CFC Reports $19.5 Million Net Loss Amid Derivatives Portfolio Decline

National Rural Utilities Cooperative Finance Corporation (CFC) reported a net loss of $19.5 million for the six months ending November 30, 2024, a significant decline from a net income of $376.3 million during the same period in the previous year. The decrease in profitability was primarily attributed to a shift from gains to losses in the derivatives portfolio, which saw a loss of $89.3 million compared to a gain of $296.8 million in the prior year. Additionally, operating expenses increased by $8 million, and net interest income fell by $3 million, reflecting a decrease in net interest yield.

In terms of financial performance, CFC's total assets rose to $37.1 billion, up from $36.2 billion as of May 31, 2024. The increase was driven by a 3% growth in loans to members, which reached $35.6 billion, primarily due to net increases in long-term and line of credit loans. The company recorded a provision for credit losses of $2 million for the year-to-date period, reflecting growth in the loan portfolio. The allowance for credit losses increased to $51 million, maintaining a coverage ratio of 0.14%.

CFC's operational metrics indicate a stable customer base, with 893 borrowers across 49 states and the District of Columbia as of November 30, 2024. The company continues to focus on providing financing to rural electric cooperatives, with 95% of loans outstanding directed towards this sector. The overall credit quality of the loan portfolio remained strong, with only one loan classified as nonperforming, totaling $49 million.

Strategically, CFC has refined its methodology for calculating the debt-to-equity ratio, which now stands at 11.44, up from 10.86 as of May 31, 2024. This increase is attributed to higher debt levels to support loan growth and a decrease in total equity due to the reported net loss and authorized patronage capital retirements. The adjusted debt-to-equity ratio was reported at 7.37, reflecting the cooperative's ongoing efforts to manage its financial structure effectively.

Looking ahead, CFC anticipates net long-term loan growth of approximately $1.68 billion over the next 12 months, supported by expected increases in member demand for loans. The cooperative expects to continue accessing the capital markets for funding, with a focus on maintaining liquidity and managing interest rate risk through its derivative portfolio. The outlook remains cautious, with management monitoring economic conditions and potential impacts on the cooperative's financial performance.