NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/ 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) INTRODUCTION We provide information on the business structure, mission, principal purpose and core business activities of each of these entities under “Item 1. Business.” 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. Management monitors a variety of key indicators and metrics to evaluate our business performance. We discuss these key measures and factors influencing changes from period to period. Our MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and related notes for the fiscal year ended May 31, 2026 included in this Report and additional information contained elsewhere in this Report, including the risk factors discussed under “Item 1A. Risk Factors.” Our fiscal year begins on June 1 and ends on May 31. References to “FY2026,” “FY2025” and “FY2024” refer to the fiscal years ended May 31, 2026, 2025 and 2024, respectively. NON-GAAP FINANCIAL MEASURES 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. GAAP. Our financial assets and liabilities expose us to interest-rate risk, therefore we use derivatives, primarily interest rate swaps, to economically hedge and manage the interest-rate sensitivity mismatch between our financial assets and liabilities. We are required under U.S. GAAP to carry derivatives at fair value on our consolidated balance sheets; however, the financial assets and liabilities for which we use derivatives to economically hedge are carried at amortized cost. Changes in interest rates and the shape of the swap curve result in periodic fluctuations in the fair value of our derivatives, which may cause volatility in our earnings because we do not apply hedge accounting for our interest rate swaps. As a result, the mark-to-market changes in our interest rate swaps are recorded in earnings. The majority of our derivative portfolio consists of pay-fixed swaps with longer maturities, leading to derivative losses when interest rates decline and derivative gains when interest rates rise. This earnings volatility generally is not indicative of the underlying economics of our business, as the derivative forward fair value gains or losses recorded each period may or may not be realized over time, depending on the terms of our derivative instruments and future changes in market conditions that impact the periodic cash settlement amounts of our interest rate swaps. Therefore, management uses non-GAAP financial measures, which we refer to as “adjusted” measures, to evaluate financial performance. Our key non-GAAP financial measures are adjusted net income, adjusted net interest income, adjusted interest expense, adjusted net interest yield, adjusted TIER, adjusted debt-to-equity ratio and members’ equity. The most comparable U.S. 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 26 Table of Contents 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), 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. GAAP, provide meaningful information and are useful to investors because management evaluates performance based on these metrics for purposes of (i) establishing short- and long-term performance goals; (ii) budgeting and forecasting; (iii) comparing period-to-period operating results, analyzing changes in results and identifying potential trends; and (iv) making compensation decisions. In addition, certain of the financial covenants in our committed bank revolving line of credit agreements and debt indentures are based on non-GAAP financial measures, as the forward fair value gains and losses related to our interest rate swaps that are excluded from our non-GAAP financial measures do not affect our cash flows, liquidity or ability to service our debt. Our non-GAAP financial measures may not be comparable to similarly titled measures reported by other companies due to differences in the way these measures are calculated. We provide a reconciliation of our non-GAAP adjusted measures to the most directly comparable U.S. GAAP measures in the section “Non-GAAP Financial Measures and Reconciliations.” EXECUTIVE SUMMARY Reported Results Net Income and TIER Table 1 below shows our net income and TIER for the periods presented and the variance between these periods. We provide a more detailed discussion of our reported results under the section “Consolidated Results of Operations.” See “Item 7. MD&A—Consolidated Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended May 31, 2025 (“2025 Form 10-K”) for a comparative discussion of our consolidated results of operations between FY2025 and FY2024. Table 1: Net Income and TIER Year Ended May 31, Variance (Dollars in thousands) 2026 2025 2024 2026 versus 2025 2025 versus 2024 Net income $ 262,736 $ 140,014 $ 554,316 $ 122,722 $ (414,302) TIER (1) 1.18 1.10 1.41 0.08 (0.31) ____________________________ (1) Calculated based on net income (loss) plus interest expense for the period divided by interest expense for the period. 27 Table of Contents Table 2 below presents a reconciliation of net income betwe en FY2026 and FY2025. Table 2 : Reconciliation of Net Income FY2026 versus FY2025— Key Highlights • 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 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 Adjusted Net Income and Adjusted TIER Table 3 below shows our adjusted net income and adjusted TIER for the periods presented and the variance between these periods. Our financial goals focus on earning an annual minimum adjusted TIER of 1.10. We provide a more detailed discussion of our non-GAAP adjusted results under the section “Consolidated Results of Operations.” See “Item 7. MD&A 28 Table of Contents —Consolidated Results of Operations” in our 2025 Form 10-K for a comparative discussion of our consolidated results of operations between FY2025 and FY2024. Table 3: Adjusted Net Income and Adjusted TIER Year Ended May 31, Variance (Dollars in thousands) 2026 2025 2024 2026 versus 2025 2025 versus 2024 Adjusted net income $ 244,523 $ 245,084 $ 289,445 $ (561) $ (44,361) Adjusted TIER 1.17 1.18 1.24 (0.01) (0.06) Table 4 below presents a reconciliation of adjusted net income betwe en FY2026 and FY2025. Table 4 : Reconciliation of Adjusted Net Income FY2026 versus FY2025— Key Highlights • 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 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 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. 29 Table of Contents Lending and Credit Quality We segregate our loan portfolio into segments based on the borrower member class, which consists of CFC distribution, CFC power supply, CFC statewide and associate, NCSC electric and NCSC telecom. 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 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 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; and • 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. 30 Table of Contents 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. ” Outlook Macroeconomic Outlook 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. The U.S. 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 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. 31 Table of Contents Projected Non-GAAP Adjusted Results Based on our current forecast assumptions, including the yield curve forecast noted above, we project: • 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. Due to the difficulty in predicting these unrealized amounts, we are unable to provide without unreasonable effort a reconciliation of our forward-looking adjusted financial measures to the most directly comparable GAAP financial measures. Projected Loan Portfolio 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. Our baseline forecast scenario takes into account known likely near-term activity as well as historical analysis. 32 Table of Contents CONSOLIDATED RESULTS OF OPERATIONS 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 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. See “Item 7. MD&A—Consolidated Results of Operations” in our 2025 Form 10-K for a comparative discussion of our consolidated results of operations between FY2025 and FY2024. Net Interest Income Net interest income, which is our largest source of revenue, represents the difference between the interest income earned on our interest-earning assets and the interest expense on our interest-bearing liabilities. 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, and term structures our members select on their loans. We do not fund each individual loan with specific debt. Rather, we attempt to minimize costs and maximize efficiency by proportionately funding large aggregated amounts of loans. Table 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 income (expense) in interest expense. We provide reconciliations of our non-GAAP financial measures to the most comparable U.S. GAAP financial measures under the section “Non-GAAP Financial Measures and Reconciliations.” 33 Table of Contents Table 5 : Average Balances, Interest Income/Interest Expense and Average Yield/Cost Year Ended May 31, (Dollars in thousands) 2026 2025 2024 Assets: Average Balance Interest Income/Expense Average Yield/Cost Average Balance Interest Income/Expense Average Yield/Cost Average Balance Interest Income/Expense Average Yield/Cost Long-term fixed-rate loans (1) $ 31,834,354 $ 1,455,862 4.57 % $ 30,836,680 $ 1,378,808 4.47 % $ 29,430,001 $ 1,269,716 4.31 % Long-term variable-rate loans 1,320,738 73,388 5.56 950,923 60,737 6.39 900,005 64,050 7.12 Line of credit loans 4,713,301 263,799 5.60 3,970,042 253,782 6.39 3,346,109 234,387 7.00 Other, net (2) — (2,314) — — (1,984) — — (1,704) — Total loans 37,868,393 1,790,735 4.73 35,757,645 1,691,343 4.73 33,676,115 1,566,449 4.65 Cash, time deposits and investment securities 238,864 5,925 2.48 389,179 11,890 3.06 699,185 26,902 3.85 Total interest-earning assets $ 38,107,257 $ 1,796,660 4.71 % $ 36,146,824 $ 1,703,233 4.71 % $ 34,375,300 $ 1,593,351 4.64 % Other assets, less allowance for credit losses (3) 1,114,278 1,134,626 1,103,602 Total assets (3) $ 39,221,535 $ 37,281,450 $ 35,478,902 Liabilities: Commercial paper $ 3,050,427 $ 124,868 4.09 % $ 2,233,253 $ 109,565 4.91 % $ 2,412,511 $ 132,746 5.50 % Other short-term borrowings 1,719,890 64,789 3.77 1,628,653 75,447 4.63 1,763,308 92,147 5.23 Short-term borrowings (4) 4,770,317 189,657 3.98 3,861,906 185,012 4.79 4,175,819 224,893 5.39 Medium-term notes 11,695,599 546,823 4.68 10,338,977 485,051 4.69 7,829,126 327,014 4.18 Collateral trust bonds (5) 6,666,928 272,963 4.09 6,949,417 275,593 3.97 7,223,988 275,956 3.82 Guaranteed Underwriter Program notes payable 6,083,149 203,383 3.34 6,360,355 207,620 3.26 6,766,949 216,379 3.20 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 (6) 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 Total interest-bearing liabilities $ 35,459,622 $ 1,494,894 4.22 % $ 33,668,356 $ 1,442,279 4.28 % $ 32,125,517 $ 1,339,088 4.17 % Other liabilities (3) 646,823 640,788 533,544 Total liabilities (3) 36,106,445 34,309,144 32,659,061 Total equity (3) 3,115,090 2,972,306 2,819,841 Total liabilities and equity (3) $ 39,221,535 $ 37,281,450 $ 35,478,902 Net interest spread (8) 0.49 % 0.43 % 0.47 % Impact of non-interest-bearing funding (9) 0.30 0.29 0.27 Net interest income/net interest yield (10) $ 301,766 0.79 % $ 260,954 0.72 % $ 254,263 0.74 % Adjusted net interest income/adjusted net interest yield: Interest income $ 1,796,660 4.71 % $ 1,703,233 4.71 % $ 1,593,351 4.64 % Interest expense 1,494,894 4.22 1,442,279 4.28 1,339,088 4.17 Add: Net periodic derivative cash settlements interest income (11) (63,953) (0.95) (99,219) (1.36) (127,166) (1.67) Adjusted interest expense/adjusted average cost (12) $ 1,430,941 4.04 % $ 1,343,060 3.99 % $ 1,211,922 3.77 % Adjusted net interest spread (8) 0.67 % 0.72 % 0.87 % Impact of non-interest-bearing funding (9) 0.29 0.28 0.24 Adjusted net interest income/adjusted net interest yield (13) $ 365,719 0.96 % $ 360,173 1.00 % $ 381,429 1.11 % ____________________________ (1) Interest income on long-term, fixed-rate loans includes loan conversion fees, which are generally deferred and recognized as interest income using the effective interest method. (2) Consists of late payment fees and net amortization of deferred loan fees and loan origination costs. 34 Table of Contents (3) The average balance represents average monthly balances, which is calculated based on the month-end balance as of the beginning of the reporting period and the balances as of the end of each month included in the specified reporting period. (4) Short-term borrowings reported on our consolidated balance sheets consist of borrowings with an original contractual maturity of one year or less. However, short-term borrowings presented in Table 5 consist of commercial paper, select notes and daily liquidity fund notes . 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 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. (9) Includes other liabilities and equity. (10) Net interest yield is calculated based on net interest income for the period divided by total average interest-earning assets for the period. (11) Represents the impact of net periodic contractual interest amounts on our interest rate swaps during the period. This amount is added to interest expense to derive non-GAAP adjusted interest expense. The average (benefit)/cost associated with derivatives is calculated based on net periodic swap settlement interest amount during the period divided by the average outstanding notional amount of derivatives during the period. The average outstanding notional amount of interest rate swaps was $6,761 million, $7,274 million and $7,597 million for FY2026, FY2025 and FY2024, respectively. (12) Adjusted interest expense consists of interest expense plus net periodic derivative cash settlements interest income (expense) during the period. Net periodic derivative cash settlements interest income (expense) is reported in our consolidated statements of operations as a component of derivative gains (losses). Adjusted average cost is calculated based on the adjusted interest expense for the period divided by total average interest-bearing liabilities during the period. (13) Adjusted net interest yield is calculated based on adjusted net interest income for the period divided by total average interest-earning assets for the period. Table 6 displays the change in net interest income between periods and the extent to which the variance for each category of interest-earning assets and interest-bearing liabilities is attributable to (i) changes in volume, which represents the change in the average balances of our interest-earning assets and interest-bearing liabilities or volume, and (ii) changes in the rate, which represents the change in the average interest rates of these assets and liabilities. The table also presents the change in adjusted net interest income between periods. 