| Loans | NOTE 4—LOANS We segregate our loan portfolio into segments, by legal entity, based on the borrower member class, which consists of CFC distribution, CFC power supply, CFC statewide and associate, NCSC and RTFC. We offer both long-term and line of credit loans to our borrowers. Under our long-term loan facilities, a borrower may select a fixed interest rate or a variable interest rate at the time of each loan advance. Line of credit loans are revolving loan facilities and generally have a variable interest rate. Loans to Members Loans to members consist of loans held for investment and loans held for sale. The outstand ing amount of loans held for investment is recorded based on the unpaid principal balance, net of discounts, charge-offs and recoveries, of loans and deferred loan origination costs. The outstanding amount of loans held for sale is recorded based on the lower of cost or fair value. The following table presents loans to members by legal entity, member class and loan type, as of February 28, 2023 and May 31, 2022. Table 4.1: Loans to Members by Member Class and Loan Type February 28, 2023 May 31, 2022 (Dollars in thousands) Amount % of Total Amount % of Total Member class: CFC: Distribution $ 25,424,628 79% $ 23,844,242 79% Power supply 5,318,565 16 4,901,770 17 Statewide and associate 155,878 — 126,863 — Total CFC 30,899,071 95 28,872,875 96 NCSC 988,371 3 710,878 2 RTFC 481,789 2 467,601 2 Total loans outstanding (1) 32,369,231 100 30,051,354 100 Deferred loan origination costs—CFC (2) 12,598 — 12,032 — Loans to members $ 32,381,829 100% $ 30,063,386 100% Loan type: Long-term loans: Fixed rate $ 28,039,808 86% $ 26,952,372 90% Variable rate 915,095 3 820,201 2 Total long-term loans 28,954,903 89 27,772,573 92 Lines of credit 3,414,328 11 2,278,781 8 Total loans outstanding (1) 32,369,231 100 30,051,354 100 Deferred loan origination costs—CFC (2) 12,598 — 12,032 — Loans to members $ 32,381,829 100% $ 30,063,386 100% ____________________________ (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 on the books of CFC. Loan Sales We may transfer whole loans and participating interests to third partie s. These transfers are typically made concurrently or within a short period of time with the closing of the loan sale or participation agreement at par value and meet the accounting criteria required for sale accounting. We sold CFC and NCSC loans, at par for cash, totaling $192 million and $64 million during the nine months ended February 28, 2023 and 2022 , respectively. We recorded immaterial losses on the sale of these loa ns attributable to the unamortized deferred loan origination costs associated with the transferred loans . We had no loans held for sale as of February 28, 2023. We had loans held for sale totaling $44 million as of May 31, 2022, which were sold at par for cash during the nine months ended February 28, 2023. Accrued Interest Receivable We report accrued interest on loans separately on our consolidated balance sheets as a component of the line item accrued interest receivable rather than as a component of loans to members. Accrued interest on loans totaled $126 million and $94 million as of February 28, 2023 and May 31, 2022, respectively. Accrued interest receivable amounts generally represent three months or less of accrued interest on loans outstanding. Because our policy is to write off past-due accrued interest receivable in a timely manner, we elected not to measure an allowance for credit losses for accrued interest receivable on loans outstanding. We also elected to exclude accrued interest receivable from the credit quality disclosures required under CECL. 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 a tax-exempt, member-owned finance cooperative, CFC’s principal focus is to provide funding to its rural electric utility cooperative members to assist them in acquiring, constructing and operating electric distribution systems, power supply systems and related facilities. Because we lend primarily to our rural electric utility cooperative members, we have had a loan portfolio subject to single-industry and single-obligor concentration risks since our inception in 1969. Loans outstanding to electric utility organizations of $31,887 million and $29,584 million as of February 28, 2023 and May 31, 2022, respectively, accounted for 98% of total loans outstanding as of each re spective date. The remaining loans outstanding in our portfolio were to RTFC members, affiliates and associates in the telecommunications industry. Our credit exposure is partially mitigated by long-term loans guaranteed by RUS, which totaled $125 million an d $131 million as of February 28, 2023 and May 31, 2022, respectively. Single-Obligor Concentration The outstanding loan exposure for o ur 20 largest borrowers totaled $6,558 million and $6,220 million as of February 28, 2023 and May 31, 2022, respectively, representing 20% and 21% of total loans outstanding as of each respective date. Our 20 largest borrowers consisted of 10 distribution systems and 10 power supp ly systems as of February 28, 2023 and 12 distribution systems and eight power supp ly systems as of May 31, 2022. The largest total outstanding exposure to a single borrower or controlled group represented 1% of total loans outstanding as of both February 28, 2023 and May 31, 2022. 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. We are required to pay Farmer Mac a monthly fee based on the unpaid principal balance of loans covered under the purchase commitment. The aggregate unpaid principal balance of designated and Farmer Mac approved loans was $443 million and $493 million as of February 28, 2023 and May 31, 2022, respectively. Loan exposure to our 20 largest borrowers covered under the Fa rmer Mac agreement totaled $270 million and $316 million as of February 28, 2023 and May 31, 2022, respectively, which reduced our exposure to the 20 largest borro wers to 19% and 20% as of each respective date. We have had no loan defaults for loans covered under this agreement; therefore, no loa ns have been put to Farmer Mac for purchase pursuant to the standby purchase agreement as of February 28, 2023. Our credit exposure is also mitigated by long-term loans guaranteed by RUS. Geographic Concentration Although our organizational structure and mission results in single-industry concentration, we serve a geographically diverse group of electric and telecommunications borrowers throughout the U.S. The consolidated number of borrowers with loans outstanding totaled 880 and 883 a s of February 28, 2023 and May 31, 2022, respectively, located in 49 states and the District of Columbia. Of the 880 and 883 borrowers with loans outstanding, 51 and 49 were electric power supply borrowers as of February 28, 2023 and May 31, 2022, respectively. Electric power supply borrowers generally require significantly more capital than electric distribution and telecommunications borrowers. Texas accounted for the largest number of borrowers with loans outstanding in any one state as of both February 28, 2023 and May 31, 2022, as well as the largest concentration of loan exposure. The following table presents the Texas-based number of borrowers and loans outstanding by legal entity and member class, as of February 28, 2023 and May 31, 2022. Table 4.2: Loan Exposure to Texas-Based Borrowers February 28, 2023 May 31, 2022 (Dollars in thousands) Number of Borrowers Amount % of Total Number of Borrowers Amount % of Total Member class: CFC: Distribution 57 $ 4,284,930 13 % 57 $ 3,984,887 13 % Power supply 8 1,128,456 4 8 1,089,896 4 Statewide and associate 1 38,428 — 1 29,335 — Total CFC 66 5,451,814 17 66 5,104,118 17 NCSC 1 16,400 — 1 378 — RTFC 2 12,313 — 1 5,853 — Total loan exposure to Texas-based borrowers 69 5,480,527 17 68 5,110,349 17 Less: Loans covered under Farmer Mac standby purchase commitment (157,098) (1) (163,369) (1) Net loan exposure to Texas-based borrowers $ 5,323,429 16 % $ 4,946,980 16 % 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, TDRs, nonperforming 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. Payment Status of Loans Loans are considered delinquent when contractual principal or interest amounts become past due 30 days or more following the scheduled payment due date. Loans are placed on nonaccrual status when payment of principal or interest is 90 days or more past due or management determines that the full collection of principal and interest is doubtful. The following table presents the payment status, by legal entity and member class, of loans outstanding as of February 28, 2023 and May 31, 2022. Table 4.3: Payment Status of Loans Outstanding February 28, 2023 (Dollars in thousands) Current 30-89 Days Past Due > 90 Days Total Total Loans Outstanding Nonaccrual Loans Member class: CFC: Distribution $ 25,424,628 $ — $ — $ — $ 25,424,628 $ — Power supply 5,314,218 — 4,347 4,347 5,318,565 131,043 Statewide and associate 155,878 — — — 155,878 — CFC total 30,894,724 — 4,347 4,347 30,899,071 131,043 NCSC 988,371 — — — 988,371 — RTFC 481,789 — — — 481,789 — Total loans outstanding $ 32,364,884 $ — $ 4,347 $ 4,347 $ 32,369,231 $ 131,043 Percentage of total loans 99.99% — % 0.01% 0.01% 100.00% 0.40% May 31, 2022 (Dollars in thousands) Current 30-89 Days Past Due > 90 Days Total Total Loans Outstanding Nonaccrual Loans Member class: CFC: Distribution $ 23,844,242 $ — $ — $ — $ 23,844,242 $ — Power supply 4,787,832 28,389 85,549 113,938 4,901,770 227,790 Statewide and associate 126,863 — — — 126,863 — CFC total 28,758,937 28,389 85,549 113,938 28,872,875 227,790 NCSC 710,878 — — — 710,878 — RTFC 467,601 — — — 467,601 — Total loans outstanding $ 29,937,416 $ 28,389 $ 85,549 $ 113,938 $ 30,051,354 $ 227,790 Percentage of total loans 99.62% 0.09% 0.29% 0.38% 100.00% 0.76% We had one CFC electric power supply borrower, Brazos Sandy Creek Electric Cooperative Inc. (“Brazos Sandy Creek”), with a delinquent loan of $4 million as of February 28, 2023. In comparison, we had two CFC electric power supply borrowers, Brazos Electric Power Cooperative, Inc. (“Brazos”) and Brazos Sandy Creek with delinquent loans totaling $114 million as of May 31, 2022. The decrease in loans on nonaccrual status of $97 million to $131 million as of February 28, 2023, from $228 million as of May 31, 2022 was due to the partial charge-offs related to the Brazos and Brazos Sandy Creek loans, and t he receipt of loan principal payments on the outstanding nonaccrual loans. See “Troubled Debt Restructurings,” “Nonperforming Loans” and “Net Charge-Offs” below for additional information. Troubled Debt Restructurings The following table presents the outstanding balance of modified loans accounted for as TDRs and the performance status, by legal entity and member class, of these loans as of February 28, 2023 and May 31, 2022. Table 4.4: Trouble Debt Restructurings February 28, 2023 May 31, 2022 (Dollars in thousands) Number of Borrowers Outstanding Amount (1) % of Total Loans Outstanding Number of Borrowers Outstanding Amount (1) % of Total Loans Outstanding TDR loans: Member class: CFC—Distribution 1 $ 4,638 0.02% 1 $ 5,092 0.02% CFC—Power Supply 1 22,875 0.07 — — — RTFC 1 3,717 0.01 1 4,092 0.01 Total TDR loans 3 $ 31,230 0.10% 2 $ 9,184 0.03% Performance status of TDR loans: Performing TDR loans 2 $ 8,355 0.03% 2 $ 9,184 0.03% Nonperforming TDR loans 1 22,875 0.07 — — — Total TDR loans 3 $ 31,230 0.10% 2 $ 9,184 0.03% ____________________________ (1) Represents the unpaid principal balance net of charge-offs and recoveries as of the end of each period. There were no unadvanced commitments related to these loans as of February 28, 2023 and May 31, 2022. We had loans outstanding to two borrowers totaling $8 million and $9 million which have been performing in accordance with the terms of their respective restructured loan agreement for an extended period of time and were classified as performing TDR loans and on accrual status as of February 28, 2023 and May 31, 2022, respectively. We had loans outstanding to Brazos totaling $23 million as of February 28, 2023, which we classified as nonperforming TDR loans during the three months ended February 28, 2023 (“current quarter,”) and were on non-accrual status as of February 28, 2023. Brazos, a CFC Texas-based electric power supply borrower, filed for bankruptcy in March 2021 due to its exposure to elevated wholesale electric power costs during the February 2021 polar vortex. On November 14, 2022, Brazos’ plan of reorganization was confirmed by the bankruptcy court and it became effective on December 15, 2022. Due to Brazos experiencing financial difficulty and the principal loan concession provided to Brazos by the bankruptcy court as part of its approval of Brazos’ plan of reorganization, which was effective on December 15, 2022, the remaining Brazos loans outstanding were moved from nonperforming loans and classified as nonperforming TDR loans during the current quarter. We did not have any TDR loans classified as nonperforming as of May 31, 2022. Prior to the Brazos loan restructuring, we have not had any loan modifications that were required to be accounted for as TDRs since fiscal year 2016. Nonperforming Loans In addition to TDR loans that may be classified as nonperforming, we also may have nonperforming loans that have not been modified as a TDR. The following table presents the outstanding balance of nonperforming loans, by legal entity and member class, as of February 28, 2023 and May 31, 2022. Loans classified as nonperforming are placed on nonaccrual status. Table 4.5: Nonperforming Loans February 28, 2023 May 31, 2022 (Dollars in thousands) Number of Borrowers Outstanding Amount (1) % of Total Loans Outstanding Number of Borrowers Outstanding Amount (1) % of Total Loans Outstanding Nonperforming loans: Member class: CFC—Power supply 2 $ 108,167 0.33% 3 $ 227,790 0.76% Total nonperforming loans 2 $ 108,167 0.33% 3 $ 227,790 0.76% ____________________________ (1) Represents the unpaid principal balance net of charge-offs and recoveries as of the end of each period. We had loans to two CFC electric power supply borrowers totaling $108 million classified as nonperforming as of February 28, 2023. In comparison we had loans to three CFC electric power supply borrowers $228 million classified as nonperforming as of May 31, 2022. Nonperforming loans represented 0.33% and 0.76% of total loans outstanding as of February 28, 2023 and May 31, 2022, respectively. The reduction in nonperforming loans of $120 million during the nine months ended February 28, 2023 was due to the receipt of loan principal payments, the partial charge-offs related to the Brazos and Brazos Sandy Creek nonperforming loans, and the classification of Brazos nonperforming loans to TDR loans during the current quarter, as discussed above. Brazos’ loans outstanding accounted for $86 million of our total nonperforming loans as of May 31, 2022. Brazos Sandy Creek, a wholly-owned subsidiary of Brazos and a CFC Texas-based electric power supply borrower, filed for bankruptcy in March 2022 following the filing of a motion by Brazos to reject its power purchase agreement with Brazos Sandy Creek as part of Brazos’ bankruptcy proceedings. Brazos Sandy Creek’s loan outstanding accounted for $4 million and $28 million of our total nonperforming loans as of February 28, 2023 and May 31, 2022, respectively, and was delinquent and on nonaccrual as of each date. The loan is secured by Brazos Sandy Creek’s 25% tenant-in-common (“TIC”) ownership interest in the Brazos Sandy Creek Energy Station (“the Plant”), and its rights under a power purchase agreement (“PPA”) with Brazos for the output of the Brazos Sandy Creek Energy Station attributable to the TIC interest. On December 20, 2022, the Brazos Sandy Creek’s 25% TIC ownership interest in the Plant was sold for a credit bid of $105 million to Riesel HoldCo, LLC (“HoldCo,”) an entity formed by the Brazos Sandy Creek noteholders. CFC was allocated ownership shares in HoldCo based on its 7.41% share in the $105 million credit bid, which totaled $8 million that was recorded as an investment in HoldCo during the current quarter in the other assets line of our consolidated balance sheets and reduced the Brazos Sandy Creek loan balance by the same amount. HoldCo intends to manage its ownership interest in the Plant directly and potentially sell it at a future date; however, HoldCo has no current timeline for its disposition. Net Charge-Of fs We had no charge-offs during the three months ended February 28, 2023. We experienced charge-offs totaling $15 million for the CFC electric power supply loan portfolio related to Brazos and Brazos Sandy Creek loans during the nine months ended February 28, 2023, which resulted in an annualized net charge-off rate of 0.06% for the nine months ended February 28, 2023. In comparison we had no loan charge-offs during the same prior-year periods. Prior to Brazos’ and Brazos Sandy Creek’s bankruptcy filings, we had not experienced any defaults or charge-offs in our electric utility and telecommunications loan portfolios since fiscal year 2013 and 2017, respectively. 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. Each risk rating is reassessed annually following the receipt of the borrower’s audited financial statements; however, 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. We categorize loans in our portfolio based on our internally assigned borrower risk ratings, which are intended to assess the general creditworthiness 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 doubtful. Pass ratings reflect relatively low probability of default, while criticized ratings have a higher probability of default. The following is a description of the borrower risk rating categories. • Pass : Borrowers that are not included in the categories of special mention, substandard or doubtful. • Special Mention : Borrowers that may be characterized by a potential credit weakness or deteriorating financial condition that is not sufficiently serious to warrant a classification of substandard or doubtful. • Substandard : Borrowers that display a well-defined credit weakness that may jeopardize the full collection of principal and interest. • Doubtful : Borrowers that have a well-defined credit weakness or weaknesses that make full collection of principal and interest, on the basis of currently known facts, conditions and collateral values, highly questionable and improbable. 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. Table 4.6 displays total loans outstanding, by borrower risk rating category and by legal entity and member class, as of February 28, 2023 and May 31, 2022. The borrower risk rating categories presented below correspond to the borrower risk rating categories used in calculating our collective allowance for credit losses. If a parent company provides a guarantee of full repayment of loans of a subsidiary borrower, we include the loans outstanding in the borrower risk-rating category of the guarantor parent company rather than the risk rating category of the subsidiary borrower for purposes of calculating the collective allowance. We present term loans outstanding as of February 28, 2023, by fiscal year of origination for each year during the five-year annual reporting period beginning in fiscal year 2019 , and in the aggregate for periods prior to fiscal year 2019 . The origination period represents the date CFC advances funds to a borrower, rather than the execution date of a loan facility for a borrower. Revolving loans are presented separately due to the nature of revolving loans. The substantial majority of loans in our portfolio represent fixed-rate advances under secured long-term facilities with terms up to 35 years, and as indicate d in Table 4.6 below, term loan advances made to borrowers prior to fiscal year 2019 totaled $17,381 million, representing 54% of our total loans outstanding of $32,369 million as of February 28, 2023. The average remaining maturity of our long-term loans, which accounted for 89% of total loans outstanding as of February 28, 2023, was 19 years. Table 4.6: Loans Outstanding by Borrower Risk Ratings and Origination Year February 28, 2023 Term Loans by Fiscal Year of Origination (Dollars in thousands) YTD Q3 2023 2022 2021 2020 2019 Prior Revolving Loans Total May 31, 2022 Pass CFC: Distribution $ 1,800,130 $ 2,431,756 $ 1,660,098 $ 1,836,617 $ 1,162,421 $ 14,049,245 $ 2,295,219 $ 25,235,486 $ 23,596,004 Power supply 343,465 354,189 551,263 181,672 386,352 2,729,956 640,626 5,187,523 4,673,980 Statewide and 23,846 33,753 2,064 15,619 2,969 17,085 47,200 142,536 112,610 CFC total 2,167,441 2,819,698 2,213,425 2,033,908 1,551,742 16,796,286 2,983,045 30,565,545 28,382,594 NCSC 238,254 48,131 5,866 210,308 3,824 256,838 225,150 988,371 710,878 RTFC 48,171 86,896 77,782 40,685 8,386 195,569 20,583 478,072 463,509 Total pass $ 2,453,866 $ 2,954,725 $ 2,297,073 $ 2,284,901 $ 1,563,952 $ 17,248,693 $ 3,228,778 $ 32,031,988 $ 29,556,981 Special mention CFC: Distribution $ 4,240 $ — $ 4,804 $ — $ 5,028 $ 12,395 $ 162,675 $ 189,142 $ 248,238 Statewide and — — — — 4,844 8,498 — 13,342 14,253 CFC total 4,240 — 4,804 — 9,872 20,893 162,675 202,484 262,491 RTFC — — — — — 3,717 — 3,717 4,092 Total special mention $ 4,240 $ — $ 4,804 $ — $ 9,872 $ 24,610 $ 162,675 $ 206,201 $ 266,583 Substandard Total substandard $ — $ — $ — $ — $ — $ — $ — $ — $ — Doubtful CFC: Power supply $ — $ — $ — $ — $ — $ 108,167 $ 22,875 $ 131,042 $ 227,790 Total doubtful $ — $ — $ — $ — $ — $ 108,167 $ 22,875 $ 131,042 $ 227,790 Total criticized loans $ 4,240 $ — $ 4,804 $ — $ 9,872 $ 132,777 $ 185,550 $ 337,243 $ 494,373 Total loans outstanding $ 2,458,106 $ 2,954,725 $ 2,301,877 $ 2,284,901 $ 1,573,824 $ 17,381,470 $ 3,414,328 $ 32,369,231 $ 30,051,354 Criticized loans totaled $337 million and $494 million as of February 28, 2023 and May 31, 2022, respectively, and represented approxima tely 1% and 2% of total loans outstanding as of each respective date. The decrease of $157 million in criticized loans was due to loan payments received from a CFC electric distribution borrower in the special mention loans category and from Brazos and Brazos Sandy Creek, and the partial charge-offs related to Brazos and Brazos Sandy Creek loans during the nine months ended February 28, 2023 . Each of the borrowers with loans outstanding in the criticized category, with the exception of Brazos Sandy Creek was current with regard to all principal and interest amounts due to us as of February 28, 2023. In contrast, each of the borrowers with loans outstanding in the criticized category, with the exception of Brazos and Brazos Sandy Creek, which filed for bankruptcy in March 2021 and March 2022, respectively, was current with regard to all principal and interest amounts due to us as of May 31, 2022. See “ Troubled Debt Restructurings ” and “N onperforming Loans ” above for additional information on Brazos and Brazos Sandy Creek, respectively. Special Mention One CFC electric distribution borrower with loans outstan ding of $189 million a nd $248 million as of February 28, 2023 and May 31, 2022, respectively, accounted for the substantial majority of loans in the special mention loan category amount of $206 million and $267 million as of each respective date. This borrower experienced an adverse financial impact from restoration costs incurred to repair damage caused by two successive hurricane s. We expect that the borrower will continue to receive grant funds from the Federal Emergency Management Agency and the state where it is located for the full reimbursement of the hurricane damage-related restoration costs. Substandard We did not have any loans classified as substandard as of February 28, 2023 or May 31, 2022. Doubtful Loans outstanding classified as doubtful totaled $131 million and $228 million as of February 28, 2023 and May 31, 2022, respectively, consisting of loans outstanding to Brazos and Brazos Sandy Creek totaling $27 million and $114 million as of each respective date and loans outstanding to a CFC electric power supply borrower of $104 million and $114 million as of each respective date. See “ Troubled Debt Restructurings ” and “N onperforming Loans ” above for additional information on these loans. Unadvanced Loan Commitments Unadvanced loan commitments represent approved and executed loan contracts for which funds have not been advanced to borrowers. The following table presents unadvanced loan commitments, by member class and by loan type, as of February 28, 2023 and May 31, 2022. Table 4.7: Unadvanced Commitments by Member Class and Loan Type (Dollars in thousands) February 28, 2023 May 31, 2022 Member class: CFC: Distribution $ 9,332,479 $ 9,230,197 Power supply 3,884,174 3,835,535 Statewide and associate 152,400 183,845 Total CFC 13,369,053 13,249,577 NCSC 606,121 551,901 RTFC 345,104 309,724 Total unadvanced commitments $ 14,320,278 $ 14,111,202 Loan type: (1) Long-term loans: Fixed rate $ — $ — Variable rate 5,643,107 5,357,205 Total long-term loans 5,643,107 5,357,205 Lines of credit 8,677,171 8,753,997 Total unadvanced commitments $ 14,320,278 $ 14,111,202 ____________________________ (1) The interest rate on unadvanced loan commitments is not set until an advance is made; therefore, all unadvanced long-term loan commitments are reported as variable rate. However, the borrower may select either a fixed or a variable rate when an advance is drawn under a loan commitment. The following table displays, by loan type, the available balance under unadvanced loan commitments as of February 28, 2023, and the related maturities in each fiscal year during the five-year period ended May 31, 2027, and thereafter. Table 4.8: Unadvanced Loan Commitments Available Notional Maturities of Unadvanced Loan Commitments (Dollars in thousands) 2023 2024 2025 2026 2027 Thereafter Line of credit loans $ 8,677,171 $ 250,394 $ 4,017,370 $ 1,404,741 $ 865,242 $ 1,274,004 $ 865,420 Long-term loans 5,643,107 171,539 1,159,276 702,264 848,354 1,429,226 1,332,448 Total $ 14,320,278 $ 421,933 $ 5,176,646 $ 2,107,005 $ 1,713,596 $ 2,703,230 $ 2,197,868 Unadvanced line of credit commitments accounted for 61% of total unadvanced loan commitments as of February 28, 2023, while unadvanced long-term loan commitments accounted for 39% of total unadvanced loan commitments. Unadvanced line of credit commitments are typically revolving facilities for periods not to exceed five years and generally serve as supplemental back-up liquidity to our borrowers. Historically, borrowers have not drawn the full commitment amount for line of credit facilities, and we have experienced a very low utilization rate on line of credit loan facilities regardless of whether or not we are obligated to fund the facility where a material adverse change exists. Our unadvanced long-term loan commitments typically have a five-year draw period under which a borrower may draw funds prior to the expiration of the commitment. We expect that the majority of the long-term unadvanced loan commitme nts of $5,643 million will be advanced prior to the expiration of the commitment. Because we historically have experienced a very low utilization rate on line of credit loan facilities, which account for the majority of our total unadvanced loan commitments, we believe the unadvanced loan commitment total of $14,320 million as of February 28, 2023 is not necessarily representative of our future funding requirements. Unadvanced Loan Commitments—Conditional The substantial majority of our line of credit commitments and all of our unadvanced long-term loan commitments include material adverse change clauses. Unadvanced loan commitments subject to material adverse change clauses totaled $11,188 million and $10,908 million as of February 28, 2023 and May 31, 2022, respectively. Prior to making an advance on these facilities, we confirm that there has been no material adverse change in the business or condition, financial or otherwi se, of the borrower since the time the loan was approved and confirm that the borrower is currently in compliance with loan terms and conditions. In some cases, the borrower’s access to the full amount of the facility is further constrained by the designated purpose, imposition of borrower-specific restrictions or by additional conditions that must be met prior to advancing funds. Unadvanced Loan Commitments—Unconditional Unadvanced loan commitments not subject to material adverse change clauses at the time of each advance consisted of unadvanced committed lines of credit t otaling $3,132 million and $3,203 million as of February 28, 2023 and May 31, 2022, respectively. As such, we are required to advance amounts on these committed facilities as long as the borrower is in compliance with the terms and conditions of the facility. The following table summarizes the available balance under unconditional committed lines of credit as of February 28, 2023, and the related maturity amounts in each fiscal year during the five-year period ending May 31, 2027, and thereafter. Table 4.9: Unconditional Committed Lines of Credit—Available Balance Available Notional Maturities of Unconditional Committed Lines of Credit (Dollars in thousands) 2023 2024 2025 2026 2027 Thereafter Committed lines of credit $ 3,131,762 $ 103,285 $ 170,500 $ 792,586 $ 434,500 $ 907,665 $ 723,226 Pledged Collateral—Loans We are required to pledge eligible mortgage notes or other collateral in an amount at least equal to the outstanding balance of our secured debt. Table 4.10 displays the borrowing amount under each of our secured borrowing agreements and the corresponding loans outstanding pledged as collateral as of February 28, 2023 and May 31, 2022. See “Note 6—Short-Term Borrowings” and “Note 7—Long-Term Debt” for information on our secured borrowings and other borrowings. Table 4.10: Pledged Loans (Dollars in thousands) February 28, 2023 May 31, 2022 Collateral trust bonds: 2007 indenture: Collateral trust bonds outstanding $ 7,772,711 $ 7,072,711 Pledged collateral: Distribution system mortgage notes pledged 8,832,021 8,564,596 RUS-guaranteed loans qualifying as permitted investments pledged 109,149 114,654 Total pledged collateral 8,941,170 8,679,250 1994 indenture: Collateral trust bonds outstanding $ 20,000 $ 25,000 Pledged collateral: Distribution system mortgage notes pledged 23,515 29,616 Guarante |
