| 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 August 31, 2023 and May 31, 2023. Table 4.1: Loans to Members by Member Class and Loan Type August 31, 2023 May 31, 2023 (Dollars in thousands) Amount % of Total Amount % of Total Member class: CFC: Distribution $ 25,818,224 78 % $ 25,437,077 78 % Power supply 5,570,554 17 5,437,242 17 Statewide and associate 232,292 1 200,368 1 Total CFC 31,621,070 96 31,074,687 96 NCSC 923,447 2 956,874 3 RTFC 538,976 2 487,788 1 Total loans outstanding (1) 33,083,493 100 32,519,349 100 Deferred loan origination costs—CFC (2) 13,153 — 12,737 — Loans to members $ 33,096,646 100 % $ 32,532,086 100 % Loan type: Long-term loans: Fixed rate $ 28,708,848 87 % $ 28,371,358 87 % Variable rate 1,012,181 3 1,024,653 3 Total long-term loans 29,721,029 90 29,396,011 90 Lines of credit 3,362,464 10 3,123,338 10 Total loans outstanding (1) 33,083,493 100 32,519,349 100 Deferred loan origination costs—CFC (2) 13,153 — 12,737 — Loans to members $ 33,096,646 100 % $ 32,532,086 100 % ____________________________ (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 $39 million and $113 million during the three months ended August 31, 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 August 31, 2023 or May 31, 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 $134 million and $133 million as of August 31, 2023 and May 31, 2023, 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 $32,545 million and $32,032 million as of August 31, 2023 and May 31, 2023, respectively, accounted for 98% and 99% of total loans outstanding as of each respective 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 $121 million an d $123 million as of August 31, 2023 and May 31, 2023, respectively. Single-Obligor Concentration The outstanding loan exposure for o ur 20 largest borrowers totaled $6,777 million and $6,588 million as of August 31, 2023 and May 31, 2023, respectively, representing 20% 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 both August 31, 2023 and May 31, 2023. The largest total outstanding exposure to a single borrower or controlled group represented 1% of total loans outstanding as of both August 31, 2023 and May 31, 2023. 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 $428 million and $436 million as of August 31, 2023 and May 31, 2023, respectively. Loan exposure to our 20 largest borrowers covered under the Fa rmer Mac agreement totaled $224 million and $267 million as of August 31, 2023 and May 31, 2023, respectively, which reduced our exposure to the 20 largest borro wers to $6,553 million and $6,321 million 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 August 31, 2023. Our credit exposure is also mitigated by long-term loans guaranteed by RUS. Geographic Concentration Although our organizational structure and mission result 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 883 and 884 a s of August 31, 2023 and May 31, 2023, respectively, located in 49 states and the District of Columbia. Of the 883 and 884 borrowers with loans outstanding, 50 and 52 were electric power supply borrowers as of August 31, 2023 and May 31, 2023, 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 August 31, 2023 and May 31, 2023, 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 August 31, 2023 and May 31, 2023. Table 4.2: Loan Exposure to Texas-Based Borrowers August 31, 2023 May 31, 2023 (Dollars in thousands) Number of Borrowers Amount % of Total Number of Borrowers Amount % of Total Member class: CFC: Distribution 57 $ 4,368,220 13 % 57 $ 4,319,937 13 % Power supply 6 1,181,919 4 8 1,128,941 4 Statewide and associate 1 75,754 — 1 51,504 — Total CFC 64 5,625,893 17 66 5,500,382 17 NCSC — — — 1 16,667 — RTFC 2 11,429 — 2 11,755 — Total loan exposure to Texas-based borrowers 66 5,637,322 17 69 5,528,804 17 Less: Loans covered under Farmer Mac standby purchase commitment (153,132) — (155,409) — Net loan exposure to Texas-based borrowers $ 5,484,190 17 % $ 5,373,395 17 % 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, modifications to borrowers experiencing financial difficulty, 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 August 31, 2023 and May 31, 2023. Table 4.3: Payment Status of Loans Outstanding August 31, 2023 (Dollars in thousands) Current 30-89 Days Past Due > 90 Days Total Total Loans Outstanding Nonaccrual Loans Member class: CFC: Distribution $ 25,818,224 $ — $ — $ — $ 25,818,224 $ — Power supply 5,570,554 — — — 5,570,554 84,987 Statewide and associate 232,292 — — — 232,292 — CFC total 31,621,070 — — — 31,621,070 84,987 NCSC 923,447 — — — 923,447 — RTFC 538,976 — — — 538,976 — Total loans outstanding $ 33,083,493 $ — $ — $ — $ 33,083,493 $ 84,987 Percentage of total loans 100.00 % — % — % — % 100.00 % 0.26 % May 31, 2023 (Dollars in thousands) Current 30-89 Days Past Due > 90 Days Total Total Loans Outstanding Nonaccrual Loans Member class: CFC: Distribution $ 25,437,077 $ — $ — $ — $ 25,437,077 $ — Power supply 5,432,895 — 4,347 4,347 5,437,242 112,209 Statewide and associate 200,368 — — — 200,368 — CFC total 31,070,340 — 4,347 4,347 31,074,687 112,209 NCSC 920,159 36,715 — 36,715 956,874 — RTFC 487,788 — — — 487,788 — Total loans outstanding $ 32,478,287 $ 36,715 $ 4,347 $ 41,062 $ 32,519,349 $ 112,209 Percentage of total loans 99.87 % 0.11% 0.02% 0.13% 100.00 % 0.35 % We had no delinquent loans as of August 31, 2023. In comparison, we had one CFC electric power supply borrower, Brazos Sandy Creek Electric Cooperative Inc. (“Brazos Sandy Creek”), with a delinquent loan totaling $4 million and one NCSC borrower with a delinquent loan of $37 million as of May 31, 2023. The decrease in loans on nonaccrual status of $27 million to $85 million as of August 31, 2023, from $112 million as of May 31, 2023 was due to the receipt of loan principal payments for Brazos Electric Power Cooperative, Inc. ( “ Brazos ” ) and Brazos Sandy Creek during the three months ended August 31, 2023. We received a total of $28 million in loan payments from Brazos and Brazos Sandy Creek to repay their $27 million of total loans outstanding in full during the three months ended August 31, 2023. The additional payment received of $1 million was recorded as a loan recovery on the Brazos and Brazos Sandy Creek previously charged-off loan amounts. Loan Modifications to Borrowers Experiencing Financial Difficulty We actively monitor problem loans and, from time to time, attempt to work with borrowers to manage such exposures through loan workouts or modifications that better align with the borrower’s current ability to pay. Therefore, as part of our loss mitigation efforts, we may provide modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for exercising remedies. We consider the impact of all loan modifications when estimating the credit quality of our loan portfolio and establishing the allowance for credit losses. On June 1, 2023, we adopted ASU 2022-02, Financial Instruments – Credit Losses (Topic 326) – Troubled Debt Restructurings and Vintage Disclosures, using the prospective adoption method. The ASU eliminated the accounting guidance for TDRs and enhanced the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty, which are to be applied prospectively. For additional information on the adoption of ASU 2022-02 see “Note 1—Summary of Significant Accounting Policies.” We had no loan modifications to borrowers experiencing financial difficulty during the three months ended August 31, 2023. Troubled Debt Restructurings—Prior to the Adoption of ASU 2022-02 As discussed above, ASU 2022-02 eliminated the accounting guidance for TDRs. Prior to the adoption of ASU 2022-02, a loan restructuring or modification of terms was accounted for as a TDR if, for economic or legal reasons related to the borrower’s financial difficulties, a concession was granted to the borrower that we would not otherwise consider. 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 May 31, 2023. Table 4.4: Troubled Debt Restructurings — Prior to the Adoption of ASU 2022-02 May 31, 2023 (Dollars in thousands) Number of Borrowers Outstanding Amount (1) % of Total Loans Outstanding TDR loans: Member class: CFC—Distribution 1 $ 4,638 0.02 % CFC—Power Supply 1 22,875 0.07 RTFC 1 3,592 0.01 Total TDR loans 3 $ 31,105 0.10 % Performance status of TDR loans: Performing TDR loans 2 $ 8,230 0.03 % Nonperforming TDR loans 1 22,875 0.07 Total TDR loans 3 $ 31,105 0.10 % ____________________________ (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 May 31, 2023. We had loans outstanding to two borrowers totaling $8 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 May 31, 2023. We had loans outstanding to Brazos totaling $23 million classified as nonperforming TDR loans during the three months ended February 28, 2023, which were on non-accrual status as of May 31, 2023. During the three months ended August 31, 2023, we received the remaining payment of Brazos’ loans outstanding of $23 million in accordance with the provisions of Brazos’ plan of reorganization to repay its loans in full. 