35 Table of Contents Table 6: Rate/Volume Analysis of Changes in Interest Income/Interest Expense 2026 versus 2025 2025 versus 2024 Total Variance Due To: (1) Total Variance Due To: (1) (Dollars in thousands) Variance Volume Rate Variance Volume Rate Interest income: Long-term fixed-rate loans $ 77,054 $ 44,609 $ 32,445 $ 109,092 $ 60,689 $ 48,403 Long-term variable-rate loans 12,651 23,621 (10,970) (3,313) 3,624 (6,937) Line of credit loans 10,017 47,512 (37,495) 19,395 43,705 (24,310) Other, net (330) — (330) (280) — (280) Total loans 99,392 115,742 (16,350) 124,894 108,018 16,876 Cash, time deposits and investment securities (5,965) (4,592) (1,373) (15,012) (11,928) (3,084) Total interest income $ 93,427 $ 111,150 $ (17,723) $ 109,882 $ 96,090 $ 13,792 Interest expense: Commercial paper $ 15,303 $ 40,091 $ (24,788) $ (23,181) $ (9,863) $ (13,318) Other short-term borrowings (10,658) 4,227 (14,885) (16,700) (7,037) (9,663) Short-term borrowings 4,645 44,318 (39,673) (39,881) (16,900) (22,981) Medium-term notes 61,772 63,646 (1,874) 158,037 104,834 53,203 Collateral trust bonds (2,630) (11,203) 8,573 (363) (10,489) 10,126 Guaranteed Underwriter Program notes payable (4,237) (9,049) 4,812 (8,759) (13,001) 4,242 Farmer Mac notes payable 1,078 7,335 (6,257) (9,247) (1,605) (7,642) Other 115 142 (27) 147 114 33 Subordinated deferrable debt (6,937) (3,514) (3,423) 3,743 5,468 (1,725) Subordinated certificates (1,191) (1,921) 730 (486) (792) 306 Total interest expense 52,615 89,754 (37,139) 103,191 67,629 35,562 Net interest income $ 40,812 $ 21,396 $ 19,416 $ 6,691 $ 28,461 $ (21,770) Adjusted net interest income: Interest income $ 93,427 $ 111,150 $ (17,723) $ 109,882 $ 96,090 $ 13,792 Interest expense 52,615 89,754 (37,139) 103,191 67,629 35,562 Net periodic derivative cash settlements interest (income) expense (2) 35,266 6,998 28,268 27,947 5,413 22,534 Adjusted interest expense (3) 87,881 96,752 (8,871) 131,138 73,042 58,096 Adjusted net interest income (3) $ 5,546 $ 14,398 $ (8,852) $ (21,256) $ 23,048 $ (44,304) ____________________________ (1) The changes for each category of interest income and interest expense represent changes in either average balances (volume) or average rates for both interest-earning assets and interest-bearing liabilities. We allocate the amount attributable to the combined impact of volume and rate to the rate variance. (2) For the net periodic derivative cash settlements interest amount, the variance due to average volume represents the change in the net periodic derivative cash settlements interest amount resulting from the change in the average notional amount of derivative contracts outstanding. The variance due to average rate represents the change in the net periodic derivative cash settlements amount resulting from the net difference between the average rate paid and the average rate received for interest rate swaps during the period. (3) See “Non-GAAP Financial Measures and Reconciliations” in this Report for additional information on our adjusted non-GAAP financial measures. 36 Table of Contents Reported Net Interest Income 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 $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 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 $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: The increase in average interest-earning assets was driven by the growth in average total loans, as discussed above. • Adjusted Net Interest Yield: 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 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. 37 Table of Contents 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. Provision (Benefit) for Credit Losses 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 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. 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 (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. Table 7: Non-Interest Income (Loss) Year Ended May 31, (Dollars in thousands) 2026 2025 2024 Non-interest income (loss) components: Fee and other income $ 28,719 $ 23,597 $ 22,792 Derivative gains (losses) 82,166 (5,851) 392,037 Investment securities gains 1,128 5,674 10,772 Total non-interest income $ 112,013 $ 23,420 $ 425,601 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, 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 38 Table of Contents 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. The portfolio was primarily composed of longer-dated pay-fixed swaps, which accounted for approximately 82% and 80% of the outstanding notional amount as of May 31, 2026 and 2025, respectively. 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, 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. Derivative cash settlements interest income (expense) represents the net periodic contractual interest amount for our interest rate swaps during the reporting period. Derivative forward value gains (losses) represent the change in fair value of our interest rate swaps during the applicable reporting period due to changes in expected future interest rates over the remaining life of our derivative contracts. Table 8: Derivative Gains (Losses) Year Ended May 31, (Dollars in thousands) 2026 2025 2024 Derivative gains (losses) attributable to: Derivative cash settlements interest income (1) $ 63,953 $ 99,219 $ 127,166 Derivative forward value gains (losses) 18,213 (105,070) 264,871 Derivative gains (losses) $ 82,166 $ (5,851) $ 392,037 ____________________________ (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. 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. We present comparative swap curves, which depict the relationship between swap rates at varying maturities, for our reported periods in Table 9 below. Comparative Swap Curves Table 9 provides comparative swap curves as of May 31, 2026, 2025, 2024 and 2023. 39 Table of Contents Table 9: Comparative Swap Curves ___________________________ Benchmark rates obtained from Bloomberg. See “Note 1—Summary of Significant Accounting Policies—Derivative Instruments” and “Note 10—Derivative Instruments and Hedging Activities” in this Report for additional information on our derivative instruments. Also refer to “Note 14—Fair Value Measurement” for information on how we measure the fair value of our derivative instruments. Non-Interest Expense Non-interest expense consists of salaries and employee benefit expense, general and administrative expenses and other miscellaneous expenses. Table 10 presents the components of non-interest expense recorded in our consolidated statements of operations. Table 10: Non-Interest Expense Year Ended May 31, (Dollars in thousands) 2026 2025 2024 Non-interest expense components: Salaries and employee benefits $ (80,083) $ (72,171) $ (67,401) Other general and administrative expenses (73,812) (70,944) (58,970) Operating expenses (153,895) (143,115) (126,371) Other non-interest expense (7,176) (9,168) (3,189) Total non-interest expense $ (161,071) $ (152,283) $ (129,560) 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 40 Table of Contents 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. See “Note 4—Loans” in our Annual Report on Form 10-K for the fiscal year ended May 31, 2023 for a detailed discussion of this equity investment. Net Income (Loss) Attributable to Noncontrolling Interests 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. CONSOLIDATED BALANCE SHEET ANALYSIS 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 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. Below is a discussion of changes in the major components of our assets and liabilities during FY2026. Period-end balance sheet amounts may vary from average balance sheet amounts due to liquidity and balance sheet management activities that are intended to manage our liquidity requirements and market risk exposure in accordance with our risk appetite framework. Loan Portfolio We segregate our loan portfolio into segments, by legal entity, based on the borrower member class. We describe and provide additional information on our member classes under “Item 1. Business—Members” and information about our loan programs and loan product types under “Item 1. Business—Loan and Guarantee Programs” in this Report. Loans Outstanding Table 11 presents loans outstanding by legal entity, member class and loan product type as of May 31, 2026 and 2025. 41 Table of Contents Table 11: Loans—Outstanding Amount by Member Class and Loan Type May 31, (Dollars in thousands) 2026 2025 Member class: Amount % of Total Amount % of Total Change CFC: Distribution $ 30,085,224 78 % $ 29,262,495 79 % $ 822,729 Power supply 6,403,396 17 5,895,500 16 507,896 Statewide and associate 258,397 — 251,325 — 7,072 Total CFC 36,747,017 95 35,409,320 95 1,337,697 NCSC: Electric 1,073,794 3 1,078,763 3 (4,969) Telecom 582,604 2 575,465 2 7,139 Total NCSC 1,656,398 5 1,654,228 5 2,170 Total loans outstanding (1) 38,403,415 100 37,063,548 100 1,339,867 Deferred loan origination costs—CFC (2) 18,713 — 16,430 — 2,283 Loans to members $ 38,422,128 100 % $ 37,079,978 100 % $ 1,342,150 Loan type: Long-term loans: Fixed rate $ 32,384,884 84 % $ 31,388,313 85 % $ 996,571 Variable rate 1,435,958 4 1,122,250 3 313,708 Total long-term loans 33,820,842 88 32,510,563 88 1,310,279 Line of credit loans 4,582,573 12 4,552,985 12 29,588 Total loans outstanding (1) 38,403,415 100 37,063,548 100 1,339,867 Deferred loan origination costs—CFC (2) 18,713 — 16,430 — 2,283 Loans to members $ 38,422,128 100 % $ 37,079,978 100 % $ 1,342,150 ____________________________ (1) Represents the unpaid principal balance, net of discounts, charge-offs and recoveries, of loans as of the end of each period. (2) Deferred loan origination costs are recorded at CFC segment. 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 $3,109 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 42 Table of Contents 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 additional information on our loans to members. Debt We utilize both secured and unsecured short-term borrowings and long-term debt as part of our funding strategy and asset/liability interest rate risk management. We seek to maintain diversified funding sources, including our members, affiliates, the capital markets and other private funding sources. Our funding strategy consists of various products and programs across markets to manage funding concentrations and reduce our liquidity or debt rollover risk. Debt Product Types 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, 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. government agencies. Table 12 displays our primary funding sources and their selected key attributes. Table 12: Debt—Debt Product Types Debt Product Type Maturity Range Market Secured/Unsecured Short-term funding programs: Commercial paper 1 to 270 days Capital markets, members and affiliates Unsecured Select notes 30 to 270 days Members and affiliates Unsecured Daily liquidity fund notes Demand note Members and affiliates Unsecured Other funding programs: Medium-term notes 9 months to 30 years Capital markets, members and affiliates Unsecured Collateral trust bonds (1) Up to 30 years Capital markets Secured Guaranteed Underwriter Program notes payable (2) Up to 30 years U.S. government Secured Farmer Mac notes payable (3) Up to 30 years Other noncapital markets Secured Subordinated deferrable debt (4) Up to 45 years Capital markets Unsecured Members’ subordinated certificates (5) Up to 100 years Members Unsecured Revolving credit agreements Up to 5 years Bank institutions Unsecured ____________________________ (1) Collateral trust bonds are secured by the pledge of permitted investments and eligibl e mortgage notes from distribution system borrowers in an amount at least equal to the outstanding principal amount of collateral trust bonds. 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 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. (3) 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 under the note purchase agreement with Farmer Mac. (4) Subordinated deferrable debt is subordinate and junior to senior debt and debt obligations we guarantee, but senior to subordinated certificates. We have the right at any time, and from time to time, during the term of the subordinated deferrable debt to suspend interest payments for a certain number of consecutive interest payment periods, as defined in the respective prospectus supplements. To date, we have not exercised our option to suspend interest payments. We also have the right to call the subordinated deferrable debt, in whole or in part, at par, either at certain intervals or any time five or 10 years after the issuance. 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. 43 Table of Contents (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. Membership subordinated certificates generally mature 100 years subsequent to issuance. Loan and guarantee subordinated certificates have the same maturity as the related long-term loan. Some certificates also may amortize annually based on the outstanding loan balance. Member capital securities mature 30 years subsequent to issuance. Member capital securities are callable at par beginning either five or 10 years subsequent to the issuance and anytime thereafter. Debt Outstanding Table 13 displays the composition, by product type, of our outstanding debt and the weighted average interest rate as of May 31, 2026 and 2025. Table 13 also displays the composition of our debt based on several additional selected attributes. 