UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-7102
__________________________
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
__________________________
District of Columbia
(State or other jurisdiction of incorporation or organization)
52-0891669
(I.R.S. employer identification no.)
20701 Cooperative Way, Dulles, Virginia, 20166
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (703) 467-1800
__________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
7.35% Collateral Trust Bonds, due 2026
5.50% Subordinated Notes, due 2064
Trading Symbol(s)
NRUC 26
NRUC
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes x No ¨
Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files).
Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company ¨ Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any
new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
The Registrant is a tax-exempt cooperative and therefore does not issue capital stock.
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
TABLE OF CONTENTS
Business.................................................................................................................................................
Overview........................................................................................................................................
Our Business...................................................................................................................................
Members.........................................................................................................................................
Loan and Guarantee Programs.......................................................................................................
Investment Policy...........................................................................................................................
Industry...........................................................................................................................................
Lending Competition......................................................................................................................
Regulation.......................................................................................................................................
Human Capital Management..........................................................................................................
Available Information.....................................................................................................................
Risk Factors...........................................................................................................................................
Unresolved Staff Comments..................................................................................................................
Properties...............................................................................................................................................
Legal Proceedings..................................................................................................................................
Mine Safety Disclosures........................................................................................................................
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities................................................................................................................................
Reserved.................................................................................................................................................
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
(“MD&A”).........................................................................................................................................
Introduction....................................................................................................................................
Summary of Selected Financial Data.............................................................................................
Executive Summary........................................................................................................................
Critical Accounting Policies and Estimates....................................................................................
Recent Accounting Changes and Other Developments..................................................................
Consolidated Results of Operations...............................................................................................
Consolidated Balance Sheet Analysis............................................................................................
Risk Management...........................................................................................................................
Credit Risk......................................................................................................................................
Liquidity Risk.................................................................................................................................
Market Risk....................................................................................................................................
Operational Risk.............................................................................................................................
Selected Quarterly Financial Data..................................................................................................
Non-GAAP Financial Measures.....................................................................................................
Quantitative and Qualitative Disclosures About Market Risk...............................................................
Financial Statements and Supplementary Data.....................................................................................
Report of Independent Registered Public Accounting Firm..................................................................
Consolidated Statements of Operations..........................................................................................
Consolidated Statements of Comprehensive Income (Loss)..........................................................
Consolidated Balance Sheets..........................................................................................................
Consolidated Statements of Changes in Equity..............................................................................
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Consolidated Statements of Cash Flows........................................................................................
Notes to Consolidated Financial Statements..................................................................................
Note 1 — Summary of Significant Accounting Policies..........................................................
Note 2 — Interest Income and Interest Expense.......................................................................
Note 3 — Investment Securities...............................................................................................
Note 4 — Loans........................................................................................................................
Note 5 — Allowance for Credit Losses....................................................................................
Note 6 — Short-Term Borrowings...........................................................................................
Note 7 — Long-Term Debt.......................................................................................................
Note 8 — Subordinated Deferrable Debt..................................................................................
Note 9 — Members’ Subordinated Certificates........................................................................
Note 10 — Derivative Instruments and Hedging Activities.......................................................
Note 11 — Equity.......................................................................................................................
Note 12 — Employee Benefits...................................................................................................
Note 13 — Guarantees................................................................................................................
Note 14 — Fair Value Measurement..........................................................................................
Note 15 — Variable Interest Entities..........................................................................................
Note 16 — Business Segments...................................................................................................
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................
Controls and Procedures........................................................................................................................
Other Information..................................................................................................................................
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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Directors, Executive Officers and Corporate Governance....................................................................
Executive Compensation.......................................................................................................................
150
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters...................................................................................................................................................
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Certain Relationships and Related Transactions, and Director Independence......................................
Principal Accounting Fees and Services................................................................................................
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PART IV
Item 15.
Item 16.
Exhibit and Financial Statement Schedules...........................................................................................
Form 10-K Summary.............................................................................................................................
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SIGNATURES............................................................................................................................................................
181
ii
CROSS REFERENCE INDEX OF MD&A TABLES
Table
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Description
Summary of Selected Financial Data.......................................................................................................
Average Balances, Interest Income/Interest Expense and Average Yield/Cost......................................
Rate/Volume Analysis of Changes in Interest Income/Interest Expense................................................
Non-Interest Income................................................................................................................................
Derivative Gains (Losses)........................................................................................................................
Derivatives—Average Notional Amounts and Interest Rates.................................................................
Comparative Swap Curves.......................................................................................................................
Non-Interest Expense...............................................................................................................................
Loans—Outstanding Amount by Member Class and Loan Type............................................................
Loans—Historical Retention Rate and Repricing Selection....................................................................
Debt—Debt Product Types......................................................................................................................
Total Debt Outstanding and Weighted-Average Interest Rates...............................................................
Member Investments................................................................................................................................
Equity.......................................................................................................................................................
Loan Portfolio Security Profile................................................................................................................
Loan Geographic Concentration..............................................................................................................
Loan Exposure to 20 Largest Borrowers.................................................................................................
Troubled Debt Restructured Loans..........................................................................................................
Nonperforming Loans..............................................................................................................................
Allowance for Credit Losses by Borrower Member Class and Evaluation Methodology.......................
Rating Triggers for Derivatives...............................................................................................................
Available Liquidity .................................................................................................................................
Committed Bank Revolving Line of Credit Agreements........................................................................
Short-Term Borrowings—Outstanding Amount and Weighted-Average Interest Rates........................
Short-Term Borrowings—Funding Sources............................................................................................
Long-Term and Subordinated Debt Issuances and Repayments.............................................................
Collateral Pledged....................................................................................................................................
Unencumbered Loans..............................................................................................................................
Loans—Maturities of Scheduled Principal Payments.............................................................................
Contractual Obligations...........................................................................................................................
Projected Sources and Uses of Liquidity from Debt and Investment Activity........................................
Credit Ratings..........................................................................................................................................
Interest Rate Sensitivity Analysis.......................................................................................................................................
LIBOR-Indexed Financial Instruments....................................................................................................
Selected Quarterly Financial Data...........................................................................................................
Adjusted Financial Measures—Income Statement..................................................................................
TIER and Adjusted TIER.........................................................................................................................
Adjusted Financial Measures—Balance Sheet........................................................................................
Debt-to-Equity Ratio and Adjusted Debt-to-Equity Ratio.......................................................................
Members’ Equity.....................................................................................................................................
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for the fiscal year ended May 31, 2021 (“this Report” or “2021 Form 10-K”) 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 in 2019 and spread of a novel coronavirus that causes
coronavirus disease 2019 (“COVID-19”) and the factors listed and described under “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.
PART I
Item 1. Business
OVERVIEW
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 and discussed below.
The business affairs of CFC, NCSC and RTFC are governed by separate boards of directors for each entity. We provide
information on CFC’s corporate governance in “Item 10. Directors, Executive Officers and Corporate Governance.” We
provide information on the members of each of these entities below in “Item 1. Business—Members” and describe the
financing products offered to members by each entity under “Item 1. Business—Loan and Guarantee Programs.”
Information on the financial performance of our business segments is disclosed in “Note 16—Business Segments.” 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.
1
CFC
CFC is a member-owned, nonprofit finance cooperative association incorporated under the laws of the District of Columbia
in April 1969. CFC’s principal purpose is to provide its members with financing 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 cooperative, CFC is owned by and exclusively serves
its membership, which consists of not-for-profit entities or subsidiaries or affiliates of not-for-profit entities. CFC is exempt
from federal income taxes under Section 501(c)(4) of the Internal Revenue Code. As a member-owned cooperative, CFC’s
objective is not to maximize profit, but rather to offer members cost-based financial products and services. As described
below under “Allocation and Retirement of Patronage Capital,” CFC annually allocates its net earnings, which consist of net
income excluding the effect of certain noncash accounting entries, to: (i) a cooperative educational fund; (ii) a general
reserve, if necessary; (iii) members based on each member’s patronage of CFC’s loan programs during the year; and (iv) a
members’ capital reserve. CFC funds its activities primarily through a combination of public and private issuances of debt
securities, member investments and retained equity. As a Section 501(c)(4) tax-exempt, member-owned cooperative, CFC
cannot issue equity securities.
NCSC
NCSC is a taxable cooperative incorporated in 1981 in the District of Columbia as a member-owned cooperative
association. The principal purpose of NCSC is to provide financing to its members, entities eligible to be members of CFC
and the for-profit and not-for-profit entities that are owned, operated or controlled by, or provide significant benefit to Class
A, B and C members of CFC. See “Members” below for a description of our member classes. NCSC’s membership consists
of distribution systems, power supply systems and statewide and regional associations that were members of CFC as of May
31, 2021. CFC, which is the primary source of funding for NCSC, manages NCSC’s business operations under a
management agreement that is automatically renewable on an annual basis unless terminated by either party. NCSC pays
CFC a fee and, in exchange, CFC reimburses NCSC for loan losses under a guarantee agreement. As a taxable cooperative,
NCSC pays income tax based on its reported taxable income and deductions. NCSC is headquartered with CFC in Dulles,
Virginia.
RTFC
RTFC is a taxable Subchapter T cooperative association originally incorporated in South Dakota in 1987 and reincorporated
as a member-owned cooperative association in the District of Columbia in 2005. RTFC’s principal purpose is to provide
financing for its rural telecommunications members and their affiliates. RTFC’s membership consists of a combination of
not-for-profit and for-profit entities. CFC is the sole lender to and manages RTFC’s business operations through a
management agreement that is automatically renewable on an annual basis unless terminated by either party. RTFC pays
CFC a fee and, in exchange, CFC reimburses RTFC for loan losses under a guarantee agreement. As permitted under
Subchapter T of the Internal Revenue Code, RTFC pays income tax based on its taxable income, excluding patronage-
sourced earnings allocated to its patrons. RTFC is headquartered with CFC in Dulles, Virginia.
OUR BUSINESS
CFC was established by and for the rural electric cooperative network to provide affordable financing alternatives to electric
cooperatives. While our business strategy and policies are set by CFC’s board of directors and may be amended or revised
from time to time, the fundamental goal of our overall business model is to work with our members to ensure that CFC is
able to meet their financing needs, as well as provide industry expertise and strategic services to aid them in delivering
affordable and reliable essential services to their communities.
2
Focus on Electric Lending
As a member-owned, nonprofit finance cooperative, our primary objective is to provide our members with the credit
products they need to fund their operations. As such, we primarily focus on lending to electric systems and securing access
to capital through diverse funding sources at rates that allow us to offer cost-based credit products to our members. Rural
electric cooperatives, most of which are not-for-profit entities, were established to provide electricity in rural areas
historically deemed too costly to be served by investor-owned utilities. As such, our electric cooperative members
experience limited competition because they generally operate in exclusive territories, the majority of which are not rate
regulated. Loans to electric utility organizations accounted for approximately 99% of our total loans outstanding as of both
May 31, 2021 and 2020. Substantially all of our electric cooperative borrowers continued to demonstrate stable operating
performance and strong financial ratios as of May 31, 2021.
Maintain Diversified Funding Sources
We strive to maintain diversified funding sources beyond capital market offerings of debt securities. We offer various short-
and long-term unsecured investment products to our members and affiliates, including commercial paper, select notes, daily
liquidity fund notes, medium-term notes and subordinated certificates. We continue to issue debt securities, such as secured
collateral trust bonds, unsecured medium-term notes and dealer commercial paper, in the capital markets. We also have
access to funds through bank revolving line of credit arrangements, government-guaranteed programs such as funding from
the Federal Financing Bank that is guaranteed by RUS through the Guaranteed Underwriter Program of the USDA (the
“Guaranteed Underwriter Program”), as well as private placement note purchase agreements with the Federal Agricultural
Mortgage Corporation (“Farmer Mac”). We provide additional information on our funding sources in “Item 7. MD&A—
Consolidated Balance Sheet Analysis,” “Item 7. MD&A—Liquidity Risk,” “Note 6—Short-Term Borrowings,” “Note 7—
Long-Term Debt,” “Note 8—Subordinated Deferrable Debt” and “Note 9—Members’ Subordinated Certificates.”
MEMBERS
Our consolidated membership, after taking into consideration entities that are members of both CFC and NCSC and
eliminating overlapping members between CFC, NCSC and RTFC, totaled 1,424 members and 246 associates as of May 31,
2021, compared with 1,439 members and 232 associates as of May 31, 2020.
CFC
CFC lends to its members and associates and also provides credit enhancements in the form of guarantees of debt
obligations and letters of credit. Membership in CFC is limited to cooperative or not-for-profit rural electric systems that are
eligible to borrow from RUS under its Electric Loan Program and affiliates of these entities. CFC categorizes its members,
all of which are not-for-profit entities or subsidiaries or affiliates of not-for-profit entities, into classes based on member
type because the demands and needs of each member class differs. Affiliates represent holding companies, subsidiaries and
other entities that are owned, controlled or operated by members. Members are not required to have outstanding loans from
RUS as a condition of borrowing from CFC. CFC membership consists of members in 49 states and three U.S. territories. In
addition to members, CFC has associates that are nonprofit groups or entities organized on a cooperative basis that are
owned, controlled or operated by members and are engaged in or plan to engage in furnishing non-electric services primarily
for the benefit of the ultimate consumers of CFC members. Associates are not eligible to vote on matters put to a vote of the
membership. CFC’s members, by member class, and associates were as follows as of May 31, 2021.
3
Member Type
Distribution systems......................................................
Power supply systems....................................................
Statewide and regional associations, including NCSC..
National association of cooperatives(1)..........................
Total CFC members.......................................................
Associates, including RTFC..........................................
Total CFC members and associates...............................
____________________________
CFC Member
Class
A
B
C
D
May 31, 2021
842
67
62
1
972
46
1,018
(1)
National Rural Electric Cooperative Association is our sole class D member.
NCSC
Membership in NCSC includes organizations that are Class A, B and C members of CFC, or eligible for such membership
and are approved for membership by the NCSC Board of Directors. In addition to members, NCSC has associates that may
include members of CFC, entities eligible to be members of CFC and for-profit and not-for-profit entities owned, controlled
or operated by, or provide significant benefit to, Class A, B, and C members of CFC. All of NCSC’s members also were
CFC members as of May 31, 2021. CFC is not, however, a member of NCSC. NCSC’s members and associates were as
follows as of May 31, 2021.
Member Type
Distribution systems......................................................
Power supply systems....................................................
Statewide associations...................................................
Total NCSC members....................................................
Associates......................................................................
Total NCSC members and associates............................
CFC Member
Class
A
B
C
May 31, 2021
447
3
6
456
195
651
RTFC
Membership in RTFC is limited to cooperative corporations, nonprofit corporations, private corporations, public
corporations, utility districts and other public bodies that are approved by the RTFC Board of Directors and are actively
borrowing or are eligible to borrow from RUS’s traditional infrastructure loan program. These companies must be engaged
directly or indirectly in furnishing telephone services as the licensed incumbent carrier. Holding companies, subsidiaries and
other organizations that are owned, controlled or operated by members, which are referred to as affiliates, are eligible to
borrow from RTFC. Associates are organizations that provide non-telephone or non-telecommunications services to rural
telecommunications companies that are approved by the RTFC Board of Directors. Neither affiliates nor associates are
eligible to vote on matters put to a vote of the membership. CFC and NCSC are not members of RTFC. RTFC’s members
and associates were as follows as of May 31, 2021.
Member Type
Members........................................................................
Associates......................................................................
Total RTFC members and associates.............................
May 31, 2021
453
6
459
4
LOAN AND GUARANTEE PROGRAMS
CFC lends to its members and associates and also provides credit enhancements in the form of guarantees of debt
obligations and letters of credit. NCSC and RTFC also lend and provide credit enhancements to their members and
associates. For information on the membership of CFC, NCSC and RTFC, see “Item 1. Business—Members.”
CFC, NCSC and RTFC loan commitments generally contain provisions that restrict further borrower advances or trigger an
event of default if there is any material adverse change in the business or condition, financial or otherwise, of the borrower.
Below is additional information on the loan and guarantee programs offered by CFC, NCSC and RTFC.
CFC Loan Programs
Long-Term Loans
CFC’s long-term loans generally have the following characteristics:
• terms of up to 35 years on a senior secured basis and terms of up to five years on an unsecured basis;
• amortizing, bullet maturity or serial payment structures;
• the property, plant and equipment financed by and securing the long-term loan has a useful life generally equal to or in
excess of the loan maturity;
• flexibility for the borrower to select a fixed interest rate for periods of one to 35 years or a variable interest rate; and
• the ability for the borrower to select various tranches with either a fixed or variable interest rate for each tranche.
Borrowers typically have the option of selecting a fixed or variable interest rate at the time of each advance on long-term
loan facilities. When selecting a fixed rate, the borrower has the option to choose a fixed rate for a term of one year through
the final maturity of the loan. When the selected fixed interest rate term expires, the borrower may select another fixed rate
for a term of one year through the remaining loan maturity or the current variable rate.
To be in compliance with the covenants in the loan agreement and eligible for loan advances, distribution systems generally
must maintain an average modified debt service coverage ratio, as defined in the loan agreement, of 1.35 or greater. CFC
may make long-term loans to distribution systems, on a case-by-case basis, that do not meet this general criterion. Power
supply systems generally are required: (i) to maintain an average modified debt service coverage ratio, as defined in the loan
agreement, of 1.00 or greater; (ii) to establish and collect rates and other revenue in an amount to yield margins for interest,
as defined in an indenture, in each fiscal year sufficient to equal at least 1.00; or (iii) both. CFC may make long-term loans
to power supply systems, on a case-by-case basis, that may include other requirements, such as maintenance of a minimum
equity level.
Line of Credit Loans
Line of credit loans are designed primarily to assist borrowers with liquidity and cash management and are generally
advanced at variable interest rates. Line of credit loans are typically revolving facilities. Certain line of credit loans require
the borrower to pay off the principal balance for at least five consecutive business days at least once during each 12-month
period. Line of credit loans are generally unsecured and may be conditional or unconditional facilities.
Line of credit loans can be made on an emergency basis when financing is needed quickly to address weather-related or
other unexpected events and can also be made available as interim financing when a member either receives RUS approval
to obtain a loan and is awaiting its initial advance of funds or submits a loan application that is pending approval from RUS
(sometimes referred to as “bridge loans”). In these cases, when the borrower receives the RUS loan advance, the funds must
be used to repay the bridge loans.
Syndicated Line of Credit Loans
A syndicated line of credit loan is typically a large financing offered by a group of lenders that work together to provide
funds for a single borrower. Syndicated loans are generally unsecured, floating-rate loans that can be provided on a
5
revolving or term basis for tenors that range from several months to five years. Syndicated financings are arranged for
borrowers on a case-by-case basis. CFC may act as lead lender, arranger and/or administrative agent for the syndicated
facilities. CFC will syndicate these line of credit facilities on a best effort basis.
NCSC Loan Programs
NCSC makes loans to electric cooperatives and their subsidiaries that provide non-electric services in the energy and
telecommunication industries as well as to entities that provide substantial benefit to CFC members, including eligible solar
energy providers and investor-owned utilities. Loans to NCSC associates may require a guarantee of repayment to NCSC
from the CFC member cooperative with which it is affiliated.
Long-Term Loans
NCSC’s long-term loans generally have the following characteristics:
• terms from 7 to up to 30 years on a senior secured basis and terms of up to five years on an unsecured basis;
• amortizing, balloon, bullet maturity or serial payment structures;
• the property, plant and equipment financed by and securing the long-term loan has a useful life equal to or in excess of the
loan maturity;
• flexibility for the borrower to select a fixed interest rate for periods of one to 30 years or a variable interest rate; and
• the ability for the borrower to select various tranches with either a fixed or variable interest rate for each tranche.
NCSC allows borrowers to select a fixed interest rate or a variable interest rate at the time of each advance on long-term
loan facilities. When selecting a fixed rate, the borrower has the option to choose a fixed rate for a term of one year through
the final maturity of the loan. When the selected fixed interest rate term expires, the borrower may select another fixed rate
for a term of one year through the remaining loan maturity or the current variable rate. The fixed rate on a loan generally is
determined on the day the loan is advanced or repriced based on the term selected.
Line of Credit Loans
NCSC also provides revolving line of credit loans to assist borrowers with liquidity and cash management on terms similar
to those provided by CFC as described herein.
RTFC Loan Programs
RTFC primarily makes long-term loans to rural local exchange carriers or holding companies of rural local exchange
carriers for debt refinancing, construction or upgrades of infrastructure, acquisitions and other corporate purposes. Most of
these rural telecommunications companies have diversified their operations and also provide broadband services.
Long-Term Loans
RTFC’s long-term loans generally have the following characteristics:
• terms not exceeding 10 years on a senior secured basis and terms of up to five years on an unsecured basis;
• amortizing or bullet maturity payment structures;
• the property, plant and equipment financed by and securing the long-term loan has a useful life generally equal to or in
excess of the loan maturity;
• flexibility for the borrower to select a fixed interest rate for periods from one year to the final loan maturity or a variable
interest rate; and
• the ability for the borrower to select various tranches with either a fixed or variable interest rate for each tranche.
When a selected fixed interest rate term expires, generally the borrower may select another fixed-rate term or the current
variable rate. The fixed rate on a loan is generally determined on the day the loan is advanced or converted to a fixed rate
based on the term selected.
6
To borrow from RTFC, a rural telecommunication system generally must be able to demonstrate the ability to achieve and
maintain an annual debt service coverage ratio of 1.25. RTFC may make long-term loans to rural telecommunication
systems, on a case-by-case basis, that do not meet this general criterion.
Line of Credit Loans
RTFC also provides revolving line of credit loans to assist borrowers with liquidity and cash management on terms similar
to those provided by CFC as described herein.
Loan Features and Options
Interest Rates
As a member-owned cooperative finance organization, CFC is a cost-based lender. As such, our interest rates are set based
on a yield that we believe will generate a reasonable level of earnings to cover our cost of funding, general and
administrative expenses and provision for credit losses. Long-term fixed rates are set daily for new loan advances and loans
that reprice. The fixed rate on each loan is generally determined on the day the loan is advanced or repriced based on the
term selected. The variable rate is established monthly. Various standardized discounts may reduce the stated interest rates
for borrowers meeting certain criteria related to performance, volume, collateral and equity requirements.
Conversion Option
Generally, a borrower may convert a long-term loan from a variable interest rate to a fixed interest rate at any time without a
fee and convert a long-term loan from a fixed rate to another fixed rate or to a variable rate at any time generally subject to a
make-whole premium fee.
Prepayment Option
Generally, borrowers may prepay long-term fixed-rate loans at any time, subject to payment of an administrative fee and a
make-whole premium, and prepay long-term variable-rate loans at any time, subject to payment of an administrative fee.
Line of credit loans may be prepaid at any time without a fee.
Loan Security
Long-term loans made by CFC typically are senior secured on parity with other secured lenders (primarily RUS), if any, by
all assets and revenue of the borrower, subject to standard liens typical in utility mortgages such as those related to taxes,
worker’s compensation awards, mechanics’ and similar liens, rights-of-way and governmental rights. We are able to obtain
liens on parity with liens for the benefit of RUS because RUS’ form of mortgage expressly provides for other lenders such
as CFC to have a parity lien position if the borrower satisfies certain conditions or obtains a written lien accommodation
from RUS. When we make loans to borrowers that have existing loans from RUS, we generally require those borrowers to
either obtain such a lien accommodation or satisfy the conditions necessary for our loan to be secured on parity under the
mortgage with the loan from RUS. As noted above, CFC line of credit loans generally are unsecured.
We provide additional information on our loan programs in the sections “Item 7. MD&A—Consolidated Balance Sheet
Analysis,” and “Item 7. MD&A—Credit Risk.”
Guarantee Programs
When we guarantee our members’ debt obligations, we use the same credit policies and monitoring procedures for
guarantees as for loans. If a member system defaults in its obligation to pay debt service, then we are obligated to pay any
required amounts under our guarantees. Meeting our guarantee obligations satisfies the underlying obligation of our member
systems and prevents the exercise of remedies by the guarantee beneficiary based upon a payment default by a member
system. The member system is required to repay any amount advanced by us with interest pursuant to the documents
evidencing the member system’s reimbursement obligation.
7
Guarantees of Long-Term Tax-Exempt Bonds
We guarantee debt issued for our members’ construction or acquisition of pollution control, solid waste disposal, industrial
development and electric distribution facilities. Governmental authorities issue such debt on a nonrecourse basis and the
interest thereon is exempt from federal taxation. The proceeds of the offering are made available to the member system,
which in turn is obligated to pay the governmental authority amounts sufficient to service the debt.