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 The following table presents the outstanding balance of nonperforming loans, by legal entity and member class, as of August 31, 2023 and May 31, 2023. Loans classified as nonperforming are placed on nonaccrual status. Table 4.5: Nonperforming Loans August 31, 2023 May 31, 2023 (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 1 $ 84,987 0.26 % 2 $ 89,334 0.27 % Total nonperforming loans 1 $ 84,987 0.26 % 2 $ 89,334 0.27 % ____________________________ (1) Represents the unpaid principal balance net of charge-offs and recoveries as of the end of each period. Nonperforming loans totaled $85 million as of August 31, 2023, a decrease of $4 million from May 31, 2023, due to the receipt of $4 million in loan payments from Brazos Sandy Creek to pay off its nonperforming loan outstanding during the three months ended August 31, 2023, as discussed above. Net Charge-Of fs We had no charge-offs during the three months ended August 31, 2023 and 2022. As mentioned above, during the three months ended August 31, 2023 we recorded a $1 million loan recovery on the Brazos and Brazos Sandy Creek previously charged-off loan amounts, which resulted in an annualized net recovery rate of 0.01%. 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 the 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 August 31, 2023 and May 31, 2023. 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 August 31, 2023, by fiscal year of origination for each year during the five-year annual reporting period beginning in fiscal year 2020 , and in the aggregate for periods prior to fiscal year 2020 . 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 2020 totaled $18,381 million, representing 56% of our total loans outstanding of $33,083 million as of August 31, 2023. The average remaining maturity of our long-term loans, which accounted for 90% of total loans outstanding as of August 31, 2023, was 19 years. Table 4.6: Loans Outstanding by Borrower Risk Ratings and Origination Year August 31, 2023 Term Loans by Fiscal Year of Origination (Dollars in thousands) YTD Q1 2024 2023 2022 2021 2020 Prior Revolving Loans Total May 31, 2023 Pass CFC: Distribution $ 552,343 $ 2,442,462 $ 2,383,521 $ 1,631,443 $ 1,808,667 $ 14,771,702 $ 2,041,214 $ 25,631,352 $ 25,242,708 Power supply 99,394 462,843 342,465 545,372 176,313 3,003,208 855,972 5,485,567 5,325,033 Statewide and 1,000 61,104 23,489 1,875 13,840 18,812 99,400 219,520 187,310 CFC total 652,737 2,966,409 2,749,475 2,178,690 1,998,820 17,793,722 2,996,586 31,336,439 30,755,051 NCSC 3,000 264,868 23,838 5,489 190,849 271,951 163,452 923,447 956,874 RTFC 55,204 50,703 81,879 72,164 37,300 196,746 41,513 535,509 484,196 Total pass $ 710,941 $ 3,281,980 $ 2,855,192 $ 2,256,343 $ 2,226,969 $ 18,262,419 $ 3,201,551 $ 32,795,395 $ 32,196,121 Special mention CFC: Distribution $ — $ 4,213 $ — $ 4,746 $ — $ 17,000 $ 160,913 $ 186,872 $ 194,369 Statewide and — — — — — 12,772 — 12,772 13,058 CFC total — 4,213 — 4,746 — 29,772 160,913 199,644 207,427 RTFC — — — — — 3,467 — 3,467 3,592 Total special mention $ — $ 4,213 $ — $ 4,746 $ — $ 33,239 $ 160,913 $ 203,111 $ 211,019 Substandard Total substandard $ — $ — $ — $ — $ — $ — $ — $ — $ — Doubtful CFC: Power supply $ — $ — $ — $ — $ — $ 84,987 $ — $ 84,987 $ 112,209 Total doubtful $ — $ — $ — $ — $ — $ 84,987 $ — $ 84,987 $ 112,209 Total criticized loans $ — $ 4,213 $ — $ 4,746 $ — $ 118,226 $ 160,913 $ 288,098 $ 323,228 Total loans outstanding $ 710,941 $ 3,286,193 $ 2,855,192 $ 2,261,089 $ 2,226,969 $ 18,380,645 $ 3,362,464 $ 33,083,493 $ 32,519,349 Criticized loans totaled $288 million and $323 million as of August 31, 2023 and May 31, 2023, respectively, and represented approxima tely 1% of total loans outstanding as of each respective date. The decrease of $35 million in criticized loans was primarily due to loan payments received from a CFC electric distribution borrower in the special mention category and from Brazos and Brazos Sandy Creek in the doubtful category during the three months ended August 31, 2023 . Each of the borrowers with loans outstanding in the criticized category was current with regard to all principal and interest amounts due to us as of August 31, 2023. In contrast, 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 May 31, 2023. Special Mention One CFC electric distribution borrower with loans outstan ding of $187 million a nd $194 million as of August 31, 2023 and May 31, 2023, respectively, accounted for the substantial majority of loans in the special mention loan