44 Table of Contents Table 13: Debt—Total Debt Outstanding and Weighte d-Average Interest Rates May 31, 2026 2025 (Dollars in thousands) Outstanding Amount Weighted- Average Interest Rate Outstanding Amount Weighted- Average Interest Rate Change Debt product type: Commercial Paper: Members, at par $ 882,692 3.27 % $ 785,608 3.98 % $ 97,084 Dealer, net of discounts 2,338,411 3.85 2,206,451 4.47 131,960 Total commercial paper 3,221,103 3.69 2,992,059 4.34 229,044 Select notes to members 1,361,207 3.54 1,304,240 4.22 56,967 Daily liquidity fund notes to members 253,271 3.00 343,916 3.75 (90,645) Medium-term notes: Members, at par 700,916 4.08 870,849 4.61 (169,933) 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) Farmer Mac notes payable 3,911,993 3.86 3,780,461 4.00 131,532 Subordinated deferrable debt (1) 1,310,282 6.19 1,329,485 6.36 (19,203) Members’ subordinated certificates: Membership subordinated certificates 627,272 4.96 628,637 4.96 (1,365) Loan and guarantee subordinated certificates 253,671 3.03 309,914 3.02 (56,243) Member capital securities 247,297 5.01 246,163 5.01 1,134 Total members’ subordinated certificates 1,128,240 4.54 1,184,714 4.46 (56,474) Total debt outstanding $ 35,944,227 4.03 % $ 34,769,316 4.14 % $ 1,174,911 Security type: Secured debt 44 % 49 % Unsecured debt 56 51 Total 100 % 100 % Funding source: Members 12 % 13 % Other non-capital markets: Guaranteed Underwriter Program notes payable 15 18 Farmer Mac notes payable 11 11 Total other non-capital markets 26 29 Capital markets 62 58 Total 100 % 100 % Interest rate type: Fixed-rate debt 78 % 81 % Variable-rate debt 22 19 Total 100 % 100 % Interest rate type including swaps impact: Fixed-rate debt (3) 90 % 94 % Variable-rate debt (4) 10 6 Total 100 % 100 % Maturity classification: (5) Short-term borrowings 14 % 15 % Long-term and subordinated debt (6) 86 85 Total 100 % 100 % ____________________________ (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. 45 Table of Contents (4) Includes fixed-rate debt that has been swapped to a variable rate, net of any variable-rate debt that has been swapped to a fixed rate. Also includes commercial paper notes, which generally have maturities of less than 90 days. The interest rate on commercial paper notes does not change once the note has been issued; however, the interest rate for new commercial paper issuances changes daily. (5) Borrowings with an original contractual maturity of one year or less are classified as short-term borrowings. Borrowings with an original contractual maturity of greater than one year are classified as long-term debt. (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. We issue debt primarily to fund growth in our loan portfolio. As such, our debt outstanding generally increases and decreases in response to member loan demand. Debt outstanding totaled $35,944 million as of May 31, 2026, which increased by $1,175 million, or 3%, from May 31, 2025, due to borrowings to fund the increase in loans to members. W e provide additional information on our financing activities for FY2026 in the below section “Liquidity Risk” of this Report. Member Investments Debt securities issued to our members represent an important, stable source of funding. Table 14 displays member debt outstanding, by product type, as of May 31, 2026 and 2025. Table 14: Debt—Member Investments May 31, Change 2026 2025 (Dollars in thousands) Amount % of Total (1) Amount % of Total (1) Member investment product type: Commercial paper $ 882,692 27 % $ 785,608 26 % $ 97,084 Select notes 1,361,207 100 1,304,240 100 56,967 Daily liquidity fund notes 253,271 100 343,916 100 (90,645) Medium-term notes 700,916 5 870,849 8 (169,933) Members’ subordinated certificates 1,128,240 100 1,184,714 100 (56,474) Total member investments $ 4,326,326 $ 4,489,327 $ (163,001) Percentage of total debt outstanding 12 % 13 % ____________________________ (1) Represents outstanding debt attributable to members for each debt product type as a percentage of the total outstanding debt for each debt product type. Member investm ents accounted for 12% and 13% of total debt outstanding as of May 31, 2026 and 2025, respectively. 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. Short-Term Borrowings Short-term borrowings consist of borrowings with an original contractual maturity of one year or less and do not include the current portion of long-term debt. 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. See “Liquidity Risk” below and “Note 6—Short-Term Borrowings” for information on the composition of our short-term borrowings. Long-Term and Subordinated Debt 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 46 Table of Contents 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 $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. We provide additional information on our long-term debt below under the section “Liquidity Risk” and “Note 7—Long-Term Debt” and “Note 8—Subordinated Deferrable Debt” in this Report. Equity Table 15 presents the components of total CFC equity and total equity as of May 31, 2026 and 2025. Table 15: Equity May 31, Change (Dollars in thousands) 2026 2025 Equity components: Membership fees and educational fund: Membership fees $ 969 $ 966 $ 3 Educational fund 2,800 2,658 142 Total membership fees and educational fund 3,769 3,624 145 Patronage capital allocated 966,253 948,526 17,727 Members’ capital reserve 1,804,161 1,631,609 172,552 Total allocated equity 2,774,183 2,583,759 190,424 Unallocated net income: Prior fiscal year-end cumulative derivative forward value gains (1) 501,663 606,215 (104,552) Fiscal year derivative forward value gains (losses) (1) 17,756 (104,552) 122,308 Fiscal year-end cumulative derivative forward value gains (1) 519,419 501,663 17,756 Other unallocated net loss (709) (709) — Unallocated net income 518,710 500,954 17,756 CFC retained equity 3,292,893 3,084,713 208,180 Accumulated other comprehensive loss (2,369) (2,236) (133) Total CFC equity 3,290,524 3,082,477 208,047 Noncontrolling interests 21,612 20,989 623 Total equity $ 3,312,136 $ 3,103,466 $ 208,670 ____________________________ (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. 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. 47 Table of Contents Allocation and Retirement of Patronage Capital We are subject to District of Columbia law governing cooperatives, under which CFC is required to make annual allocations of net earnings, if any, in accordance with the provisions of the District of Columbia statutes. District of Columbia cooperative law requires cooperatives to allocate net earnings to patrons, to a general reserve in an amount sufficient to maintain a balance of at least 50% of paid-up capital and to a cooperative educational fund. In addition, the District of Columbia cooperative law permits additional allocations to board-approved reserves. District of Columbia cooperative law also requires that a cooperative’s net earnings be allocated to all patrons in proportion to their individual patronage and each patron’s allocation be distributed to the patron unless the patron agrees that the cooperative may retain its share as additional capital. Pursuant to these provisions, the CFC Board of Directors is required to make annual allocations of net earnings, if any. CFC’s net earnings for determining allocations are based on non-GAAP adjusted net income, which excludes the impact of derivative forward value gains (losses). We provide a reconciliation of our adjusted net income to our reported net income and an explanation of the adjustments below in “Non-GAAP Financial Measures and Reconciliations.” In May 2026, the CFC Board of Directors authorized the allocation of $1 million of net earnings for FY2026 to the cooperative educational fund. In July 2026, the CFC Board of Directors authorized the allocation of FY2026 adjusted net income as follows: $72 million to members in the form of patronage capital and $172 million to the members’ capital reserve. 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. The remaining portion of the patronage capital allocation for FY2026 will be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC Board of Directors in June 2009. In May 2025, the CFC Board of Directors authorized the allocation of $1 million of net earnings for FY2025 to the cooperative educational fund. In July 2025 the CFC Board of Directors authorized the allocation of FY2025 adjusted net income as follows: $67 million to members in the form of patronage capital and $176 million to the members’ capital reserve. In July 2025, the CFC Board of Directors also authorized the retirement of patronage capital totaling $53 million, of which $34 million represented 50% of the patronage capital allocation for FY2025 and $19 million represented 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. This amount was returned to members in cash in September 2025. 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. The CFC Board of Directors is required to make annual allocations of adjusted net income, if any. CFC has made annual retirements of allocated net earnings in 46 of the last 47 fiscal years; however, future retirements of allocated amounts are determined based on CFC’s financial condition. The CFC Board of Directors has the authority to change the current practice for allocating and retiring net earnings at any time, subject to applicable laws. ENTERPRISE RISK MANAGEMENT Overview CFC has an Enterprise Risk Management (“ERM”) framework that is designed to identify, assess, monitor and manage the risks we assume in conducting our activities to serve the financial needs of our members. We face a variety of potential internal and external risks that can significantly affect our financial condition, liquidity position, reputation and ability to meet the expectations of our members, investors and other stakeholders. As a financial services company, the major categories of risk exposures inherent in our business activities include credit risk, liquidity risk, market risk and operational risk. These risk categories are summarized below. • Credit risk is the risk that a borrower or other counterparty will be unable to meet its obligations in accordance with agreed-upon terms. 48 Table of Contents • Liquidity risk is the risk that we will be unable to fund our operations and meet our contractual financial obligations or that we will be unable to fund new loans to borrowers at a reasonable cost and tenor in a timely manner. • 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. Operational risk also includes cybersecurity risk, compliance risk, fiduciary risk, reputational risk and litigation risk. Effective risk management is critical to our overall operations and to achieving our primary objective of providing cost-based financial products to our rural electric members while maintaining the sound financial results required to retain our investment-grade credit ratings on our rated debt instruments. In line with this, we have established a risk-management framework designed to oversee the key risks encountered in our operations and the maximum level of risk we are prepared to undertake, known as risk tolerance. This also includes risk limits and guidelines that are in alignment with CFC’s mission and strategic objectives. Risk-Management Framework Our ERM framework consists of a defined policy and process for managing key risks in alignment with CFC’s mission and the CFC Board of Director’s strategic objectives. 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 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. For additional information about the role of the CFC Board of Directors in risk governance and oversight, see “Item 10. Directors, Executive Officers and Corporate Governance.” The Enterprise Risk Group reports to the Chief Risk Officer and collectively provides independent oversight and support in the establishment of CFC’s ERM framework, and is responsible for establishing and maintaining internal controls to mitigate key risks. In addition, we have a number of management-level risk oversight committees across the organization and groups within the organization that have a defined set of authorities and responsibilities specific to one or more risk types, including the Corporate Credit Committee, Asset Liability Committee, Cybersecurity Committee, Investment Management Committee, Information Technology Steering Committee and Disclosure Committee. 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; the status of any gaps or deficiencies in the ERM process; CFC’s overall risk universe profile and important trends; and emerging risks and opportunities previously not identified or reported. 49 Table of Contents CREDIT RISK 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 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 We manage credit risk related to our loan portfolio consistent with credit policies established by the CFC Board of Directors and through credit underwriting, approval and monitoring processes and practices adopted by management. Our board-established credit policies include guidelines regarding the types of credit products we offer, limits on credit we extend to individual borrowers, approval authorities delegated to management, and use of syndications and loan sales. We maintain an internal risk rating system in which we assign a rating to each borrower and credit facility. We review and update the risk ratings at least annually. Assigned risk ratings inform our credit approval, borrower monitoring and portfolio review processes. Our Corporate Credit Committee approves individual credit actions within its own authority and, together with our Enterprise Risk Group, establishes standards for credit underwriting, oversees credits deemed to be higher risk, reviews assigned risk ratings for accuracy, and monitors the overall credit quality and performance statistics of our loan portfolio. Loan Portfolio Credit Risk Our primary credit exposure is loans to rural electric cooperatives, which provide essential electric services to end-users, the majority of which are residential customers. We also have a limited portfolio of loans to not-for-profit and for-profit telecommunication companies. The substantial majority of loans to our borrowers are long-term fixed-rate loans with terms of up to 35 years. Long-term fixed-rate loans accounted for 84% and 85% of total loans outstanding as of May 31, 2026 and 2025, respectively. Because we lend primarily to our rural electric utility cooperative members, we have had a loan portfolio inherently subject to single-industry and single-obligor credit concentration risk since our inception in 1969. We historically, however, have experienced limited defaults and losses in our electric utility loan portfolio due to several factors. First, the majority of our electric cooperative borrowers operate in states where electric cooperatives are not subject to rate regulation. Thus, they are able to make rate adjustments to pass along increased costs to the end customer without first obtaining state regulatory approval, allowing them to cover operating costs and generate sufficient earnings and cash flows to service their debt obligations. 