodology

Adjusted total liabilities:

Adjusted total debt outstanding:

Total liabilities Total debt outstanding (1)

Derivative liabilities —

Debt used to fund loans guaranteed by RUS —

100% of Subordinated deferrable debt

50% of Subordinated deferrable debt

Members’ subordinated certificates

Adjusted total liabilities Adjusted total debt outstanding

Adjusted total equity:

Total equity Total equity

Period-end cumulative derivative forward value gains

AOCI attributable to derivatives

100% of Subordinated deferrable debt

50% of Subordinated deferrable debt

Members’ subordinated certificates Members’ subordinated certificates

Adjusted total equity Adjusted total equity

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(1) Total debt outstanding includes our interest-bearing debt and excludes non-interest-bearing liabilities, such as derivative liabilities.

The most directly comparable financial measure calculated and presented in accordance with U.S.

GAAP was also revised from total liabilities divided by total equity to total debt outstanding divided by total equity.

Prior-period amounts have been recast to reflect the updated presentation for both adjusted debt-to-equity and debt-to-equity ratios.

We adjust the comparable U.S.

GAAP financial measure to:

• exclude from total debt outstanding, and add to total equity, 100% of members’ subordinated certificates;

• exclude from total debt outstanding, and add to total equity, 50% of subordinated deferrable debt;

• exclude from total equity the noncash cumulative impact of changes in derivative forward value gains (losses), historical foreign currency translation adjustments, and the amounts of AOCI.

Members’ subordinated certificates are accounted for as debt under U.S.

These subordinated certificates are held only by our members and are subordinated to all senior and non-member subordinated indebtedness of CFC.

These subordinated certificates are held only by our members and are subordinated to all senior and nonmember subordinated indebtedness of CFC.

The members’ subordinated certificates have long-dated maturities and in certain cases pay no interest or pay interest that is below market.

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We record derivative instruments at fair value on our consolidated balance sheets.

Our total equity includes the noncash impact of derivative forward value gains (losses) and foreign currency translation adjustments recorded in net income.

It also includes as a component of AOCI the impact of changes in the fair value of derivatives designated as cash flow hedges as well as the unrealized losses on the defined benefit pension plan.

Our total equity includes the noncash impact of derivative forward value gains (losses) and historical foreign currency translation adjustments recorded in net income.

We have not issued foreign-denominated debt since 2007, and as of May 31, 2026 and 2025, there were no foreign currency derivative instruments outstanding.

It al so includes as a component of AOCI the impact of changes in the fair value of derivatives designated as cash flow hedges as well as the unrealized gains (losses) on the defined benefit pension plan.

In evaluating our adjusted debt-to-equity ratio, we make adjustments to equity similar to the adjustments made in calculating TIER.

We exclude from total equity the noncash cumulative impact of changes in derivative forward value gains (losses) and foreign currency translation adjustments, and the amounts of AOCI, which reflects management’s perspective on our operations and, therefore, we believe, is a useful financial measure for investors.

We exclude from total equity the noncash cumulative impact of changes in derivative forward value gains (losses), historical foreign currency translation adjustments, and the amounts of AOCI, which reflects management’s perspective on our operations and, therefore, we believe, is a useful financial measure for investors.

Table 35 provides a reconciliation between our total debt outstanding and total equity and the adjusted amounts used in the calculation of our adjusted debt-to-equity ratio a s of May 31, 2026 and 2025.

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(2) Represents consolidated total derivative forward value gains (losses).

The cumulative amounts also include historical foreign currency translation adjustments recorded in net income.

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

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Total CFC Equity and Members ’ Equity

Members’ equity excludes the noncash impact of derivative forward value gains (losses) and foreign currency adjustments recorded in net income and amounts recorded in AOCI.

Members’ equity excludes the noncash impact of derivative forward value gains (losses), historical foreign currency adjustments recorded in net income, and amounts recorded in AOCI.

Because these amounts generally have not been realized, they are not available to members and are excluded by the CFC Board of Directors in determining the annual allocation of adjusted net income to patronage capital, to the members’ capital reserve and to other member funds.

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(1) Represents period-end cumulative derivative forward value gains for CFC only, as total CFC equity does not include the noncontrolling interest of the variable interest entity, which we are required to consolidate.

(1) Represents period-end cumulative derivative forward value gains and historical foreign currency translation adjustments recorded in net income for CFC only, as total CFC equity does not include the noncontrolling interest of the variable interest entity, which we are required to consolidate.

We report the separate results of operations for CFC in “Note 16—Business Segments.” The period-end cumulative derivative forward value total gain amounts as of May 31, 2026 and 2025 are presented above in Table 35.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis