Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)

This Quarterly Report on Form 10-Q for the quarterly period ended February 28,August 31, 2022 (“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 products, lending competition, changes in the quality or composition of our loan portfolio, changes in our ability to access external financing, changes in the credit ratings on our debt, valuation of collateral supporting impaired loans, charges associated with our operation or disposition of foreclosed assets, nonperformance of counterparties to our derivative agreements, economic conditions and regulatory or technological changes within the rural electric industry, the costs and impact of legal or governmental proceedings involving us or our members, general economic conditions, governmental monetary and fiscal policies, the occurrence and effect of natural disasters, including severe weather events or public health emergencies, such as the emergence and spread since 2019 of a novel coronavirus that causes coronavirus disease 2019 (“COVID-19”) and the factors listed and described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended May 31, 20212022 (“20212022 Form 10-K”), as well as any risk factors identified under “Part II—Item 1A. Risk Factors” in this Report. Forward-looking statements speak only as of the date they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect the impact of events, circumstances or changes in expectations that arise after the date any forward-looking statement is made.

Our financial statements include the consolidated accounts of National Rural Utilities Cooperative Finance Corporation (“CFC”), National Cooperative Services Corporation (“NCSC”), Rural Telephone Finance Cooperative (“RTFC”) and subsidiaries created and controlled by CFC to hold foreclosed assets resulting from defaulted loans or bankruptcy. CFC and its consolidated entities have not held any foreclosed assets since the fiscal year ended May 31, 2017. Our principal operations are currently organized for management reporting purposes into three business segments, which are based on the accounts of each of the legal entities included in our consolidated financial statements: CFC, NCSC and RTFC.

CFC is a member-owned, nonprofit finance cooperative association with a principal purpose of providing financing to its members to supplement the loan programs of the Rural Utilities Service (“RUS”) of the United States Department of Agriculture (“USDA”). CFC extends loans to its rural electric members for construction, acquisitions, system and facility repairs and maintenance, enhancements and ongoing operations to support the goal of electric distribution and generation and transmission (“power supply”) systems of providing reliable, affordable power to the customers they service. CFC also provides its members with credit enhancements in the form of letters of credit and guarantees of debt obligations. As a Section 501(c)(4) tax-exempt, member-owned cooperative, CFC’s objective is not to maximize profit, but rather to offer members cost-based financial products and services. Because CFC is a tax-exempt cooperative, we cannot issue equity securities as a source of funding. CFC’s primary funding sources consist of a combination of public and private issuances of

debt securities, member investments and retained equity. NCSC is a member-owned taxable cooperative that is permitted to provide financing to members of CFC, government or quasi-government entities which own electric utility systems that meet the Rural Electrification Act definition of “rural,” and for-profit and nonprofit entities that are owned, operated or controlled by, or provide significant benefits to certain members of CFC. RTFC is a taxable Subchapter T member-owned cooperative association. RTFC’s principal purpose is to provide financing to its rural telecommunications members and their affiliates. See “Item 1. Business” in our 20212022 Form 10-K for additional information on the business structure, principal purpose, members and core business activities of each of these entities. Unless stated otherwise, references to “we,” “our” or “us” relate to CFC and its consolidated entities. All references to members within this document include members, associates and affiliates of CFC and its consolidated entities, except where indicated otherwise.

The following MD&A is intended to enhance the understanding of our consolidated financial statements by providing material 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, the unaudited consolidated financial statements included in this Report, our audited consolidated financial statements and related notes for the fiscal year ended May 31, 20212022 (“fiscal year 2021”2022”) included in our 20212022 Form 10-K and additional information, including the risk factors discussed under “Item 1A. Risk Factors,” contained in our 20212022 Form 10-K, as well as additional information contained elsewhere in this Report.