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 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. Fourth, electric cooperatives tend to adhere to a conservative core business strategy model that has historically resulted in a relatively stable, resilient operating environment and overall strong financial performance and credit strength for the electric cooperative network. Finally, we generally lend to our members on a senior secured basis, which reduces the risk of loss in the event of a borrower default. Below we provide information on the credit risk profile of our loan portfolio, including security provisions, credit concentration, credit quality indicators and our allowance for credit losses. Security Provisions Except when providing line of credit loans, we generally lend to our members on a senior secured basis. Long-term loans are generally secured on parity with other secured lenders (primarily RUS), if any, by all assets and revenue of the borrower with exceptions typical in utility mortgages. 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. 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% were secured as of both May 31, 2026 and 2025. 50 Table of Contents Table 16: Loans—Loan Portfolio Security Profile May 31, 2026 (Dollars in thousands) Secured % of Total Unsecured % of Total Total Member class: CFC: Distribution $ 27,366,476 91 % $ 2,718,748 9 % $ 30,085,224 Power supply 4,909,622 77 1,493,774 23 6,403,396 Statewide and associate 231,324 90 27,073 10 258,397 Total CFC 32,507,422 88 4,239,595 12 36,747,017 NCSC: Electric 1,070,028 100 3,766 — 1,073,794 Telecom 538,331 92 44,273 8 582,604 Total NCSC 1,608,359 97 48,039 3 1,656,398 Total loans outstanding (1) $ 34,115,781 89 $ 4,287,634 11 $ 38,403,415 Loan type: Long-term loans: Fixed rate $ 32,073,241 99 % $ 311,643 1 % $ 32,384,884 Variable rate 1,067,585 74 368,373 26 1,435,958 Total long-term loans 33,140,826 98 680,016 2 33,820,842 Line of credit loans 974,955 21 3,607,618 79 4,582,573 Total loans outstanding (1) $ 34,115,781 89 $ 4,287,634 11 $ 38,403,415 May 31, 2025 (Dollars in thousands) Secured % of Total Unsecured % of Total Total Member class: CFC: Distribution $ 26,376,425 90 % $ 2,886,070 10 % $ 29,262,495 Power supply 4,771,255 81 1,124,245 19 5,895,500 Statewide and associate 238,596 95 12,729 5 251,325 Total CFC 31,386,276 89 4,023,044 11 35,409,320 NCSC: Electric 1,064,125 99 14,638 1 1,078,763 Telecom 561,132 98 14,333 2 575,465 Total NCSC 1,625,257 98 28,971 2 1,654,228 Total loans outstanding (1) $ 33,011,533 89 $ 4,052,015 11 $ 37,063,548 Loan type: Long-term loans: Fixed rate $ 31,269,102 100 % $ 119,211 — % $ 31,388,313 Variable rate 911,573 81 210,677 19 1,122,250 Total long-term loans 32,180,675 99 329,888 1 32,510,563 Line of credit loans 830,858 18 3,722,127 82 4,552,985 Total loans outstanding (1) $ 33,011,533 89 $ 4,052,015 11 $ 37,063,548 ____________________________ (1) Represents the unpaid principal balance, net of discounts, charge-offs and recoveries of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $19 million and $16 million as of May 31, 2026 and 2025, respectively. 51 Table of Contents Credit Concentration Concentrations of credit may exist when a lender has large credit exposures to single borrowers, large credit exposures to borrowers in the same industry sector or engaged in similar activities, or large credit exposures to borrowers in a geographic region that would cause the borrowers to be similarly impacted by economic or other conditions in the region. As discussed above under “Credit Risk—Loan Portfolio Credit Risk,” because we lend primarily to our rural electric utility cooperative members, our loan portfolio is inherently subject to single-industry and single-obligor credit concentration risk. Loans outstanding to electric utility organizations totaled $37,821 million and $36,488 million as of May 31, 2026 and 2025, respectively, and represented approximately 98% of our total loans outstanding as of both the dates. Our credit exposure is partially mitigated by long-term loans guaranteed by RUS, which totaled $95 million and $105 million as of May 31, 2026 and 2025, respectively. Single-Obligor Concentration Table 17 displays the outstanding loan exposure for our 20 largest borrowers, by legal entity and member class, as of May 31, 2026 and 2025. 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. Table 17: Loans—Loan Exposure to 20 Largest Borrowers May 31, 2026 2025 (Dollars in thousands) Amount % of Total Amount % of Total Member class: CFC: Distribution $ 4,517,595 12 % $ 5,054,345 14 % Power supply 2,684,723 7 1,926,448 5 Total CFC 7,202,318 19 6,980,793 19 NCSC Electric 171,788 — 168,063 — Total loan exposure to 20 largest borrowers 7,374,106 19 7,148,856 19 Less: Loans covered under Farmer Mac standby purchase commitment (1) (214,210) — (155,078) — 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. 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 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 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. 52 Table of Contents Table 18 provides a breakdown, by state or U.S. territory, of the total number of borrowers with loans outstanding as of May 31, 2026 and 2025 and the outstanding loan exposure to borrowers in each jurisdiction as a percentage of total loans outstanding of $38,403 million and $37,064 million as of May 31, 2026 and 2025, respectively. 53 Table of Contents Table 18: Loans—Loan Geographic Concentration May 31, 2026 2025 U.S. State/Territory Number of Borrowers % of Total Loans Outstanding Number of Borrowers % of Total Loans Outstanding Alabama 24 2.68 % 22 2.57 % Alaska 16 2.83 16 2.96 Arizona 11 1.34 12 1.27 Arkansas 24 3.66 24 3.64 California 4 0.13 4 0.13 Colorado 30 5.01 27 4.77 Delaware 3 0.11 3 0.14 Florida 19 4.88 21 5.40 Georgia 44 5.58 45 5.96 Hawaii 2 0.18 2 0.20 Idaho 12 0.38 12 0.36 Illinois 28 3.25 29 3.12 Indiana 40 4.24 41 4.30 Iowa 38 2.17 37 2.22 Kansas 29 3.02 27 3.30 Kentucky 25 2.58 22 2.41 Louisiana 10 1.43 10 1.66 Maine 3 0.04 3 0.05 Maryland 2 1.17 2 1.33 Massachusetts 1 0.16 1 0.16 Michigan 12 2.79 11 2.26 Minnesota 45 1.64 45 1.70 Mississippi 21 2.02 21 1.90 Missouri 47 5.49 44 5.60 Montana 24 0.88 22 0.86 Nebraska 11 0.10 11 0.10 Nevada 7 0.52 7 0.53 New Hampshire 2 0.68 2 0.60 New Jersey 2 0.06 2 0.06 New Mexico 11 0.13 11 0.14 New York 15 0.54 17 0.46 North Carolina 25 2.64 26 2.77 North Dakota 14 2.25 16 2.41 Ohio 26 2.09 26 1.96 Oklahoma 24 3.17 26 3.22 Oregon 20 1.17 19 1.20 Pennsylvania 14 1.71 13 1.67 Rhode Island 1 0.03 1 0.03 South Carolina 22 3.17 22 3.16 South Dakota 28 0.78 28 0.71 Tennessee 24 1.01 24 0.98 Texas 67 16.67 68 16.47 Utah 4 0.78 4 0.63 Vermont 4 0.20 4 0.16 Virginia 17 0.89 19 0.93 Washington 11 0.93 11 0.85 West Virginia 2 0.02 2 0.03 Wisconsin 27 1.88 27 1.78 Wyoming 11 0.92 10 0.88 Total 903 100.00 % 899 100.00 % 54 Table of Contents 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, 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. Payment status trends and internal risk ratings are indicators, among others, of the probability of borrower default and overall credit quality of our loan portfolio. We believe the overall credit quality of our loan portfolio remained strong as of May 31, 2026. L oan Modifications to Borrowers Experiencing Financial Difficulty 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 Charge-offs represent the amount of a loan that has been removed from our consolidated balance sheet when the loan is deemed uncollectible. Generally, the amount of a charge-off is the recorded investment in excess of the discounted expected cash flows from the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral securing the loan. We report charge-offs net of amounts recovered on previously charged-off loans. We 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. Of the 18 defaults, one remains unresolved with an expected ultimate resolution date in calendar year 2026; nine resulted in no loss; and eight resulted in cumulative net charge-offs of $100 million. Of this amount, $81 million was attributable to seven electric power supply cooperatives and $19 million was attributable to one electric distribution cooperative. We historically have experienced high recovery rates for our electric loan portfolio. 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 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.” 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. 55 Table of Contents Borrower Risk Ratings As part of our management of credit risk, we maintain a credit risk-rating framework under which we employ a consistent process for assessing the credit quality of our loan portfolio. We evaluate each borrower and loan facility in our loan portfolio and assign internal borrower and loan facility risk ratings based on 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. Our borrower risk ratings align with the U.S. federal banking regulatory agencies’ credit risk definitions of pass and criticized categories, with the criticized category further segmented among special mention, substandard and dou btful. Pass ratings reflect relatively low probability of default, while criticized ratings have a higher probability of default. Our internally assigned borrower risk ratings serve as the primary credit quality indicator for our loan portfolio. Because our internal borrower risk ratings provide important information on the probability of default, they are a key input in determining our allowance for credit losses. We use our internal risk ratings to measure the credit risk of each borrower and loan facility, identify or confirm problem or potential problem loans in a timely manner, differentiate risk within each of our portfolio segments, assess the overall credit quality of our loan portfolio and manage overall risk levels. Our internally assigned borrower risk ratings, which we map to equivalent credit ratings by external credit rating agencies, serve as the primary credit quality indicator for our loan portfolio. 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 $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. We provide additional information on our borrower risk rating classifications, including the amount of loans outstanding in each of the criticized loan categories of special mention, substandard and doubtful, in “Note 1—Summary of Significant Accounting Policies” and “Note 4—Loans” in this Report. Allowance for Credit Losses We are required to maintain an allowance based on a current estimate of credit losses that are expected to occur over the remaining contractual term of the loans in our portfolio. Our allowance for credit losses consists of a collective allowance and an asset-specific allowance. The collective allowance is established for loans in our portfolio that share similar risk characteristics and are therefore evaluated on a collective, or pool, basis in measuring expected credit losses. The asset-specific allowance is established for loans in our portfolio that do not share similar risk characteristics with other loans in our portfolio and are therefore evaluated on an individual basis in measuring expected credit losses. Table 19 presents, by legal entity and member class, loans outstanding and the related allowance for credit losses and allowance coverage ratio as of May 31, 2026 and 2025 and the allowance components as of each date. 56 Table of Contents Table 19: Allowance for Credit Losses by Borrower Member Class and Evaluation Methodology May 31, 2026 2025 (Dollars in thousands) Loans Outstanding (1) Allowance for Credit Losses Allowance Coverage Ratio (2) Loans Outstanding (1) Allowance for Credit Losses Allowance Coverage Ratio (2) Member class: CFC: Distribution $ 30,085,224 $ 16,625 0.06 % $ 29,262,495 $ 18,473 0.06 % Power supply 6,403,396 6,661 0.10 5,895,500 15,456 0.26 Statewide and associate 258,397 970 0.38 251,325 1,100 0.44 Total CFC 36,747,017 24,256 0.07 35,409,320 35,029 0.10 NCSC: Electric 1,073,794 4,108 0.38 1,078,763 3,818 0.35 Telecom 582,604 1,583 0.27 575,465 1,768 0.31 Total NCSC 1,656,398 5,691 0.34 1,654,228 5,586 0.34 Total $ 38,403,415 $ 29,947 0.08 $ 37,063,548 $ 40,615 0.11 Allowance components: Collective allowance $ 38,392,544 $ 29,844 0.08 % $ 37,031,238 $ 31,313 0.08 % Asset-specific allowance 10,871 103 0.95 32,310 9,302 28.79 Total $ 38,403,415 $ 29,947 0.08 $ 37,063,548 $ 40,615 0.11 Allowance coverage ratios: Nonaccrual loans (3) $ 7,500 399.29 % $ 26,099 155.62 % ___________________________ (1) Represents the unpaid principal balance, net of discounts, charge-offs and recoveries, of loans as of each period-end. Excludes unamortized deferred loan origination costs of $19 million and $16 million as of May 31, 2026 and 2025, respectively. (2) Calculated based on the allowance for credit losses attributable to each member class and allowance components at period-end divided by the related loans outstanding at period-end. (3) Calculated based on the total allowance for credit losses at period-end divided by loans outstanding on nonaccrual status at period end. Nonaccrual loans represented 0.02% and 0.07% of total loans outstanding as of May 31, 2026 and 2025, respectively. We provide additional information on our nonaccrual loans in “Note 4—Loans” in 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. Counterparty Credit Risk In addition to credit exposure from our borrowers, we enter into other types of financial transactions in the ordinary course of business that expose us to counterparty credit risk, primarily related to transactions involving our cash and cash equivalents, securities held in our investment securities portfolio and derivatives. We mitigate our risk by only entering into these transactions with counterparties with investment-grade ratings, establishing operational guidelines and counterparty 57 Table of Contents exposure limits and monitoring our