If a system defaults for failure to make the debt payments and any available debt service reserve funds have been exhausted,
we are obligated to pay scheduled debt service under our guarantee. Such payment will prevent the occurrence of an event
of payment default that would otherwise permit acceleration of the bond issue. The system is required to repay any amount
that we advance pursuant to our guarantee plus interest on that advance. This repayment obligation, together with the
interest thereon, is typically senior secured on parity with other lenders (including, in most cases, RUS), by a lien on
substantially all of the system’s assets. If the security instrument is a common mortgage with RUS, then in general, we may
not exercise remedies for up to two years following default. However, if the debt is accelerated under the common mortgage
because of a determination that the related interest is not tax-exempt, the system’s obligation to reimburse us for any
guarantee payments will be treated as a long-term loan. The system is required to pay us initial and/or ongoing guarantee
fees in connection with these transactions.
Certain guaranteed long-term debt bears interest at variable rates that are adjusted at intervals of one to 270 days including
weekly, every five weeks or semi-annually to a level favorable to their resale or auction at par. If funding sources are
available, the member that issued the debt may choose a fixed interest rate on the debt. When the variable rate is reset,
holders of variable-rate debt have the right to tender the debt for purchase at par. In some transactions, we have committed
to purchase this debt as liquidity provider if it cannot otherwise be re-marketed. If we hold the securities, the member
cooperative pays us the interest earned on the bonds or interest calculated based on our short-term variable interest rate,
whichever is greater. The system is required to pay us stand-by liquidity fees in connection with these transactions.
Letters of Credit
In exchange for a fee, we issue irrevocable letters of credit to support members’ obligations to energy marketers, other third
parties and to the USDA Rural Business-Cooperative Service. Each letter of credit is supported by a reimbursement
agreement with the member on whose behalf the letter of credit was issued. In the event a beneficiary draws on a letter of
credit, the agreement generally requires the member to reimburse us within one year from the date of the draw, with interest
accruing from the draw date at our line of credit variable interest rate.
The U.S. Federal Communications Commission (“FCC”) has designated CFC as an acceptable source for letters of credit in
support of USDA and FCC programs that encourage deployment of high-speed broadband services throughout rural
America. The designation allows CFC to provide credit support for rural electric cooperatives and telecommunication
providers that participate in programs designed to increase deployment of broadband services to underserved rural areas.
Other Guarantees
We may provide other guarantees as requested by our members. Other guarantees are generally unsecured with guarantee
fees payable to us.
We provide additional information on our guarantee programs and outstanding guarantee amounts as of May 31, 2021 and
2020 in “Note 13—Guarantees.”
8
INVESTMENT POLICY
We invest funds in accordance with policies adopted by our board of directors. Pursuant to our current investment policy, an
Investment Management Committee was established to oversee and administer our investments with the objective of
seeking returns consistent with the preservation of principal and maintenance of adequate liquidity. The Investment
Management Committee may direct funds to be invested in direct obligations of, or obligations guaranteed by, the United
States (“U.S.”) or agencies thereof and investments in government-sponsored enterprises, certain financial institutions in the
form of overnight investment products and Eurodollar deposits, bankers’ acceptances, certificates of deposit, working
capital acceptances or other deposits. Other permitted investments include highly rated obligations, such as commercial
paper, certain obligations of foreign governments, municipal securities, asset-backed securities, mortgage-backed securities
and certain corporate bonds. In addition, we may invest in overnight or term repurchase agreements. Investments are
denominated in U.S. dollars exclusively. All of these investments are subject to requirements and limitations set forth in our
investment policy.
INDUSTRY
Overview
Our rural electric cooperative members operate in the energy sector, which is one of 16 critical infrastructure sectors
identified by the U.S. government because the services provided by each sector, all of which have an impact on other
sectors, are deemed as essential in supporting and maintaining the overall functioning of the U.S. economy. Rural electric
cooperatives are an integral part of the U.S. electric utility industry, a sub-sector of the energy sector, serving as power
providers for approximately 1 in 8 individuals in the U.S., totaling approximately 42 million people, including over 20
million businesses, homes, schools, churches, farms, irrigation systems and other establishments across the U.S. Based on
the latest annual data reported by the U.S. Energy Information Administration, a statistical and analytical agency within the
U.S. Department of Energy, the electric utility industry had revenue of approximately $402 billion in 2019, of which
approximately 12% was generated by electric cooperatives. For more than 75 years, electric cooperatives have powered
local economies across approximately 56% of the nation’s land mass.
CFC was established by electric utility cooperatives to serve as a supplemental financing source to RUS loan programs and
to mitigate uncertainty related to government funding. CFC aggregates the combined strength of its rural electric member
cooperatives to access the public capital markets and other funding sources. CFC works cooperatively with RUS; however,
CFC is not a federal agency or a government-sponsored enterprise. CFC meets the financial needs of its rural electric
members by:
• providing financing to RUS-eligible rural electric utility systems for infrastructure, including for those facilities that are
not eligible for financing from RUS;
• providing bridge loans required by borrowers in anticipation of receiving RUS funding;
• providing financial products not otherwise available from RUS, including lines of credit, letters of credit, guarantees on
tax-exempt financing, weather-related emergency lines of credit, unsecured loans and investment products such as
commercial paper, select notes, medium-term notes and member capital securities; and
• meeting the financing needs of those rural electric systems that repay or prepay their RUS loans and replace the
government loans with private capital.
Electric Member Operating Environment
In general, electric cooperatives have not been significantly impacted by the effects of retail deregulation. There were 19
states that had adopted programs that allow consumers to choose their supplier of electricity as of May 31, 2021. Depending
on the state, the choices can range from being limited to commercial and industrial consumers to “retail choice” for all
consumers. In most states, cooperatives have been exempted from or have been allowed to opt out of the regulations
allowing for competition. In states offering retail competition, it is important to note that while consumers may be able to
9
choose their energy supplier, the electric utility still receives compensation for the necessary service of delivering electricity
to consumers through its utility transmission and distribution plant.
The electric utility industry is facing a potential decrease to kilowatt-hour sales due to technology advances that increase
energy efficiency of all appliances and devices used in the home and in businesses as well as from distributed generation in
the form of rooftop solar and home generators (“behind-the-meter generation”). Electric cooperatives are facing the same
issues, but in general to a lesser extent than investor-owned power systems. To date, we have not seen negative impacts in
the electric cooperative financial results due to behind-the-meter generation.
Electric cooperatives have options to mitigate the impact of such issues, such as rate structures to ensure that costs are
appropriately recovered for grid and other necessary ancillary services and the use of electricity for end-uses that would
otherwise be powered by fossil fuels where doing so reduces emissions and saves consumers money (“beneficial
electrification”). The push away from fossil fuel use may continue the trend toward beneficial electrification such as the
adoption of electric vehicles, which may increase kilowatt-hour sales to many utilities. Beneficial electrification may also
improve the utilities’ ability to balance load profiles by leveraging and balancing consumer and system assets such as
electric vehicles and battery storage.
Facilitation of Rural Broadband Expansion by Electric Cooperatives
Many electric cooperatives are making investments in fiber to support core electric plant communications. Some of these
electric cooperatives are leveraging these fiber assets to offer broadband services, either directly or through partnering with
local telecommunication companies and others. Over 30 electric cooperatives were awarded approximately $250 million in
federal funding through the Connect America Fund Phase II auction (“CAF II”) process by the FCC that was held in 2018.
The awarded funds are being distributed over a 10-year period. More than 190 electric cooperatives, many of which are
already offering or building out projects, were awarded approximately $1.6 billion though the FCC’s Rural Development
Opportunity Fund (“RDOF”). Those funds also will be distributed over a 10-year period. As federal and state governments
increase funding opportunities for electric cooperatives in order to offer broadband services, we will continue to increase our
credit support, which may include loans and/or letters of credit, to borrowers who participate in CAF II, RDOF and other
programs designed to increase broadband services in rural areas. Loans outstanding to our members related to the
construction and operation of broadband services totaled approximately $854 million as of May 31, 2021.
Regulatory Oversight of Electric Cooperatives
There are 11 states in which some or all electric cooperatives are subject to state regulatory oversight of their rates and
tariffs by state utility commissions and do not have a right to opt out of regulation. Those states are Arizona, Arkansas,
Hawaii, Kentucky, Louisiana, Maine, Maryland, New Mexico, Vermont, Virginia and West Virginia. Regulatory
jurisdiction by state commissions generally includes rate and tariff regulation, the issuance of securities and the enforcement
of service territory as provided for by state law.
The Federal Energy Regulatory Commission (“FERC”) has regulatory authority over three aspects of electric power, as
provided for under Parts II and III of the Federal Power Act (“FPA”):
• the transmission of electric energy in interstate commerce;
• the sale of electric energy at wholesale in interstate commerce; and
• the approval and enforcement of reliability standards affecting all users, owners and operators of the bulk power system.
In addition, FERC regulates the issuance of securities by public utilities under the FPA in the event the applicable state
commission does not.
Our electric distribution and power supply members are subject to regulation by various federal, regional, state and local
authorities with respect to the environmental effects of their operations. At the federal level, the U.S. Environmental
Protection Agency (“EPA”) from time to time proposes rulemakings that could force the electric utility industry to incur
capital costs to comply with potential new regulations and possibly retire coal-fired generating capacity. Since there are only
11 states in which some or all electric cooperatives are subject to state regulatory oversight of their rates and tariffs, in most
cases any associated costs of compliance can be passed on to cooperative consumers without additional regulatory approval.
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On June 19, 2019, the EPA issued the final Affordable Clean Energy (“ACE”) rule. Falling under Section 111(d) of the
Federal Clean Air Act, the ACE rule addresses existing sources of emissions and sets a framework under which states
should develop plans establishing standards of performance for their existing emissions sources and then submit those plans
to the EPA for approval. States will have three years from the date of the final rule to prepare and submit a plan that
establishes a standard of performance. A coalition of 23 states, several local governments and several environmental
organizations filed a lawsuit against the EPA challenging the ACE rule in the U.S. Court of Appeals for the D.C. Circuit. On
January 19, 2021, the court vacated the ACE rule and directed the EPA to consider the greenhouse gas standards. A petition
for certiorari has been filed with the U.S. Supreme Court.
LENDING COMPETITION
Overview
RUS is the largest lender to electric cooperatives, providing them with long-term secured loans. CFC provides financial
products and services to its members, primarily in the form of long-term secured and short-term unsecured loans, to
supplement RUS financing, to provide loans to members that have elected not to borrow from RUS, and to bridge long-term
financing provided by RUS. We also offer other financing options, such as credit support in the form of letters of credit and
guarantees, loan syndications and loan participations. Our credit products are tailored to meet the specific needs of each
borrower, and we often offer specific transaction structures that our competitors do not provide. CFC also offers certain risk-
mitigation products and interest rate discounts on secured, long-term loans for its members that meet performance, volume,
collateral and equity requirements.
Primary Lending Competitors
CFC’s primary competitor is CoBank, ACB a federally chartered instrumentality of the U.S. that is a member of the Farm
Credit System. CFC also competes with banks, other financial institutions and the capital markets to provide loans and other
financial products to our members. As a result, we are competing with the customer service, pricing and funding options our
members are able to obtain from these sources. We attempt to minimize the effect of competition by offering a variety of
loan options and value-added services and by leveraging the working relationships developed with the majority of our
members over the past 52 years. Further, on an annual basis, we allocate substantially all net earnings to members (i) in the
form of patronage capital, which reduces our members’ effective cost of borrowing, and (ii) through the members’ capital
reserve. The value-added services that we provide include, but are not limited to, benchmarking tools, financial models,
publications and various conferences, meetings and training workshops.
We are not able to specifically identify the amount of debt our members have outstanding to CoBank, ACB from either the
annual financial and statistical reports our members file with us or from CoBank, ACB’s public disclosure; however, we
believe CoBank, ACB is the additional lender, along with CFC and RUS, with significant long-term debt outstanding to
rural electric cooperatives.
Rural Electric Lending Market
Most of our rural electric borrowers are non-for-profit, private companies owned by the members they serve. As such, there
is limited publicly available information to accurately determine the overall size of the rural electric lending market. We
utilize the annual financial and statistical reports submitted to us by our members to estimate the overall size of the rural
electric lending market. The substantial majority of our members have a fiscal year-end that corresponds with the calendar
year-end. Therefore, the annual information we use to estimate the size of the rural electric market is typically based on the
calendar year-end rather than CFC’s fiscal year-end.
Based on financial data submitted to us by our electric utility members, we present the long-term debt outstanding to CFC
by member class, RUS and other lenders in the electric cooperative industry as of December 31, 2020 and 2019 in the table
below. The data presented as of December 31, 2020, were based on information reported by 811 distribution systems and 52
power supply systems. The data presented as of December 31, 2019, were based on information reported by 800 distribution
systems and 53 power supply systems.
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December 31,
2020
2019
Debt
Outstanding
% of Total
Debt
Outstanding
% of Total
(Dollars in thousands)
Total long-term debt reported by members:(1)
Distribution................................................................ $
Power supply.............................................................
52,274,309
44,830,704
Less: Long-term debt funded by RUS.......................
(39,660,041)
$
49,976,016
43,958,889
(39,214,146)
Members’ non-RUS long-term debt..........................
$
57,444,972
$
54,720,759
Funding sources of members’ long-term debt:
Long-term debt funded by CFC by member class:
Distribution................................................................
$
20,382,616
36 % $
19,540,233
36 %
Power supply..............................................................
Long-term debt funded by CFC.................................
Long-term debt funded by other lenders...................
4,723,956
25,106,572
32,338,400
8
44
56
4,398,516
23,938,749
30,782,010
8
44
56
Members’ non-RUS long-term debt..........................
____________________________
$
57,444,972
100 % $
54,720,759
100 %
(1)
Reported amounts are based on member-provided financial information, which may not have been subject to audit by an independent accounting firm.
While we believe our estimates of the overall size of the rural electric lending market serve as a useful tool in gauging the
size of this lending sector, they should be viewed as estimates rather than precise measures as there are certain limitations in
our estimation methodology, including, but not limited to, the following:
• Although certain underlying data included in the financial and statistical reports provided to us by members may have
been audited by an independent accounting firm, our accumulation of the data from these reports has not been subject to a
review for accuracy by an independent accounting firm.
• The data presented is not necessarily inclusive of all members because in some cases our receipt of annual member
financial and statistical reports may be delayed and not received in a timely manner to incorporate into our market
estimates.
• The financial and statistical reports submitted by members include information on indebtedness to RUS, but the reports do
not include comprehensive data on indebtedness to other lenders and are not on a consolidated basis.
REGULATION
General
CFC, NCSC and RTFC are not subject to direct federal regulatory oversight or supervision with regard to lending. CFC,
NCSC and RTFC are subject to state and local jurisdiction commercial lending and tax laws that pertain to business
conducted in each state, including but not limited to lending laws, usury laws and laws governing mortgages. These state
and local laws regulate the manner in which we make loans and conduct other types of transactions. The statutes, regulations
and policies to which the companies are subject may change at any time. In addition, the interpretation and application by
regulators of the laws and regulations to which we are subject may change from time to time. Certain of our contractual
arrangements, such as those pertaining to funding obtained through the Guaranteed Underwriter Program, provide for the
Federal Financing Bank and RUS to periodically review and assess CFC’s compliance with program terms and conditions.
Derivatives Regulation
CFC engages in over-the-counter (“OTC”) derivative transactions to manage interest rate risk. As an end user of derivative
financial instruments, CFC is subject to regulations that apply to derivatives generally. The Dodd-Frank Act (“DFA”),
enacted July 2010, resulted in, among other things, comprehensive regulation of the OTC derivatives market. The DFA
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provides for an extensive framework for the regulation of OTC derivatives, including mandatory clearing, exchange trading
and transaction reporting of certain OTC derivatives. Subsequent to the enactment of the DFA, the U.S. Commodity Futures
Trading Commission (“CFTC”) issued a final rule, “Clearing Exemption for Certain Swaps Entered into by Cooperatives,”
which created an exemption from mandatory clearing for cooperatives. The CFTC’s final rule, “Margin Requirements for
Uncleared Swaps for Swap Dealers and Major Swap Participants,” includes an exemption from margin requirements for
uncleared swaps for cooperatives that are financial end users. CFC is an exempt cooperative end user of derivative financial
instruments and does not participate in the derivatives markets for speculative, trading or investing purposes and does not
make a market in derivatives.
HUMAN CAPITAL MANAGEMENT
CFC’s success in providing industry expertise and responsive service to meet the needs of our members across the U.S. is
dependent on the quality of service provided by our employees and their relationships with our members. We therefore
strive to align our human resource policies and staffing strategy with our member-focused mission and core values of
service, integrity and excellence. Our staffing objectives are (i) to attract, develop and retain a highly qualified workforce,
with diverse backgrounds and experience in multiple areas whose skills and strengths are consistent with CFC’s mission,
and (ii) to create an engaged, inclusive and collaborative work culture, which we believe are both critical in delivering
exceptional service to our members. Because much of our business operations involves significant member-facing
interaction with a relatively stable base of long-standing member borrowers, we place a priority on the retention of high-
performing employees who have extensive, in-depth experience serving the needs of our members. Over the last four fiscal
years, our voluntary turnover rate has remained at or below 10%, which is lower than the annual voluntary separation rates
reported by the U.S. Bureau of Labor Statistics for the financial activities industry sector for this period. We had 248 and
253 employees as of May 31, 2021 and 2020, respectively, all of which were located in the U.S. The slight decrease in the
number of employees during fiscal year 2021 was primarily due to natural attrition.
Because attracting, developing and retaining high-level talent is a key component of our human capital objectives, we seek
to provide competitive compensation and benefits packages. In establishing base salary amounts, we take into account
market and industry competitive data. We encourage regular, ongoing employee performance feedback and conduct annual
performance reviews of each employee, which are intended to evaluate individual performance, achievements and
contributions to the company, identify development opportunities and serve as a basis for awarding annual merit increases.
In addition to base salary amounts, we offer annual incentive bonus plan opportunities that are based on attainment of a
scorecard of targeted corporate goals established at the beginning of each fiscal year. Attainment of each of the annual
scorecard goals requires the collective engagement and effort of employees across the company, which we believe
incentivizes employees to work together across teams and fosters an overall collaborative working environment.
We place a high priority on the health and wellness of our employees. We therefore offer various programs intended to
promote the physical, mental and financial well-being of employees. Our benefits offerings include vacation and leave
programs; health, dental, vision, life and disability insurance coverage; and flexible spending and health savings plans, most
of which are funded in whole or in part by CFC. We make investments in the future financial security of our employees by
offering retirement plans that consist of a 401(k) plan with a company match component and an employer-funded defined
benefit retirement plan in which CFC makes an annual contribution in an amount that approximates 17% of each employee’s
base salary, which we believe helps in our efforts to engage employees, retain high-performing employees and reduce
turnover. We also offer programs and resources intended to promote work-life balance, assist in navigating life events and
improve employee well-being, such as flexible work schedules, remote work options, an employee assistance program, legal
insurance and identity theft coverage services.
As part of our efforts to promote an engaged, inclusive and collaborative workplace culture, we encourage employees to
expand their capabilities and enhance their career potential through employer-funded onsite training, external training,
tuition assistance and professional events. In fiscal year 2021, CFC employees completed more than 3,632 training hours
through our internal corporate training classes and resources as well as through our support of employees’ enrollment in
external professional training opportunities. We seek to tailor our training programs to evolving events and employee
interests. Examples of training programs offered in the reporting period include Unconscious Bias & Allyship, Inclusive
Leadership, Leading Virtual Teams, Personal Finance and Adapting to Change. We also support employee development
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though a company-sponsored Toastmasters chapter, guest speakers from cooperative partners and staff trips to local electric
cooperatives to allow new employees to learn first-hand how their efforts contribute to our members’ success.
The onset of the COVID-19 pandemic in March 2020 introduced numerous, unprecedented challenges. Our priorities during
the COVID-19 pandemic, which continues to persist, have been to protect the health and safety of our employees while also
ensuring that we are able to meet the needs of our electric cooperative borrowers as they operate in a sector that provides an
essential service to residential and commercial customers. We responded promptly to these challenges, taking a number of
precautionary steps to safeguard our business operations and employees, including, but not limited to, implementing remote
work arrangements, limiting employee travel and in-person meetings, providing flexible work schedules to accommodate
school and childcare challenges and offering training to help our employees adapt to the changes in our work environment.
In July 2021, following the expiration on June 30, 2021 of the state of emergency declared in March 2020 by Virginia’s
governor in response to the pandemic and the lifting of all COVID-19 restrictions in Virginia, subject to certain exceptions,
we brought 100% of our staff back to CFC’s corporate headquarters building, which continues to adhere to the COVID-19
workplace safety and health standards established by Virginia and guidance provided by the CDC. While we have been able
to maintain business continuity throughout the pandemic and experienced no pandemic-related employee furloughs or
layoffs, we believe we can provide the highest quality of service and deliver more effectively on our member-focused
mission, which requires a significant number of member-facing staff working collaboratively with other staff, by resuming
full-time, in-office work.
AVAILABLE INFORMATION
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to
these reports, are available for free at www.nrucfc.coop as soon as reasonably practicable after they are electronically filed
with or furnished to the U.S. Securities and Exchange Commission (“SEC”). These reports also are available for free on the
SEC’s website at www.sec.gov. Information posted on our website is not incorporated by reference into this Form 10-K.
Item 1A. Risk Factors
Our financial condition, results of operations and liquidity are subject to various risks and uncertainties, some of which are
inherent in the financial services industry and others of which are more specific to our own business. The discussion below
addresses the most significant risks, of which we are currently aware, that could have a material adverse impact on our
business, financial condition, results of operations or liquidity. However, other risks and uncertainties, including those not
currently known to us, could also negatively impact our business, financial condition, results of operations and liquidity.
Therefore, the following should not be considered a complete discussion of all the risks and uncertainties we may face. For
information on how we manage our key risks, see “Item 7. MD&A—Risk Management.” You should consider the following
risks together with all of the other information in this report.
RISK FACTORS
Credit Risks
We are subject to credit risk that a borrower or other counterparty may not be able to meet its contractual obligations in
accordance with agreed-upon terms, which could have a material adverse effect on our financial condition, results of
operations and liquidity. Because we lend primarily to U.S. rural electric utility systems, we also are inherently subject to
single-industry and single-obligor concentration risks.
As a lender, our primary credit risk arises from the extension of credit to borrowers. Our loan portfolio, which represents the
largest component of assets on our balance sheet, accounts for the substantial majority of our credit risk exposure. Loans
outstanding to electric utility organizations represented approximately 99% of our total loans outstanding as of May 31,
2021. We had 892 borrowers with loans outstanding as of May 31, 2021, and our 20 largest borrowers accounted for 22% of
total loans outstanding as of May 31, 2021. The largest total exposure to a single borrower or controlled group represented
less than 2% of total loans outstanding as of May 31, 2021. Texas historically has had the largest number of borrowers with
14
loans outstanding and the largest loan concentration in any one state. Loans outstanding to Texas borrowers represented
17% of total loans outstanding as of May 31, 2021.
We face the risk that the principal of, or interest on, a loan will not be paid timely or at all or that the value of any
underlying collateral securing a loan will be insufficient to cover our outstanding exposure. A deterioration in the financial
condition of a borrower or underlying collateral could impair the ability of a borrower to repay a loan or our ability to
recover unpaid amounts from the underlying collateral. We maintain an internal risk rating system in which we assign a
rating to each borrower and credit facility that are intended to reflect the ability of a borrower to repay its obligations and
assess the probability of default. Unforeseen events and developments that affect specific borrowers or that occur in a region
where we have a high concentration of credit risk, such as the February 2021 polar vortex, may result in significant risk
rating downgrades. Such an event may result in an increase in delinquent, nonperforming and criticized loans and net
charge-offs and an increase in our credit risk.
We establish an allowance for credit losses for estimated expected credit losses in our loan portfolio. Because the process for
determining our allowance for credit losses requires significant, complex judgments about the ability of borrowers to repay
their loans, we identified the estimation of our allowance for credit losses as a critical accounting policy. Our borrower risk
ratings are a key input in establishing our allowance for credit losses. Therefore, the deterioration in the financial condition
of a borrower may result in a significant increase in our allowance for credit losses and provision for credit losses and may
have a material adverse impact on our results of operations, financial condition and liquidity. In addition, we might
underestimate expected credit losses and have credit losses in excess of the established allowance for credit losses if we fail
to timely identify a deterioration in a borrower’s financial condition or due to other factors, such as if the methodology and
process we use in assigning risk ratings and making judgments in extending credit to our borrowers does not accurately
capture the level of our credit risk exposure or our historical loss experience proves to be not indicative of our expected
future losses.
Adverse changes, developments or uncertainties in the rural electric utility industry could adversely impact the operations
or financial performance of our member electric cooperatives, which, in turn, could have an adverse impact on our
financial results.
Our focus as a member-owned finance cooperative is on lending to our rural member electric utility cooperatives, which is
the primary source of our revenue. As a result of lending primarily to our members, we have a loan portfolio with single-
industry concentration. Loans to rural electric utility cooperatives accounted for approximately 99% of our total loans
outstanding as of May 31, 2021. While we historically have experienced limited defaults and very low credit losses in our
electric utility loan portfolio, factors that may have a negative impact on the operations of our member rural electric
cooperatives include but are not limited to, the price and availability of distributed energy resources, regulatory or
compliance factors related to managing greenhouse gas emissions (including the potential for stranded assets) and extreme
weather conditions related to climate change. The factors listed above, individually or in combination, could result in
declining sales or increased power supply and operating costs and could potentially cause a deterioration in the financial
performance of our members and the value of the collateral securing their loans. This could impair their ability to repay us in
accordance with the terms of their loans. In such case, it may be necessary to increase our allowance for credit losses, which
would result in an increase in the provision for credit losses and a decrease in our net income.