In addition to financial measures determined in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”), management also evaluates performance based on certain non-GAAP measures and metrics, which we refer to as “adjusted” measures. Our key non-GAAP financial measures are adjusted net income, adjusted net interest income, adjusted interest expense, adjusted net interest yield, adjusted times interest earned ratio (“TIER”) and adjusted debt-to-equity ratio. The most comparable U.S. GAAP measures are net income, net interest income, interest expense, net interest yield, TIER and debt-to-equity ratio, respectively. The primary adjustments we make to calculate these non-GAAP measures consist of (i) adjusting interest expense and net interest income to include the impact of net periodic derivative cash settlements expense amounts; (ii) adjusting net income, total liabilities and total equity to exclude the non-cash impact of the accounting for derivative financial instruments; (iii) adjusting total liabilities to exclude the amount that funds CFC member loans guaranteed by RUS, subordinated deferrable debt and members’ subordinated certificates; and (iv) adjusting total equity to include subordinated deferrable debt and members’ subordinated certificates and exclude cumulative derivative forward value gains and losses and accumulated other comprehensive income (“AOCI”).

We believe our non-GAAP adjusted 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 adjusted measures, as the forward fair value gains and losses related to our interest rate swaps that are excluded from our non-GAAP measures do not affect our cash flows, liquidity or ability to service our debt. Our non-GAAP adjusted measures may not be comparable to similarly titled measures reported by other companies due to differences in the way that 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.”

Table 1 provides a summary of selected financial data and key metrics used by management in evaluating performance for the three and nine months ended February 28,August 31, 2022 and 2021, and as of February 28,August 31, 2022 and May 31, 2021.2022.

As a member-owned, nonprofit finance cooperative, our primary objective is to provide our rural electric utility members with access to affordable, flexible financing products while also maintaining a sound, stable financial position and adequate liquidity to meet our financial obligations and maintain ongoing investment-grade credit ratings. Because maximizing profit is not our primary objective, the interest rates on lending products offered to our member borrowers reflect our funding costs plus a spread to cover operating expenses and estimated credit losses and generate sufficient earnings to cover interest owed on our debt obligations and achieve certain financial target goals. Our financial goals focus on earning an annual minimum adjusted TIER of 1.10 and maintaining an adjusted debt-to-equity ratio at approximately 6.00-to-1 or below.

We are subject to period-to-period volatility in our reported U.S. GAAP results 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. We use derivatives, primarily interest rate swaps, as part of our strategy in managing this risk. Our derivatives are intended 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. Because our derivative portfolio consists of a higher proportion of pay-fixed swaps, the majority of which are longer dated, than receive-fixed swaps, the majority of which are shorter dated, we generally record 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, as discussed above under “Summary of Selected Financial Data,” management uses our non-GAAP adjusted measures to evaluate financial performance. Our adjusted financial results include the realized net periodic contractual interest expense amounts on our interest rate swaps but exclude the unrealized forward fair value gains and losses.

We reported net income of $262$162 million and TIER of 2.511.77 for the three months ended February 28, 2022 (“current quarter”),quarter, compared with net incomeloss of $379$90 million and TIER of 3.19 for the three months ended February 28, 2021 (“same prior-year quarter”). We reported net income of $307 million and TIER of 1.59 for the current year-to-date period, compared with net income of $684 million and TIER of 2.300.48 for the same prior year-to-date period.prior-year quarter. The significant variances between our reported results for the current quarter and year-to-date period and the same prior-year quarter and year-to-date period are attributable to mark-to-market changes in the fair value of our derivative instruments. Our debt-to-equity ratio decreased to 17.4513.28 as of February 28,August 31, 2022, from 20.1713.59 as of May 31, 2021,2022, primarily due to an increase in equity resulting from our reported net income of $307$162 million for the current year-to-date period,quarter, which was partially offset by a decrease in equity attributable to the CFC Board of Directors’ authorized patronage capital retirement in July 20212022 of $58$59 million.

The decrease in net interest income of $11 million, or 10%, to $98 million for the current quarter was attributable to a decrease in the net interest yield of 23 basis points, or 16%, to 1.24%, partially offset by an increase in lossesaverage interest-earning assets of $1,843 million, or 6%. The decrease in the net interest yield reflected the combined impact of an increase in our average cost of borrowings of 32 basis points to 2.85%, partially offset by an increase in the average yield on our

our investment securities was primarily attributableinterest-earning assets of 7 basis points to unrealized losses resulting from period-to-period market fluctuations in fair value.

The increase in our adjusted net income of $47$4 million to $66$58 million for the current quarter, from $19$54 million for the same prior-year quarter reflected the combined impact of a favorable shift in our provision for credit losses of $46 million andwas due primarily to an increase in adjusted net interest income of $10$6 million, partially offset by an increase in operating expenses of $1 million and an increase in losses recorded on our investment securities of $9$1 million, primarily due to period-to-period market fluctuations in fair value. As discussed above under “Current Quarter Reported Results,” we recorded a benefit for credit losses of $13 million for the current quarter, primarily due to a reduction in our collective allowance resulting from an improvement in the credit risk profile of Rayburn following payment in full of its obligations to ERCOT upon the successful completion of a securitization transaction in February 2022 to cover extraordinary costs and expenses incurred during the February 2021 polar vortex and a significant reduction in loans outstanding to Rayburn. In contrast, we recorded a provision for credit losses of $33 million for the same prior-year quarter attributable to an allowance build for loans outstanding to Brazos and Rayburn, which together totaled $465 million as of February 28, 2021, due to a significant deterioration in their credit risk profile resulting from exposure to elevated wholesale electric power costs during the February 2021 polar vortex.

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

Loans to members totaled $29,520$30,687 million as of February 28,August 31, 2022, an increase of $1,093$624 million, or 4%2%, from May 31, 2021,2022, reflecting net increases in long-term and line of credit loans of $999$380 million and $94$244 million, respectively. We experienced increases in CFC distribution loans, CFC power supply loans, CFC statewide and associate loans, NCSC loans and RTFC loans of $1,198$400 million, $23$200 million, $5 million, $17 million and $37 million, respectively, and decreases in CFC power supply loans and CFC statewide and associate loans of $162 million and $3$2 million, respectively.

Long-term loan advances totaled $2,384$815 million during the nine months ended February 28, 2022,current quarter, of which approximately 79%95% was provided to members for capital expenditures and approximately 20%2% was provided for the refinancing of loans made by other lenders. In comparison, long-term loan advances totaled $727 million during the same prior-year quarter, of which approximately 62% was provided to members for capital expenditures and approximately 35% was provided to members for other expenses, primarily to fund operating expenses and alsoattributable to refinance advances that were drawn under line of credit facilities to meetthe elevated power cost obligations incurred during the February 2021 polar vortex. In comparison, long-term loan advances totaled $2,050 million during the same prior year-to-date period, of which approximately 84% was provided to members for capital expenditures and 9% was provided for the refinancing of loans made by other lenders. Of the $2,384$815 million total long-term loans advanced during the current year-to-date period, $2,030quarter, $747 million were fixed-rate loan advances with a weighted average fixed-rate term of 2321 years.

We believe the overall credit quality of our loan portfolio remained strong as of February 28,August 31, 2022. Historically, we have had limited defaults and losses on loans in our electric utility loan portfolio largely because of the essential nature of the service provided by electric utility cooperatives as well as other factors, such as limited rate regulation and competition, which we discuss further in the section “Credit Risk—Loan Portfolio Credit Risk.” In addition, we generally lend to members on a senior secured basis, which reduces the risk of loss in the event of a borrower default. Loans outstanding to electric utility organizations of $29,051$30,205 million and $27,995$29,584 million as of February 28,August 31, 2022 and May 31, 2021,2022, respectively, represented approximately 98% and 99% of total loans outstanding as of each respective date. Of our total loans outstanding, 93% were secured as of both February 28,August 31, 2022 and May 31, 2021.2022.

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. Total debt outstanding increased $744$614 million, or 3%2%, to $28,170$29,361 million as of February 28,August 31, 2022, due to borrowings to fund the increase in loans to members. Outstanding dealer commercial paper of $1,105$1,279 million as of February 28,August 31, 2022 was belowwithin our targeted maximum threshold of $1,250 million.quarter-end target range. We provide additional information on our financing activities underduring the current quarter in the “Consolidated Balance Sheet Analysis—Debt.”Debt” section of this Report.

On December 13, 2021, S&P Global Ratings (“S&P”) affirmed CFC’s credit ratings and stable outlook under its revised criteria and updated methodology for rating financial institutions published on December 9, 2021. On December 16, 2021, Moody’s Investors Service (“Moody’s”) affirmed CFC’s credit ratings and stable outlook. On February 4,September 7, 2022, Fitch issued a credit ratings report review of CFC in which Fitch affirmed CFC’s credit ratings and stable outlook. Our senior secured debt ratings by Moody’s, S&P and Fitch were A1, A- and A+, respectively, as of February 28, 2022, and our long-term issuer credit ratings by Moody’s, S&P and Fitch were A2, A- and A, respectively, as of February 28, 2022. We presentTable 24 presents our credit ratings for each CFC debt product type as of February 28,August 31, 2022, which remain unchanged as of the date of this Report, in the section “Liquidity Risk—Credit Ratings.”Ratings” section of this Report.

OurIn addition to cash on hand, our primary sources of funds include member loan principal repayments, securities held in our investment portfolio, committed bank revolving lines of credit, committed loan facilities under the USDA Guaranteed Underwriter Program

Agricultural Mortgage Corporation (“Farmer Mac”) and proceeds from debt issuances to our members and in the public capital markets. Although as a non-bank financial institution we are not subject to regulatory liquidity requirements, we monitor our liquidity and funding positions on an ongoing basis and assess 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 repayment amounts, as well as our continued ability to access the private placement and public capital markets.

Debt scheduled to mature over the next 12 months totaled $6,784$7,282 million as of February 28,August 31, 2022, consisting of short-term borrowings of $4,428$5,271 million and long-term and subordinated debt of $2,356$2,011 million. The short-term borrowings scheduled maturity amount of $4,428$5,271 million consists of member investments of $3,323$3,992 million and dealer commercial paper of $1,105$1,279 million. The long-term and subordinated scheduled debt obligations over the next 12 months of $2,356$2,011 million consist of debt maturities and scheduled debt payment amounts.

We expect to continue accessing the dealer commercial paper market as a cost-effective means of satisfying our incremental short-term liquidity needs. Although the intra-period amount of dealer commercial paper outstanding may fluctuate based on our liquidity requirements, our intent is to manage our short-term wholesale funding risk by maintaining dealer commercial paper outstanding at an amount near or below $1,250each quarter-end within a range of $1,000 million and $1,500 million. Maintaining our committed bank revolving line of credit agreements and continuing to be in compliance with the covenants of these agreements serve to mitigate our rollover risk, as we can draw on these facilities, if necessary, to repay dealer or member commercial paper that cannot be refinanced with similar debt. In addition, under master repurchase agreements we have with counterparties, we can obtain short-term funding in secured borrowing transactions by selling investment-grade corporate debt securities from our investment securities portfolio subject to an obligation to repurchase the same or similar securities at an agreed-upon price and date.

The issuance of long-term debt, which represents the most significant component of our funding, allows us to reduce our reliance on short-term borrowings, as well as effectively manage our refinancing and interest rate risk. We expect to continue to issue debt in the private placement and public capital markets 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.

We provide additional information on our liquidity profile and our primary sources and uses of funds, including projected amounts, by quarter, over each of the next six fiscal quarters through the quarter ending August 31, 2023,February 29, 2024, in the “Liquidity Risk” section of this Report.

Although the COVD-19 pandemic continues to persist, weWe believe that the COVID-19 pandemic has not adversely affected our primary objective of providing our members with the credit products they need to fund their operations and that we have been able to successfully navigate the challenges of the COVID-19 pandemic to date. Our electric utility cooperative borrowers operate in a sector identified by the United States (“U.S.”) government as one of the 16 critical infrastructure sectors because the nature of the services provided in these sectors are considered essential and vital in supporting and maintaining the overall functioning of the U.S. economy. Historically, the utility sector in which our electric utility borrowers operate has been resilient to economic downturns. To date, we believe that the pandemic has not had a significant negative impact on the overall financial performance of our members. We also believe that the overalland credit quality of our loan portfolio has not been adversely affected by market, economic and other disruptions caused by the pandemic, as we have not experienced any delinquencies in scheduled loan payments or received requests for payment deferrals from our borrowers due to the pandemic.members.

CFC has been able to maintain business continuity throughout the pandemic and has experienced no pandemic-related employee furloughs or layoffs. We have remote-work options available forAlthough most employees while also providing for in-person collaboration at our headquarters in Loudoun County, Virginia, as we believe this working model allows CFC to provide the highest quality of servicehealth and deliver more effectively on our member-focused mission. On February 25, 2022, the Centers for Disease Control and Prevention (“CDC”) announced new COVID-19 guidance that updated the metrics used to measure and assess the impact of COVID-19 “Community Levels.” The updated metrics include the levels of new COVID-19 hospital admissions, inpatient beds occupied by COVID-19 patients and new COVID-19 cases. Based on these combined metrics, Community Levels are classified as low, medium or high. The CDC also issued prevention strategies for each COVID-19 Community Level and recommended using the COVID-19 Community Levels as a tool to inform decisions about community prevention strategies and individual preventive behaviors based on the latest data. Effective March 2, 2022, we lifted our mask requirement at CFC’s headquarters for vaccinated employees based on the CDC’s updated guidance and the COVID-19 Community Level low classification for Loudoun County. We plan to continue to monitor and update our practicessafety restrictions in response to changes in the COVID-19 workplace safety and health standards established by the Occupational Safety and Health Administration (“OSHA”) and Virginia as they relate to Loudoun County and guidance provided by the CDC.

We also expect that our adjusted net income and adjusted TIER will decrease slightly over the next 12 months, primarily attributable to our projected modest decrease in adjusted net interest income. We believe that our adjusted debt-to-equity ratio will remain

We are unable to provide a reconciliation of our projected adjusted net income, adjusted TIER and adjusted debt-to-equity ratio to the most directly comparable GAAP measures or directional guidance for the most directly comparable GAAP measures on a forward-looking basis without unreasonable effort due to the significant shifts in the unrealized derivative forward value gains and losses recorded each period. The majority of our swaps are long-term, with an average remaining life of approximately 15 years as of February 28,August 31, 2022. We can reasonably estimate the realized net periodic derivative cash settlement amounts over the next 12 months for our interest rate swaps, which are typically based on the 3-month London Interbank Offered Rate (“LIBOR”) and the fixed rate of the swap. In contrast, the unrealized periodic derivative forward value gains and losses are largely based on future expected changes in longer-term interest rates, which we are unable to accurately predict for each reporting period over the next 12 months. Because unrealized periodic derivative forward value gain and loss amounts are a key driver of changes in our earnings between periods, this unavailable information is likely to have a significant impact on our reported net income, TIER and debt-to-equity ratio, which represent the most directly comparable GAAP measures. We provide reconciliations of our non-GAAP adjusted net income, adjusted TIER and adjusted debt-to-equity ratio to the most directly comparable GAAP measures for each reporting period included in this Report in the section “Non-GAAP Financial Measures.” These reconciliations illustrate the potential significant impact that unrealized derivative forward value gains and losses could have on our future reported net income, reported TIER and reported adjusted debt-to-equity ratio.

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 our 20212022 Form 10-K.

Our allowance for credit losses and allowance coverage ratio decreasedincreased slightly to $74$71 million and 0.25%0.23%, respectively, as of February 28,August 31, 2022, from $86$68 million and 0.30%0.22%, respectively, as of May 31, 2021.2022. The decreaseincrease in allowance for credit

We discuss the risks and uncertainties related to management’s judgments and estimates in applying accounting policies that have been identified as a critical accounting policyestimates under “Item 1A. Risk Factors—Regulatory and Compliance Risks” in our 20212022 Form 10-K. We provide additional information on the allowance for credit losses under the section “Credit Risk—Allowance for Credit Losses” section and in “Note 5—Allowance for Credit Losses” inof this Report.

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.

This section provides a comparative discussion of our consolidated results of operations between the three months ended February 28,August 31, 2022 and February 28, 2021 and between the nine months ended February 28, 2022 and February 28,August 31, 2021. Following this section, we provide a discussion and analysis of material changes between amounts reported on our consolidated balance sheet as of February 28,August 31, 2022 and amounts reported as of May 31, 2021.2022. 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.

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. 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 2 presents average balances for the three and nine months ended February 28,August 31, 2022 and 2021, 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 2 also presents non-GAAP adjusted interest expense, adjusted net interest income and adjusted net interest yield, which reflect the inclusion of net accrued periodic derivative cash settlements expense in interest expense. We provide reconciliations of our non-GAAP adjusted measures to the most comparable U.S. GAAP measures under “Non-GAAP Financial Measures.”