counterparty credit risk position. We evaluate our counterparties based on certain quantitative and qualitative factors, and periodically assign internal risk rating grades to our counterparties. Cash and Investments Securities Counterparty Credit Exposure Our cash and cash equivalents and investment securities t otaled $249 million and $42 million , respectively, as of May 31, 2026. The primary credit exposure associated with investments held in our investment portfolio is that issuers will not repay principal and interest in accordance with the contractual terms. Our cash and cash equivalents with financial institutions generally have an original maturity of less than one year and pursuant to our investment policy guidelines, all fixed-income debt securities, at the time of purchase, must be rated at least investment grade based on external credit ratings from at least two of the leading global credit rating agencies, when available, or the corresponding equivalent, when not available. We therefore believe that the risk of default by these counterparties is low. As of May 31, 2026, our overall counterparty credit risk was deemed to be satisfactory and not materially changed compared with May 31, 2025. We provide additional information on the holdings in our investment securities portfolio below under “Liquidity Risk—Investment Securities Portfolio” and in “Note 3—Investment Securities.” Derivative Counterparty Credit Exposure Our derivative counterparty credit exposure relates principally to interest-rate swap contracts. We generally engage in OTC derivative transactions, which expose us to individual counterparty credit risk because these transactions are executed and settled directly between us and each counterpart y. We are exposed to the risk that an individual derivative counterparty defaults on payments due to us, which we may not be able to collect or which may require us to seek a replacement derivative from a different counterparty. This replacement may be at a higher cost, or we may be unable to find a suitable replacement. We manage our derivative counterparty credit 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. We had 12 active derivative counterparties with credit ratings ranging from Aa1 to Baa1 by Moody’s as of both May 31, 2026 and 2025, and fro m AA- to BBB+ by S&P as of both May 31, 2026 and 2025. 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% 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. The fair value of our derivatives includes credit valuation adjustments reflecting counterparty credit risk. We estimate our exposure to credit loss on our derivatives by calculating the replacement cost to settle at current market prices, as defined in our derivative agreements, of all outstanding derivatives in a net gain position at the counterparty level where a right of legal offset exists. We provide information on the impact of netting provisions under our master swap agreements and collateral pledged, if any, in “Note 10—Derivative Instruments and Hedging Activities—Impact of Derivatives on Consolidated Balance Sheets.” We believe our exposure to derivative counterparty risk, at any point in time, is equal to the amount of our outstanding derivatives in a net gain position, at the individual counterparty level, which totaled $524 million and $506 million as of May 31, 2026 and 2025, respectively. We provide additional detail on our derivative agreements, including a discussion of derivative contracts with credit rating triggers and settlement amounts that would be required in the event of a ratings trigger, in “Note 10—Derivative Instruments and Hedging Activities” in this Report. See “Item 1A. Risk Factors” in this Report for additional information about credit risks related to our business. 58 Table of Contents LIQUIDITY RISK 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 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. Liquidity Risk Management Our liquidity risk management framework is designed to meet our liquidity objectives of providing a reliable source of funding to members, meet maturing debt and other financial obligations, issue new debt and fund our operations on a cost-effective basis under normal operating conditions as well as under CFC-specific and/or market stress conditions. Our Asset Liability Committee establishes guidelines that are intended to ensure we maintain sufficient, diversified sources of liquidity to cover potential funding requirements as well as unanticipated contingencies. Our Treasury and Finance Group develops strategies to manage our targeted liquidity position, projects our funding needs under various scenarios, including adverse circumstances, and monitors our liquidity position on an ongoing basis. Available Liquidity As part of our strategy in managing liquidity risk and meeting our liquidity objectives, we seek to maintain various committed sources of funding that are available to meet our near-term liquidity needs. Table 20 presents a comparison between our available liquidity, which consists of cash and cash equivalents, our debt securities investment portfolio and amounts under committed credit facilities as of May 31, 2026 and 2025. Table 20 : Available Liquidity May 31, 2026 2025 (Dollars in millions) Total Accessed Available Total Accessed Available Liquidity sources: Cash and investment debt securities: Cash and cash equivalents $ 249 $ — $ 249 $ 135 $ — $ 135 Debt securities investment portfolio (1) 31 — 31 114 — 114 Total cash and investment debt securities 280 — 280 249 — 249 Committed credit facilities: Committed bank revolving line of credit agreements—unsecured (2) 3,500 7 3,493 3,300 7 3,293 Guaranteed Underwriter Program committed facilities—secured (3) 10,823 9,023 1,800 10,373 9,023 1,350 Farmer Mac revolving note purchase agreement—secured (4) 6,500 3,912 2,588 6,500 3,780 2,720 Total committed credit facilities 20,823 12,942 7,881 20,173 12,810 7,363 Total available liquidity $ 21,103 $ 12,942 $ 8,161 $ 20,422 $ 12,810 $ 7,612 ____________________________ (1) Represents the aggregate fair value of our portfolio of debt securities as of period end. 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 as of both May 31, 2026 and 2025, relates to letters of credit issued pursuant to the four-year revolving line of credit agreement. 59 Table of Contents (3) The committed facilities under the Guaranteed Underwriter Program are not revolving. (4) Availability subject to market conditions. Although as a nonbank financial institution we are not subject to regulatory liquidity requirements, our liquidity management framework includes monitoring our liquidity and funding positions on an ongoing basis and assessing our ability to meet our scheduled debt obligations and other cash flow requirements based on point-in-time metrics as well as forward-looking projections. Our liquidity and funding assessment takes into consideration amounts available under existing liquidity sources, the expected rollover of member short-term investments and scheduled loan principal payment amounts, as well as our continued ability to access the capital markets and other non-capital market-related funding sources. Liquidity Risk Assessment We utilize several measures to assess our liquidity risk and ensure we have adequate coverage to meet our liquidity needs. Our primary liquidity measures indicate the extent to which we have sufficient liquidity to cover the payment of scheduled debt obligations over the next 12 months. We calculate our liquidity coverage ratios under several scenarios that take into consideration various assumptions about our near-term sources and uses of liquidity, including the assumption that maturities of member short-term investments will not have a significant impact on our anticipated cash outflows. Our members have historically maintained a relatively stable level of short-term investments in CFC in the form of daily liquidity fund notes, commercial paper, select notes and medium-term notes. As such, we expect that our members will continue to reinvest their excess cash in short-term investment products offered by CFC. Table 21 presents our primary liquidity coverage ratios as of May 31, 2026 and 2025 and displays the calculation of each ratio as of these respective dates based on the assumptions discussed above. Table 21: Liquidity Coverage Ratios May 31, (Dollars in millions) 2026 2025 Liquidity coverage ratio: (1) Total available liquidity (2) $ 8,161 $ 7,612 Debt scheduled to mature over next 12 months: Short-term borrowings (3) 5,160 5,091 Long-term and subordinated debt scheduled to mature over next 12 months (4) 4,602 3,679 Total debt scheduled to mature over next 12 months 9,762 8,770 Deficit in available liquidity over debt scheduled to mature over next 12 months $ (1,601) $ (1,158) Liquidity coverage ratio 0.84 0.87 Liquidity coverage ratio, excluding expected maturities of member short-term investments (5) Total available liquidity (2) $ 8,161 $ 7,612 Total debt scheduled to mature over next 12 months 9,762 8,770 Exclude: Member short-term investments (6) (2,821) (2,885) Total debt, excluding member short-term investments, scheduled to mature over next 12 months 6,941 5,885 Excess in available liquidity over total debt, excluding member short-term investments, scheduled to mature over next 12 months $ 1,220 $ 1,727 Liquidity coverage ratio, excluding expected maturities of member short-term investments 1.18 1.29 ___________________________ (1) Calculated based on available liquidity at period-end divided by total debt scheduled to mature over the next 12 months at period-end. (2) Total available liquidity is presented above in Table 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. 60 Table of Contents (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. (6) Member short-term investments include commercial paper sold directly to members, select notes, daily liquidity fund notes and short-term medium-term notes sold to members. See Table 23: Short-Term Borrowings—Outstanding Amount and Weighted-Average Interest Rates below for additional information. 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. As mentioned above , our members historically have maintained a relatively stable level of short-term investments in CFC. 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, 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. 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. The issuance of long-term debt, which represents the most significant component of our funding, allows us to reduce our reliance on short-term borrowings, as well as effectively manage our refinancing and interest rate risk. We expect to continue to issue long-term debt in the public capital markets and under our other non-capital market debt arrangements to meet our funding needs and believe that we have sufficient sources of liquidity to meet our debt obligations and support our operations over the next 12 months. Investment Securities Portfolio We have an investment portfolio of debt securities classified as trading and equity securities, both of which are reported on our consolidated balance sheets at fair value. 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. Borrowing Capacity Under Various Credit Facilities The aggregate borrowing capacity under our committed bank revolving line of credit agreements, committed loan facilities under the Guaranteed Underwriter Program and revolving note purchase agreement with Farmer Mac totale d $20,823 million and $20,173 million as of May 31, 2026 and 2025, respectively, and the aggregate amount available for access totaled $7,881 million and $7,363 million as of each respective date. The following is a discussion of our borro wing capacity and key terms and conditions under each of these credit facilities. 61 Table of Contents Committed Bank Revolving Line of Credit Agreements—Unsecured Our committed bank revolving lines of credit may be used for general corporate purposes; however, we generally rely on them as a backup source of liquidity for our commercial paper. 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. Under our current committed bank revolving line of credit agreements, we have the ability to request up to $300 million of letters of credit, which would result in a reduction in the remaining available amount under the facilities. Table 22 presents the total commitment amount under our committed bank revolving line of credit agreements, outstanding letters of credit and the amount available for access as of May 31, 2026. Table 22: Committed Bank Revolving Line of Credit Agreements May 31, 2026 (Dollars in millions) Total Commitment Letters of Credit Outstanding Amount Available for Access Maturity Annual Facility Fee (1) Bank revolving agreements: 3-year agreement $ 50 $ — $ 50 November 28, 2027 7.5 bps 3-year agreement 1,695 — 1,695 November 28, 2028 7.5 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 ___________________________ (1) Facility fee based on CFC’s senior unsecured credit ratings in accordance with the established pricing schedules at the inception of the related agreement. We did not have any outstanding borrowings under our committed bank revolving line of credit agreements as of May 31, 2026; however, we had letters of credit outstanding of $7 million under the four-year committed bank revolving agreement as of this date. Although our committed bank revolving line of credit agreements do not contain a material adverse change clause or rating triggers that would limit the banks’ obligations to provide funding under the terms of the agreements, we must be in compliance with the covenants to draw on the facilities. We have been and expect to continue to be in compliance with the covenants under our committed bank revolving line of credit agreements. As such, we could draw on these facilities to repay commercial paper that cannot be rolled over. Guaranteed Underwriter Program Committed Facilities—Secured 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. The borrowings under this program are guaranteed by RUS. Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the advance. 62 Table of Contents 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. Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the advance. 