Advances in technology may change the way electricity is generated and transmitted, which could adversely affect the
business operations of our members and negatively impact the credit quality of our loan portfolio and financial results.
Advances in technology could reduce demand for power supply systems and distribution services. The development of
alternative technologies that produce electricity, including solar cells, wind power and microturbines, has expanded and
could ultimately provide affordable alternative sources of electricity and permit end users to adopt distributed generation
systems that would allow them to generate electricity for their own use. As these and other technologies, including energy
conservation measures, are created, developed and improved, the quantity and frequency of electricity usage by rural
customers could decline. Advances in technology and conservation that cause our electric system members’ power supply,
transmission and/or distribution facilities to become obsolete prior to the maturity of loans secured by these assets could
have an adverse impact on the ability of our members to repay such loans, which could result in an increase in
nonperforming or restructured loans. These conditions could negatively impact the credit quality of our loan portfolio and
financial results.
15
We may obtain entities or other assets through foreclosure, which would subject us to the same performance and
financial risks as any other owner or operator of similar businesses or assets.
As a financial institution, from time to time we may obtain entities and assets of borrowers in default through foreclosure
proceedings. If we become the owner and operator of entities or assets obtained through foreclosure, we are subject to the
same performance and financial risks as any other owner or operator of similar assets or entities. In particular, the value of
the foreclosed assets or entities may deteriorate and have a negative impact on our results of operations. We assess
foreclosed assets, if any, for impairment periodically as required under generally accepted accounting principles in the U.S.
(“U.S. GAAP.”) Impairment charges, if required, represent a reduction to earnings in the period of the charge. There may be
substantial judgment used in the determination of whether such assets are impaired and in the calculation of the amount of
the impairment. In addition, when foreclosed assets are sold to a third party, the sale price we receive may be below the
amount previously recorded in our financial statements, which will result in a loss being recorded in the period of the sale.
The nonperformance of our derivative counterparties could impair our financial results.
We use interest rate swaps to manage our interest rate risk. There is a risk that the counterparties to these agreements will
not perform as agreed, which could adversely affect our results of operations. The nonperformance of a counterparty on an
agreement would result in the derivative no longer being an effective risk-management tool, which could negatively affect
our overall interest rate risk position. In addition, if a counterparty fails to perform on our derivative obligation, we could
incur a financial loss to replace the derivative with another counterparty and/or a loss through the failure of the counterparty
to pay us amounts owed. We were in a net payable position for all of our interest rate swaps, after taking into consideration
master netting agreements, of $464 million as of May 31, 2021.
A decline in our credit rating could trigger payments under our derivative agreements, which could impair our financial
results.
We have certain interest rate swaps that contain credit risk-related contingent features referred to as rating triggers. Under
certain rating triggers, if the credit rating for either counterparty falls to the level specified in the agreement, the other
counterparty may, but is not obligated to, terminate the agreement. If either counterparty terminates the agreement, a net
payment may be due from one counterparty to the other based on the prevailing fair value, excluding credit risk, of the
underlying derivative instrument. These rating triggers are based on our senior unsecured credit ratings by Moody’s
Investors Service (“Moody’s”) and S&P Global Inc. (“S&P”). Based on our interest rate swap agreements subject to rating
triggers, if all agreements for which we owe amounts were terminated as of May 31, 2021 and our senior unsecured ratings
fell below Baa2 by Moody’s or below BBB by S&P, we would have been required to make a payment of up to $328 million
as of that date. In addition, if our senior unsecured ratings fell below Baa3 by Moody’s, below BBB- by S&P or below
BBB- by Fitch Ratings Inc. (“Fitch”), we would have been required to make a payment of up to $22 million as of that date.
In calculating the required payments, we only consider agreements that, when netted for each counterparty pursuant to a
master netting agreement, would require a payment upon termination. In the event that we are required to make a payment
as a result of a rating trigger, it could have a material adverse impact on our financial results.
Liquidity Risks
If we are unable to access the capital markets or other external sources for funding, our liquidity position may be
negatively affected and we may not have sufficient funds to meet all of our financial obligations as they become due.
We depend on access to the capital markets and other sources of financing, such as our investment portfolio, repurchase
agreements, bank revolving credit agreements, investments from our members, private debt issuances through Farmer Mac
and through the Guaranteed Underwriter Program, to fund new loan advances and refinance our long- and short-term debt
and, if necessary, to fulfill our obligations under our guarantee and repurchase agreements. Market disruptions, downgrades
to our long-term and/or short-term debt ratings, adverse changes in our business or performance, downturns in the electric
industry and other events over which we have no control may deny or limit our access to the capital markets and/or subject
us to higher costs for such funding. Our access to other sources of funding also could be limited by the same factors, by
adverse changes in the business or performance of our members, by the banks committed to our revolving credit agreements
or Farmer Mac, or by changes in federal law or the Guaranteed Underwriter Program. Our funding needs are determined
primarily by scheduled short- and long-term debt maturities and the amount of our loan advances to our borrowers relative
to the scheduled payment amortization of loans previously made by us. If we are unable to timely issue debt into the capital
markets or obtain funding from other sources, we may not have the funds to meet all of our obligations as they become due.
16
A reduction in the credit ratings for our debt could adversely affect our liquidity and/or cost of debt.
Our credit ratings are important to maintaining our liquidity position. We currently contract with three nationally recognized
statistical rating organizations to receive ratings for our secured and unsecured debt and our commercial paper. In order to
access the commercial paper markets at current levels, we believe that we need to maintain our current ratings for
commercial paper of P-1 from Moody’s, A-2 from S&P and F1 from Fitch. Changes in rating agencies’ rating methodology,
actions by governmental entities or others, losses from individually evaluated loans and other factors could adversely affect
the credit ratings on our debt. A reduction in our credit ratings could adversely affect our liquidity and competitive position,
increase our borrowing costs or limit our access to the capital markets and the sources of financing available to us. A
significant increase in our cost of borrowings and interest expense could cause us to sustain losses or impair our liquidity by
requiring us to seek other sources of financing, which may be difficult to obtain.
Our ability to maintain compliance with the covenants related to our revolving credit agreements, collateral trust bond
and medium-term note indentures and debt agreements could affect our ability to retire patronage capital, result in the
acceleration of the repayment of certain debt obligations, adversely impact our credit ratings and hinder our ability to
obtain financing.
We must maintain compliance with all covenants and conditions related to our revolving credit agreements and debt
indentures. We are required to maintain a minimum average adjusted times interest earned ratio (“adjusted TIER”) for the
six most recent fiscal quarters of 1.025 and an adjusted leverage ratio of no more than 10-to-1. In addition, we must maintain
loans pledged as collateral for various debt issuances at or below 150% of the related secured debt outstanding as a
condition to borrowing under our revolving credit agreements. If we were unable to borrow under the revolving credit
agreements, our short-term debt ratings would likely decline, and our ability to issue commercial paper could become
significantly impaired. Our revolving credit agreements also require that we earn a minimum annual adjusted TIER of 1.05
in order to retire patronage capital to members. See “Item 7. MD&A—Non-GAAP Financial Measures” for additional
information on our adjusted measures and a reconciliation to the most comparable U.S. GAAP measures.
Pursuant to our collateral trust bond indentures, we are required to maintain eligible pledged collateral at least equal to 100%
of the principal amount of the bonds issued under the indenture. Pursuant to one of our collateral trust bond indentures and
our medium-term note indenture, we are required to limit senior indebtedness to 20 times the sum of our members’ equity,
subordinated deferrable debt and members’ subordinated certificates. If we were in default under our collateral trust bond or
medium-term note indentures, the existing holders of these securities have the right to accelerate the repayment of the full
amount of the outstanding debt of the security before the stated maturity of such debt. That acceleration of debt repayments
poses a significant liquidity risk, as we might not have enough cash or committed credit available to repay the debt. In
addition, if we are not in compliance with the collateral trust bond and medium-term note covenants, we would be unable to
issue new debt securities under such indentures. If we were unable to issue new collateral trust bonds and medium-term
notes, our ability to fund new loan advances and refinance maturing debt would be impaired.
We are required to pledge eligible distribution system or power supply system loans as collateral equal to at least 100% of
the outstanding balance of debt issued under a revolving note purchase agreement with Farmer Mac. We also are required to
pledge distribution or power supply loans as collateral equal to at least 100% of the outstanding balance of debt under the
Guaranteed Underwriter Program. Collateral coverage less than 100% for either of these debt programs constitutes an event
of default, which if not cured within 30 days, could result in creditors accelerating the repayment of the outstanding debt
principal before the stated maturity. An acceleration of the repayment of debt could pose a liquidity risk if we had
insufficient cash or committed credit available to repay the debt. In addition, we would be unable to issue new debt
securities under the applicable debt agreement, which could impair our ability to fund new loan advances and refinance
maturing debt.
Market Risks
Changes in the level and direction of interest rates or our ability to successfully manage interest rate risk could adversely
affect our financial results and condition.
Our primary strategies for managing interest rate risk include the use of derivatives in order to manage the difference
between interest-earning assets and interest-bearing liabilities. We face the risk that changes in interest rates could reduce
our net interest income and our earnings, especially if actual conditions turn out to be materially different than those we
assumed. Fluctuations in interest rates, including changes in the relationship between short-term rates and long-term rates
17
may affect the pricing of loans to borrowers and our cost of funds, which could adversely affect the difference between the
interest that we earn on assets and the interest we pay on liabilities used to fund assets. Such changes may also result in
increased costs to hedge existing interest rate risk which may have an adverse impact on the net interest income, earnings
and cash flows. See “Item 7. MD&A—Market Risk” for additional information.
The uncertainty as to the nature of potential changes or other reforms in the London Interbank Offered Rate (“LIBOR”)
benchmark interest rate may adversely affect our financial condition and results of operations.
We have loans, derivative contracts, debt securities and other financial instruments with attributes that are either directly or
indirectly dependent on LIBOR. In 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates
LIBOR, announced that the FCA intends to stop persuading or compelling banks to submit the rates required to calculate
LIBOR after December 31, 2021. In November 2020, the Board of Governors of the Federal Reserve System, the Office of
the Comptroller of the Currency and the Federal Deposit Insurance Corporation issued a joint statement encouraging
financial institutions to cease entering into new contracts that use U.S. dollar-denominated (“USD”) LIBOR as a reference
rate as soon as practicable and in any event by December 31, 2021, in order to facilitate an orderly, safe and sound LIBOR
transition. The joint statement indicated that new contracts entered into before December 31, 2021 should either utilize a
reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate
after LIBOR’s discontinuation. In March 2021, the FCA and the Intercontinental Exchange (“ICE”) Benchmark
Administration, the administrator for LIBOR, concurrently confirmed the intention to stop requesting banks to submit the
rates required to calculate LIBOR after December 31, 2021 for one-week and two-month LIBOR and June 30, 2023 for all
remaining LIBOR tenors.
Regulators and various financial industry groups have sponsored or formed committees (e.g., the Federal Reserve-sponsored
Alternative Reference Rates Committee (“ARRC”) to, among other things, facilitate the identification of an alternative
benchmark index to replace LIBOR, and publish consultations on recommended practices for transitioning away from
LIBOR, including (i) the utilization of recommended fallback language for LIBOR-linked financial instruments, and (ii)
development of alternative pricing methodologies for recommended alternative benchmarks such as the Secured Overnight
Financing Rate (“SOFR”). SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury
securities, and is based on directly observable U.S. Treasury-based repurchase transactions. While the ARRC has selected
SOFR as its recommended alternative to U.S. dollar LIBOR, other replacement rates have emerged as alternatives,
including, but not limited to the Bloomberg Short-Term Bank Yield Index (“BSBY”). At this time, there is no consensus as
to whether SOFR, BSBY or another rate will become acceptable alternatives to LIBOR. We are not able to predict how
SOFR, BSBY or an alternate rate will perform in comparison to LIBOR in response to changing market conditions, what the
effect of such rate’s implementation may be on the markets for floating-rate financial instruments or whether such rates will
be vulnerable to manipulation.
The replacement of LIBOR creates operational and market risks. We will continue to assess all of our contracts and financial
instruments that are directly or indirectly dependent on LIBOR to determine what impact the replacement of LIBOR will
have on us. Uncertainty as to the nature of such potential changes or other reforms may adversely affect our financial
condition and results of operations.
Operations and Business Risks
Breaches of our information technology systems, or those managed by third parties, may damage relationships with our
members or subject us to reputational, financial, legal or operational consequences.
Cyber-related attacks pose a risk to the security of our members’ strategic business information and the confidentiality and
integrity of our data, which include strategic and proprietary information. Security breaches may occur through the actions
of third parties, employee error, malfeasance, technology failures or other irregularities. Any such breach or unauthorized
access could result in a loss of this information, a loss of integrity of this information, a delay or inability to provide service
of affected products, damage to our reputation, including a loss of confidence in the security of our products and services,
and significant legal and financial exposure. Because the techniques used to obtain unauthorized access, disable or degrade
service or sabotage systems change frequently, we may be unable to anticipate these techniques or implement adequate
preventative measures. As a result, cyber-related attacks may remain undetected for an extended period and may be costly to
remediate.
18
Our business depends on the reliable and secure operation of computer systems, network infrastructure and other
information technology managed by third parties including, but not limited to, our service providers for external storage and
processing of our information on cloud-based systems; our consulting and advisory firms and contractors that have access to
our confidential and proprietary data; and administrators for our employee payroll and benefits management. We have
limited control and visibility over third-party systems that we rely on for our business. The occurrence of a cyber-related
attack, breach, unauthorized access or other cybersecurity event could result in damage to our third parties’ operations. The
failure of third parties to provide services agreed upon through service-level agreements, whether as a result of the
occurrence of a cyber-related attack or other event, could result in the loss of access to our data, the loss of integrity of our
data, disruptions to our corporate functions, loss of business opportunities or reputational damage, or otherwise adversely
impact our financial results and cause significant costs and liabilities.
While CFC maintains insurance coverage that, subject to policy terms and conditions, covers certain aspects of cyber risks,
including business interruptions caused by cyber-related attacks on information technology systems managed by third
parties, such insurance coverage may be insufficient to cover all losses. Our failure to comply with applicable laws and
regulations regarding data security and privacy could result in fines, sanctions and litigation. Additionally, new regulation in
the areas of data security and privacy may increase our costs and our members’ costs.
Our elected directors also serve as officers or directors of certain of our individual member cooperatives, which may
result in a potential conflict of interest with respect to loans, guarantees and extensions of credit that we may make to or
on behalf of such member cooperatives.
In accordance with our charter documents and the purpose for which we were formed, we lend only to our members and
associates. CFC’s directors are elected or appointed from our membership, with 10 director positions filled by directors of
members, 10 director positions filled by general managers or chief executive officers of members, two positions appointed
by NRECA and one at-large position that must, among other things, be a director, financial officer, general manager or chief
executive of one of our members. CFC currently has loans outstanding to members that are affiliated with CFC directors and
may periodically extend new loans to such members. The relationship of CFC’s directors to our members may give rise to
conflicts of interests from time to time. See “Item 13. Certain Relationships and Related Transactions, and Director
Independence—Review and Approval of Transactions with Related Persons” for a description of our policies with regard to
approval of loans to members affiliated with CFC directors.
Natural or man-made disasters, including widespread health emergencies such as the COVID-19 pandemic, or other
similar external events beyond our control, could disrupt our business and adversely affect our results of operations and
financial condition.
Our operations may be subject to disruption due to the occurrence of natural disasters, acts of terrorism or war, public health
emergencies, such as the ongoing COVID-19 pandemic, or other unexpected or disastrous conditions, events or emergencies
beyond our control, some of which may be intensified by the effects of a government response to the event, or climate
change and changing weather patterns.
COVID-19 resulted in the declaration of the COVID-19 outbreak as a pandemic by the World Health Organization and has
caused significant economic and financial turmoil both in the U.S. and around the world. In early July 2021, pursuant to the
lifting of restrictions in the Commonwealth of Virginia where our headquarters are located, we implemented a policy that
required 100% of employees that work at headquarters to return to the office full-time subject to certain exceptions. While
most states have allowed all businesses to resume operations at normal capacity, there continues to be uncertainty regarding
the manner and timing in which all businesses will return to all of their business operations. If federal, state or local
authorities impose new or additional restrictions in response to COVID-19 variants, such actions could disrupt the business,
activities and operations of our members, as well our business and operations.
There is significant uncertainty about the duration and severity of the COVID-19 pandemic. The effect of the recent surge in
COVID-19 variants in the U.S. and certain measures that may be taken by federal, state and local governments, in the U.S.
to contain the spread, could adversely impact our business, results of operations and financial condition. The extent to which
the COVID-19 pandemic impacts us will depend on future developments that are highly uncertain and cannot be predicted
including, but not limited to, the duration and spread of the pandemic, its severity, actions taken to contain COVID-19 and
mitigate its effects, and how quickly and to what extent normal economic and operating conditions resume.
19
Although we have implemented a business continuity management program that we enhance on an ongoing basis, there can
be no assurance that the program will adequately mitigate the risks of business disruptions. Further, events such as natural
disasters and public health emergencies may divert our attention away from normal operations and limit necessary
resources. We generally must resume operations promptly following any interruption. If we were to suffer a disruption or
interruption and were not able to resume normal operations within a period consistent with industry standards, our business,
financial condition or results of operations could be adversely affected in a material manner. In addition, depending on the
nature and duration of the disruption or interruption, we might become vulnerable to fraud, additional expense or other
losses, or to a loss of business.
Competition from other lenders could adversely impact our financial results.
We compete with other lenders for the portion of the rural utility loan demand for which RUS will not lend and for loans to
members that have elected not to borrow from RUS. The primary competition for the non-RUS loan volume is from
CoBank, ACB, a federally chartered instrumentality of the U.S. that is a member of the Farm Credit System. As a
government-sponsored enterprise, CoBank, ACB has the benefit of an implied government guarantee with respect to its
funding. Competition may limit our ability to raise rates to adequately cover increases in costs, which could have an adverse
impact on our results of operations, and increasing interest rates to cover costs could cause a reduction in new lending
business.
Regulatory and Compliance Risks
Loss of our tax-exempt status could adversely affect our earnings.
CFC has been recognized by the IRS as an organization for which income is exempt from federal taxation under Section
501(c)(4) of the Internal Revenue Code (other than any net income from an unrelated trade or business). In order to maintain
CFC’s tax-exempt status, it must continue to operate exclusively for the promotion of social welfare by operating on a
cooperative basis for the benefit of its members by providing them cost-based financial products and services consistent
with sound financial management, and no part of CFC’s net earnings may inure to the benefit of any private shareholder or
individual other than the allocation or return of net earnings or capital to its members in accordance with CFC’s bylaws and
incorporating statute in effect in 1996.
If CFC were to lose its status as a 501(c)(4) organization, it would become a taxable cooperative and would be required to
pay income tax based on its taxable income. If this event occurred, we would evaluate all options available to modify CFC’s
structure and/or operations to minimize any potential tax liability.
As a tax-exempt cooperative and nonbank financial institution, our lending activities are not subject to the regulations
and oversight of U.S. financial regulators such as the Federal Reserve, the Federal Deposit Insurance Corporation or
the Office of Comptroller of Currency. Because we are not under the purview of such regulation, we could engage in
activities that could expose us to greater credit, market and liquidity risk, reduce our safety and soundness and adversely
affect our financial results.
Financial institutions subject to regulations, oversight and monitoring by U.S. financial regulators are required to maintain
specified levels of capital and may be restricted from engaging in certain lending-related and other activities that could
adversely affect the safety and soundness of the financial institution or are considered conflicts of interest. As a tax-exempt,
nonbank financial institution, we are not subject to the same oversight and supervision. There is no federal financial
regulator that monitors compliance with our risk policies and practices or that identifies and addresses potential deficiencies
that could adversely affect our financial results. Without regulatory oversight and monitoring, there is a greater potential for
us to engage in activities that could pose a risk to our safety and soundness relative to regulated financial institutions.
Changes in accounting standards or assumptions in applying accounting policies could materially impact our financial
statements.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of
operations. Some of these policies require the use of estimates and assumptions that may affect the reported carrying amount
of our assets or liabilities and our results of operations. We consider the accounting policies that require management to
make difficult, subjective and complex judgments about matters that are inherently uncertain as our most critical accounting
policies. The use of reasonably different estimates and assumptions could have a material impact on our financial statements
20
or if the assumptions, estimates or judgments were incorrectly made, we could be required to correct and restate prior-period
financial statements. In addition, from time to time, the Financial Accounting Standards Board (“FASB”) and the SEC
change the accounting and reporting standards that govern the preparation of our financial statements. These changes can be
hard to predict and can materially impact how CFC records and reports its financial condition and results of operations. We
could be required to apply a new or revised standard retroactively or apply an existing standard differently, on a retroactive
basis, in each case potentially resulting in restating prior-period financial statements. For information on what we consider
to be our most critical accounting policies and estimates and recent accounting changes, see “Item 7. MD&A—Critical
Accounting Policies and Estimates” and “Note 1—Summary of Significant Accounting Policies—New Accounting
Standards Adopted in Fiscal Year 2021” to our consolidated financial statements.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
CFC owns an office building, with approximately 141,000 gross square footage, in Loudoun County, Virginia, that serves as
its headquarters.
Item 3. Legal Proceedings
From time to time, CFC is subject to certain legal proceedings and claims in the ordinary course of business, including
litigation with borrowers related to enforcement or collection actions. Management presently believes that the ultimate
outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, liquidity or
results of operations. CFC establishes reserves for specific legal matters when it determines that the likelihood of an
unfavorable outcome is probable and the loss is reasonably estimable. Accordingly, no reserve has been recorded with
respect to any legal proceedings at this time.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Not applicable.
Item 6. Reserved
21
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)
INTRODUCTION
Our financial statements include the consolidated accounts of CFC, NCSC, RTFC and any 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 (“fiscal year 2017”). We provide information
on the business structure, mission, principal purpose and core business activities of each of these entities under “Item 1.
Business.” Unless stated otherwise, references to “we,” “our” or “us” relate to CFC and its consolidated entities.
We conduct our operations through three business segments, which are based on each of the legal entities included in our
consolidated financial statements: CFC, NCSC and RTFC. CFC’s business operations account for the substantial majority of
our loans and revenue. Loans to members totaled $28,427 million as of May 31, 2021, of which 96% was attributable to
CFC. We generated total revenue, which consists of net interest income and fee and other income, of $433 million for fiscal
year ended May 31, 2021 (“fiscal year 2021”), compared with $353 million for fiscal year ended May 31, 2020 (“fiscal year
2020”). Our adjusted total revenue was $318 million for fiscal year 2021, compared with $297 million for fiscal year 2020.
We provide information on the financial performance of our business segments in “Note 16—Business Segments.”
Management monitors a variety of key indicators and metrics to evaluate our business performance. In addition to financial
measures determined in accordance with U.S. GAAP, management also evaluates performance based on certain non-GAAP
measures, which we refer to as “adjusted” measures. We identify our non-GAAP adjusted measures and describe our use of
these measures below under “Summary of Selected Financial Data.”
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. Our MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated
financial statements and related notes for the fiscal year ended May 31, 2021 included in this Report and additional
information contained elsewhere in this Report, including the risk factors discussed under “Item 1A. Risk Factors.”
SUMMARY OF SELECTED FINANCIAL DATA
Table 1 provides a summary of consolidated selected reported financial data and non-GAAP adjusted measures for each
fiscal year in the five-year period ended May 31, 2021. Our key non-GAAP financial measures are adjusted net income,
adjusted net interest income, adjusted interest expense, adjusted net interest yield, adjusted 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; (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 are not a substitute for U.S. GAAP and may not be consistent with
similarly titled non-GAAP measures used by other companies, 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
22
measures. We provide a reconciliation of our non-GAAP adjusted measures to the most comparable U.S. GAAP measures in
the section “Non-GAAP Financial Measures.”
Table 1: Summary of Selected Financial Data(1)
(Dollars in thousands)
Statements of operations
Interest income............................
Interest expense...........................
Net interest income......................
Fee and other income..................
Total revenue...............................
Benefit (provision) for credit
losses...........................................
Derivative gains (losses):
Derivative cash settlements
interest expense(2)......................
Derivative forward value gains
(losses)(3)....................................
Derivative gains (losses).............
Other non-interest income
(expense)...................................
Non-interest expense(4)................
Income (loss) before income
taxes...........................................
Income tax benefit (provision)....
Net income (loss)........................
Adjusted operational financial
measures
Interest income............................
Interest expense...........................
Include: Derivative cash
settlements interest expense(2)...