category amount of $203 million and $211 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 August 31, 2023 or May 31, 2023. Doubtful We had loans outstanding classified as doubtful totaling $85 million as of August 31, 2023 to a CFC electric power supply borrower. We had loans outstanding classified as doubtful totaling $112 million as of May 31, 2023, consisting of $85 million loans outstanding to a CFC electric power supply borrower and $27 million of loans outstanding to Brazos and Brazos Sandy Creek. See “Troubled Debt Restructurings — Prior to the Adoption of ASU 2022-02” 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 August 31, 2023 and May 31, 2023. Table 4.7: Unadvanced Commitments by Member Class and Loan Type (1) (Dollars in thousands) August 31, 2023 May 31, 2023 Member class: CFC: Distribution $ 9,803,363 $ 9,673,712 Power supply 3,995,643 3,995,128 Statewide and associate 157,100 175,150 Total CFC 13,956,106 13,843,990 NCSC 633,895 604,436 RTFC 374,920 340,135 Total unadvanced commitments $ 14,964,921 $ 14,788,561 Loan type: (2) Long-term loans: Fixed rate $ — $ — Variable rate 5,796,421 5,669,634 Total long-term loans 5,796,421 5,669,634 Lines of credit 9,168,500 9,118,927 Total unadvanced commitments $ 14,964,921 $ 14,788,561 ____________________________ (1) Excludes the portion of any commitment to advance funds under swingline loan facilities in excess of CFC’s total commitment amount in a syndicated credit facility. Other syndicate lenders have an absolute obligation to acquire participations in such swingline loans upon CFC’s election, including during a default by the borrower. (2) 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 August 31, 2023, and the related maturities in each fiscal year during the five-year period ended May 31, 2028, and thereafter. Table 4.8: Unadvanced Loan Commitments Available Notional Maturities of Unadvanced Loan Commitments (Dollars in thousands) 2024 2025 2026 2027 2028 Thereafter Line of credit loans $ 9,168,500 $ 758,854 $ 5,172,684 $ 837,114 $ 1,199,718 $ 636,387 $ 563,743 Long-term loans 5,796,421 877,539 694,623 706,646 1,301,246 1,684,716 531,651 Total $ 14,964,921 $ 1,636,393 $ 5,867,307 $ 1,543,760 $ 2,500,964 $ 2,321,103 $ 1,095,394 Unadvanced line of credit commitments accounted for 61% of total unadvanced loan commitments as of August 31, 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 when a material adverse change has occurred. 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 $5,796 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 $14,965 million as of August 31, 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 $11,817 million and $11,617 million as of August 31, 2023 and May 31, 2023, 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 $3,148 million and $3,172 million as of August 31, 2023 and May 31, 2023, respectively. 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 August 31, 2023, and the related maturity amounts in each fiscal year during the five-year period ending May 31, 2028, and thereafter. Table 4.9: Unconditional Committed Lines of Credit—Available Balance Available Notional Maturities of Unconditional Committed Lines of Credit (Dollars in thousands) 2024 2025 2026 2027 2028 Thereafter Committed lines of credit $ 3,148,266 $ 160,500 $ 486,002 $ 539,800 $ 864,900 $ 688,665 $ 408,399 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 August 31, 2023 and May 31, 2023. 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) August 31, 2023 May 31, 2023 Collateral trust bonds: 2007 indenture: Collateral trust bonds outstanding $ 7,772,711 $ 7,772,711 Pledged collateral: Distribution system mortgage notes pledged 8,623,311 8,719,287 RUS-guaranteed loans qualifying as permitted investments pledged 120,554 122,874 Total pledged collateral 8,743,865 8,842,161 1994 indenture: Collateral trust bonds outstanding $ 20,000 $ 20,000 Pledged collateral: Distribution system mortgage notes pledged 22,278 22,900 Guaranteed Underwriter Program: Notes payable outstanding $ 6,670,146 $ 6,720,643 Pledged collateral: Distribution and power supply system mortgage notes pledged 7,804,512 7,877,558 Farmer Mac: Notes payable outstanding $ 3,625,953 $ 3,149,898 Pledged collateral: Distribution and power supply system mortgage notes pledged 4,227,149 4,294,282 Clean Renewable Energy Bonds Series 2009A: Notes payable outstanding $ 1,098 $ 1,098 Pledged collateral: Distribution and power supply system mortgage notes pledged 603 1,029 Cash 780 391 Total pledged collateral 1,383 1,420 |
