National Rural Utilities Cooperative Finance Corporation Reports Net Loss of $164.3 Million in Q1 FY2025

The National Rural Utilities Cooperative Finance Corporation (CFC) reported significant financial challenges for the first quarter of fiscal year 2025, which ended on August 31, 2024. The organization, a nonprofit finance cooperative, primarily provides loans to rural electric cooperatives, supplementing the loan programs of the Rural Utilities Service (RUS) of the USDA.

For Q1 FY2025, CFC recorded a net loss of $164.3 million, a stark contrast to a net income of $228.3 million in the same period of the previous year. This decline was primarily attributed to a $198.3 million loss from its derivatives portfolio, driven by decreases in interest rates. The adjusted net income for the quarter was $66.1 million, slightly down from $66.3 million in Q1 FY2024. The adjusted net interest income increased marginally by $1 million to $93.7 million, supported by a 5% rise in average interest-earning assets.

Total loans to members rose to $35.1 billion, reflecting a $569 million increase from the previous fiscal year. The loan portfolio remains heavily concentrated, with 78% allocated to CFC distribution borrowers. The organization issued $550 million in long-term debt at an average fixed interest rate of 5.03% during the quarter, contributing to an overall debt increase of $448 million, bringing total debt outstanding to $33.2 billion.

Operating expenses also increased, rising by approximately $4 million to $36.6 million, with notable increases in salaries and employee benefits. The debt-to-equity ratio climbed to 12.03 from 11.01, influenced by the net loss and increased borrowing for loan growth. The adjusted debt-to-equity ratio slightly increased to 6.32 from 6.24.

CFC's liquidity position showed a slight decline, with available liquidity at $6.95 billion, down from $6.95 billion in the previous quarter. The organization continues to manage interest rate risk through derivatives, although it reported significant losses in this area due to market conditions.

In terms of strategic developments, CFC's Board of Directors authorized the retirement of $47 million in patronage capital, which was returned to members in cash in September 2024. The cooperative's financial strategy remains focused on providing cost-based financial products rather than maximizing profits, aligning with its mission to support rural electric cooperatives.

Overall, CFC's performance in Q1 FY2025 reflects the challenges posed by market volatility and interest rate fluctuations, impacting both profitability and operational costs.