Adjusted interest expense(5).........
Adjusted net interest income(5)....
Net income (loss)........................
Exclude: Derivative forward
value gains (losses)(3).................
Adjusted net income(5).................
Selected ratios
Times interest earned ratio
(TIER)(6)..................................
Adjusted TIER(5).........................
Net interest yield(7)......................
Adjusted net interest yield(5)(8).....
Net charge-off rate(9)...................
2021
2020
2019
2018
2017
Year Ended May 31,
Change
2021 vs.
2020
2020 vs.
2019
$ 1,116,601
(702,063)
414,538
18,929
433,467
$ 1,151,286
(821,089)
330,197
22,961
353,158
$ 1,135,670
(836,209)
299,461
15,355
314,816
$ 1,077,357
(792,735)
284,622
17,578
302,200
$ 1,036,634
(741,738)
294,896
19,713
314,609
(3) %
(14)
26
(18)
23
1 %
(2)
10
50
12
(28,507)
(35,590)
1,266
18,575
(5,978)
(20)
**
(115,645)
(55,873)
(43,611)
(74,281)
(84,478)
107
621,946
506,301
(734,278)
(790,151)
(319,730)
(363,341)
306,002
231,721
179,381
94,903
**
**
1,495
(97,780)
9,431
(127,438)
(1,799)
(101,941)
—
(92,827)
(1,749)
(87,982)
(84)
(23)
814,976
(998)
313,803
(1,704)
$ 813,978 $ (589,430) $ (151,210) $ 457,364 $ 312,099
(590,590)
1,160
(150,999)
(211)
459,669
(2,305)
**
**
**
$ 1,116,601
$ 1,151,286
$ 1,135,670
$ 1,077,357
$ 1,036,634
(3)
(702,063)
(821,089)
(836,209)
(792,735)
(741,738)
(14)
(84,478)
(115,645)
(817,708)
(826,216)
$ 298,893 $ 274,324 $ 255,850 $ 210,341 $ 210,418
(43,611)
(879,820)
(74,281)
(867,016)
(55,873)
(876,962)
107
(7)
9
$ 813,978
$ (589,430) $ (151,210)
$ 457,364
$ 312,099
**
621,946
179,381
(319,730)
$ 192,032 $ 144,848 $ 168,520 $ 151,362 $ 132,718
(734,278)
306,002
**
33
28
130
117
**
25
291
**
290
1
(2)
28
—
7
290
130
(14)
2.16
1.23
0.28
1.17
0.82
1.19
1.58
1.17
1.42
1.16
1.47 %
1.21 %
1.14 %
1.12 %
1.20 %
1.06
0.00
1.00
0.00
0.97
0.00
0.83
0.00
0.86
0.01
188
bps
(54)
bps
6
26
6
—
(2)
7
3
—
23
(Dollars in thousands)
2021
2020
2019
2018
2017
vs. 2020
vs. 2019
Year Ended May 31,
Change
2021
2020
Balance sheets
Assets:
Cash, cash equivalents and
restricted cash..........................
Investment securities...................
Loans to members(10)...................
Allowance for credit losses(11).....
Loans to members, net................
Total assets..................................
Liabilities and equity:
Short-term borrowings................
Long-term debt............................
Subordinated deferrable debt......
Members’ subordinated
certificates...............................
Total debt outstanding.................
Total liabilities.............................
Total equity.................................
Adjusted balance sheet
measures
Adjusted total liabilities(5)...........
Adjusted total equity(5)................
Members’ equity(5)......................
Selected ratios period end
Allowance coverage ratio(11)(13)...
Nonperforming loans ratio(14)......
Debt-to-equity ratio(15).................
Adjusted debt-to-equity ratio(5)...
____________________________
$ 303,361
611,277
28,426,961
(85,532)
28,341,429
29,638,363
$ 680,019
370,135
26,702,380
(53,125)
26,649,255
28,157,605
$ 186,204
652,977
25,916,904
(17,535)
25,899,369
27,124,372
$ 238,824
609,851
25,178,608
(18,801)
25,159,807
26,690,204
$ 188,421
92,554
24,367,044
(37,376)
24,329,668
25,205,692
(55) % 265 %
65
6
61
6
5
(43)
3
203
3
4
4,582,096
20,603,123
986,315
3,961,985
19,712,024
986,119
3,607,726
19,210,793
986,020
3,795,910
18,714,960
742,410
3,342,900
17,955,594
742,274
1,254,660
27,426,194
28,238,484
1,399,879
1,339,618
25,999,746
27,508,783
648,822
1,357,129
25,161,668
25,820,490
1,303,882
1,379,982
24,633,262
25,184,351
1,505,853
1,419,025
23,459,793
24,106,887
1,098,805
$ 25,273,384 $ 23,777,823 $ 22,931,626 $ 22,625,162 $ 21,392,856
3,597,378
3,999,164
4,106,172
1,389,303
1,625,847
1,836,135
3,661,239
1,496,620
4,061,411
1,707,770
0.30 %
0.84
20.17
6.15
0.20 %
0.63
0.07 %
—
0.07 %
—
0.15 %
—
42.40
5.85
19.80
5.73
16.72
6.18
21.94
5.95
16
5
—
(6)
5
3
116
6
1
8
10
3
—
(1)
3
7
(50)
4
2
5
bps
10
21
(52) % 114 %
13
63
bps
5
2
**Calculation of percentage change is not meaningful.
(1)
Certain reclassifications have been made to prior periods to conform to the current-period presentation.
(2)
(3)
(4)
(5)
(6)
(7)
Consists of net periodic contractual interest amounts on our interest rate swaps, which we refer to as derivatives cash settlements interest (expense)
income.
Consists of derivative forward value gains (losses), which represent changes in fair value during the period, excluding net periodic contractual interest
amounts, related to derivatives not designated for hedge accounting and amounts reclassified into income related to the cumulative transition adjustment
amount recorded in accumulated other comprehensive income as of June 1, 2001, the adoption date of the derivative accounting guidance requiring
derivatives to be reported at fair value on the balance sheet.
Consists of salaries and employee benefits and the other general and administrative expenses components of non-interest expense, each of which are
presented separately on our consolidated statements of operations.
See “Non-GAAP Financial Measures” for a description of our non-GAAP adjusted measures and additional detail on the reconciliation of these
measures to the most comparable U.S. GAAP measures.
Calculated based on net income (loss) plus interest expense for the period divided by interest expense for the period.
Calculated based on net interest income for the period divided by average interest-earning assets for the period.
(8)
Calculated based on adjusted net interest income for the period divided by average interest-earning assets for the period.
(9)
(10)
(11)
Calculated based on net charge-offs (recoveries) for the period divided by average total loans outstanding for the period.
Consists of the unpaid principal balance of member loans plus unamortized deferred loan origination costs of $12 million as of May 31, 2021, and
$11 million as of May 31, 2020, 2019, 2018, and 2017.
On June 1, 2020, we adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, which replaces the incurred loss methodology previously used for estimating our allowance for credit losses
with an expected loss methodology referred to as the current expected credit loss (“CECL”) model. At adoption, we recorded an increase in our
24
allowance for credit losses of $4 million and a corresponding decrease in retained earnings through a cumulative-effect adjustment. Our allowance for
credit losses prior to June 1, 2020 was determined based on the incurred loss methodology.
Reflects the total amount of member obligations for which CFC has guaranteed payment to a third party as of the end of each period. This amount
represents our maximum exposure to loss, which significantly exceeds the guarantee liability recorded on our consolidated balance sheets. See “Note 13
—Guarantees” for additional information.
Calculated based on the allowance for credit losses at period end divided by total loans outstanding at period end.
(12)
(13)
(14)
Calculated based on total nonperforming loans at period end divided by total loans outstanding at period end.
(15)
Calculated based on total liabilities at period end divided by total equity at period end.
EXECUTIVE SUMMARY
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. As discussed
above under “Summary of Selected Financial Data,” in addition to our reported U.S. GAAP results, management uses our
non-GAAP adjusted measures to establish short- and long-term performance goals.
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. As such, management uses our non-GAAP adjusted results to evaluate our
operating performance. Our adjusted results include realized net periodic interest rate swap settlement amounts but exclude
the impact of unrealized forward fair value gains and losses. Certain of the financial covenants in our committed bank
revolving line of credit agreements and debt indentures are also based on our non-GAAP adjusted results, as the forward fair
value gains and losses related to our interest rate swaps do not affect our cash flows, liquidity or ability to service our debt.
Financial Performance
Reported Results
We reported net income of $814 million for fiscal year 2021 (“current fiscal year”), which resulted in a TIER of 2.16. In
comparison, we reported a net loss of $589 million and a TIER of 0.28 for fiscal year 2020 (“prior fiscal year”). The
significant variance between our current and prior fiscal year reported results was attributable to mark-to-market changes in
the fair value of our derivative instruments. Our debt-to-equity ratio decreased to 20.17 as of May 31, 2021, from 42.40 as
of May 31, 2020, primarily due to an increase in equity resulting from our reported net income of $814 million for fiscal
year 2021, which was partially offset by patronage capital retirement of $60 million authorized by the CFC Board of
Directors in July 2020 and paid to members in September 2020.
We experienced a variance of $1,403 million between our reported net income of $814 million for fiscal year 2021 and our
reported net loss of $589 million for the prior fiscal year. The variance reflected a favorable shift in the change in the fair
25
value of our derivatives of $1,296 million between periods. We recorded derivative gains of $506 million in fiscal year 2021
due to an increase in the net fair value of our swap portfolio attributable to increases in medium- and longer-term swap
interest rates. In contrast, we recorded derivative losses of $790 million in fiscal year 2020 due to a decrease in the net fair
value of our swap portfolio resulting from declines in interest rates across the swap curve. In addition, net interest income
increased $84 million, or 26%, to $415 million in fiscal year 2021, attributable to the combined impact of an increase in our
reported net interest yield of 26 basis points, or 21%, to 1.47% and an increase in average interest-earning assets of $859
million, or 3%. The increase in the net interest yield was largely driven by a reduction in our average cost of borrowings of
53 basis points to 2.66%, which was partially offset by a decrease in the average yield on interest-earning assets of 25 basis
points to 3.95%.
The decreases in our average cost of borrowings and average yield on interest-earning assets were driven by lower interest
rates on our short-term borrowings and line of credit and variable-rate loans attributable to a steep decline in short-term
interest rates since the onset of the COVID-19 pandemic. In mid-March 2020, the Federal Open Market Committee
(“FOMC”) of the Federal Reserve lowered the federal funds rate to a near-zero target range of 0% to 0.25% as part of a
series of measures implemented to ease the economic impact of the COVID-19 pandemic. The benchmark federal funds rate
has remained at this near-zero target range since March 2020. During fiscal year 2021, the 3-month LIBOR decreased 21
basis points to 0.13% as of May 31, 2021. In contrast, medium- and longer-term interest rates began trending up in fiscal
year 2021, following significant declines during fiscal year 2020. The 10-year swap rate increased 92 basis points to 1.56%
as of May 31, 2021, while the 30-year swap rate increased 106 basis points to 2.00% as of May 31, 2021.
We recorded a provision for credit losses of $29 million in fiscal year 2021, a decrease of $7 million from the provision for
credit losses of $36 million recorded in fiscal year fiscal year 2020. The provision for the current fiscal year was primarily
attributable to a significant adverse financial impact on two CFC Texas-based electric power supply borrowers, Brazos
Electric Power Cooperative, Inc. (“Brazos”) and Rayburn Country Electric Cooperative, Inc. (“Rayburn”), due to their
exposure to elevated wholesale electric power costs during the mid-February 2021 polar vortex (the “February 2021 polar
vortex”). The provision for the prior fiscal year was primarily attributable to the establishment of an asset-specific allowance
of $34 million for a loan to a CFC power supply borrower totaling $168 million as of May 31, 2020, resulting from our
classification of this loan as nonperforming as of May 31, 2020. We provide additional information on these borrowers and
the loans outstanding as of May 31, 2021 below under “Credit Quality.” The variance between our current and prior fiscal
year results also reflects the absence of the non-cash impairment charge of $31 million recorded in fiscal year 2020 due to
management’s decision to abandon a software project to develop an internal-use loan origination and servicing platform.
Adjusted Non-GAAP Results
Our adjusted net income increased $47 million to $192 million in fiscal year 2021, resulting in an adjusted TIER of 1.23,
from $145 million in fiscal year 2020 and adjusted TIER of 1.17. Our adjusted debt-to-equity ratio increased above our
target threshold of 6.00-to-1 to 6.15 as of May 31, 2021, from 5.85 as of May 31, 2020. The increase was primarily
attributable to an increase in adjusted liabilities due to additional borrowings to fund the growth in our loan portfolio.
The increase in adjusted net income of $47 million was attributable to an increase in adjusted net interest income of $25
million and the absence of the non-cash impairment charge of $31 million recorded in fiscal year 2020 due to management’s
decision to abandon a software project to develop an internal-use loan origination and servicing platform, partially offset by
the decrease in the provision for credit losses of $7 million discussed above. The increase in adjusted net interest income of
$25 million, or 9%, to $299 million for fiscal year 2021 was driven by the combined impact of an increase in the adjusted
net interest yield of 6 basis points, or 6%, to 1.06% and an increase in average interest-earning assets of $859 million, or
3%. The increase in our adjusted net interest yield was attributable to a reduction in our adjusted average cost of borrowings
of 31 basis points to 3.09%, which was partially offset by a decrease in the average yield on interest-earning assets of 25
basis points to 3.95%. The reductions in our adjusted average cost of borrowings and average yield on interest-earning assets
were largely attributable to the decrease in short-term interest rates, which reduced the average cost of our short-term
borrowings and variable-rate debt and the average yield on line of credit and variable-rate loans.
See “Non-GAAP Financial Measures” for additional information on our adjusted measures, including a reconciliation of
these measures to the most comparable U.S. GAAP measures.
26
Lending Activity
Loans to members totaled $28,427 million as of May 31, 2021, an increase of $1,725 million, or 6%, from May 31, 2020.
The increase was driven by increases in long-term and line of credit loans of $1,046 million and $679 million, respectively.
Of the $679 million increase in line of credit loans, approximately 38% was attributable to borrowings under emergency line
of credit loans for weather-related events. We experienced increases in CFC distribution loans, CFC power supply loans,
RTFC loans and NCSC loans of $1,258 million, $423 million, $35 million and $9 million, respectively.
Long-term loan advances totaled $2,514 million during fiscal year 2021, of which approximately 86% was provided to
members for capital expenditures and 8% was provided for the refinancing of loans made by other lenders. In comparison,
long-term loan advances totaled $2,422 million during fiscal year 2020, of which approximately 80% was provided to
members for capital expenditures and 15% was provided for the refinancing of loans made by other lenders. CFC had long-
term fixed-rate loans totaling $397 million that were scheduled to reprice during fiscal year 2021. Of this amount, $384
million repriced to a new long-term fixed rate, $10 million repriced to a long-term variable rate and $3 million was repaid in
full. In comparison, CFC had long-term fixed-rate loans totaling $463 million that were scheduled to reprice during fiscal
year 2020, of which $441 million repriced to a new long-term fixed rate, $11 million repriced to a long-term variable rate
and $10 million was repaid in full.
Credit Quality
We historically 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.” Loans outstanding to
electric utility organizations of $27,995 million and $26,306 million as of May 31, 2021 and 2020, respectively, represented
approximately 99% of total loans outstanding as of each date. 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. Of our total loans outstanding, 93% and 94% were
secured as of May 31, 2021 and 2020, respectively.
Texas historically has accounted for the largest number of borrowers with loans outstanding in any one state and also the
largest concentration of loan exposure in any one state. Loans outstanding to Texas-based electric utility organizations
totaled $4,878 million and $4,222 million as of May 31, 2021 and 2020, respectively, and accounted for 17% and 16% of
total loans outstanding as of each respective date. Of the loans outstanding to Texas-based electric utility organizations,
$172 million and $181 million as of May 31, 2021 and 2020, respectively, were covered by the Federal Agricultural
Mortgage Corporation (“Farmer Mac”) standby repurchase agreement, which slightly reduces our Texas loan exposure.
In mid-February 2021, Texas and several neighboring states experienced a series of severe winter storms and record-low
temperatures as a result of the polar vortex. The freezing conditions affected power demand, supply and market prices in
Texas, triggering unprecedented increases in electrical power load demand in combination with significant reductions in
power supply across Texas, including a loss of almost half of the electric generation within the Electric Reliability Council
of Texas (“ERCOT”) service area. ERCOT raised wholesale electric power prices per megawatt-hour to the amount of
$9,000, to spur greater power generation by providing a financial incentive for power generators in the state to remain on-
line. According to ERCOT data, pre-storm wholesale power prices were less than $50 per megawatt-hour. ERCOT also
initiated controlled rolling power outages, which impacted millions of residential and commercial customers, to protect and
maintain the stability of the Texas electric grid.
The surge in wholesale electricity prices had a direct financial impact primarily on certain electric power supply utilities,
including a significant adverse financial impact on two CFC Texas-based electric power supply borrowers, Brazos and
Rayburn. These power supply borrowers had insufficient generation supply during the February 2021 polar vortex and were
forced, at the height of the surge in power prices, to purchase power at peak prices to meet the electric demand of their
member distribution system customers. On March 1, 2021, we were informed that Brazos filed for Chapter 11 bankruptcy
protection. In the third quarter of fiscal year 2021, we downgraded Brazos’ borrower risk rating from a rating within the pass
category to doubtful, classified its loans outstanding as nonperforming, placed the loans on nonaccrual status, and reversed
unpaid interest amounts previously accrued and recognized in interest income. We had loans outstanding to Brazos of
$85 million as of May 31, 2021, pursuant to a syndicated Bank of America revolving credit agreement, of which $64 million
was unsecured and $21 million was secured. The secured amount is based on the set-off provisions of the revolving credit
27
agreement, which was approved by the bankruptcy court. In the third quarter of fiscal year 2021, we also made a material
downgrade in the borrower risk rating for Rayburn from a rating within the pass category to special mention. We further
downgraded Rayburn’s borrower risk rating to substandard in the fourth quarter of fiscal year 2021. Loans outstanding to
Rayburn consisted of secured loans of $167 million and unsecured loans of $212 million, which together totaled
$379 million as of May 31, 2021.
Under the terms of the syndicated Bank of America revolving credit agreement, in the event of bankruptcy by Brazos, each
lending participant is permitted to hold any deposited or investment funds from Brazos, up to the amount of the participant’s
exposure to Brazos pursuant to the agreement, for set-off against such exposure to Brazos. The total so held by all
participants is required to be shared among the participants in accordance with the pro rata share of each participant in the
agreement. As of the bankruptcy filing date, funds on deposit from or invested by Brazos with participating lenders of the
agreement, available for set-off against Brazos’ obligations, totaled $124 million. Based on our exposure of $85 million
under the $500 million syndicated Bank of America agreement, our pro rata share set-off right is 17%, or approximately
$21 million. The set-off rights have been agreed to and confirmed by Brazos and the bankruptcy court. In order to allow
Brazos to access such deposited or invested funds, the lenders have been granted adequate protection liens and super-priority
claims in an amount equal to the diminution of value of the amount available for set-off.
In mid-June 2021, the Texas governor signed into law a bill that offers a financing program intended to provide relief to
retail electric providers that incurred extraordinary costs due to exposure to elevated power costs during the February 2021
polar vortex. The bill allows qualifying electric cooperatives to securitize these costs and issue bonds directly or through a
special purpose vehicle legal entity, with a requirement that payments on the bonds be made over a period not to exceed 30
years. We provide information about the financing program offered pursuant to the provisions of this bill under “Credit Risk
—Allowance for Credit Losses.” While Brazos and Rayburn are eligible to utilize the provisions of this bill, we are
currently uncertain whether they will elect to do so.
Nonperforming loans increased $69 million to $237 million, or 0.84% of total loans outstanding as of May 31, 2021, from
$168 million, or 0.63% of total loans outstanding, as of May 31, 2020, primarily due to our classification of the loans
outstanding of $85 million to Brazos as nonperforming as a result of its bankruptcy filing. In addition to Brazos, we
classified loans outstanding to two affiliated RTFC telecommunications borrowers as nonperforming during fiscal year
2021. Loans outstanding to these RTFC borrowers totaled $9 million as of May 31, 2021. Although we experienced an
increase in nonperforming and criticized loans due to the polar vortex-related impact on Brazos and Rayburn, we believe the
overall credit quality of our loan portfolio remained strong as of May 31, 2021, as the adverse impact on the credit quality of
our loan portfolio from the February 2021 polar vortex is primarily limited to these two Texas-based electric power supply
borrowers. Prior to Brazos’ bankruptcy filing, we had not experienced any defaults or charge-offs in our electric utility and
telecommunications loan portfolios since fiscal years 2013 and 2017, respectively. Brazos is not permitted to make
scheduled loan payments without approval of the bankruptcy court. As a result, we have not received payments from
Brazos, and its loans outstanding of $85 million were delinquent as of May 31, 2021. In comparison, we had no delinquent
loans as of May 31, 2020.
Our allowance for credit losses and allowance coverage ratio increased to $86 million and 0.30%, respectively, as of
May 31, 2021, from $53 million and 0.20%, respectively, as of May 31, 2020. The increase was primarily due to an addition
to the allowance of $33 million in fiscal year 2021, attributable to the material risk rating downgrades of Brazos and
Rayburn.
On June 1, 2020, we adopted the CECL accounting standard, which replaces the incurred loss methodology for estimating
credit losses with an expected loss methodology. We used the modified retrospective approach in our adoption of CECL,
which resulted in an increase in our allowance for credit losses for our loan portfolio of $4 million and a corresponding
decrease to retained earnings of $4 million recorded through a cumulative-effect adjustment. The impact on the reserve for
credit losses for our off-balance sheet credit exposures related to unadvanced loan commitments and financial guarantees
was not material. While CECL had no impact on our earnings at adoption on June 1, 2020, subsequent estimates of lifetime
expected credit losses for newly recognized loans, unadvanced loan commitments and financial guarantees, as well as
changes during the period in our estimate of lifetime expected credit losses for existing financial instruments subject to
CECL, are now recognized in earnings. Our reported allowance for credit losses prior to June 1, 2020 was determined based
on the incurred loss methodology.
28
We discuss our methodology for estimating the allowance for credit losses under the CECL model in “Note 1—Summary of
Significant Accounting Policies” of this Report. We also provide information on the allowance for credit losses below in the
MD&A sections “Critical Accounting Policies and Estimates” and “Credit Risk—Allowance for Credit Losses” and in
“Note 5—Allowance for Credit Losses.”
Financing Activity
We issue debt primarily to fund growth in our loan portfolio. As such, our outstanding debt volume generally increases and
decreases in response to member loan demand. Total debt outstanding increased $1,426 million, or 5%, to $27,426 million
as of May 31, 2021, due to borrowings to fund the increase in loans to members. Outstanding dealer commercial paper of
$895 million as of May 31, 2021 was below our targeted maximum threshold of $1,250 million.
On March 5, 2021, S&P issued a downgrade of our long-term issuer credit rating, citing a shift from “Strong” to “Adequate”
in its view of CFC’s risk position due to CFC’s loan portfolio concentration in the State of Texas. S&P also revised its
outlook on CFC to negative based on the potential for additional elevated credit stress posed by Texas electric cooperatives
due to the February 2021 polar vortex. The downgrade of CFC’s long-term issuer credit rating by S&P resulted in a
downgrade of: (i) our senior secured and senior unsecured debt ratings to A- from A; (ii) our subordinated debt rating to
BBB from BBB+; and (iii) our short-term issuer credit and commercial paper ratings to A-2 from A-1, each with a negative
outlook. Our credit ratings by Moody’s and Fitch remain unchanged from May 31, 2020, and as of the date of this Report.
We provide additional information on our financing activities during fiscal year 2021, as well as information on the
amendment to and extension of our three-year and five-year committed bank revolving line of credit agreements under
“Consolidated Balance Sheet Analysis—Debt” and “Liquidity Risk.”
Liquidity
As of May 31, 2021, our sources of available liquidity totaled $7,090 million, consisting of (i) $295 million in cash and cash
equivalents; (ii) investments in debt securities with a fair value of $576 million, subject to changes in market value; (iii) up
to $2,722 million available for access under committed bank revolving line of credit agreements; (iv) up to $975 million
available under committed loan facilities under the Guaranteed Underwriter Program; and (v) up to $2,522 million available
under a revolving note purchase agreement with Farmer Mac, subject to market conditions.
Debt scheduled to mature over the next 12 months totaled $7,180 million as of May 31, 2021, consisting of short-term
borrowings of $4,582 million and long-term debt of $2,598 million. The short-term borrowings scheduled maturity amount
of $4,582 million consists of member investments of $3,487 million, dealer commercial paper of $895 million and secured
borrowings under securities repurchase agreements of $200 million. The long-term debt scheduled maturity amount of
$2,598 million consists of fixed-rate debt totaling $1,537 million with a weighted average cost of 2.33%, variable-rate debt
totaling $810 million and scheduled amortization on borrowings under the Guaranteed Underwriter Program and notes
payable to Farmer Mac totaling $251 million. Our available liquidity of $7,090 million as of May 31, 2021, was $90 million
below our total debt obligations over the next 12 months of $7,180 million and $3,598 million in excess of, or two times,
our long-term debt and dealer commercial paper obligations over the next 12 months of $2,598 million and $895 million,
respectively, which together total $3,493 million.
Our members historically have maintained a relatively stable level of short-term investments in CFC in the form of daily
liquidity fund notes, commercial paper, select notes and medium-term notes. Member short-term investments in CFC
averaged $3,639 million over the last six fiscal quarter-end reporting periods. We believe we can continue to roll over
outstanding member short-term debt, which totaled $3,487 million as of May 31, 2021, based on our expectation that our
members will continue to reinvest their excess cash in these short-term investment products offered by CFC. 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 outstanding dealer commercial paper may fluctuate based on our
liquidity requirements, we intend to manage our short-term wholesale funding risk by maintaining outstanding dealer
commercial paper at an amount near or below $1,250 million for the foreseeable future. We expect to continue to be in
compliance with the covenants under our committed bank revolving line of credit agreements, which will allow us to
mitigate rollover risk, as we can draw on these facilities to repay dealer or member commercial paper that cannot be
refinanced with similar debt.
29
We provide additional information on our primary sources and uses of liquidity and our liquidity profile below in the section
“Liquidity Risk.”
COVID-19
Our priorities during the COVID-19 pandemic, which continues to persist, have been to protect the health and safety of our
employees, while also ensuring that we are able to meet the needs of our electric cooperative borrowers as they operate in a
sector that provides an essential service to residential and commercial customers. In mid-June 2020, we implemented a
return-to-work plan that included a rotating work schedule in which the in-office occupancy level at our corporate
headquarters building located in Loudoun County, Virginia, was limited to approximately 25% of normal capacity and other
measures to protect the well-being of our employees, as well as comply with Virginia’s reopening guidelines. In early May
2021, as Virginia eased some COVID-19 restrictions, we moved toward more normal operations by bringing staff back to
our corporate office under a gradual transition schedule, with appropriate workplace protocols to mitigate risk and maintain
the safety of our employees in compliance with federal, state and local laws and guidance from the CDC. In July 2021,
following the expiration on June 30, 2021 of the state of emergency declared in March 2020 by Virginia’s governor in
response to the pandemic and the lifting of all COVID-19 restrictions in Virginia, subject to certain exceptions, we brought
100% of our staff back to CFC’s corporate headquarters building, which continues to adhere to the COVID-19 workplace
safety and health standards established by Virginia and guidance provided by the CDC. While we have been able to
maintain business continuity throughout the pandemic and experienced no pandemic-related employee furloughs or layoffs,
we believe we can provide the highest quality of service and deliver more effectively on our member-focused mission,
which requires a significant number of member-facing staff working collaboratively with other staff, by resuming full-time,
in-office work.
While several U.S. industry sectors have been severely affected by the COVID-19 pandemic, we believe we have been able
to navigate the challenges of the COVID-19 pandemic to date and that the pandemic has not had any significant negative
effect on our liquidity. During fiscal year 2021, we continued to be able to access the capital markets, private funding
programs and our members for the funds required to repay maturing debt and provide loan advances to our members for
capital improvements and to fund their operations. We also believe that the credit quality of our loan portfolio has remained
strong throughout the pandemic. Our electric utility cooperative borrowers operate in a sector identified by the 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. We have not
experienced any delinquencies in scheduled loan payments or received requests for payment deferrals from our borrowers
due to the pandemic. We are in contact with our member borrowers on a continuous basis, closely monitoring developments
and key credit metrics to facilitate the timely identification of loans with potential credit weaknesses and assess any notable
shifts in the credit quality of our loan portfolio. To date, we believe that the pandemic has not had a significant negative
impact on the overall financial performance of our members.
Recent Developments
On March 10, 2021, the CFC Board of Directors appointed J. Andrew Don, who had served as CFC’s Senior Vice President
and Chief Financial Officer since 2013, to succeed Sheldon C. Petersen as CFC’s Chief Executive Officer (“CEO”),
effective May 3, 2021. We do not anticipate any fundamental changes in CFC’s overall business model as a result of this
leadership change. As a member-owned cooperative, we plan to continue working with our members to ensure that CFC is
able to meet their financing needs, as well as provide industry expertise and strategic services to aid them in delivering
affordable and reliable essential services to their communities.
Outlook
We currently anticipate growth in loans outstanding over the next 12 months. Assuming the yield curve remains steep
during this period, we believe our anticipated growth in loans outstanding will contribute to an increase in our net interest
income, net interest yield, adjusted net interest income and adjusted net interest yield over the next 12 months. We expect
that our adjusted debt-to-equity ratio, which excludes the impact of derivative forward fair value gains and losses, will
remain elevated above our target threshold of 6.00-to-1 in the near term due to a projected increase in total debt outstanding
to fund the anticipated growth in our loan portfolio. Our reported income and equity include the impact of periodic
30
unrealized fluctuations in the fair value of our interest rate swaps. These periodic fluctuations are primarily driven by
changes in expected interest rates over the life of the swaps, which we are unable to predict because the majority of our
swaps are long-term, with an average remaining life of approximately 14 years as of May 31, 2021. We therefore exclude
the potential impact of derivative forward value gains and losses from our forecasted adjusted net income-related measures.
Despite S&P’s downgrade of our issuer credit ratings in March 2021, we believe that the overall credit quality of our loan
portfolio remained high as of May 31, 2021, as the significant adverse financial impact from the surge in wholesale power
costs in Texas during the February 2021 polar vortex was primarily limited to our exposure to Brazos and Rayburn. Our
estimate of expected credit losses on loans outstanding to these two borrowers, which together totaled $464 million as of
May 31, 2021, involves significant judgment and assumptions that are based on information available to us as of the date of
this Report. Although Texas enacted legislation in mid-June 2021 that offers financing programs for qualifying electric
cooperatives exposed to power costs during the February 2021 polar vortex, we are currently uncertain whether Brazos and
Rayburn will utilize the provisions available under the legislation.
See “Item 1A. Risk Factors” for a discussion of the potential adverse impact of natural disasters, including weather-related
events such as the February 2021 polar vortex, and widespread health emergencies, such as COVID-19, on our business,
results of operations, financial condition and liquidity.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance 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 under “Note 1—Summary of Significant Accounting Policies.”
Certain accounting policies are considered critical because they involve significant judgments and assumptions about highly
complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a
material impact on our results of operations or financial condition. Our estimation of the allowance for expected credit
losses involves significant judgments and assumptions. We have therefore identified the estimation of the allowance for
credit losses as a critical accounting policy. See “Item 1A. Risk Factors” for a discussion of the risks associated with
management’s judgments and estimates in applying our accounting policies and methods.
Prior to the adoption of CECL on June 1, 2020, we maintained an allowance based on an estimate of probable incurred
losses inherent in our loan portfolio as of each balance sheet date. Under CECL, we are required to maintain an allowance
based on a current estimate of credit losses that are expected to occur over the remaining contractual life of the loans in our
portfolio. The methods utilized to estimate the allowance for credit losses, key assumptions and quantitative and qualitative
information considered by management in determining the appropriate allowance for credit losses is discussed in “Note 1—
Summary of Significant Accounting Policies.”
31
Some of the key inputs we use in in determining the appropriate allowance for credit losses are more readily quantifiable,
such as our historical loss data and third-party default data, while other inputs require more qualitative judgment, such as our
internally assigned borrower risk ratings that are intended to assess a borrower’s capacity to meet its financial obligations
and provide information on the probability of default. Degrees of imprecision exist in each of these inputs due in part to
subjective judgments involved and an inherent lag in the data available to quantify current conditions and events that may
affect our credit loss estimate.
Our internally assigned borrower risk ratings serve as the primary credit quality indicator for our loan portfolio. We perform
an annual comprehensive review of each of our borrowers, following the receipt of the borrower’s annual audited financial
statements, to reassess the borrower’s risk rating. In addition, 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. Our
Credit Risk Management Group and Corporate Credit Committee review and provide rigorous oversight and governance
around our internally assigned risk ratings to ensure that the ratings process is consistent. In addition, we engage third-party
credit risk management experts to conduct an independent annual review of our risk rating system to validate the overall
integrity of our rating system. This review involves an evaluation of the accuracy and timeliness of individual risk ratings
and the overall effectiveness of our risk-rating framework relative to the risk profile of our credit exposures. While we have
a robust risk-rating process, changes in our borrower risk ratings may not always directly coincide with changes in the risk
profile of an individual borrower due to the timing of the rating process and a potential lag in the receipt of information
necessary to evaluate the impact of emerging developments and current conditions on the risk ratings of our borrower.
Although our allowance for credit losses is sensitive to each key input, shifts in the credit risk ratings of our borrowers
generally have the most notable impact on our allowance for credit losses.
Allowance for Credit Losses
Our allowance for credit losses was $86 million as of May 31, 2021, consisting of an allowance for loans collectively
evaluated of $43 million and an allowance for loans individually evaluated of $43 million. The allowance coverage ratio
was 0.30% as of May 31, 2021. We discuss the methodology used to estimate the allowance for credit losses in “Note 1—
Summary of Significant Accounting Policies.”
Key Assumptions
Determining the appropriateness of the allowance for credit losses is subject to numerous estimates and assumptions
requiring significant management judgment about matters that involve a high degree of subjectivity and are difficult to
predict. The key assumptions in determining our collective allowance that require significant management judgment and
may have a material impact on the amount of the allowance include the segmentation of our loan portfolio; our internally
assigned borrower risk ratings; the probability of default; the loss severity or recovery rate in the event of default for each
portfolio segment; and management’s consideration of qualitative factors that may cause estimated credit losses associated
with our existing loan portfolio to differ from our historical loss experience.
As discussed below in “Credit Risk—Loan Portfolio Credit Risk,” CFC has experienced only 17 defaults in its 52-year
history, and prior to Brazos we had no defaults in our electric utility loan portfolio since fiscal year 2013. As such, we have
a limited history of defaults to develop reasonable and supportable estimated probability of default rates for our existing loan
portfolio. We therefore utilize third-party default data for the utility sector as a proxy to estimate probability of default rates
for our loan portfolio segments. However, we utilize our internal historical loss experience to estimate loss given default, or
the recovery rate, for each of our loan portfolio segments. We believe our internal historical loss experience serves as a more
reliable estimate of loss severity than third-party data due to the organizational structure and operating environment of rural
utility cooperatives, our lending practice of generally requiring a senior security position on the assets and revenue of
borrowers for long-term loans, the approach we take in working with borrowers that may be experiencing operational or
financial issues and other factors discussed in “Credit Risk—Loan Portfolio Credit Risk.”
The key assumptions in determining our asset-specific allowance that require significant management judgment and may
have a material impact on the amount of the allowance include the determination that a loan is individually evaluated,
measuring the amount and timing of future cash flows for individually evaluated loans that are not collateral-dependent and
estimating the value of the underlying collateral for individually evaluated loans that are collateral-dependent.
32
The degree to which any particular assumption affects the allowance for credit losses depends on the severity of the change
and its relationship to the other assumptions. We regularly evaluate the underlying assumptions used in determining the
allowance for credit losses and periodically update our assumptions to better reflect present conditions, including current
trends in credit performance and borrower risk profile, portfolio concentration risk, changes in risk-management practices,
changes in the regulatory environment, general economic trends and other factors specific to our loan portfolio segments.
We did not change the nature of the underlying inputs used in determining our allowance for credit losses during fiscal year
2021.
Sensitivity Analysis
As noted above, our allowance for credit losses is sensitive to a variety of factors. While management uses its best judgment
to assess loss data and other factors to determine the allowance for credit losses, changes in our loss assumptions,
adjustments to assigned borrower risk ratings, the use of alternate external data sources or other factors could affect our
estimate of probable credit losses inherent in the portfolio as of each balance sheet date, which would also impact the related
provision for credit losses recognized in our consolidated statements of operations. For example, changes in the inputs
below, without taking into consideration the impact of other potential offsetting or correlated inputs, would have the
following effect on our allowance of credit losses as of May 31, 2021.
• A 10% increase or decrease in the default rates for all of our portfolio segments would result in a corresponding increase
or decrease of approximately $4 million.
• A 1% increase or decrease in the recovery rates for all of our portfolio segments would result in a corresponding decrease
or increase of approximately $10 million.
• A one-notch downgrade in the internal borrower risk ratings for our entire loan portfolio would result in an increase of
approximately $23 million, while a one-notch upgrade would result in a decrease of approximately $27 million.
These sensitivity analyses are intended to provide an indication of the isolated impact of hypothetical alternative
assumptions on our allowance for credit losses. Because management evaluates a variety of factors and inputs in
determining the allowance for credit losses, these sensitivity analyses are not considered probable and do not imply an
expectation of future changes in loss rates or borrower risk ratings. Given current processes employed in estimating the
allowance for credit losses, management believes the inherent loss rates and currently assigned risk ratings are appropriate.
It is possible that others performing the analyses, given the same information, may at any point in time reach different
reasonable conclusions that could be significant to our consolidated financial statements.
We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them
as necessary based on changing conditions. Management has discussed significant judgments and assumptions in applying
our critical accounting policies with the Audit Committee of the CFC Board of Directors. We also provide additional
information on the allowance for credit losses in the “Credit Risk—Allowance for Credit Losses” section and in “Note 5—
Allowance for Credit Losses.” Also see the “Credit Risk—Loan Portfolio Credit Risk—Credit Quality Indicators” section
and “Note 4—Loans” where we provide information on credit metrics and discuss the overall credit quality of our loan
portfolio.
RECENT ACCOUNTING CHANGES AND OTHER DEVELOPMENTS
Recent Accounting Changes
See “Note 1—Summary of Significant Accounting Policies” for information on accounting standards adopted during the
current fiscal year, as well as recently issued accounting standards not yet required to be adopted and the expected impact of
the adoption of these accounting standards. 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 also discuss the
impact in the applicable section(s) of this MD&A.
33
CONSOLIDATED RESULTS OF OPERATIONS
The section below provides a comparative discussion of our consolidated results of operations between fiscal years 2021 and
2020. Following this section, we provide a discussion and analysis of material changes in amounts reported on our
consolidated balance sheet as of May 31, 2021 from amounts reported as of May 31, 2020. 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. See “Item 7. MD&A—Consolidated Results of Operations” in our Annual Report on Form 10-K
for the fiscal year ended May 31, 2020 (“2020 Form 10-K”) for a comparative discussion of our consolidated results of
operations between fiscal year 2020 and the fiscal year ended May 31, 2019 (“fiscal year 2019”).
Net Interest Income
Net interest income represents the difference between the interest income earned on our interest-earning assets, which
includes loans and investment securities, 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 fiscal years 2021, 2020 and 2019, 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.”
34
Table 2: Average Balances, Interest Income/Interest Expense and Average Yield/Cost
(Dollars in thousands)
Assets:
Long-term fixed-rate loans(1)....
Long-term variable-rate loans...
Line of credit loans...................
Troubled debt restructuring
(“TDR”) loans...........................
Nonperforming loans................
Other, net(2)...............................
Total loans.................................
Cash, time deposits and
investment securities.................
Total interest-earning assets..
Other assets, less allowance for
credit losses(3)........................
Total assets(3).............................
Liabilities:
Commercial paper.....................
Other short-term borrowings.....
Total short-term borrowings.....
Medium-term notes...................
Collateral trust bonds ...............
Guaranteed Underwriter
Program notes payable..........
Farmer Mac notes payable........
Other notes payable...................
Subordinated deferrable debt ...
Subordinated certificates...........
Total interest-bearing
liabilities...................................
Other liabilities(3)......................
Total liabilities(3).......................
Total equity(3)............................
Total liabilities and equity(3).....
Net interest spread(4)..................
Impact of non-interest bearing
funding(5)...............................
Net interest income/net interest
yield(6)...................................
Adjusted net interest income/
adjusted net interest yield:
Interest income..........................
Interest expense.........................
Add: Net periodic derivative
cash settlements interest
expense(7)...............................
Adjusted interest expense/
adjusted average cost(8).........
Adjusted net interest spread(6)...
Impact of non-interest bearing
funding(5)...............................
Adjusted net interest income/
adjusted net interest yield(9)...
Year Ended May 31,
2021
Interest
Income/
Expense
Average
Balance
Average
Yield/
Cost
Average
Balance
2020
Interest
Income/
Expense
Average
Yield/
Cost
Average
Balance
2019
Interest
Income/
Expense
Average
Yield/
Cost
$ 24,978,267 $ 1,051,524
4.21 % $ 23,890,577 $ 1,043,918
4.37 % $ 22,811,905 $ 1,012,277
4.44 %
645,819
1,626,092
14,976
35,596
10,328
185,554
790
—
—
(1,381)
2.32
2.19
7.65
—
—
891,541
1,718,364
31,293
55,140
11,238
5,957
836
—
—
(1,304)
3.51
3.21
7.44
—
—
1,093,455
1,609,629
41,219
57,847
12,183
—
—
846
—
(1,128)
3.77
3.59
6.94
—
—
27,446,060
1,101,505
4.01
26,517,677
1,129,883
4.26
25,527,172
1,111,061
4.35
796,566
15,096
1.90
866,013
21,403
2.47
838,599
24,609
2.93
$ 28,242,626 $ 1,116,601
3.95 % $ 27,383,690 $ 1,151,286
4.20 % $ 26,365,771 $ 1,135,670
4.31 %
537,506
$ 28,780,132
551,378
$ 27,935,068
879,817
$ 27,245,588
$ 2,189,558 $
2,148,767
8,330
6,400
4,338,325
14,730
3,904,603
113,582
6,938,534
249,248
6,146,410
167,403
2,844,252
50,818
10,246
986,209
1,270,385
241
51,551
54,490
0.38 % $ 2,318,112 $ 45,713
1.97 % $ 2,413,784 $ 62,175
0.30
0.34
2.91
3.59
2.72
1.79
2.35
5.23
4.29
1,795,351
4,113,463
32,282
77,995
3,551,973
125,954
7,185,910
257,396
5,581,854
162,929
2,986,469
87,617
17,586
986,035
1,349,454
671
51,527
57,000
1.80
1.90
3.55
3.58
2.92
2.93
3.82
5.23
4.22
1,315,455
3,729,239
30,679
92,854
3,813,666
133,797
7,334,957
273,413
5,045,478
147,895
2,807,705
28,044
759,838
1,369,051
90,942
1,237
38,628
57,443
2.58 %
2.33 %
2.49
3.51
3.73
2.93
3.24
4.41
5.08
4.20
$ 26,438,964 $ 702,063
2.66 % $ 25,772,744 $ 821,089
3.19 % $ 24,887,978 $ 836,209
3.36 %
1,380,414
27,819,378
960,754
$ 28,780,132
1,141,884
26,914,628
1,020,440
$ 27,935,068
816,074
25,704,052
1,541,536
$ 27,245,588
1.29 %
0.18
1.01 %
0.20
0.95 %
0.19
$ 414,538
1.47 %
$ 330,197
1.21 %
$ 299,461
1.14 %
$ 1,116,601
3.95 %
702,063
2.66
$ 1,151,286
4.20 %
821,089
3.19
$ 1,135,670
4.31 %
836,209
3.36
115,645
1.28
55,873
0.55
43,611
0.40
$ 817,708
3.09 %
0.86 %
0.20
$ 876,962
3.40 %
0.80 %
0.20
$ 879,820
3.54 %
0.77 %
0.20
$ 298,893
1.06 %
$ 274,324
1.00 %
$ 255,850
0.97 %
35
____________________________
(1)
(2)
Interest income on long-term, fixed-rate loans includes loan conversion fees, which are generally deferred and recognized as interest income using the
effective interest method.
Consists of late payment fees and net amortization of deferred loan fees and loan origination costs.
(3)
Average balance is calculated based on a month-end average balance.
Net interest spread represents the difference between the average yield on total average interest-earning assets and the average cost of total average
interest-bearing liabilities. Adjusted net interest spread represents the difference between the average yield on total average interest-earning assets and
the adjusted average cost of total average interest-bearing liabilities.
Includes other liabilities and equity.
(6)
Net interest yield is calculated based on net interest income for the period divided by total average interest-earning assets for the period.
Represents the impact of net periodic contractual interest amounts on our interest rate swaps during the period. This amount is added to interest expense
to derive non-GAAP adjusted interest expense. The average (benefit)/cost associated with derivatives is calculated based on net periodic swap settlement
interest amount during the period divided by the average outstanding notional amount of derivatives during the period. The average outstanding notional
amount of interest rate swaps was $9,062 million, $10,180 million and $10,968 million for fiscal years 2021, 2020 and 2019, respectively.
Adjusted interest expense consists of interest expense plus net periodic derivative cash settlements interest expense during the period. Net periodic
derivative cash settlement interest amounts are reported on our consolidated statements of operations as a component of derivative gains (losses).
Adjusted average cost is calculated based on adjusted interest expense for the period divided by total average interest-bearing liabilities during the
period.
Adjusted net interest yield is calculated based on adjusted net interest income for the period divided by total average interest-earning assets for the
period.
(4)
(5)
(7)
(8)
(9)
Table 3 displays the change in net interest income between periods and the extent to which the variance is attributable to (i)
changes in the volume of our interest-earning assets and interest-bearing liabilities or (ii) changes in the interest rates of
these assets and liabilities. The table also presents the change in adjusted net interest income between periods. Changes that
are not solely due to either volume or rate are allocated to these categories on a pro-rata basis based on the absolute value of
the change due to average volume and average rate.
36
Table 3: Rate/Volume Analysis of Changes in Interest Income/Interest Expense
2021 versus 2020
2020 versus 2019
(Dollars in thousands)
Interest income:
Total
Variance
Variance Due To:
Volume
Rate
(1)
Total
Variance
Variance Due To:
(1)
Volume
Rate
Long-term fixed-rate loans..........................
$
7,606
$
47,527 $ (39,921) $ 31,641 $ 47,866 $ (16,225)
Long-term variable-rate loans.....................
Line of credit loans......................................
TDR loans....................................................
Other, net.....................................................
Total loans...................................................
Cash, time deposits and investment
securities..................................................
(16,317)
(19,544)
(46)
(77)
(8,625)
(7,692)
(9,926)
(7,611)
(2,315)
(2,961) (16,583)
(2,707)
3,908
(6,615)
(68)
—
22
(77)
(10)
(176)
(66)
—
56
(176)
(28,378)
35,873
(64,251)
18,822
44,097
(25,275)
(6,307)
(1,716)
(4,591)
(3,206)
804
(4,010)
Total interest income...................................
$
(34,685) $
34,157 $ (68,842) $ 15,616 $ 44,901 $ (29,285)
Interest expense:
Commercial paper.......................................
$
(37,383) $
(2,535) $ (34,848) $ (16,462) $
(2,464) $ (13,998)
(688)
(9,115)
1,400
379
Other short-term borrowings.......................
Total short-term borrowing.........................
Medium-term notes.....................................
Collateral trust bonds...................................
Guaranteed Underwriter Program notes
payable.....................................................
(25,882)
(63,265)
(12,372)
(8,148)
6,355
(32,237)
1,603
11,192
(9,589)
3,820
(67,085)
(14,859)
8,728
(23,587)
12,504
(24,876)
(7,843)
(9,181)
1,338
(8,861)
713
(16,017)
(5,556)
(10,461)
4,474
16,479
(12,005)
15,034
15,722
Farmer Mac notes payable...........................
(36,799)
(4,172) (32,627)
(3,325)
5,790
Other notes payable.....................................
Subordinated deferrable debt.......................
(430)
24
(280)
(150)
(566)
(461)
(105)
9
15
12,899
11,499
Subordinated certificates.............................
(2,510)
(3,340)
830
(443)
(822)
Total interest expense..................................
(119,026)
16,159
(135,185)
(15,120)
25,719
(40,839)
Net interest income....................................
$
84,341
$
17,998 $ 66,343
$ 30,736 $ 19,182 $ 11,554
Adjusted net interest income:
Interest income............................................
Interest expense...........................................
Net periodic derivative cash settlements
interest expense(2).....................................
Adjusted interest expense(3).........................
Adjusted net interest income.......................
____________________________
$
(34,685) $
34,157 $ (68,842) $ 15,616 $ 44,901 $ (29,285)
(119,026)
16,159
(135,185)
(15,120)
25,719
(40,839)
59,772
(6,137) 65,909
12,262
(3,136)
15,398
(59,254)
10,022
(69,276)
(2,858)
22,583
(25,441)
$
24,569
$
24,135 $
434
$ 18,474 $ 22,318 $
(3,844)
(1)
(2)
(3)
The changes for each category of interest income and interest expense are divided between the portion of change attributable to the variance in volume
and the portion of change attributable to the variance in rate for that category. The amount attributable to the combined impact of volume and rate has
been allocated to each category based on the proportionate absolute dollar amount of change for that category.
