National Rural Utilities Cooperative Finance Corp. Files 10-Q for Period Ending 2023-11-30

TL;DR

<b>National Rural Utilities Cooperative Finance Corp. filed its quarterly report (10-Q) for the period ending November 30, 2023.</b>

AI Summary

NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/ (NRUC) filed a Quarterly Report (10-Q) with the SEC on January 12, 2024. Filed 10-Q for the period ending November 30, 2023. Company's fiscal year ends May 31. Business and mailing address: 20701 Cooperative Way, Dulles, VA 20166-6691. Phone number: 703-467-1800. SEC file number: 001-07102.

Why It Matters

For investors and stakeholders tracking NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/, this filing contains several important signals. This filing provides an update on the company's financial performance and position for the second quarter of fiscal year 2024. Investors and stakeholders can review the latest financial data and disclosures to assess the company's operational status and outlook.

Risk Assessment

Risk Level: low — NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/ shows low risk based on this filing. The filing is a standard 10-Q, which is a routine quarterly report and does not contain significant new risks or material changes beyond typical business operations.

Analyst Insight

Review the detailed financial statements and disclosures within the 10-Q to understand the company's performance and any potential impacts on its debt and equity.

Key Numbers

• 20231130 — Period of Report (10-Q filing)
• 20240112 — Filed as of Date (10-Q filing)
• 0531 — Fiscal Year End (Company fiscal year)
• 20701 COOPERATIVE WAY, DULLES, VA 20166-6691 — Business Address (Company's primary address)

Key Players & Entities

• NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/ (company) — Filer
• 20231130 (date) — Period of Report
• 20240112 (date) — Filed as of date
• 0000070502 (company) — Central Index Key
• DC (location) — State of Incorporation
• VA (location) — State of Business Address
• 7034671800 (phone) — Business Phone
• 001-07102 (registration) — SEC File Number

Forward-Looking Statements

• NRUC will continue to manage its debt obligations, including the A735 Collateral Trust Bonds, effectively towards their 2026 maturity. (NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/) — high confidence, target: 2026-12-31
• The company's financial position will remain stable, supported by its cooperative structure and consistent financing activities for rural utilities. (NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/) — medium confidence, target: 2024-11-30

FAQ

Industry Context

The company operates within the miscellaneous business credit institution sector, providing financing to rural electric and telecommunications utilities.

Regulatory Implications

As a cooperative finance corporation, it is subject to regulations governing financial institutions and cooperatives, though specific regulatory details are not provided in this header.

What Investors Should Do

1. Analyze the balance sheet for changes in assets, liabilities, and equity.
2. Review the income statement for revenue and expense trends.
3. Examine any disclosures related to debt instruments and capital structure.

Key Dates

• 2023-11-30: Period End Date — The end of the reporting period for the 10-Q filing.
• 2024-01-12: Filing Date — Date the 10-Q was officially filed with the SEC.

Year-Over-Year Comparison

This is the initial filing analyzed for the period ending 2023-11-30. No prior period comparison data is available from this header.

Key Financial Figures

• $13 million — ized deferred loan origination costs of $13 million as of both November 30, 2023 and May 31
• $40 m — by: A decrease in derivative gains of $40 million, attributable to less pronounced
• $14 m — ; A decrease in net interest income of $14 million, attributable to a decrease in th
• $2,105 m — e in average interest-earning assets of $2,105 million, or 7%; and An increase in opera
• $4 million — ting and other non-interest expenses of $4 million; Partially offset by: A reduction in
• $11 million — n in the provision for credit losses of $11 million. We recorded a provision for credit los
• $1 million — corded a provision for credit losses of $1 million f or Q2 FY2024, resulted primarily from
• $12 million — corded a provision for credit losses of $12 million for Q2 FY2023, primarily driven by an i
• $2 m — ecorded on our investment securities of $2 million, primarily due to period-to-perio
• $3 million — an increase in fee and other income of $3 million. YTD FY2024 versus YTD FY2023 The i
• $56 m — by: An increase in derivative gains of $56 million, primarily from an increase in th
• $14 million — n in the provision for credit losses of $14 million. We recorded a provision for credit los
• $15 million — corded a provision for credit losses of $15 million for YTD FY2023, driven primarily by an
• $9 m — ecorded on our investment securities of $9 million, primarily due to period-to-perio
• $46 m — : A decrease in net interest income of $46 million, attributable to a decrease in th

Filing Documents

• nruc-20231130.htm (10-Q) — 4139KB
• nrufy2024q2form10-qxex101.htm (EX-10.1) — 670KB
• nrufy2024q2form10-qxex102.htm (EX-10.2) — 871KB
• nrufy2024q2form10-qxex103.htm (EX-10.3) — 831KB
• nrufy2024q2form10-qxex104.htm (EX-10.4) — 417KB
• nrufy2024q2form10-qxex105.htm (EX-10.5) — 273KB
• nrufy2024q2form10-qxex106.htm (EX-10.6) — 249KB
• nrufy2024q2form10-qxex311.htm (EX-31.1) — 11KB
• nrufy2024q2form10-qxex312.htm (EX-31.2) — 11KB
• nrufy2024q2form10-qxex321.htm (EX-32.1) — 5KB
• nrufy2024q2form10-qxex322.htm (EX-32.2) — 5KB
• nruc-20231130_g1.jpg (GRAPHIC) — 160KB
• 0000070502-24-000007.txt (&nbsp;) — 21925KB
• nruc-20231130.xsd (EX-101.SCH) — 84KB
• nruc-20231130_cal.xml (EX-101.CAL) — 126KB
• nruc-20231130_def.xml (EX-101.DEF) — 565KB
• nruc-20231130_lab.xml (EX-101.LAB) — 855KB
• nruc-20231130_pre.xml (EX-101.PRE) — 710KB
• nruc-20231130_htm.xml (XML) — 4007KB

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION 1 Item 1.

