More annual reports from National Rural Utilities Cooperative Finance Corporation:
2023 ReportANNUAL REPORT 2016 About CFC Created and owned by America’s electric cooperative network, the National Rural Utilities Cooperative Finance Corporation (CFC)—a nonprofit finance cooperative with approximately $24 billion in assets— provides capital and industry-leading financial products to serve the needs of our member-owners—America’s 900-plus, consumer-controlled electric cooperatives. CFC operates under the seven cooperative principles and our core values of Service, Integrity and Excellence. By delivering unparalleled industry expertise, flexibility and responsiveness, we help our members maintain a sophisticated system of generation, transmission and distribution resources that spans 75 percent of the United States land mass. This infrastructure provides a safe, reliable and affordable flow of power to 42 million consumers each day and plays a critical role in boosting the nation’s economy and rural quality of life. CFC operates from its corporate headquarters in Dulles, Virginia. co-ops power 75% of the united STATES 42 MILLION PEOPLE States 2 message from the ceo & board president C FC wrapped up fiscal year 2016 (FY 2016) in a very healthy financial position. Total loans outstanding to our electric cooperative members at May 31, 2016, stood at $23.2 billion, a gross increase of $1.7 billion during FY 2016 as compared with our prior fiscal year-end at May 31, 2015. Five states accounted for more than half of the loan growth—Georgia, Missouri, North Carolina, North Dakota and Texas. Our members’ equity, which excludes derivative forward value losses, increased by $131 million at May 31, 2016, from the prior fiscal year-end. This amount helped drive our adjusted debt-to-equity ratio below 6-to-1 at the close of FY 2016. We have diligently focused on building equity through earnings over the last few years to ensure we are in the best position possible to meet our members’ needs. Sheldon C. Petersen CFC CEO Other highlights from the fiscal year include: • CFC’s adjusted times interest earned ratio for FY 2016 was 1.22, and our adjusted debt-to-equity ratio was 5.82-to-1.* • Total loans outstanding to members at May 31, 2016, were $23.2 billion, a gross increase of $1.7 billion during the 12 months of the fiscal year. • CFC remained committed to our mission to serve the electric cooperative network, and 99 percent of CFC’s loans were to rural electric systems at the close of the fiscal year. R. Grant Clawson CFC Board President and Trustee, Continental Divide Electric Cooperative, NM CFC also focuses on maintaining and improving our credit ratings, which remain robust because ratings agencies recognize that CFC’s financial strength rests with the quality of our loan portfolio and the strength of our members. Almost 100 percent of our assets are tied to financially sound, cash flow-generating electric cooperatives. CFC is focused solely on meeting the needs of our members, not generating sales or earnings growth to meet shareholder requirements. In July 2016, the board was pleased to approve a patronage capital allocation of $84 million for FY 2016. CFC retired and distributed $42 million in cash to members in September 2016. Members also received more than $60 million on their adjusted equity holdings in CFC in FY 2016, consisting of subscription, loan and member certificates. Taken together, this represents more than $100 million in cash back to members during the 12 months ended October 31, 2016. There are strong ties between the success of electric cooperatives and the success of CFC. We’re proud to say that everyone here at CFC works hard every day to help electric cooperatives be successful. For more information on the adjustments that CFC makes to its financial results for the purposes of its own analysis and covenant compliance and for a reconciliation of the non-GAAP measures to the applicable GAAP measures, please refer to “Non-GAAP Financial Measures” in the Management’s Discussion & Analysis (MD&A) section of the May 31, 2016, Form 10-K. CFC’s 10-K is available at www.nrucfc.coop. * Times interest earned ratio (TIER) based on GAAP results was less than 1.00 due to the $52 million net loss reported for the year ended May 31, 2016. Debt-to-equity ratio based on GAAP results was 28.69 at May 31, 2016. 3 2016 CFC Board of Directors From Electric Co-ops, For Electric Co-ops CFC is guided by a 23-member board of directors that represents 10 geographically defined districts and the electric cooperative network’s national trade association. There is also one at-large director from a member company. Comprised exclusively of electric cooperative directors and executives, the board sets overall policy, establishes programs and develops strategies for CFC. CFC BOARD OFFICERS District 1 District 3 District 5 Curtin R. Rakestraw II Director Sullivan County Rural Electric Cooperative, PA Jimmy A. LaFoy Director Baldwin County Electric Membership Corporation, AL R. Grant Clawson President Mike Campbell Vice President Harry Park Secretary-Treasurer Dean R. Tesch Board Chairman Taylor Electric Cooperative, WI Alan W. Wattles President & CEO Monroe County Electric Co-Operative, IL District 6 Thomas L. Hayes Director Brown County Rural Electrical Association, MN Gregory D. Williams General Manager & Executive Vice President Appalachian Electric Cooperative, TN District 4 Stephen C. Vail Director NineStar Connect, IN Todd P. Ware President & CEO Licking Rural Electrification, OH Bradley J. Schardin General Manager Southeastern Electric Cooperative, SD Kent D. Farmer President & CEO Rappahannock Electric Cooperative, VA District 2 Harry N. Park Director Southern Rivers Energy, GA Mike Campbell Executive Vice President & General Manager Central Florida Electric Cooperative, FL BELOW: Pictured, front row from left, Kent D. Farmer, Harry N. Park, R. Grant Clawson, Mike Campbell and Robert M. Hill. Back row, from left, Dean R. Tesch, Jimmy A. LaFoy, Curtin R. Rakestraw II, Robert “Bob” Brockman, Debra L. Robinson, Alan W. Wattles, Thomas L. Hayes, Bradley J. Schardin, Todd P. Ware, Mark D. Snowden, Kirk A. Thompson, Gregory D. Williams, Patrick L. Bridges, Stephen C. Vail, Roman E. Gillen, Mel Coleman, Doyle Jay Hanson and Phil Carson. District 7 District 9 District 11 Robert “Bob” Brockman Board President Wheatland Rural Electric Association, WY Kirk A. Thompson General Manager CMS Electric Cooperative, KS Doyle Jay Hanson Director Fall River Rural Electric Cooperative, ID Roman E. Gillen President & CEO Consumers Power, OR District 8 District 10 Robert M. Hill Board Chair First Electric Cooperative Corporation, AR Mark D. Snowden CEO Cimarron Electric Cooperative, OK R. Grant Clawson Trustee Continental Divide Electric Cooperative, NM Debra L. Robinson CEO & General Manager Wood County Electric Cooperative, TX Mel Coleman Board President, NRECA CEO North Arkansas Electric Cooperative, AR Phil Carson Board Vice President, NRECA Director Tri-County Electric Cooperative, IL At-Large Director Audit Committee Financial Expert Patrick L. Bridges CFO Tri-State Generation and Transmission Association, CO Flexible Financing to Meet the Needs of Our Members Total Loans Outstanding As of May 31, 2016 Dollars in Billions $23B $22B $21B $20B $19B $18B At the end of FY2016, CFC’s loans outstanding totaled $23.2 billion. $23.2 $21.5 $20.3 $20.5 $18.9 FY2012 FY2013 FY2014 FY2015 FY2016 Total Loans Outstanding by member class As of May 31, 2016 Dollars in Millions 99% $22,811 Electric At the end of FY2016, $23 billion, or 99 percent, of CFC’s loans were to rural electric systems. TOTAL $23,153 1% $342 TELECOMMUNICATIONS 6 Flexible Financing to Meet the Needs of Our Members 37 consecutive Calendar Patronage Capital Retirement Years of Cash Retirement of Patronage Capital As of May 31, 2016 CFC retired $39 million in patronage capital in September 2015 (FY2016) and an additional $42 million in patronage capital in September 2016 (FY2017). As the only lender created and owned by America’s electric cooperative network, CFC is committed to our members’ financial success like no other. CFC’s patronage capital retirements play a role in that commitment and represent a key tenet of the cooperative business model. CFC is proud to have returned $1.55 billion in patronage capital to our members since 1980. The retirement in September 2016 represents the 37th consecutive calendar year CFC has made a cash retirement of patronage capital. Approximate cumulative Amount returned to members since 1980 $1.40 BILLION $1.43 BILLION $1.47 BILLION $1.51 BILLION $1.55 BILLION FY2012 FY2013 FY2014 FY2015 FY2016 $681 National Cooperative Services Corporation 76% $17,674 Electric Distribution 19% $4,401 Power Supply (G&T) <3% <1% $55 Statewide & Associate $342 Telecommunications 1% 7 Our Members’ Strength Is Our Strength Member Investments & Equity As of May 31, 2016 Dollars in Millions $654 Medium-term Notes $1,444 Members’ Subordinated Certificates Members had more than $5 billion in investments and equity in CFC at May 31, 2016. 38% 12% 26% 24% $2,076 Short-term Investments (including Commercial paper, Daily liquidity Fund and Select Notes) $1,298 Members’ Equity Funding Sources As of May 31, 2016 Dollars in Millions During FY2016, CFC’s debt capitalization stood at $22.6 billion, compared with $21.3 billion at the prior year-end. 50% $11,345 Capital Markets 8 $4,777 Guaranteed Underwriter Program 21% 19% $4,173 MEMBERS 10% $2,303 Federal agriculturAL Mortgage Corporation Adjusted Net Income For the fi scal year ended May 31, 2016 CFC reported adjusted net income of $170 million for fi scal year 2016.