For the net periodic derivative cash settlements interest amount, the variance due to average volume represents the change in the net periodic derivative
cash settlements interest amount resulting from the change in the average notional amount of derivative contracts outstanding. The variance due to
average rate represents the change in the net periodic derivative cash settlements amount resulting from the net difference between the average rate paid
and the average rate received for interest rate swaps during the period.
See “Non-GAAP Financial Measures” for additional information on our adjusted non-GAAP measures.
37
Reported Net Interest Income
Reported net interest income of $415 million for fiscal year 2021 increased $84 million, or 26%, from fiscal year 2020,
driven by the combined impact of an increase in the net interest yield of 21% (26 basis points) to 1.47% and an increase in
average interest-earning assets of $859 million, or 3%.
• Net Interest Yield: The increase in the net interest yield of 26 basis points, or 21%, was primarily attributable to a
reduction in our average cost of borrowings of 53 basis points to 2.66%, which was partially offset by a decrease in the
average yield on interest-earning assets of 25 basis points to 3.95%. The decreases in our average cost of borrowings and
average yield on interest-earning assets were driven by lower interest rates on our short-term borrowings and line-of-
credit and variable-rate loans attributable to a steep decline in short-term interest rates since the onset of the COVID-19
pandemic. In mid-March 2020, the FOMC of the Federal Reserve lowered the federal funds rate to a near-zero target
range of 0% to 0.25% as part of a series of measures implemented to ease the economic impact of the COVID-19
pandemic. The benchmark federal funds rate has remained at this near-zero target range since March 2020. During fiscal
year 2021, the 3-month LIBOR decreased 21 basis points to 0.13% as of May 31, 2021. In contrast, medium- and longer-
term interest rates began trending up in fiscal year 2021, following significant declines during fiscal year 2020. The 10-
year swap rate increased 92 basis points to 1.56% as of May 31, 2021, while the 30-year swap rate increased 106 basis
points to 2.00% as of May 31, 2021.
• Average Interest-Earning Assets: The increase in average interest-earning assets of 3% during fiscal year 2021 was driven
by growth in average total loans of $928 million, or 4%, from fiscal year 2020, primarily attributable to an increase in
average long-term fixed-rate loans of $1,088 million, or 5%. The lower interest rate presented an opportunity for members
to obtain advances to fund capital investments and refinance with us loans made by other lenders at a reduced fixed rate of
interest.
Adjusted Net Interest Income
Adjusted net interest income of $299 million for fiscal year 2021 increased $25 million, or 9%, from fiscal year 2020, driven
by an increase in the adjusted net interest yield of 6 basis points, or 6%, to 1.06% , and the increase in average interest-
earning assets of $859 million, or 3%.
• Adjusted Net Interest Yield: The increase in the adjusted net interest yield of 6 basis points, or 6%, reflected the favorable
impact of a reduction in our adjusted average cost of borrowings of 31 basis points to 3.09%, which was partially offset by
a decrease in the average yield on interest-earning assets of 25 basis points to 3.95%, both of which were attributable to
the lower interest rate environment. Reductions in the average yields on line-of-credit and variable-rate loans drove the
decrease in the average yield on interest-earning assets, while reductions in interest rates on our short-term and variable-
rate borrowings drove the reduction in our adjusted average cost of borrowings.
• Average Interest-Earning Assets: The increase in average interest-earning assets of 3% was driven by the growth in
average total loans of $928 million, or 4%, from fiscal year 2020, primarily attributable to an increase in average long-
term fixed-rate loans as described above.
We include the net periodic derivative interest settlement amounts on our interest rate swaps in the calculation of our
adjusted average cost of borrowings, which, as a result, also impacts the calculation of adjusted net interest income and
adjusted net interest yield. We recorded net periodic derivative cash settlements interest expense of $116 million in fiscal
year 2021, an increase of $60 million, or 107%, from $56 million in fiscal year 2020. Because our derivative portfolio
consists of a higher proportion of pay-fixed swaps than receive-fixed swaps, we generally record derivative losses when
interest rates decline and derivative gains when interest rates rise. The floating-rate payments on our interest rate swaps are
typically based on the 3-month LIBOR, which decreased 21 basis points over the last 12 months to 0.13% as of May 31,
2021. The decrease in the 3-month LIBOR drove the increase in the net periodic derivative cash settlements interest expense
recorded in fiscal year 2021.
See “Non-GAAP Financial Measures” for additional information on our adjusted measures, including a reconciliation of
these measures to the most comparable U.S. GAAP measures.
38
Provision for Credit Losses
We recorded a provision for credit losses, based on the CECL model for estimating the allowance, of $29 million in fiscal
year 2021. In comparison, we recorded a provision for credit losses, based on the incurred model for estimating the
allowance, of $36 million in fiscal year 2020.
Under CECL, we are required to maintain an allowance based on a current estimate of credit losses that are expected to
occur over the remaining contractual term of the loans in our portfolio. Prior to the adoption of CECL using the modified
retrospective approach on June 1, 2020, we maintained an allowance based on an estimate of probable incurred losses
inherent in our loan portfolio as of each balance sheet date.
The provision for credit losses of $29 million for fiscal year 2021 was primarily attributable to an addition to the allowance
for credit losses of $33 million in fiscal year 2021, resulting from material risk rating downgrades of Brazos and Rayburn
due to their exposure to elevated power costs during the February 2021 polar vortex. The provision for credit losses of $36
million for fiscal year 2020 was primarily attributable to the establishment of an asset-specific allowance of $34 million in
the fourth quarter resulting from the classification of loans outstanding to a CFC power supply borrower, which totaled $168
million as of May 31, 2020, as nonperforming.
We discuss our methodology for estimating the allowance for credit losses under the CECL model, which we adopted using
the modified retrospective approach on June 1, 2020, in “Note 1—Summary of Significant Accounting Policies.” We also
provide information on the allowance for credit losses below in the section “Credit Risk—Allowance for Credit Losses” and
in “Note 5—Allowance for Credit Losses.”
Non-Interest Income
Non-interest income consists of fee and other income, gains and losses on derivatives not accounted for in hedge accounting
relationships and gains and losses on equity and debt investment securities. In the fourth quarter of fiscal year 2020, we
transferred all of the debt securities in our held-to-maturity investment portfolio to trading. As a result, we discontinued the
reporting of our debt securities at amortized cost and began reporting these securities at fair value and recognizing the
related unrealized gains and losses in earnings.
Table 4 presents the components of non-interest income (loss) recorded in our consolidated statements of operations for
fiscal years 2021, 2020 and 2019.
Table 4: Non-Interest Income
(Dollars in thousands)
Non-interest income components:
Fee and other income............................................................... $
Derivative gains (losses)..........................................................
Investment securities gains (losses).........................................
Year Ended May 31,
2021
2020
2019
$
18,929
506,301
1,495
$
22,961
(790,151)
9,431
15,355
(363,341)
(1,799)
Total non-interest income (loss)..............................................
$
526,725
$
(757,759) $
(349,785)
The significant variances in non-interest income between fiscal years were primarily attributable to changes in the derivative
gains (losses) recognized in our consolidated statements of operations during each fiscal year. In addition, we experienced a
decrease of $8 million in our investment securities gains, primarily due to changes in the fair market value and a decrease in
fee and other income of $4 million due to lower prepayment fees than in the same prior-year period.
Derivative Gains (Losses)
Our derivative instruments are an integral part of our interest rate risk management strategy. Our principal purpose in using
derivatives is to manage our aggregate interest rate risk profile within prescribed risk parameters. The derivative instruments
we use primarily include interest rate swaps, which we typically hold to maturity. In addition, we may on occasion use
treasury locks to manage the interest rate risk associated with debt that is scheduled to reprice in the future. The primary
39
factors affecting the fair value of our derivatives and derivative gains (losses) recorded in our results of operations include
changes in interest rates, the shape of the swap curve and the composition of our derivative portfolio. We generally do not
designate our interest rate swaps, which currently account for all our derivatives, for hedge accounting. Accordingly,
changes in the fair value of interest rate swaps are reported in our consolidated statements of operations under derivative
gains (losses). However, if we execute a treasury lock, we typically designate the treasury lock as a cash flow hedge. We did
not have any derivatives designated as accounting hedges as of May 31, 2021 or May 31, 2020.
We currently use two types of interest rate swap agreements: (i) we pay a fixed rate of interest and receive a variable rate of
interest (“pay-fixed swaps”), and (ii) we pay a variable rate of interest and receive a fixed rate of interest (“receive-fixed
swaps”). The interest amounts are based on a specified notional balance, which is used for calculation purposes only. The
benchmark variable rate for the substantial majority of the floating-rate payments under our swap agreements is 3-month
LIBOR. As interest rates decline, pay-fixed swaps generally decrease in value and result in the recognition of derivative
losses, as the amount of interest we pay remains fixed, while the amount of interest we receive declines. In contrast, as
interest rates rise, pay-fixed swaps generally increase in value and result in the recognition of derivative gains, as the amount
of interest we pay remains fixed, but the amount we receive increases. With a receive-fixed swap, the opposite results occur
as interest rates decline or rise. Our derivative portfolio consists of a higher proportion of pay-fixed swaps than receive-fixed
swaps; therefore, we generally record derivative losses when interest rates decline and derivative gains when interest rates
rise. Because our pay-fixed and receive-fixed swaps are referenced to different maturity terms along the swap curve,
different changes in the swap curve—parallel, flattening, inversion or steepening—will also impact the fair value of our
derivatives.
Table 5 presents the components of net derivative gains (losses) recorded in our consolidated statements of operations.
Derivative cash settlements interest expense represents the net periodic contractual interest amount for our interest-rate
swaps during the reporting period. Derivative forward value gains (losses) represent the change in fair value of our interest
rate swaps during the applicable reporting period due to changes in expected future interest rates over the remaining life of
our derivative contracts.
Table 5: Derivative Gains (Losses)
(Dollars in thousands)
Derivative gains (losses) attributable to:
Derivative cash settlements interest expense........................... $
Year Ended May 31,
2021
2020
2019
(115,645) $
(55,873) $
(43,611)
Derivative forward value gains (losses)..................................
Derivative gains (losses).......................................................... $
621,946
506,301
$
(734,278)
(790,151) $
(319,730)
(363,341)
The derivative gains of $506 million in fiscal year 2021 were due to an increase in the net fair value of our swap portfolio,
attributable to increases in medium- and longer-term swap interest rates, as depicted by the comparative May 31, 2021 and
May 31, 2020 swap curves presented in Table 7 below.
The net derivative losses of $790 million in fiscal year 2020 were due to a decrease in the net fair value of our swap
portfolio attributable to declines in interest rates across the swap curve, as depicted by the comparative May 31, 2020 and
May 31, 2019 swap curves presented in Table 7 below.
Derivative Cash Settlements
As indicated in Table 5 above, we recorded derivative cash settlements interest expense of $116 million in fiscal year 2021,
an increase of $60 million compared with fiscal year 2020. The variable-rate payments on our interest rate swaps are
typically based on the 3-month LIBOR, which decreased 21 basis points during fiscal year 2021 to 0.13% as of May 31,
2021. Because our derivatives portfolio consists of a higher proportion of pay-fixed, receive-variable swaps, the decrease in
the 3-month LIBOR resulted in a reduction in variable-rate payments due to us on our pay-fixed swaps, which drove the
increase derivative cash settlements interest expense in fiscal year 2021.
Table 6 displays, by interest rate swap agreement type, the average outstanding notional amount and the weighted-average
interest rate paid and received for the net periodic derivative cash settlements interest expense during each respective period.
40
Pay-fixed swaps accounted for approximately 73% and 71% of the outstanding notional amount of our derivative portfolio
as of May 31, 2021 and 2020, respectively.
Table 6: Derivatives—Average Notional Amounts and Interest Rates
2021
Year Ended May 31,
2020
2019
(Dollars in thousands)
Average
Notional
Amount
Weighted-
Average Rate
Paid
Received
Average
Notional
Amount
Weighted-
Average Rate
Paid
Received
Average
Notional
Amount
Weighted-
Average Rate
Paid
Received
Pay-fixed swaps.........
$ 6,566,734
2.73 % 0.27 % $ 7,092,961
2.82 % 1.91 % $ 7,352,704
2.83 % 2.53 %
Receive-fixed swaps..
2,494,890
1.03
2.78
3,086,705
2.62
2.64
3,615,781
3.15
2.53
Total..........................
$ 9,061,624
2.26 % 0.96 % $ 10,179,666
2.76 % 2.13 % $ 10,968,485
2.93 % 2.53 %
The average remaining maturity of our pay-fixed and receive-fixed swaps was 19 years and three years, respectively, as of
May 31, 2021. In comparison, the average remaining maturity of our pay-fixed and receive-fixed swaps was 20 years and
four years, respectively, as of May 31, 2020.
Comparative Swap Curves
Table 7 table below depicts comparative swap curves as of May 31, 2021, 2020, 2019 and 2018.
Table 7: Comparative Swap Curves
____________________________
Benchmark rates obtained from Bloomberg.
See “Note 1—Summary of Significant Accounting Policies—Derivative Instruments” and “Note 10—Derivative
Instruments and Hedging Activities” for additional information on our derivative instruments. Also refer to “Note 14—Fair
Value Measurement” for information on how we estimate the fair value of our derivative instruments.
41
Comparative Swap Curves0.13%0.23%0.88%1.56%2.00%0.34%0.25%0.36%0.64%0.94%2.50%1.98%1.92%2.09%2.30%2.32%2.68%2.81%2.88%2.91%May 31, 2021May 31, 2020May 31, 2019May 31, 20183-month LIBOR2-year swap rate5-year swap rate10-year swap rate30-year swap rate0.00%0.50%1.00%1.50%2.00%2.50%3.00%
Non-Interest Expense
Non-interest expense consists of salaries and employee benefit expense, general and administrative expenses, gains and
losses on the early extinguishment of debt and other miscellaneous expenses.
Table 8 presents the components of non-interest expense recorded in our consolidated statements of operations in fiscal
years 2021, 2020 and 2019.
Table 8: Non-Interest Expense
(Dollars in thousands)
Non-interest expense components:
Salaries and employee benefits................................................ $
Other general and administrative expenses.............................
Losses on early extinguishment of debt...................................
Other non-interest expense......................................................
Total non-interest expense.......................................................
$
Year Ended May 31,
2021
2020
2019
(55,258) $
(39,447)
(1,456)
(1,619)
(97,780) $
(54,522) $
(46,645)
(683)
(25,588)
(127,438) $
(49,824)
(43,342)
(7,100)
(1,675)
(101,941)
Non-interest expense of $98 million for fiscal year 2021 decreased $30 million, or 23%, from fiscal year 2020. The decrease
was primarily attributable to the absence of a non-cash impairment charge of $31 million recorded in the fourth quarter of
fiscal 2020 due to management’s decision to abandon a software project to develop an internal-use loan origination and
servicing platform. We also experienced a reduction in other general and administrative expenses of $7 million largely due
to reduced travel and in-person meeting costs and the cancellation of certain events because of the COVID-19 pandemic,
which was offset by the absence of a gain of $8 million recorded in fiscal year 2020 in connection with our sale of land.
Net Income (Loss) Attributable to Noncontrolling Interests
Net income (loss) attributable to noncontrolling interests represents 100% of the results of operations of NCSC and RTFC,
as the members of NCSC and RTFC own or control 100% of the interest in their respective companies. The fluctuations in
net income (loss) attributable to noncontrolling interests are primarily due to changes in the fair value of NCSC’s derivative
instruments recognized in NCSC’s earnings.
We recorded a net income attributable to noncontrolling interests of $2 million in fiscal year 2021. In comparison we
recorded a net loss attributable to noncontrolling interests of $4 million and $2 million in fiscal years 2020 and 2019,
respectively.
CONSOLIDATED BALANCE SHEET ANALYSIS
Total assets increased $1,481 million, or 5%, in fiscal year 2021 to $29,638 million as of May 31, 2021, primarily due to
growth in our loan portfolio. We experienced an increase in total liabilities of $730 million, or 3%, to $28,238 million as of
May 31, 2021, largely due to the issuances of debt to partially fund the growth in our loan portfolio. Total equity increased
$751 million to $1,400 million as of May 31, 2021, attributable to our reported net income of $814 million, which was
partially offset by patronage capital retirement of $60 million authorized by the CFC Board of Directors in July 2020 and
paid to members in September 2020.
Below is a discussion of changes in the major components of our assets and liabilities during fiscal year 2021. Period-end
balance sheet amounts may vary from average balance sheet amounts due to liquidity and balance sheet management
activities that are intended to manage our liquidity requirements and market risk exposure in accordance with our risk
appetite framework.
42
Loan Portfolio
We segregate our loan portfolio into segments 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. We
describe and provide additional information on our member classes in “Item 1. Business—Members” and information about
our loan programs and loan product types in “Item 1. Business—Loan and Guarantee Programs.”
Loans Outstanding
Table 9 presents loans outstanding, by member class and by loan product type, as of May 31, 2021 and 2020. As indicated
in Table 9, loans to CFC distribution and power supply borrowers accounted for 96% of total loans to members as of both
May 31, 2021 and 2020, and long-term fixed-rate loans accounted for 90% and 92% of loans to members as of May 31,
2021 and 2020, respectively.
Table 9: Loans—Outstanding Amount by Member Class and Loan Type
(Dollars in thousands)
Member class:
CFC:
May 31,
2021
2020
Amount
% of Total
Amount
% of Total
Change
$
Distribution.............................................
Power supply...........................................
Statewide and associate...........................
CFC............................................................
NCSC.........................................................
RTFC.........................................................
Total loans outstanding(1)...........................
Deferred loan origination costs—CFC(2)...
Loans to members...................................... $
22,027,423
5,154,312
106,121
27,287,856
706,868
420,383
28,415,107
11,854
28,426,961
78 % $
18
—
96
3
1
100 %
—
100 % $
20,769,653
4,731,506
106,498
25,607,657
697,862
385,335
26,690,854
11,526
26,702,380
78 % $ 1,257,770
422,806
18
—
(377)
1,680,199
96
9,006
3
35,048
1
100 % 1,724,253
328
—
100 % $ 1,724,581
Loan type:
Long-term loans:
$
Fixed-rate ...............................................
Variable-rate ...........................................
Total long-term loans ................................
Line of credit loans....................................
Total loans outstanding(1)...........................
Deferred loan origination costs—CFC(2)...
Loans to members...................................... $
____________________________
25,514,766
658,579
26,173,345
2,241,762
90 % $
2
92
8
24,472,003
655,704
25,127,707
1,563,147
92 % $ 1,042,763
2
2,875
1,045,638
94
678,615
6
28,415,107
100 %
26,690,854
100 % 1,724,253
11,854
—
11,526
—
328
28,426,961
100 % $
26,702,380
100 % $ 1,724,581
Represents the unpaid principal balance, net of charge-offs and recoveries, of loans as of the end of each period.
(1)
(2) Deferred loan origination costs are recorded on the books of CFC.
Loans to members totaled $28,427 million as of May 31, 2021, an increase of $1,725 million, or 6%, from May 31, 2020.
The increase in loans was driven by an increase in long-term and line of credit loans of $1,046 million and $679 million,
respectively. We experienced increases in CFC distribution loans, CFC power supply loans, RTFC loans and NCSC loans of
$1,258 million, $423 million, $35 million and $9 million, respectively.
Long-term loan advances totaled $2,514 million during fiscal year 2021, of which approximately 86% was provided to
members for capital expenditures and 8% was provided for the refinancing of loans made by other lenders. In comparison,
43
long-term loan advances totaled $2,422 million during fiscal year 2020, of which approximately 80% was provided to
members for capital expenditures and 15% was provided for the refinancing of loans made by other lenders.
We provide additional information about our loan product types in “Item 1. Business—Loan and Guarantee Programs” and
“Note 4—Loans.” See “Debt—Collateral Pledged” below for information on encumbered and unencumbered loans and
“Credit Risk—Credit Risk Management” for information on the credit risk profile of our loan portfolio.
Loans—Retention Rate
Table 10 presents a summary of the options selected by borrowers for CFC’s long-term fixed-rate loans that repriced, in
accordance with our standard loan repricing provisions, during the past three fiscal years. At the repricing date, the borrower
has the option of (i) selecting CFC’s current long-term fixed rate for a term ranging from one year to the full remaining term
of the loan; (ii) selecting CFC’s current long-term variable rate; or (iii) repaying the loan in full.
Table 10: Loans—Historical Retention Rate and Repricing Selection(1)
2021
May 31,
2020
2019
Amount
(Dollars in thousands)
Loans retained:
Long-term fixed rate selected.............. $ 383,939
9,564
Long-term variable rate selected.........
393,503
Total loans retained by CFC................
3,508
Loans repaid.........................................
Total..................................................... $ 397,011
____________________________
(1)
Does not include NCSC and RTFC loans.
% of Total
Amount
% of Total
Amount
% of Total
97 % $ 441,165
11,446
2
452,611
99
10,350
1
95 % $ 568,252
123,636
3
691,888
98
69,250
2
75 %
16
91
9
100 % $ 462,961
100 % $ 761,138
100 %
As displayed in Table 10, of the loans that repriced over the last three fiscal years, the substantial majority of borrowers
selected a new long-term fixed or variable rate. The average retention rate, calculated based on the election made by the
borrower at the repricing date, was 96% for CFC loans that repriced during the three fiscal years ended May 31, 2021.
Debt
We utilize both short-term borrowings and long-term debt as part of our funding strategy and asset/liability interest rate risk
management. We seek to maintain diversified funding sources across products, programs and markets to manage funding
concentrations and reduce our liquidity or debt rollover risk. Our funding sources include a variety of secured and unsecured
debt securities in a wide range of maturities to our members and affiliates and in the capital markets.
Debt Product Types
We offer various short- and long-term unsecured debt securities to our members and affiliates, including commercial paper,
select notes, daily liquidity fund notes, medium-term notes and subordinated certificates. We also issue commercial paper,
medium-term notes and collateral trust bonds in the capital markets. Additionally, we have access to funds under borrowing
arrangements with banks, private placements and U.S. government agencies. Table 11 displays our primary funding sources
and their selected key attributes.
44
Table 11: Debt—Debt Product Types
Debt Product Type:
Short-term funding programs:
Commercial paper....................................
Select notes..............................................
Daily liquidity fund notes........................
Securities sold under repurchase
agreements...............................................
Other funding programs:
Medium-term notes..................................
Collateral trust bonds(1)............................
Guaranteed Underwriter Program notes
payable(2).................................................
Farmer Mac notes payable(3)....................
Other notes payable(4)...............................
Subordinated deferrable debt(5)................
Members’ subordinated certificates(6)......
Revolving credit agreements....................
____________________________
Maturity Range
Market
Secured/
Unsecured
1 to 270 days Capital markets, members and affiliates Unsecured
Unsecured
30 to 270 days Members and affiliates
Unsecured
Demand note Members and affiliates
1 to 90 days Capital markets
Secured
9 months to 30 years Capital markets, members and affiliates Unsecured
Up to 30 years Capital markets
Up to 30 years U.S. government
Up to 30 years Private placement
Up to 3 years Private placement
Up to 45 years Capital markets
Up to 100 years Members
Up to 5 years Bank institutions
Secured
Secured
Secured
Both
Unsecured
Unsecured
Unsecured
(1)
(2)
(3)
(4)
(5)
(6)
Collateral trust bonds are secured by the pledge of permitted investments and eligible mortgage notes from distribution system borrowers in an amount at
least equal to the outstanding principal amount of collateral trust bonds.
Represents notes payable under the Guaranteed Underwriter Program, which supports the Rural Economic Development Loan and Grant program. The
Federal Financing Bank provides the financing for these notes, and RUS provides a guarantee of repayment. We are required to pledge eligible mortgage
notes from distribution and power supply system borrowers in an amount at least equal to the outstanding principal amount of the notes payable.
We are required to pledge eligible mortgage notes from distribution and power supply system borrowers in an amount at least equal to the outstanding
principal amount under note purchase agreements with Farmer Mac.
Other notes payable consist of unsecured and secured Clean Renewable Energy Bonds. We are required to pledge eligible mortgage notes from
distribution and power supply system borrowers in an amount at least equal to the outstanding principal amount under the Clean Renewable Energy
Bonds Series 2009A note purchase agreement.
Subordinated deferrable debt is subordinate and junior to senior debt and debt obligations we guarantee, but senior to subordinated certificates. We have
the right at any time, and from time to time, during the term of the subordinated deferrable debt to suspend interest payments for a maximum period of
20 consecutive quarters for $1,000 par notes, or a maximum period of 40 consecutive quarters for $25 par notes. To date, we have not exercised our
option to suspend interest payments. We have the right to call the subordinated deferrable debt, at par, any time after 10 years for $1,000 par notes or 5
years for $25 par notes.