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 $1,800 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. The notes payable to FFB and guaranteed by RUS under the Guaranteed Underwriter Program contain a provision that if during any portion of the fiscal year, our senior secured credit ratings do not have at least two of the following ratings: (i) A3 or higher from Moody’s, (ii) A- or higher from S&P, (iii) A- or higher from Fitch or (iv) an equivalent rating from a successor rating agency to any of the above rating agencies, we may not make cash patronage capital distributions in excess of 5% of total patronage capital. Farmer Mac Revolving Note Purchase Agreement—Secured 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. As displayed in Table 20, the amount available for borrowing under this agreement was $2,588 million as of May 31, 2026. We are required to pledge eligible electric distribution system or electric power supply system loans as collateral in an amount at least equal to the total principal amount of notes outstanding under this agr eement. We provide additional information on pledged collateral below under “Pledged Collateral” in this section and “Note 4—Loans.” 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, and medium-term notes offered to members and dealers. 63 Table of Contents Table 23: Short-Term Borrowings—Outstanding Amount and Weighted-Average Interest Rates May 31, 2026 2025 (Dollars in thousands) Outstanding Amount Weighted- Average Interest Rate Outstanding Amount Weighted-Average Interest Rate Short-term borrowings: Commercial paper: Commercial paper sold through dealers, net of discounts $ 2,338,411 3.85 % $ 2,206,451 4.47 % Commercial paper sold directly to members, at par 882,692 3.27 785,608 3.98 Total commercial paper 3,221,103 3.69 2,992,059 4.34 Select notes to members 1,361,207 3.54 1,304,240 4.22 Daily liquidity fund notes to members 253,271 3.00 343,916 3.75 Medium-term notes sold to members 324,190 3.81 451,201 4.62 Total short-term borrowings outstanding $ 5,159,771 3.62 $ 5,091,416 4.30 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. Table 24 displays the composition, by funding source, of our short-term borrowings as of May 31, 2026 and 2025. 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. Table 24: Short-Term Borrowings—Funding Sources May 31, 2026 2025 (Dollars in thousands) Outstanding Amount % of Total Short-Term Borrowings Outstanding Amount % of Total Short-Term Borrowings Funding source: Members $ 2,821,360 55 % $ 2,884,965 57 % Capital markets 2,338,411 45 2,206,451 43 Total $ 5,159,771 100 % $ 5,091,416 100 % Long-Term and Subordinated Debt 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. 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. 64 Table of Contents 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. Pursuant to Rule 405 of the Securities Act, we are classified as a “well-known seasoned issuer.” Under our effective shelf registration statements filed with the SEC, we may offer and issue the following debt securities: • an unlimited amount of collateral trust bonds and senior and subordinated debt securities, including medium-term notes, member capital securities and subordinated deferrable debt, until October 2026; and • daily liquidity fund notes up to $20,000 million in the aggregate—with a $3,000 million limit on the aggregate principal amount outstanding at any time—until March 2028. Although we register member capital securities and the daily liquidity fund notes with the SEC, these securities are not available for sale to the general public. Medium-term notes are available for sale to both the general public and members. Notwithstanding the foregoing, we have contractual limitations with respect to the amount of senior indebtedness we may incur. 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 Table 25 summarizes long-term and subordinated debt issuances and repayments during FY2026. Table 25: Long-Term and Subordinated Debt — Issuances and Repayments Year Ended May 31, 2026 (Dollars in thousands) Issuances Repayments (1) Debt product type: Collateral trust bonds (2) $ — $ 412,520 Guaranteed Underwriter Program notes payable — 1,118,130 Farmer Mac notes payable 250,000 118,467 Medium-term notes sold to members 101,946 144,868 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 Total $ 5,425,878 $ 4,340,347 ___________________________ (1) Repayments include principal maturities, scheduled amortization payments, repurchases and redemptions. (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. Pledged Collateral Under our secured borrowing agreements, we are required to pledge loans, investment debt securities or other collateral and maintain certain pledged collateral ratios. Of our 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 65 Table of Contents 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. Secured Borrowing Agreements—Pledged Loan Requirements We are required to pledge loans or other collateral in transactions under our collateral trust bond indentures, bond agreements under the Guaranteed Underwriter Program and note purchase agreement with Farmer Mac. 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. Table 26: Collateral Pledged Requirement Coverage Ratios Actual Coverage Ratios (1) Minimum Debt Indentures Maximum Committed Bank Revolving Line of Credit Agreements May 31, 2026 2025 Secured borrowing agreement type: Collateral trust bonds 1994 indenture 100 % N/A 143 % 146 % Collateral trust bonds 2007 indenture 100 150 115 116 Guaranteed Underwriter Program notes payable 100 150 126 118 Farmer Mac notes payable 100 150 124 123 ____________________________ (1) Calculated based on the amount of collateral pledged divided by the face amount of outstanding secured debt. 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. Table 27: Loans — Unencumbered Loans May 31, (Dollars in thousands) 2026 2025 Total loans outstanding (1) $ 38,403,415 $ 37,063,548 Less: Loans required to be pledged under secured debt agreements (2) (15,920,906) (17,320,024) Loans pledged in excess of required amount (2)(3) (3,361,068) (3,195,994) Total pledged loans (19,281,974) (20,516,018) Unencumbered loans $ 19,121,441 $ 16,547,530 Unencumbered loans as a percentage of total loans outstanding 50 % 45 % ____________________________ (1) Represents the unpaid principal balance of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $19 million and $16 million as of May 31, 2026 and 2025, respectively. (2) Reflects unpaid principal balance of pledged loans. (3) If there is an event of default under most of our indentures, we can only withdraw the excess collateral if we substitute cash or permitted investments of equal value. As displayed above in Table 27, we had excess loans pledged as collateral totaling $3,361 million and $3,196 million as of May 31, 2026 and 2025, respectively. To ensure that we do not fall below the minimum collateral coverage ratio requirement, we typically pledge loans in excess of the required amount for the following reasons: (i) our distribution and 66 Table of Contents 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; and (iii) individual loans may become ineligible for various reasons, some of which may be temporary. We provide additional information on our borrowings, including the maturity profile, below in “Liquidity Risk” and additional information on pledged loans in “Note 4—Loans” in this Report. For additional detail on each of our debt product types, refer to “Note 6—Short-Term Borrowings,” “Note 7—Long-Term Debt,” “Note 8—Subordinated Deferrable Debt” and “Note 9—Members’ Subordinated Certificates” in this Report. Member Loan Repayments Table 28 displays future scheduled loan principal payment amounts, by member class and by loan type, on loans outstanding as of May 31, 2026, disaggregated by amounts due (i) in one year or less; (ii) after one year up to five years; (iii) after five years up to 15 years; and (iv) after 15 years. Table 28: Loans—Scheduled Principal Payments May 31, 2026 (Dollars in thousands) Due ≤ 1 Year Due > 1 Year Up to 5 Years Due > 5 Years Up to 15 Years Due After 15 Years Total Member class: CFC: Distribution $ 3,402,816 $ 6,126,755 $ 11,269,420 $ 9,286,233 $ 30,085,224 Power supply 496,566 2,518,817 2,113,007 1,275,006 6,403,396 Statewide and associate 73,737 87,775 35,681 61,204 258,397 Total CFC 3,973,119 8,733,347 13,418,108 10,622,443 36,747,017 NCSC: Electric 104,946 579,424 314,834 74,590 1,073,794 Telecom 88,945 336,940 156,719 — 582,604 Total NCSC 193,891 916,364 471,553 74,590 1,656,398 Total loans outstanding $ 4,167,010 $ 9,649,711 $ 13,889,661 $ 10,697,033 $ 38,403,415 Loan type: Fixed rate $ 1,656,920 $ 6,674,241 $ 13,677,527 $ 10,376,196 $ 32,384,884 Variable rate 2,510,090 2,975,470 212,134 320,837 6,018,531 Total loans outstanding $ 4,167,010 $ 9,649,711 $ 13,889,661 $ 10,697,033 $ 38,403,415 Contractual Obligations Our contractual obligations affect both our short- and long-term liquidity needs. Our most significant contractual obligations include scheduled payments on our debt obligations. Table 29 displays scheduled amounts due on our debt obligations as of May 31, 2026 and the expected timing of these payments. The amounts presented reflect undiscounted future cash payment amounts due pursuant to these obligations, aggregated by the type of contractual obligation. The table excludes certain obligations that are short-term, such as trade payables, or where the amount is not fixed and determinable, such as derivatives subject to valuation based on market factors. The timing of actual future payments may differ from those presented due to a number of factors, such as discretionary debt redemptions or changes in interest rates that may impact our expected future cash interest payments. 67 Table of Contents Table 29: Contractual Obligations (1) Payments Due by Period (Dollars in thousands) In 1 Year or Less After 1 Year Through 3 Years After 3 Years Through 5 Years After 5 Years Total Short-term borrowings $ 5,159,771 $ — $ — $ — $ 5,159,771 Long-term debt 4,598,356 9,636,680 4,560,777 9,744,295 28,540,108 Subordinated deferrable debt — — — 1,322,956 1,322,956 Members’ subordinated certificates (2) 3,484 10,767 68,942 1,045,029 1,128,222 Total long-term and subordinated debt 4,601,840 9,647,447 4,629,719 12,112,280 30,991,286 Finance leases 1,472 3,081 2,322 1,645 8,520 Contractual interest on long-term debt (3) 1,226,249 1,889,154 1,268,036 6,133,491 10,516,930 Total $ 10,989,332 $ 11,539,682 $ 5,900,077 $ 18,247,416 $ 46,676,507 ____________________________ (1) Callable debt is included in this table at its contractual maturity. (2) Member loan subordinated certificates totaling $114 million are amortizing annually based on the unpaid principal balance of the related loan. Amortization payments on these certificates totaled $7 million in FY2026 and represented 6% of amortizing loan subordinated certificates outstanding. (3) Represents the amounts of future interest payments on long-term and subordinated debt outstanding as of May 31, 2026, based on the contractual terms of the securities. These amounts were determined based on certain assumptions, including that variable-rate debt continues to accrue interest at the contractual rates in effect as of May 31, 2026 until maturity, and redeemable debt continues to accrue interest until its contractual maturity. Off-Balance Sheet Arrangements In the ordinary course of business, we engage in financial transactions that are not presented on our consolidated balance sheets, or may be recorded on our consolidated balance sheets in amounts that are different from the full contract or notional amount of the transaction. Our off-balance sheet arrangements consist primarily of unadvanced loan commitments intended to meet the financial needs of our members and guarantees of member obligations, which may affect our liquidity and funding requirements based on the likelihood that borrowers will advance funds under the loan commitments or we will be required to perform under the guarantee obligations. We provide information on our unadvanced loan commitments in “Note 4—Loans” and information on our guarantee obligations in “Note 13—Guarantees.” Projected Near-Term Sources and Uses of Funds Table 30 below displays a projection of our primary long-term sources and uses of funds as of May 31, 2026 , by quarter, over each of the next six fisc al quarters. Our projection is based on the following, which includes several assumptions: (i) the estimated issuance of long-term debt, including capital market and other non-capital market term debt, is based on our market-risk management goal of minimizing the mismatch between the cash flows from our financial assets and our financial liabilities; (ii) long-term loan scheduled amortization repayment amounts represent scheduled loan principal payments for long-term loans outstanding as of May 31, 2026 and estimated loan principal payments for long-term loan advances, plus estimated prepayment amounts on long-term loans; (iii) long-term and subordinated debt maturities consist of both scheduled principal maturity and amortization amounts and projected principal maturity and amortization amounts on term debt outstanding in each period presented; and (iv) long-term loan advances are based on our current projection of member demand for loans. In addition, amounts available under our committed bank revolving lines of credit, net increases in dealer commercial paper and short-term member investments, are intended to serve as a backup source of liquidity. 68 Table of Contents Table 30: Projected Long-Term Sources and Uses of Funds (1) Projected Long-Term Sources of Funds Projected Long-Term Uses of Funds (Dollars in millions) Long-Term Debt Issuance Anticipated Long-Term Loan Repayments (2) Total Projected Long-Term Sources of Funds Long-Term and Subordinated Debt Maturities (3) Long-Term Loan Advances Total Projected Long-Term Uses of Funds 1Q FY 2027 $ 600 $ 641 $ 1,241 $ 725 $ 662 $ 1,387 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 ____________________________ (1) The dates presented represent the end of each quarterly period through the quarter ended November 30, 2027. (2) Anticipated long-term loan repayments include scheduled long-term loan amortizations and anticipated cash repayments at repricing date. (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. The estimates presented above are developed at a particular point in time based on our expected future business growth and funding. Our actual results and future estimates may vary, perhaps significantly, from the current projections, as a result of changes in market conditions, management actions or other factors. 