* CFC’s FY 2016 year-end results include GAAP and non-GAAP adjusted fi nancial measures. Please refer to CFC’s annual report on Form 10-K for the fi scal year ended May 31, 2016, as fi led with the SEC and as posted on the CFC website, for a discussion of why CFC believes the adjusted measures are useful information in analyzing its fi nancial performance and the reconciliation to related GAAP measures. *CFC reported a GAAP net loss of $52 million for the fi scal year ended May 31, 2016. CREDIT RATINGS As of May 31, 2016 CFC’s long- and short-term debt securities are rated by three nationally recognized credit rating agencies registered with the U.S. Securities and Exchange Commission: Fitch Ratings, Moody’s Investors Service and S&P Global. CFC Debt Instrument Collateral Trust Bonds (CTBs) Medium-Term Notes (MTNs) InterNotes Subordinated Notes Commercial Paper (CP) Rating Outlook Fitch Ratings Moody’s Investors Service A+ A A BBB+ F1 Stable A1 A2 A2 A3 P-1 Stable S&P Global A A A BBB+ A-1 Stable Th e ratings shown here have the meaning defi ned by each of the rating agencies. Th ey are not recommendations to buy, sell or hold securities and are subject to revision at any time by the rating agencies. 9 Economic Development Support N A H T E R O M $102 MILLION REDL&G CONTRIBUTED BY CFC TO DATE CFC plays a critical role in preserving the USDA Rural Economic Development Loan and Grant Program (REDL&G). CFC supports REDL&G by paying fees— currently more than $14 million annually, and $102 million total to date—based on our balance of USDA Guaranteed Underwriter Program loans outstanding. These annual fees provide a predictable source of REDL&G funding, and directly underpin hundreds of millions of dollars in REDL&G loans and grants made by electric cooperatives. Over the years, REDL&G loans and grants—backed by electric cooperatives—have assisted a wide range of rural economic development projects, including new medical clinics, libraries, school and fire station renovations, and local businesses expansion. To date, REDL&G has awarded more than $800 million to roughly 1,600 projects, creating approximately 67,000 jobs across rural America. Nearly 500 electric cooperatives have participated in the program. $ Since 1989, REDL&G has provided: 800 million to 1,600 projects creating or preserving 67, 000 jobs through the participation of 500 electric co-ops 10 CFC Leadership Team CFC’s senior leadership team and key staff have extensive experience in rural utility fi nance, operations and management. Th e chief executive offi cer and senior leadership team manage CFC’s operations and carry out the board’s directives. Sheldon C. Petersen Chief Executive Officer John T. Evans Executive Vice President and Chief Operating Officer Joel Allen Senior Vice President, Member Services Roberta Aronson Senior Vice President and General Counsel John Borak Senior Vice President, Credit Risk Management Brad Captain Senior Vice President, Corporate Relations Graceann Clendenen Senior Vice President, Corporate Services Sarah DeShazior Senior Executive, Corporate Administration 800 million 1,600 projects 67, 000 jobs 500 electric co-ops Andrew Don Senior Vice President and Chief Financial Officer Steve Kettler Senior Vice President, Strategic Services Steven L. Lilly Senior Vice President, Special Asset Management (Retired) Robin Reed Senior Vice President, Loan Operations Gregory Starheim Senior Vice President, Business and Industry Development CONTACT US National Rural Utilities Cooperative Finance Corporation (CFC) 20701 Cooperative Way Dulles, VA 20166 703-467-1800 or 800-424-2954 Core Business Hours Monday-Friday, 8 a.m. – 4:45 p.m. Eastern Time www.nrucfc.coop 11 Service Our dedicated staff strives to exceed our members’ expectations by focusing exclusively on the needs of the electric cooperative network that created us. Integrity We have been our members’ trusted and independent fi nance cooperative for nearly 50 years. Th eir long-term fi nancial health is our goal. Excellence We provide our members with reliable access to funding regardless of market conditions, leveraging relationships in the fi nancial community to build a stable, diverse base of funds. © 2016 CFC. All Rights Reserved. November 2016. CFC is an equal opportunity provider. 20701 Cooperative Way Dulles, VA 20166 www.nrucfc.coop
Continue reading text version or see original annual report in PDF format above