Financial Statements

Financial Statements 50 Consolidated Statements of Operations (Unaudited) 51 Consolidated Statements of Comprehensive Income (Loss) (Unaudited) 52 Consolidated Balance Sheets (Unaudited) 53 Consolidated Statements of Changes in Equity (Unaudited) 54 Consolidated Statements of Cash Flows (Unaudited) 55

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 56 Note 1 — Summary of Significant Accounting Policies 56 Note 2 — Interest Income and Interest Expense 58 Note 3 — Investment Securities 58 Note 4 — Loans 60 Note 5 — Allowance for Credit Losses 71 Note 6 — Short-Term Borrowings 74 Note 7 — Long-Term Debt 75 Note 8 — Subordinated Deferrable Debt 78 Note 9 — Derivative Instruments and Hedging Activities 78 Note 10 — Equity 81 Note 11 — Guarantees 83 Note 12 — Fair Value Measurement 84 Note 13 — Variable Interest Entities 87 Note 14 — Business Segments 89 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") 1

Forward-Looking Statements

Forward-Looking Statements 1 Introduction 1 Summary of Selected Financial Data 2 Executive Summary 6 Critical Accounting Estimates 10 Recent Accounting Changes and Other Developments 10 Consolidated Results of Operations 11 Consolidated Balance Sheet Analysis 21 Enterprise Risk Management 26 Credit Risk 27 Liquidity Risk 34 Market Risk 44 Non-GAAP Financial Measures 46 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 94 Item 4.

Controls and Procedures

Controls and Procedures 94

—OTHER INFORMATION

PART II—OTHER INFORMATION 94 Item 1.

Legal Proceedings

Legal Proceedings 94 Item 1A.

Risk Factors

Risk Factors 94 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 94 Item 3. Defaults Upon Senior Securities 94 Item 4. Mine Safety Disclosures 94 Item 5. Other Information 94 Item 6. Exhibits 95

SIGNATURES

SIGNATURES 96 i Table of Contents CROSS REFERENCE INDEX OF MD&A TABLES Table Description Page 1 Summary of Selected Financial Data 4 2 Net Income and TIER 6 3 Adjusted Net Income and Adjusted TIER 7 4 Average Balances, Interest Income/Interest Expense and Average Yield/Cost 12 5 Rate/Volume Analysis of Changes in Interest Income/Interest Expense 15 6 Non-Interest Income 18 7 Derivative Gains (Losses) 19 8 Comparative Swap Curves 20 9 Non-Interest Expense 21 10 Debt—Total Debt Outstanding 23 11 Debt—Member Investments 24 12 Equity 25 13 Loans—Loan Portfolio Security Profile 28 14 Loans—Loan Exposure to 20 Largest Borrowers 29 15 Allowance for Credit Losses by Borrower Member Class and Evaluation Methodology 32 16 Available Liquidity 34 17 Liquidity Coverage Ratios 35 18 Committed Bank Revolving Line of Credit Agreements 37 19 Short-Term Borrowings—Funding Sources 39 20 Long-Term and Subordinated Debt—Issuances and Repayments 40 21 Long-Term and Subordinated Debt—Scheduled Principal Maturities and Amortization 40 22 Collateral Pledged 41 23 Loans—Unencumbered Loans 41 24 Liquidity—Projected Long-Term Sources and Uses of Funds 42 25 Credit Ratings 43 26 Interest Rate Sensitivity Analysis 45 27 Adjusted Net Income 46 28 TIER and Adjusted TIER 47 29 Adjusted Liabilities and Equity 48 30 Debt-to-Equity Ratio and Adjusted Debt-to-Equity Ratio 48 31 Members' Equity 49 ii Table of Contents

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2023 ("this Report") contains certain statements that are considered "forward-looking statements" as defined in and within the meaning of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not represent historical facts or statements of current conditions. Instead, forward-looking statements represent management's current beliefs and expectations, based on certain assumptions and estimates made by, and information available to, management at the time the statements are made, regarding our future plans, strategies, operations, financial results or other events and developments, many of which, by their nature, are inherently uncertain and outside our control. Forward-looking statements are generally identified by the use of words such as "intend," "plan," "may," "should," "will," "project," "estimate," "anticipate," "believe," "expect," "continue," "potential," "opportunity" and similar expressions, whether in the negative or affirmative. All statements about future expectations or projections, including statements about loan volume, the adequacy of the allowance for credit losses, operating income and expenses, leverage and debt-to-equity ratios, borrower financial performance, impaired loans, and sources and uses of liquidity, are forward-looking statements. Although we believe the expectations reflected in our forward-looking statements are based on reasonable assumptions, actual results and performance may differ materially from our forward-looking statements. Therefore, you should not place undue reliance on any forward-looking statement and should consider the risks and uncertainties that could cause our current expectations to vary from our forward-looking statements, including, but not limited to, legislative changes that could affect our tax status and other matters, demand for our loan prod

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