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, 2026, which remain unchanged as of the date of this Report. Table 31: Credit Ratings May 31, 2026 CFC credit ratings and outlook: Moody’s S&P Fitch Long-term issuer credit rating (1) A2 A- A Senior secured debt (2) A1 A- A+ Senior unsecured debt (3) A2 A- A Subordinated debt A3 BBB BBB+ Short-term issuer credit rating P-1 N/A F1 Outlook Stable Stable Stable Rating agency credit opinion/report date February 24, 2026 November 24, 2025 September 23, 2025 ___________________________ (1) Based on our senior unsecured debt rating. (2) Applies to our collateral trust bonds. (3) Applies to our medium-term notes. 69 Table of Contents See “Credit Risk—Counterparty Credit Risk—Derivative Counterparty Credit Exposure” above for information on credit rating provisions related to our derivative contracts. Financial Ratios 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. 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. Our adjusted debt-to-equity ratio w as 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 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 debt-to-equity ratio and adjusted debt-to-equity ratio under the section “Non-GAAP Financial Measures and Reconciliations” in this Report. Debt Covenants As part of our short-term and long-term borrowing arrangements, we are subject to various financial and operational covenants. If we fail to maintain specified financial ratios, such failure could constitute a default by CFC of certain covenants under our committed bank revolving line of credit agreements and senior debt indentures. We were in compliance with all covenants and conditions under our committed bank revolving line of credit agreements and senior debt indentures as of May 31, 2026. As discussed above in “Non-GAAP Financial Measures,” the financial covenants set forth in our committed bank revolving line of credit agreements and senior debt indentures are based on adjusted financial measures, including adjusted TIER. We provide a reconciliation of adjusted TIER and other non-GAAP financial measures disclosed in this Report to the most comparable U.S. GAAP financial measures below in “Non-GAAP Financial Measures and Reconciliations.” MARKET RISK Interest rate risk represents our primary source of market risk, as interest rate volatility or changes in interest rates can have a significant impact on our earnings and overall financial condition as a financial institution. We are exposed to interest rate risk primarily from the differences in the timing between the maturity or repricing of our loans and the liabilities funding our loans. We use derivatives as a tool in matching the duration and repricing characteristics of our interest rate-sensitive assets and liabilities. Below we discuss how we manage and measure interest rate risk. 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. 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.” 70 Table of Contents Interest Rate Risk Assessment Our Asset Liability Management (“ALM”) framework includes the use of analytic tools and capabilities, enabling CFC to generate a comprehensive profile of our interest rate risk exposure. We routinely measure and assess our interest rate risk exposure using various methodologies through the use of ALM models that enable us to accurately measure and monitor our interest rate risk exposure under multiple interest rate scenarios using several different techniques. Below we present two measures used to assess our interest rate risk exposure: (i) the interest rate sensitivity of projected net interest income and adjusted net interest income; and (ii) duration gap. Interest Rate Sensitivity Analysis We regularly evaluate the sensitivity of our interest-earning assets and the interest-bearing liabilities funding those assets and our net interest income and adjusted net interest income projections under multiple interest rate scenarios. Each month we update our ALM models to reflect our existing balance sheet position and incorporate different assumptions about forecasted changes in our balance sheet position over the next 12 months. Based on the forecasted balance sheet changes, we generate various projections of net interest income and adjusted net interest income over the next 12 months. Management reviews and assesses these projections and underlying assumptions to identify a baseline scenario of projected net interest income and adjusted net interest income over the next 12 months, which reflects what management considers, at the time, as the most likely scenario. As discussed under “Non-GAAP Financial Measures,” we derive adjusted net interest income by adjusting our reported interest expense and net interest income to include the impact of net derivative cash 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 projection. 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 ; 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, 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. 71 Table of Contents Table 32: Interest Rate Sensitivity Analysis May 31, 2026 May 31, 2025 Estimated Impact (1) + 100 Basis Points – 100 Basis Points Inverted + 100 Basis Points – 100 Basis Points Inverted Net interest income (4.28)% 3.43% (2.61)% (1.68)% 1.79% (5.07)% Derivative cash settlements 12.34% (12.18)% 9.37% 11.33% (11.32)% 9.12% Adjusted net interest income (2) 8.06% (8.74)% 6.76% 9.65% (9.54)% 4.04% ____________________________ (1) The actual impact on our reported and adjusted net interest income may differ significantly from the sensitivity analysis presented. (2) We include net periodic derivative cash settlement interest amounts as a component of interest expense in deriving adjusted net interest income. See the section “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of the non-GAAP financial measures presented in this Report to the most comparable U.S. GAAP financial measures. The changes in the sensitivity measures between May 31, 2026 and 2025 are primarily attributable to changes in the size and composition of our forecasted balance sheet, as well as changes in current interest rates and forecasted interest rates. As the interest rate sensitivity simulations displayed in Table 32 indicate, we would expect an unfavorable impact on our projected net interest income over a 12-month horizon as of May 31, 2026, under the hypothetical scenario of an instantaneous parallel shift of plus 100 basis points in the interest rate yield curve and an inverted yield curve. We would expect an unfavorable impact on our adjusted net interest income over a 12-month horizon as of May 31, 2026, under the hypothetical scenario of an instantaneous parallel shift of minus 100 basis points in the interest rate yield curve. Duration Gap The duration gap, which represents the difference between the estimated duration of our interest-earning assets and the estimated duration of our interest-bearing liabilities, summarizes the extent to which the cash flows for assets and liabilities are matched over time. We use derivatives in managing the differences in timing between the maturities or repricing of our interest-earning assets and the debt funding those assets. A positive duration gap indicates that the duration of our interest-earning assets is greater than the duration of our debt and derivatives, and therefore denotes an increased exposure to rising interest rates over the long term. Conversely, a negative duration gap indicates that the duration of our interest-earning assets is less than the duration of our debt and derivatives, and therefore denotes an increased exposure to declining interest rates over the long term. While the duration gap provides a relatively concise and simple measure of the interest rate risk inherent 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 While we believe that the interest income sensitivities and duration gap measures provided are useful tools in assessing our interest rate risk exposure, there are inherent limitations in any methodology used to estimate the exposure to changes in market interest rates. These measures should be understood as estimates rather than as precise measurements. The interest rate sensitivity analyses only contemplate certain hypothetical movements in interest rates and are performed at a particular point in time based on the existing balance sheet and, in some cases, expected future business growth and funding mix assumptions. The strategic actions that management may take to manage our balance sheet may differ significantly from our projections, which could cause our actual interest income to differ substantially from the above sensitivity analysis. Moreover, as discussed above, we use various other methodologies to measure and monitor our interest rate risk under multiple interest rate scenarios, which, together, provide a comprehensive profile of our interest rate risk. 72 Table of Contents OPERATIONAL RISK 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 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. The measurement, assessment and effective management of such risk is important to the achievement of our objectives. Operational risk is a core component of CFC’s Enterprise Risk Management framework and is governed by the CFC Board of Directors while management oversight of the risk is the responsibility of the Chief Risk Officer. We maintain related risk guidelines and limits, business policies and procedures, employee training, an internal control framework, a comprehensive business continuity and disaster recovery plan, as well as a detailed third-party risk management program that are collectively intended to provide a sound operational environment. Our business policies and controls have been designed to manage operational risk at appropriate levels given our financial strength, the business environment and markets in which we operate, and the nature of our businesses, while also considering factors such as competition and regulation. C orporate Compliance monitors compliance with established procedures and applicable laws that are designed to ensure adherence to generally accepted conduct, ethics and business practices defined in our corporate policies. We provide employee compliance training programs, including information protection, Regulation FD (“Fair Disclosure”) compliance and operational risk. 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 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 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. These plans anticipate a variety of probable scenarios ranging from local to regional crises. We continue to enhance our crisis management framework to provide additional corporate guidance on the management of and response to significant crises that may have an adverse disruptive impact on our business. The crises identified include, but are not limited to, man-made and natural disasters including infectious disease pandemics, technology disruption and workforce issues. The objectives of the enhancements are to ensure, in the event of an identified crisis, we have well-documented plans in place to protect our employees and the work environment, safeguard CFC’s operations, protect CFC’s brand and reputation and minimize the impact of business disruptions. We conducted a business impact analysis for each identified crisis to assess the potential impact on our business operations, financial performance, technology and staff. The results of the business impact analysis have been utilized to develop management action plans that align business priorities, clarify responsibilities and establish processes and procedures that enable us to respond in a timely, proactive manner and take appropriate actions to manage and mitigate the potential disruptive impact of specified crises. Our cybersecurity risk-management efforts are a core component of our overall enterprise risk management framework and CFC’s operational risk oversight. We provide more information on our cybersecurity risk management and strategy as well as cybersecurity governance in “Item 1C. Cybersecurity. ” 73 Table of Contents CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with U.S. GAAP requires management to make a number of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and expenses in our consolidated financial statements. Understanding our accounting policies and the extent to which we use management’s judgment and estimates in applying these policies is integral to understanding our financial statements. We provide a discussion of our significant accounting policies in “Note 1—Summary of Significant Accounting Policies” in this Report. Certain accounting estimates are considered critical because they involve significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our results of operations or financial condition. The determination of the allowance for expected credit losses over the remaining expected life of the loans in our loan portfolio involves a significant degree of management judgment and level of estimation uncertainty. As such, we have identified our accounting policy governing the estimation of the allowance for credit losses as a critical accounting estim ate. Management established policies and control procedures intended to ensure that the methodology used for determining our allowance for credit losses, including any judgments and assumptions made as part of such method, are well controlled and applied consistently from period to period. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. We describe our allowance methodology and process for estimating the allowance for credit losses under “Note 1—Summary of Significant Accounting Policies—Allowance for Credit Losses—Loan Portfolio.” We maintain an allowance based on a current estimate of credit losses that are expected to occur over the remaining life of the loans in our portfolio. The methods utilized to estimate the allowance for credit losses, key assumptions and quantitative and qualitative information considered by management in determining the appropriate allowance for credit losses are discussed in “Note 1—Summary of Significant Accounting Policies.” Key inputs, such as our historical loss data and third-party default data, that we use in determining the appropriate allowance for credit losses are more readily quantifiable, while other inputs, such as our internally assigned borrower risk ratings that are intended to assess a borrower’s capacity to meet its financial obligations and provide information on the probability of default, require more qualitative judgment. Degrees of imprecision exist in each of these inputs due in part to subjective judgments involved and an inherent lag in the data available to quantify current conditions and events that may affect our credit loss estimate. Our internally assigned borrower risk ratings serve as the primary credit quality indicator for our loan portfolio. 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 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 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. Key Assumptions Determining the appropriateness of the allowance for credit losses is subject to numerous estimates and assumptions requiring significant management judgment about matters that involve a high degree of subjectivity and are difficult to predict. The key assumptions in determining our collective allowance that require significant management judgment and may have a material impact on the amount of the allowance include the segmentation of our loan portfolio; our internally assigned borrower risk ratings; the probability of default; the loss severity or recovery rate in the event of default for each portfolio segment; and management’s consideration of qualitative factors that may cause estimated credit losses associated with our existing loan portfolio to differ from our historical loss experience. 74 Table of Contents As discussed in “Credit Risk—Loan Portfolio Credit Risk,” CFC has experienced only 18 defaults in its 57-year history, and prior to the two CFC electric power supply loan defaults in fiscal years 2021 and 2022, we had no defaults in our electric utility loan portfolio since fiscal year 2013. As such, we have a limited history of defaults to develop reasonable and supportable estimated probability of default rates for our existing loan portfolio. We therefore utilize third-party default data for the utility sector as a proxy to estimate probability of default rates for our loan portfolio segments. However, we utilize our internal historical loss experience to estimate loss given default, or the recovery rate, for each of our loan portfolio segments. We believe our internal historical loss 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 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. The degree to which any particular assumption affects the allowance for credit losses depends on the severity of the change and its relationship to the other assumptions. We regularly evaluate the key inputs and assumptions used in determining the allowance for credit losses and update them, as necessary, to better reflect present conditions, including current trends in credit performance and borrower risk profile, portfolio concentration risk, changes in risk-management practices, changes in the regulatory environment and other factors relevant to our loan portfolio segments. We did not change our allowance methodology or the nature of the underlying key inputs and assumptions used in measuring our allowance for credit losses during FY2026. Sensitivity Analysis 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 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 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. Because management evaluates a variety of factors and inputs in determining the allowance for credit losses, these sensitivity analyses are not considered probable and do not imply an expectation of future changes in loss rates or borrower risk ratings. Given current processes employed in estimating the allowance for credit losses, management believes the inherent loss rates and currently assigned risk ratings are appropriate. 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 critical accounting estimates under “Item 1A. Risk Factors—Regulatory and Compliance Risks” in 75 Table of Contents this Report. 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. RECENT ACCOUNTING CHANGES AND OTHER DEVELOPMENTS Recent Accounting Changes We provide information on recently adopted accounting standards and the adoption impact on CFC’s consolidated financial statements and recently issued accounting standards not yet required to be adopted and the expected adoption impact in “Note 1—Summary of Significant Accounting Policies.” To the extent we believe the adoption of new accounting standards has had or will have a material impact on our consolidated results of operations, financial condition or liquidity, we discuss the impact in the applicable section(s) of this MD&A. NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS As discussed above in the section “Non-GAAP Financial Measures,” in addition to financial measures determined in accordance with U.S. GAAP, we believe our non-GAAP financial measures, which are not a substitute for U.S. GAAP and may not be consistent with similarly titled non-GAAP financial measures used by other companies, provide meaningful information and are useful to investors because management evaluates performance based on these metrics for purposes of (i) establishing corporate goals; (ii) budgeting and forecasting; (iii) comparing period-to-period operating results, analyzing changes in results and identifying potential trends; (iv) monitoring our overall leverage and credit ratings; and (v) making compensation decisions. In addition, certain of the financial covenants in our committed bank revolving line of credit agreements and debt indentures are based on non-GAAP financial measures. Below we discuss each of the non-GAAP financial measures and provide a reconciliation of our non-GAAP financial measures to the most comparable U.S. GAAP financial measures. Statements of Operations Non-GAAP Financial Measures One of our primary performance measures is TIER, which is a measure indicating our ability to cover the interest expense requirements on our debt. 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) 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. We use derivatives to manage interest rate risk on our funding of the loan portfolio. The derivative cash settlements income (expense) represents the amount that we receive from or pay to our counterparties based on the interest rate indexes in our derivatives that do not qualify for hedge accounting. We adjust the reported interest expense to include the derivative cash settlements income (expense). We use the adjusted cost of funding to set interest rates on loans to our members and believe that the interest expense adjusted to include derivative cash settlements income (expense) represents our total cost of funding for the period. 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) 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. 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. 76 Table of Contents Net Income and Adjusted Net Income Table 33 provides a reconciliation of adjusted interest expense, adjusted net interest income and adjusted net income to the comparable U.S. GAAP financial measures. These adjusted financial measures are used in the calculation of our adjusted net interest yield and adjusted TIER. Table 33: Adjusted Net Income Year Ended May 31, (Dollars in thousands) 2026 2025 2024 Adjusted net interest income: Interest income $ 1,796,660 $ 1,703,233 $ 1,593,351 Interest expense (1,494,894) (1,442,279) (1,339,088) Include: Derivative cash settlements interest income (1) 63,953 99,219 127,166 Adjusted interest expense (1,430,941) (1,343,060) (1,211,922) Adjusted net interest income $ 365,719 $ 360,173 $ 381,429 Adjusted net income: Net income $ 262,736 $ 140,014 $ 554,316 Exclude: Derivative forward value gains (losses) (2) 18,213 (105,070) 264,871 Adjusted net income $ 244,523 $ 245,084 $ 289,445 ____________________________ (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. We primarily fund our loan portfolio through the issuance of debt. However, we use derivatives as economic hedges as part of our strategy to manage the interest rate risk associated with funding our loan portfolio. We therefore consider the interest income and expense incurred on our derivatives to be part of our funding cost in addition to the interest expense on our debt. As such, we add net periodic derivative cash settlements interest income and expense amounts to our reported interest expense to derive our adjusted interest expense and adjusted net interest income. We exclude unrealized derivative forward value gains (losses) from our adjusted net income. TIER and Adjusted TIER Table 34 displays the calculation of our TIER and adjusted TIER. Table 34: TIER and Adjusted TIER Year Ended May 31, 2026 2025 2024 TIER (1) 1.18 1.10 1.41 Adjusted TIER (2) 1.17 1.18 1.24 ____________________________ (1) TIER is calculated based on our net income (loss) plus interest expense for the period divided by interest expense for the period. (2) Adjusted TIER is calculated based on adjusted net income (loss) plus adjusted interest expense for the period divided by adjusted interest expense for the period. 77 Table of Contents Debt Outstanding and Equity and Adjusted Debt Outstanding and Equity Adjusted debt-to-equity ratio is one of the key measures in managing our business and is used for: (i) establishing corporate goals; (ii) budgeting and forecasting; and (iii) monitoring our overall leverage and credit ratings. We therefore believe that this adjusted financial measure, in combination with the comparable U.S. GAAP financial measure, is useful to investors in evaluating our financial condition. 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; and • 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. GAAP. 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. Under certain conditions we are prohibited from making interest payments to members on the subordinated certificates. Given the subordinated certificates’ equity-like characteristics, we subtract 100% of members’ subordinated certificates from total debt outstanding and add them to total equity when calculating our adjusted debt-to-equity ratio. We issue subordinated deferrable debt in the capital markets with maturities of up to 45 years including the option to defer interest payments. The characteristics of subordination, deferrable interest and long-dated maturity are all equity-like characteristics. Since the subordinated deferrable debt is issued in the capital markets and not just to members of CFC and it ranks higher in subordination compared with members’ subordinated certificates, we subtract 50% of our subordinated deferrable debt from total debt outstanding and add it to total equity. This approach more closely aligns with the rating agencies’ methodology for calculating the adjusted debt-to-equity ratio. 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 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), 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. 78 Table of Contents Table 35: Adjusted Total Debt Outstanding and Equity May 31, (Dollars in thousands) 2026 2025 Adjusted total debt outstanding: Total debt outstanding (1) $ 35,944,227 $ 34,769,316 Exclude: 50% of Subordinated deferrable debt 655,141 664,743 Members’ subordinated certificates 1,128,240 1,184,714 Adjusted total debt outstanding $ 34,160,846 $ 32,919,859 Adjusted total equity: Total equity $ 3,312,136 $ 3,103,466 Exclude: Prior fiscal year-end cumulative derivative forward value gains (2) 502,899 607,969 Current fiscal year derivative forward value gains (losses) (2) 18,213 (105,070) Current fiscal year-end cumulative derivative forward value gains (2) 521,112 502,899 Accumulated other comprehensive loss (2,369) (2,236) Subtotal 518,743 500,663 Include: 50% of Subordinated deferrable debt 655,141 664,743 Members’ subordinated certificates 1,128,240 1,184,714 Subtotal 1,783,381 1,849,457 Adjusted total equity $ 4,576,774 $ 4,452,260 ____________________________ (1) Total debt outstanding includes our interest-bearing debt and excludes non-interest-bearing liabilities, such as derivative liabilities. (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 Table 36 displays the calculations of our debt-to-equity a nd adjusted debt-to-equity ratios as of May 31, 2026 and 2025 . Table 36: Debt-to-Equity Ratio and Adjusted Debt-to-Equity Ratio May 31, (Dollars in thousands) 2026 2025 Debt-to-equity ratio: Total debt outstanding $ 35,944,227 $ 34,769,316 Total equity 3,312,136 3,103,466 Debt-to-equity ratio (1) 10.85 11.20 Adjusted debt-to-equity ratio: Adjusted total debt outstanding (2) $ 34,160,846 $ 32,919,859 Adjusted total equity (2) 4,576,774 4,452,260 Adjusted debt-to-equity ratio (3) 7.46 7.39 ____________________________ (1) Calculated based on total debt outstanding at period end divided by total equity at period end. (2) See Table 35 above for details on the calculation of these non-GAAP financial measures and the reconciliation to the most comparable U.S. GAAP financial measures. (3) Calculated based on adjusted total debt outstanding at period end divided by adjusted total equity at period end. 79 Table of Contents Total CFC Equity and Members ’ Equity 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. Table 37 provides a reconciliation of members’ equity to total CFC equity as of May 31, 2026 and 2025. We present the components of AOCI in “Note 11—Equity.” Table 37: Members’ Equity May 31, (Dollars in thousands) 2026 2025 Members’ equity: Total CFC equity $ 3,290,524 $ 3,082,477 Exclude: Accumulated other comprehensive loss (2,369) (2,236) Period-end cumulative derivative forward value gains attributable to CFC (1) 519,419 501,663 Subtotal 517,050 499,427 Members’ equity $ 2,773,474 $ 2,583,050 ____________________________ (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. Item 7A. Quantitative and Qualitative Disclosures About Market Risk For quantitative and qualitative disclosures about market risk, see “Item 7. MD&A—Market Risk” and “MD&A—Consolidated Results of Operations—Non-Interest Income—Derivatives Gains (Losses)” and also “Note 10—Derivative Instruments and Hedging Activities” in this Report. 80 Table of Contents