Members’ subordinated certificates consist of membership subordinated certificates, loan and guarantee certificates and member capital securities, and
are subordinated and junior to senior debt, subordinated debt and debt obligations we guarantee. Membership subordinated certificates generally mature
100 years subsequent to issuance. Loan and guarantee subordinated certificates have the same maturity as the related long-term loan. Some certificates
also may amortize annually based on the outstanding loan balance. Member capital securities mature 30 years subsequent to issuance. Member capital
securities are callable at par beginning 10 years subsequent to the issuance and anytime thereafter.
Debt Outstanding
Table 12 displays the composition, by product type, of our outstanding debt and the weighted average interest rate as of
May 31, 2021 and 2020. Table 12 also displays the composition of our debt based on several additional selected attributes.
45
Table 12: Total Debt Outstanding and Weighted-Average Interest Rates
(Dollars in thousands)
Debt product type:
Commercial Paper:
Members, at par.............................................
Dealer, net of discounts.................................
Total commercial paper.....................................
Select notes to members....................................
Daily liquidity fund notes to members..............
Securities sold under repurchase agreements....
Medium-term notes:
Members, at par.............................................
Dealer, net of discounts.................................
Total medium-term notes..................................
Collateral trust bonds........................................
Guaranteed Underwriter Program notes
payable..............................................................
Farmer Mac notes payable................................
Other notes payable...........................................
Subordinated deferrable debt............................
Members’ subordinated certificates:
Membership subordinated certificates...........
Loan and guarantee subordinated
certificates......................................................
Member capital securities..............................
Total members’ subordinated certificates.........
Total debt outstanding.......................................
Security type:
Secured debt......................................................
Unsecured debt..................................................
Total..................................................................
Funding source:
Members............................................................
Private placement:
Guaranteed Underwriter Program notes
payable............................................................
Farmer Mac notes payable................................
Total private placement.....................................
Capital markets..................................................
Total..................................................................
Interest rate type:
Fixed-rate debt...................................................
Variable-rate debt..............................................
Total..................................................................
Interest rate type including the impact of
swaps:
Fixed-rate debt(1)................................................
Variable-rate debt(2)...........................................
Total..................................................................
Maturity classification:(3)
Short-term borrowings......................................
Long-term and subordinated debt(4)..................
Total..................................................................
2021
May 31,
2020
Outstanding
Amount
Weighted-
Average
Interest Rate
Outstanding
Amount
Weighted-
Average
Interest Rate
Change
$ 1,124,607
894,977
2,019,584
1,539,150
460,556
200,115
595,037
3,923,385
4,518,422
7,191,944
6,269,303
2,977,909
8,236
986,315
628,594
0.14 % $ 1,318,566
0.16
—
0.15
1,318,566
0.30
1,597,959
508,618
0.08
—
0.30
1.28
2.31
2.17
3.15
2.76
1.68
1.68
5.11
4.95
658,959
3,068,793
3,727,752
7,188,553
6,261,312
3,059,637
11,612
986,119
630,483
0.34 % $
—
0.34
0.75
0.10
—
2.32
3.34
3.16
3.23
2.74
1.99
1.37
5.11
4.95
(193,959)
894,977
701,018
(58,809)
(48,062)
200,115
(63,922)
854,592
790,670
3,391
7,991
(81,728)
(3,376)
196
(1,889)
386,896
239,170
1,254,660
$ 27,426,194
482,965
2.89
226,170
5.00
4.32
1,339,618
2.42 % $ 25,999,746
2.92
5.00
4.22
2.72 % $
(96,069)
13,000
(84,958)
1,426,448
61 %
39
100 %
18 %
23
11
34
48
100 %
77 %
23
100 %
93 %
7
100 %
17 %
83
100 %
46
64 %
36
100 %
21 %
24
12
36
43
100 %
75 %
25
100 %
90 %
10
100 %
15 %
85
100 %
____________________________
(1)
Includes variable-rate debt that has been swapped to a fixed rate, net of any fixed-rate debt that has been swapped to a variable rate.
(2)
(3)
(4)
Includes fixed-rate debt that has been swapped to a variable rate, net of any variable-rate debt that has been swapped to a fixed rate. Also includes
commercial paper notes, which generally have maturities of less than 90 days. The interest rate on commercial paper notes does not change once the note
has been issued; however, the interest rate for new commercial paper issuances changes daily.
Borrowings with an original contractual maturity of one year or less are classified as short-term borrowings. Borrowings with an original contractual
maturity of greater than one year are classified as long-term debt.
Consists of long-term debt, subordinated deferrable debt and total members’ subordinated debt reported on our consolidated balance sheets. Maturity
classification is based on the original contractual maturity as of the date of issuance of the debt.
We issue debt primarily to fund growth in our loan portfolio. As such, our outstanding debt volume generally increases and
decreases in response to member loan demand. Total debt outstanding increased $1,426 million, or 5%, to $27,426 million
as of May 31, 2021, due to borrowings to fund the increase in loans to members. Outstanding dealer commercial paper of
$895 million as of May 31, 2021 was below our targeted maximum threshold of $1,250 million.
Below is a summary of significant financing activities during fiscal year 2021:
• On October 8, 2020, we issued $400 million aggregate principal amount of 1.35% sustainability collateral trust bonds due
March 15, 2031. On February 8, 2021, we issued $350 million of aggregate principal amount of 1.65% collateral trust
bonds due June 15, 2031. In February 2021, we issued dealer medium-term notes totaling $1,425 million.
• On November 19, 2020, we closed on a $375 million committed loan facility (“Series R”) from the Federal Financing
Bank under the Guaranteed Underwriter Program. Pursuant to this facility, we may borrow any time before July 15, 2025.
Each advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the
advance.
• On May 25, 2021, we borrowed $200 million under a securities repurchase agreement and pledged as collateral
investment debt securities classified as trading, the fair value of which was $211 million as of May 31, 2021. We
repurchased these investment debt securities on June 2, 2021.
Member Investments
Debt securities issued to our members represent an important, stable source of funding. Table 13 displays outstanding
member debt, by product type, as of May 31, 2021 and 2020.
Table 13: Member Investments
(Dollars in thousands)
Member investment product type:
May 31,
2021
2020
Amount
% of Total (1)
Amount
% of Total (1)
Change
Commercial paper.................................. $ 1,124,607
56 % $ 1,318,566
100 % $
(193,959)
Select notes............................................
1,539,150
Daily liquidity fund notes......................
Medium-term notes................................
460,556
595,037
Members’ subordinated certificates.......
1,254,660
Total member investments..................... $ 4,974,010
100
100
13
100
1,597,959
508,618
658,959
1,339,618
$ 5,423,720
100
100
18
100
(58,809)
(48,062)
(63,922)
(84,958)
$
(449,710)
Percentage of total debt outstanding......
____________________________
18 %
21 %
(1)
Represents outstanding debt attributable to members for each debt product type as a percentage of the total outstanding debt for each debt product type.
Member investments totaled $4,974 million and accounted for 18% of total debt outstanding as of May 31, 2021, compared
with $5,424 million, or 21%, of total debt outstanding as of May 31, 2020. Over the last three fiscal years, outstanding
member investments as of the end of each quarterly reporting period have averaged $4,995 million.
47
Short-Term Borrowings
Short-term borrowings consist of borrowings with an original contractual maturity of one year or less and do not include the
current portion of long-term debt. Short-term borrowings totaled $4,582 million and accounted for 17% of total debt
outstanding as of May 31, 2021, compared with $3,962 million, or 15%, of total debt outstanding as of May 31, 2020. See
“Liquidity Risk” below and in “Note 6—Short-Term Borrowings” for information on the composition of our short-term
borrowings.
Long-Term and Subordinated Debt
Long-term debt, defined as debt with an original contractual maturity term of greater than one year, primarily consists of
medium-term notes, collateral trust bonds, notes payable under the Guaranteed Underwriter Program and notes payable
under our note purchase agreement with Farmer Mac. Subordinated debt consists of subordinated deferrable debt and
members’ subordinated certificates. Our subordinated deferrable debt and members’ subordinated certificates have original
contractual maturity terms of greater than one year.
Long-term and subordinated debt of $22,844 million and $22,038 million as of May 31, 2021 and 2020, respectively,
accounted for 83% and 85%, of total debt outstanding as of each respective date. We provide additional information on our
long-term debt below under “Liquidity Risk” and in “Note 7—Long-Term Debt” and “Note 8—Subordinated Deferrable
Debt.”
Equity
Table 14 presents the components of total CFC equity and total equity as of May 31, 2021 and 2020.
Table 14: Equity
(Dollars in thousands)
Equity components:
Membership fees and educational fund:
May 31,
2021
2020
Change
Membership fees.........................................................................
$
968
$
969
$
Educational fund.........................................................................
Total membership fees and educational fund..................................
Patronage capital allocated..............................................................
Members’ capital reserve.................................................................
2,157
3,125
923,970
909,749
2,224
3,193
894,066
807,320
Total allocated equity.......................................................................
1,836,844
1,704,579
Unallocated net income (loss):
Prior fiscal year-end cumulative derivative forward value
losses(1)..........................................................................................
Year-to-date derivative forward value gains (losses) (1)................
Period-end cumulative derivative forward value losses(1).............
Other unallocated net income......................................................
(1,079,739)
618,577
(461,162)
(709)
(348,965)
(730,774)
(1,079,739)
3,191
Unallocated net loss.........................................................................
(461,871)
(1,076,548)
CFC retained equity.........................................................................
1,374,973
Accumulated other comprehensive loss..........................................
Total CFC equity.............................................................................
Noncontrolling interests...................................................................
(25)
1,374,948
24,931
628,031
(1,910)
626,121
22,701
(1)
(67)
(68)
29,904
102,429
132,265
(730,774)
1,349,351
618,577
(3,900)
614,677
746,942
1,885
748,827
2,230
Total equity......................................................................................
____________________________
$
1,399,879
$
648,822
$
751,057
(1)
Represents derivative forward value gains (losses) for CFC only, as total CFC equity does not include the noncontrolling interests of the variable interest
48
entities NCSC and RTFC, which we are required to consolidate. We present the consolidated total derivative forward value gains (losses) in Table 38 in
the “Non-GAAP Financial Measures” section below. Also, see “Note 16—Business Segments” for the statements of operations for CFC.
Total equity increased $751 million during fiscal year 2021 to $1,400 million as of May 31, 2021, primarily attributable to
our reported net income of $814 million, which was partially offset by the retirement of patronage capital of $60 million
authorized by the CFC Board of Directors in July 2020 and paid to members in September 2020.
Allocation and Retirement of Patronage Capital
District of Columbia cooperative law requires cooperatives to allocate net earnings to patrons, to a general reserve in an
amount sufficient to maintain a balance of at least 50% of paid-up capital and to a cooperative educational fund, as well as
permits additional allocations to board-approved reserves. District of Columbia cooperative law also requires that a
cooperative’s net earnings be allocated to all patrons in proportion to their individual patronage and each patron’s allocation
be distributed to the patron unless the patron agrees that the cooperative may retain its share as additional capital. Pursuant
to these provisions, the CFC Board of Directors is required to make annual allocations of net earnings, if any. CFC’s net
earnings for determining allocations is based on non-GAAP adjusted net income, which excludes the impact of derivative
forward value gains (losses). We provide a reconciliation of our adjusted net income to our reported net income and an
explanation of the adjustments below in “Non-GAAP Financial Measures.”
In May 2021, the CFC Board of Directors authorized the allocation of $1 million of net earnings for fiscal year 2021 to the
cooperative educational fund. In July 2021, the CFC Board of Directors authorized the allocation of net earnings for fiscal
year 2021 as follows: $90 million to members in the form of patronage capital and $102 million to the members’ capital
reserve. In July 2021, the CFC Board of Directors also authorized the retirement of patronage capital totaling $58 million, of
which $45 million represented 50% of the patronage capital allocation for fiscal year 2021 and $13 million represented the
portion of the allocation from fiscal year 1996 net earnings that has been held for 25 years pursuant to the CFC Board of
Directors’ policy. We expect to return the authorized patronage capital retirement amount of $58 million to members in cash
in the second quarter of fiscal year 2022. The remaining portion of the patronage capital allocation for fiscal year 2021 will
be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC Board of Directors in June 2009.
In May 2020, the CFC Board of Directors authorized the allocation of $1 million of net earnings for fiscal year 2020 to the
cooperative educational fund. In July 2020 the CFC Board of Directors authorized the allocation of net earnings for fiscal
year 2020 as follows: $96 million to members in the form of patronage capital and $48 million to the members’ capital
reserve. In July 2020, the CFC Board of Directors also authorized the retirement of patronage capital totaling $60 million, of
which $48 million represented 50% of the patronage capital allocation for fiscal year 2020 and $12 million represented the
portion of the allocation from net earnings for fiscal year 1995 that has been held for 25 years pursuant to the CFC Board of
Directors’ policy. This amount was returned to members in cash in September 2020. The remaining portion of the patronage
capital allocation for fiscal year 2020 will be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC
Board of Directors in June 2009.
The CFC Board of Directors is required to make annual allocations of adjusted net income, if any. CFC has made annual
retirements of allocated net earnings in 41 of the last 42 fiscal years; however, future retirements of allocated amounts are
determined based on CFC’s financial condition. The CFC Board of Directors has the authority to change the current practice
for allocating and retiring net earnings at any time, subject to applicable laws. See “Item 1. Business—Allocation and
Retirement of Patronage Capital” in our 2020 Form 10-K and “Note 11—Equity” for additional information.
49
RISK MANAGEMENT
Overview
We face a variety of risks that can significantly affect our financial performance, liquidity, reputation and ability to meet the
expectations of our members, investors and other stakeholders. As a financial services company, the major categories of risk
exposures inherent in our business activities include credit risk, liquidity risk, market risk and operational risk. These risk
categories are summarized below.
• Credit risk is the risk that a borrower or other counterparty will be unable to meet its obligations in accordance with
agreed-upon terms.
• Liquidity risk is the risk that we will be unable to fund our operations and meet our contractual obligations or that we will
be unable to fund new loans to borrowers at a reasonable cost and tenor in a timely manner.
• Market risk is the risk that changes in market variables, such as movements in interest rates, may adversely affect the
match between the timing of the contractual maturities, re-pricing and prepayments of our financial assets and the related
financial liabilities funding those assets.
• Operational risk is the risk of loss resulting from inadequate or failed internal controls, processes, systems, human error
or external events, including natural disasters or public health emergencies, such as the current COVID-19 pandemic.
Operational risk also includes compliance risk, fiduciary risk, reputational risk and litigation risk.
Effective risk management is critical to our overall operations and to achieving our primary objective of providing cost-
based financial products to our rural electric members while maintaining the sound financial results required for investment-
grade credit ratings on our rated debt instruments. Accordingly, we have a risk-management framework that is intended to
govern the principal risks we face in conducting our business and the aggregate amount of risk we are willing to accept,
referred to as risk appetite and risk guidelines, in the context of CFC’s mission and strategic objectives and initiatives.
Risk-Management Framework
Our risk-management framework consists of defined policies, procedures and risk tolerances that are intended to align with
CFC’s mission. The CFC Board of Directors is responsible for risk governance by approving the enterprise risk-
management framework and providing oversight on risk policies, risk appetite, guidelines and our performance against
established goals. In fulfilling its risk governance responsibility, the CFC Board of Directors receives periodic reports on
business activities from management. The CFC Board of Directors reviews CFC’s risk profile and management’s
assessment of those risks throughout the year at its periodic meetings. The board also establishes CFC’s loan policies and
has established a Loan Committee of the board comprising no fewer than 10 directors that reviews the performance of the
loan portfolio in accordance with those policies. For additional information about the role of the CFC Board of Directors in
risk governance and oversight, see “Item 10. Directors, Executive Officers and Corporate Governance.”
Management is responsible for execution of the risk-management framework, risk policy formation and daily management
of the risks associated with our business. Management executes its responsibility by establishing processes for identifying,
measuring, assessing, managing, monitoring and reporting risks. Management and operating groups maintain policies and
procedures, specific to each major risk category, to identify and measure our primary risk exposures at the transaction,
obligor and portfolio levels and ensure that our exposures remain within prescribed limits. Management also is responsible
for establishing and maintaining internal controls to mitigate key risks. We have a number of management-level risk
oversight committees across the organization and groups within the organization that have a defined set of authorities and
responsibilities specific to one or more risk types, including the Corporate Credit Committee, Credit Risk Management
group, Treasury group, Asset Liability Committee, Investment Management Committee, Corporate Compliance, Internal
Audit group, Business Technology Services group and Disclosure Committee. These risk oversight committees and groups
collectively help management facilitate enterprise-wide understanding and monitoring of CFC’s risk profile and the control
processes with respect to our inherent risks. Management and the risk oversight committees periodically report actual
results, significant current and emerging risks, initiatives and risk-management concerns to the CFC Board of Directors.
50
CREDIT RISK
Our loan portfolio, which represents the largest component of assets on our balance sheet, accounts for the substantial
majority of our credit risk exposure. We also engage in certain non-lending activities that may give rise to counterparty
credit risk, such as entering into derivative transactions to manage interest rate risk and purchasing investment securities.
Our primary credit exposure is loans to rural electric cooperatives, which provide essential electric services to end-users, the
majority of which are residential customers. We also have a limited portfolio of loans to not-for-profit and for-profit
telecommunication companies.
Credit Risk Management
We manage credit risk related to our loan portfolio consistent with credit policies established by the CFC Board of Directors
and through credit underwriting, approval and monitoring processes and practices adopted by management. Our board-
established credit policies include guidelines regarding the types of credit products we offer, limits on credit we extend to
individual borrowers, approval authorities delegated to management, and use of syndications and loan sales. We maintain an
internal risk rating system in which we assign a rating to each borrower and credit facility. We review and update the risk
ratings at least annually. Assigned risk ratings inform our credit approval, borrower monitoring and portfolio review
processes. Our Corporate Credit Committee approves individual credit actions within its own authority and together with
our Credit Risk Management group, establishes standards for credit underwriting, oversees credits deemed to be higher risk,
reviews assigned risk ratings for accuracy, and monitors the overall credit quality and performance statistics of our loan
portfolio.
Loan Portfolio Credit Risk
As a 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. Loans outstanding to electric utility organizations of $27,995 million and $26,306 million as of May 31,
2021 and 2020, respectively, represented 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.
Because we lend primarily to our rural electric utility cooperative members, we have had a loan portfolio inherently subject
to single-industry and single-obligor concentration risks since our inception in 1969. We historically, however, have
experienced limited defaults and losses in our electric utility loan portfolio due to several factors. First, the majority of our
electric cooperative borrowers operate in states where electric cooperatives are not subject to rate regulation. Thus, they are
able to make rate adjustments to pass along increased costs to the end customer without first obtaining state regulatory
approval, allowing them to cover operating costs and generate sufficient earnings and cash flows to service their debt
obligations. Second, electric cooperatives face limited competition, as they tend to operate in exclusive territories not
serviced by public investor-owned utilities. Third, electric cooperatives typically are consumer-owned, not-for-profit entities
that provide an essential service to end-users, the majority of which are residential customers. Fourth, electric cooperatives
tend to adhere to a conservative core business strategy model that has historically resulted in a relatively stable, resilient
operating environment and overall strong financial performance and credit strength for the electric cooperative network.
Finally, we generally lend to our members on a senior secured basis, which reduces the risk of loss in the event of a
borrower default.
Below we provide information on the credit risk profile of our loan portfolio, including security provisions, credit
concentration, credit quality indicators and our allowance for credit losses.
Security Provisions
Except when providing line of credit loans, we generally lend to our members on a senior secured basis. Long-term loans are
generally secured on parity with other secured lenders (primarily RUS), if any, by all assets and revenue of the borrower
with exceptions typical in utility mortgages. Line of credit loans are generally unsecured. In addition to the collateral
pledged to secure our loans, distribution and power supply borrowers also are required to set rates charged to customers to
achieve certain specified financial ratios.
51
Table 15 presents, by loan type and by company, the amount and percentage of secured and unsecured loans in our loan
portfolio as of May 31, 2021 and 2020. Of our total loans outstanding, 93% and 94% were secured as of May 31, 2021 and
2020, respectively.
Table 15: Loan Portfolio Security Profile
(Dollars in thousands)
Loan type:
Long-term loans:
Secured
% of Total
Unsecured
% of Total
Total
May 31, 2021
Long-term fixed-rate loans.................. $ 25,278,805
99 % $
235,961
1 % $ 25,514,766
Long-term variable-rate loans.............
655,675
Total long-term loans.............................
25,934,480
376,991
Line of credit loans................................
Total loans outstanding(1)....................... $ 26,311,471
100
99
17
93
2,904
238,865
1,864,771
$ 2,103,636
—
1
83
7
658,579
26,173,345
2,241,762
$ 28,415,107
Company:
CFC........................................................ $ 25,248,972
662,782
NCSC.....................................................
RTFC.....................................................
399,717
Total loans outstanding(1) ...................... $ 26,311,471
93 % $ 2,038,884
44,086
94
95
20,666
$ 2,103,636
93
May 31, 2020
7 % $ 27,287,856
706,868
6
420,383
5
$ 28,415,107
7
(Dollars in thousands)
Loan type:
Long-term loans:
Secured
% of Total
Unsecured
% of Total
Total
Long-term fixed-rate loans.................. $ 24,137,145
99 % $
334,858
1 % $ 24,472,003
650,192
Long-term variable-rate loans.............
24,787,337
Total long-term loans.............................
Line of credit loans................................
191,268
Total loans outstanding(1)....................... $ 24,978,605
99
99
12
94
5,512
340,370
1,371,879
$ 1,712,249
1
1
88
6
655,704
25,127,707
1,563,147
$ 26,690,854
Company:
CFC........................................................ $ 23,977,438
638,488
NCSC.....................................................
RTFC.....................................................
362,679
Total loans outstanding(1)....................... $ 24,978,605
____________________________
94 % $ 1,630,219
59,374
91
94
22,656
$ 1,712,249
94
6 % $ 25,607,657
697,862
9
385,335
6
$ 26,690,854
6
(1)
Represents the unpaid principal balance, net of charge-offs and recoveries of loans as of the end of each period. Excludes unamortized deferred loan
origination costs of $12 million and $11 million as of May 31, 2021 and 2020, respectively.
Credit Concentration
Concentrations may exist when there are amounts loaned to borrowers engaged in similar activities or in geographic areas
that would cause them to be similarly impacted by economic or other conditions or when there are large exposures to single
borrowers. As discussed above under “Credit Risk—Loan Portfolio Credit Risk,” loans outstanding to electric utility
organizations represented approximately 99% of our total loans outstanding as of both May 31, 2021 and 2020.
52
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 892 and 889 as of May 31, 2021 and 2020, respectively, located in 49 states. Of the 892
borrowers with loans outstanding as of May 31, 2021, 49 were electric power supply borrowers. In comparison, of the 889
borrowers with loans outstanding as of May 31, 2020, 52 were electric power supply borrowers. Electric power supply
borrowers generally require significantly more capital than electric distribution and telecommunications borrowers.
Texas, which had 67 borrowers with loans outstanding as of both May 31, 2021 and 2020, accounted for the largest number
of borrowers with loans outstanding in any one state as of each respective date. Texas also accounted for the largest
concentration of loan exposure in any one state as of each respective date. Loans outstanding to Texas-based electric utility
organizations totaled $4,878 million and $4,222 million as of May 31, 2021 and 2020, respectively, and accounted for 17%
and 16% of total loans outstanding as of each respective date. Of the loans outstanding to Texas-based electric utility
organizations, $172 million and $181 million as of May 31, 2021 and 2020, respectively, were covered by the Farmer Mac
standby repurchase agreement, which slightly reduced our credit risk exposure to Texas borrowers. Of the 49 electric power
supply borrowers with loans outstanding as of May 31, 2021, seven were located in Texas.
Table 16 provides a breakdown, by state or U.S. territory, of the total number of borrowers with loans outstanding as of
May 31, 2021 and 2020 and the outstanding loan exposure to borrowers in each jurisdiction as a percentage of total loans
outstanding of $28,415 million and $26,691 million as of May 31, 2021 and 2020, respectively.
53
Table 16: Loan Geographic Concentration
U.S. State/Territory
Alabama...............................................
Alaska..................................................
Arizona................................................
Arkansas..............................................
California.............................................
Colorado..............................................
Delaware..............................................
Florida..................................................
Georgia................................................
Hawaii..................................................
Idaho....................................................
Illinois..................................................
Indiana.................................................
Iowa.....................................................
Kansas..................................................
Kentucky..............................................
Louisiana..............................................
Maine...................................................
Maryland..............................................
Massachusetts......................................
Michigan..............................................
Minnesota............................................
Mississippi...........................................
Missouri...............................................
Montana...............................................
Nebraska..............................................
Nevada.................................................
New Hampshire...................................
New Jersey...........................................
New Mexico.........................................
New York.............................................
North Carolina.....................................
North Dakota.......................................
Ohio.....................................................
Oklahoma.............................................
Oregon.................................................
Pennsylvania........................................
Rhode Island........................................
South Carolina.....................................
South Dakota.......................................
Tennessee.............................................
Texas....................................................
Utah......................................................
Vermont...............................................
Virginia................................................
Washington..........................................
West Virginia.......................................
Wisconsin............................................
Wyoming.............................................
Total.....................................................
May 31,
2021
2020
Number of
Borrowers
% of Total
Loans
Outstanding
Number of
Borrowers
% of Total
Loans
Outstanding
22
16
11
20
4
26
3
18
45
2
11
32
39
34
31
23
10
2
2
1
12
48
20
45
25
12
8
1
2
14
9
28
15
27
26
19
16
1
21
29
17
67
5
5
18
10
2
24
11
889
2.29 %
3.55
0.82
2.32
0.13
5.89
0.40
4.15
5.18
0.40
0.46
3.51
3.11
2.37
4.40
2.81
0.92
0.03
1.64
0.23
1.00
2.50
1.50
5.42
0.75
0.11
0.94
0.30
0.07
0.23
0.21
3.42
3.22
2.27
3.08
1.33
1.92
0.02
2.93
0.72
0.73
15.82
1.10
0.20
1.23
1.22
0.04
1.89
1.22
100.00 %
24
16
11
20
4
27
3
18
45
2
11
31
39
34
29
23
9
3
2
1
11
48
20
46
25
12
8
2
2
13
13
28
14
27
27
19
16
1
24
29
16
67
4
5
17
10
2
23
11
892
2.28 %
3.48
0.80
2.21
0.12
5.70
0.31
3.84
5.42
0.36
0.40
3.22
3.21
2.32
4.13
2.65
1.95
0.08
1.56
0.21
1.32
2.38
1.58
5.65
0.77
0.10
0.80
0.30
0.06
0.20
0.43
3.08
2.90
2.18
3.40
1.27
1.78
0.02
2.77
0.64
0.71
17.17
0.92
0.18
1.08
1.12
0.04
1.82
1.08
100.00 %
54
Single-Obligor Concentration
Table 17 displays the outstanding loan exposure for our 20 largest borrowers, by company, as of May 31, 2021 and 2020.
The 20 largest borrowers consisted of 10 distribution systems and 10 power supply systems as of May 31, 2021. The 20
largest borrowers consisted of 11 distribution systems and nine power supply systems as of May 31, 2020. The largest total
exposure to a single borrower or controlled group represented less than 2% of total loans outstanding as of both May 31,
2021 and 2020.
Table 17: Loan Exposure to 20 Largest Borrowers
(Dollars in thousands)
Company:
May 31,
2021
2020
Amount
% of Total
Amount
% of Total
Change
CFC........................................................................... $ 5,978,342
21 % $ 5,661,540
21 % $ 316,802
NCSC........................................................................
203,392
Total loan exposure to 20 largest borrowers.............
Less: Loans covered under Farmer Mac standby
6,181,734
1
22
215,595
5,877,135
1
22
(12,203)
304,599
purchase commitment....................................
(308,580)
(1)
(313,644)
(1)
5,064
Net loan exposure to 20 largest borrowers...............
$ 5,873,154
21 % $ 5,563,491
21 % $ 309,663
As part of our strategy in managing credit exposure to large borrowers, 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. The
aggregate unpaid principal balance of designated and Farmer Mac-approved loans was $512 million and $569 million as of
May 31, 2021 and 2020, respectively. Loan exposure to our 20 largest borrowers covered under the Farmer Mac agreement
totaled $309 million and $314 million as of May 31, 2021 and 2020, respectively. No loans had been put to Farmer Mac for
purchase pursuant to this agreement as of May 31, 2021. Our credit exposure is also mitigated by long-term loans
guaranteed by RUS. Guaranteed RUS loans totaled $139 million and $147 million as of May 31, 2021 and 2020,
respectively.
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, troubled debt restructurings, 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.
Troubled Debt Restructurings
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. A loan restructuring or
modification of terms is accounted for as a troubled debt restructuring (“TDR”) if, for economic or legal reasons related to
the borrower’s financial difficulties, a concession is granted to the borrower that we would not otherwise consider. TDR
loans generally are initially classified as nonperforming and placed on nonaccrual status, although in many cases such loans
were already classified as nonperforming prior to modification. These loans may be returned to performing status and the
accrual of interest resumed if the borrower performs under the modified terms for an extended period of time, and we expect
the borrower to continue to perform in accordance with the modified terms. In certain limited circumstances in which a TDR
loan is current at the modification date, the loan may remain on accrual status at the time of modification
55
We have not had any loan modifications that were required to be accounted for as TDRs since fiscal year 2016. Table 18
presents the outstanding amount of modified loans accounted for as TDRs in prior periods, by member class, and the
performance status of these loans as of May 31, 2021 and 2020. The TDR loans outstanding for CFC and RTFC each relate
to the modification of a loan for one borrower that, at the time of the modification, was experiencing financial difficulty.
Table 18: Troubled Debt Restructured Loans
(Dollars in thousands)
TDR loans:
CFC—Distribution......................................
RTFC...................................................
Total TDR loans..................................
Performance status of TDR loans:
Performing TDR loans.........................
Total TDR loans..................................
____________________________
2021
2020
May 31,
Number of
Borrowers
Outstanding
Amount(1)
% of Total
Loans
Outstanding
Number of
Borrowers
Outstanding
Amount(1)
% of Total
Loans
Outstanding
1
1
2
2
2
$
$
$
$
5,379
4,592
9,971
0.02 %
0.02
0.04 %
9,971
9,971
0.04 %
0.04 %
1
1
2
2
2
$
$
$
$
5,756
5,092
10,848
0.02 %
0.02
0.04 %
10,848
10,848
0.04 %
0.04 %
(1)
Represents the unpaid principal balance net of charge-offs and recoveries as of the end of each period.
We did not have any TDR loans classified as nonperforming as of either May 31, 2021 or May 31, 2020. Although TDR
loans may be returned to performing status if the borrower performs under the modified terms of the loan for an extended
period of time, TDR loans are evaluated on an individual basis in estimating lifetime expected credit losses under the CECL
model for determining the allowance for credit losses.
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 loan. We classify such loans as nonperforming at the earlier of the date when we determine:
(i) interest or principal payments on the loan is past due 90 days or more; (ii) as a result of court proceedings, the collection
of interest or principal payments based on the original contractual terms is not expected; or (iii) the full and timely collection
of interest or principal is otherwise uncertain. Once a loan is classified as nonperforming, we generally place the loan on
nonaccrual status. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed against
earnings. Table 19 presents the outstanding balance of nonperforming loans, by member class, as of May 31, 2021 and
2020.
Table 19: Nonperforming Loans
(Dollars in thousands)
Nonperforming loans:
CFC—Power supply(2)
RTFC...................................................
..............................
Total nonperforming loans..................
____________________________
2021
2020
May 31,
Number of
Borrowers
Outstanding
Amount (1)
% of Total
Loans
Outstanding
Number of
Borrowers
Outstanding
Amount (1)
% of Total
Loans
Outstanding
2
2
4
$ 228,312
9,185
0.81 %
0.03
$ 237,497
0.84 %
1
—
1
$ 167,708
0.63 %
—
—
$ 167,708
0.63 %
(1)
Represents the unpaid principal balance net of charge-offs and recoveries as of the end of each period.
(2)
In addition, we had less than $1 million letters of credit outstanding to Brazos as of May 31, 2021.
Nonperforming loans increased $69 million to $237 million, or 0.84% of total loans outstanding as of May 31, 2021, from
$168 million, or 0.63% of total loans outstanding, as of May 31, 2020, primarily due to our classification of the loans
56
outstanding of $85 million to Brazos as nonperforming in fiscal year 2021 as a result of its bankruptcy filing. In addition to
Brazos, we classified loans outstanding to two affiliated RTFC telecommunications borrowers as nonperforming during
fiscal year 2021. Loans outstanding to these RTFC borrowers totaled $9 million as of May 31, 2021. Brazos is not permitted
to make scheduled loan payments without approval of the bankruptcy court. As a result, we have not received payments
from Brazos, and its loans outstanding of $85 million were delinquent as of May 31, 2021. In comparison, we had no
delinquent loans as of May 31, 2020. We provide additional information on Brazos and the impact of the February 2021
polar vortex on our Texas-based borrowers below under “Credit Risk—Allowance for Credit Losses.”
One loan to another CFC power supply borrower, with an outstanding balance of $143 million and $168 million as of
May 31, 2021 and 2020, respectively, accounted for the majority of nonperforming loans as of May 31, 2021, and the entire
amount of nonperforming loans as of May 31, 2020. Under the terms of this loan, which matures in December 2026, the
amount the borrower is required to pay in 2024 and 2025 may vary, as the payments are contingent on the borrower’s
financial performance in those years. Based on our review and assessment of the borrower’s forecast and underlying
assumptions provided to us in May 2020, we no longer believed that the future expected cash payments from the borrower
through the maturity of the loan in December 2026 would be sufficient to repay the outstanding loan balance. We therefore
classified this loan as nonperforming, placed the loan on nonaccrual status and established an asset-specific allowance for
credit losses as of May 31, 2020. Payments received from the borrower on this loan during fiscal year 2021 reduced the
outstanding balance to $143 million as of May 31, 2021. While the borrower is not in default and was current with respect to
required payments on the loan as of May 31, 2021, we have continued to report the loan as nonperforming based on the
expectation that we will not recover the full principal amount.
Net Charge-Offs
Charge-offs represent the amount of a loan that has been removed from our consolidated balance sheet when the loan is
deemed uncollectible. Generally the amount of a charge-off is the recorded investment in excess of the fair value of the
expected cash flows from the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral securing
the loan. We report charge-offs net of amounts recovered on previously charged off loans. We did not experience any
charge-offs during fiscal years 2021, 2020 or 2019. Prior to Brazos’ bankruptcy filing, we had not experienced any defaults
or charge-offs in our electric utility loan portfolio since fiscal year 2013 and in our telecommunications loan portfolio since
fiscal year 2017.
In our 52-year history, we have experienced only 17 defaults in our electric utility loan portfolio, which includes our most
recent default by Brazos due to its bankruptcy filing in March 2021. Of the 16 defaults prior to Brazos, one remains
unresolved with an expected ultimate resolution date in calendar year 2025, nine resulted in no loss and six resulted in
cumulative net charge-offs of $86 million. Of this amount, $67 million was attributable to five electric power supply
cooperatives and $19 million was attributable to one electric distribution cooperatives. We cite the factors that have
historically contributed to the relatively low risk of default by our electric utility cooperatives, our principal lending market,
above under “Credit Risk—Loan Portfolio Credit Risk.”
In comparison, since inception in 1987, RTFC has experienced 15 defaults and cumulative net charge-offs of $427 million
in our telecommunications loan portfolio, the most significant of which was a charge-off of $354 million in fiscal year 2011.
We recorded this charge-off, which related to loans outstanding to Innovative Communications Corporation (“ICC”), a
former RTFC member, pursuant to the transfer of ICC’s assets in foreclosure to Caribbean Asset Holdings, LLC.
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,
57
substandard and doubtful. Pass ratings reflect relatively low probability of default, while criticized ratings have a higher
probability of default.
We use our internal risk ratings to measure the credit risk of each borrower and loan facility, identify or confirm problem or
potential problem loans in a timely manner, differentiate risk within each of our portfolio segments, assess the overall credit
quality of our loan portfolio and manage overall risk levels. Our internally assigned borrower risk ratings, which we map to
equivalent credit ratings by external credit rating agencies, 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 estimating our allowance for credit losses.
Criticized loans increased $515 million to $886 million as of May 31, 2021, from $371 million as of May 31, 2020,
representing approximately 3% and 1% of total loans outstanding as of each respective date. The increase was primarily due
to the material borrower risk-ratings downgrades of Brazos and Rayburn in fiscal year 2021 due to their exposure to
elevated power costs during the February 2021 polar vortex. Brazos and Rayburn had loans outstanding of $85 million and
$379 million, respectively, as of May 31, 2021, together totaling $464 million. Prior to the downgrades of the borrower risk
ratings for Brazos and Rayburn to a rating in the “criticized” category, each borrower had a rating in the “pass” category.
The increase also reflects the impact of a risk rating downgrade of a CFC electric distribution borrower made in fiscal year
2021. We downgraded the risk rating of this borrower, which had loans outstanding of $219 million as of May 31, 2021,
from a rating in the “pass” category to a rating in “criticized” category. The risk rating downgrade for this CFC electric
distribution borrower was attributable to the adverse financial impact from restoration costs incurred to repair damage
caused by two successive hurricanes. We expect that the borrower will receive grant funds from the Federal Emergency
Management Agency and the state where it is located for reimbursement of the hurricane damage-related restoration costs.
Each of the borrowers downgraded to a criticized rating in fiscal year 2021, except Brazos, was current with regard to
scheduled principal and interest amounts due as of May 31, 2021. As noted above under “Nonperforming Loans,” Brazos is
not permitted to make scheduled loan payments without approval of the bankruptcy court. As a result, we have not received
payments from Brazos, and its loans outstanding of $85 million were delinquent as of May 31, 2021.
The increase in criticized loans of $683 million attributable to the risk rating downgrades of the three borrowers discussed
above was partially offset by an upgrade in the risk rating of a CFC electric distribution borrower and its subsidiary from a
rating in the “criticized” category to a rating in the “pass” category in fiscal year 2021. The upgrade in the risk rating for this
borrower, which had loans outstanding of $146 million as of May 31, 2021, was attributable to the borrower’s improved
financial performance.
We provide additional information on our borrower risk rating classifications, including the amount of loans outstanding in
each of the criticized loan categories of special mention, substandard and doubtful, in “Note 1—Summary of Significant
Accounting Policies” and “Note 4—Loans.”
Allowance for Credit Losses
We adopted the CECL accounting standard using the modified retrospective approach on June 1, 2020, which resulted in an
increase in our allowance for credit losses for our loan portfolio of $4 million and a corresponding decrease to retained
earnings of $4 million recorded through a cumulative-effect adjustment. The impact on the reserve for credit losses for our
off-balance sheet credit exposures related to unadvanced loan commitments and financial guarantees from the adoption of
CECL was not material. Under CECL, we are required to maintain an allowance based on a current estimate of credit losses
that are expected to occur over the remaining contractual term of the loans in our portfolio. Prior to the adoption of CECL
on June 1, 2020, we maintained an allowance based on an estimate of probable incurred losses inherent in our loan portfolio
as of each balance sheet date. We discuss our methodology for estimating the allowance for credit losses under the CECL
and incurred loss models in “Note 1—Summary of Significant Accounting Policies.”
Table 20 presents, by member borrower type, loans outstanding and the related allowance for credit losses and allowance
coverage ratio as of May 31, 2021 and the allowance components. The allowance components, which are based on the
evaluation method used to measure credit losses, consist of a collective allowance and an asset-specific allowance. Loans
that share similar risk characteristics are evaluated on a collective basis in measuring credit losses, while loans that do not
share similar risk characteristics with other loans in our portfolio are evaluated on an individual basis. The allowance for
58
credit losses as of May 31, 2020 is based on the incurred loss model, as our effective date for the adoption of CECL was
June 1, 2020.
Table 20: Allowance for Credit Losses by Borrower Member Class and Evaluation Methodology
May 31,
Loans
Outstanding(1)
2021
Allowance
for Credit
Losses
Allowance
Coverage
Ratio (2)
Loans
Outstanding (1)
2020
Allowance
for Credit
Losses
Allowance
Coverage
Ratio (2)
(Dollars in thousands)
Member class:
CFC:
Distribution......................................
Power supply....................................
Statewide and associate....................
CFC total.............................................
NCSC ..............................................
RTFC ..............................................
Total.................................................
$ 22,027,423 $ 13,426
64,646
1,391
79,463
1,374
4,695
$ 28,415,107 $ 85,532
5,154,312
106,121
27,287,856
706,868
420,383
Allowance components:
Collective allowance........................ $ 28,167,639 $ 42,442
Asset-specific allowance..................
43,090
$ 28,415,107 $ 85,532
Total allowance for credit losses.....
247,468
0.06 % $ 20,769,653 $
1.25
1.31
0.29
0.19
1.12
0.30
8,002
38,027
1,409
47,438
806
4,881
$ 26,690,854 $ 53,125
4,731,506
106,498
25,607,657
697,862
385,335
0.04 %
0.80
1.32
0.19
0.12
1.27
0.20
0.15 % $ 26,512,298 $ 18,292
17.41
34,833
178,556
$ 26,690,854 $ 53,125
0.30
0.07 %
19.51
0.20
Allowance coverage ratios:
Percentage of nonperforming and
nonaccrual loans (3)......................... $
___________________________
237,497
36.01 % $
167,708
31.68 %
(1)
(2)
Represents the unpaid principal balance, net of charge-offs and recoveries of loans as of each period end. Excludes unamortized deferred loan
origination costs of $12 million and $11 million as of May 31, 2021 and 2020.
Calculated based on the allowance for credit losses attributable to each member class divided by the related loans outstanding at period end.
(3)
Calculated based on the total allowance for credit losses at period end divided by loans outstanding classified as nonperforming and on nonaccrual status
at period end.
The allowance for credit losses increased $32 million to $86 million as of May 31, 2021, and the allowance coverage ratio
increased to 0.30%. Of the $32 million increase in the allowance, $24 million was attributable to the collective allowance
and $8 million was attributable to the asset-specific allowance.
The increase in the collective allowance of $24 million was primarily driven by the risk rating downgrade of Rayburn, a
CFC Texas-based power supply borrower with loans outstanding of $379 million as of May 31, 2021, from a pass rating to a
criticized rating in fiscal year 2021, coupled with a decrease we made in the recovery rate assumption for power supply
loans during fiscal year 2021 and the addition to the collective allowance of $4 million upon our adoption of CECL using
the modified retrospective approach on June 1, 2020. The increase in the asset-specific allowance of $8 million was
primarily driven by the classification of loans outstanding to Brazos totaling $85 million as of May 31, 2021 as
nonperforming due to its bankruptcy filing.
As indicated above in Table 20 , the increase in the allowance was largely attributable to CFC power supply loans. While
there was not a material change in the allowance coverage ratios for most of our member classes, the allowance coverage
ratio for CFC power supply loans increased 45 basis points to 1.25% as of May 31, 2021, from 0.80% as of May 31, 2020.
Below we provide additional information on the primary conditions and factors that contributed to the allowance increase
for CFC power supply loans and recent developments that we expect will have an impact on our estimated credit losses.
59
Texas Polar Vortex
In mid-February 2021, Texas and several neighboring states experienced a series of severe winter storms and record-low
temperatures as a result of a polar vortex. The freezing conditions affected power demand, supply and market prices in
Texas, triggering unprecedented increases in electrical power load demand in combination with significant reductions in
power supply across Texas, including a loss of almost half of the electric generation within the ERCOT service area.
ERCOT raised wholesale electric power prices to $9,000 per megawatt-hour, to spur greater power generation by providing
a financial incentive for power generators in the state to remain on-line. According to ERCOT data, pre-storm wholesale
power prices were less than $50 per megawatt-hour. ERCOT also initiated controlled rolling power outages, which impacted
millions of residential and commercial customers, to protect and maintain the stability of the Texas electric grid.
Impact of Texas Polar Vortex
The surge in wholesale electricity prices had a direct financial impact primarily on certain electric power supply utilities,
including a significant adverse financial impact on two CFC Texas-based electric power supply borrowers, Brazos and
Rayburn. These power supply borrowers had insufficient generation supply during the February 2021 polar vortex and were
forced, at the height of the surge in power prices, to purchase power at peak prices to meet the electric demand of their
member distribution system customers. On March 1, 2021, we were informed that Brazos filed for Chapter 11 bankruptcy
protection. In fiscal year 2021, we downgraded Brazos’ borrower risk rating from a rating within the pass category to
doubtful, classified its loans outstanding as nonperforming, placed the loans on nonaccrual status, and reversed unpaid
interest amounts previously accrued and recognized in interest income. We had loans outstanding to Brazos of $85 million
as of May 31, 2021, pursuant to a syndicated Bank of America revolving credit agreement, of which $64 million was
unsecured and $21 million was secured. In the third quarter of fiscal year 2021, we also made a material downgrade in the
borrower risk rating for Rayburn from a rating within the pass category to special mention. We further downgraded
Rayburn’s borrower risk rating to substandard in the fourth quarter of fiscal year 2021. Loans outstanding to Rayburn
consisted of secured loans of $167 million and unsecured loans of $212 million, which together totaled $379 million as of
May 31, 2021. On March 12, 2021, the Public Utility Commission of Texas (“PUCT”) ordered ERCOT to extend the
deadline for filing an invoice, settlement statements or resettlement statement dispute or exception to an invoice, settlement
statement, or resettlement statement, related to ERCOT operating days from February 14, 2021 to February 19, 2021, to six
months after ERCOT posted the invoice, settlement statement, or resettlement statement. Rayburn received an invoice for
February 14, 2021 on February 16, 2021 and as a result the deadline for disputing this invoice is August 16, 2021.
Under the terms of the syndicated Bank of America revolving credit agreement, in the event of bankruptcy by Brazos, each
lending participant is permitted to hold any deposited or investment funds from Brazos, up to the amount of the participant’s
exposure to Brazos pursuant to the agreement, for set-off against such exposure to Brazos. The total held by all participants
is required to be shared among the participants in accordance with the pro rata share of each participant in the agreement. As
of the bankruptcy filing date, funds on deposit from or invested by Brazos with participating lenders of the agreement,
available for set-off against Brazos’ obligations, totaled $124 million. Based on our exposure of $85 million under the
$500 million syndicated Bank of America agreement, our pro rata share set-off right is 17%, or approximately $21 million.
The set-off rights have been agreed to and confirmed by Brazos and the bankruptcy court. In order to allow Brazos to access
such deposited or invested funds, the lenders have been granted adequate protection liens and super-priority claims in an
amount equal to the diminution of value of the amount available for set-off.
Texas Enactment of Legislation to Address Certain Polar-Vortex Related Costs
On June 18, 2021, the Texas governor signed into law Senate Bill 1580, the electric cooperative securitization bill, which
became effective immediately with the governor’s signature. This bill allows electric cooperatives to securitize
extraordinary costs and expenses incurred due to exposure to high power costs during the February 2021 polar vortex,
including amounts owed to ERCOT. Qualifying cooperatives may issue bonds directly or through a special purpose vehicle
legal entity. Payments on the bonds are required to be made over a period not to exceed 30 years. The bill also requires that
cooperatives that owe ERCOT use all means necessary to securitize the amount owed, calculated according to ERCOT’s
protocols in effect during the period of the February 2021 polar vortex, and stipulates that failure to pay such amount may
result in being barred from the ERCOT-administered power market by the PUCT. While Brazos and Rayburn are eligible to
utilize the provisions of this bill, we are currently uncertain whether they will elect to do so.
60
Counterparty Credit Risk
We are exposed to counterparty credit risk related to the performance of the parties with which we enter into financial
transactions, primarily for derivative instruments, cash and time deposit accounts and our investment security holdings. To
mitigate this risk, we only enter into these transactions with financial institutions with investment-grade ratings. Our cash
and time deposits with financial institutions generally have an original maturity of less than one year.
We manage our derivative counterparty credit risk by monitoring the overall creditworthiness of each counterparty based on
our internal counterparty credit risk scoring model; using counterparty-specific credit risk limits; executing master netting
arrangements; and diversifying our derivative transactions among multiple counterparties. We also require that our
derivative counterparties be a participant in one of our committed bank revolving line of credit agreements. Our active
derivative counterparties had credit ratings ranging from Aa2 to Baa2 by Moody’s and from AA- to A- by S&P as of
May 31, 2021. Our largest counterparty exposure, based on the outstanding notional amount, represented approximately
24% and 25% of the total outstanding notional amount of derivatives as of May 31, 2021 and 2020, respectively.
Credit Risk-Related Contingent Features
Our derivative contracts typically contain mutual early-termination provisions, generally in the form of a credit rating
trigger. Under the mutual credit rating trigger provisions, either counterparty may, but is not obligated to, terminate and
settle the agreement if the credit rating of the other counterparty falls below a level specified in the agreement. If a
derivative contract is terminated, the amount to be received or paid by us would be equal to the prevailing fair value, as
defined in the agreement, as of the termination date.
Our senior unsecured credit ratings from Moody’s, S&P and Fitch were A2, A- and A, respectively, as of May 31, 2021.
Moody’s and Fitch had our ratings on stable outlook as of May 31, 2021. S&P had our ratings on negative outlook as of
May 31, 2021. As discussed below under “Liquidity Risk—Credit Ratings,” on March 5, 2021, S&P downgraded our senior
unsecured credit ratings from A to A- with a negative outlook. No action on our ratings had been taken by Moody’s or Fitch
as of the date of this Report. Table 21 displays the outstanding notional amounts of our derivative contracts with rating
triggers as of May 31, 2021, and the payments that would be required if the contracts were terminated as of that date because
of a downgrade of our unsecured credit ratings or the counterparty’s unsecured credit ratings below A3/A-, below Baa1/
BBB+, to or below Baa2/BBB, or to or below Ba2/BB+ by Moody’s or S&P, respectively. In calculating the payment
amounts that would be required upon termination of the derivative contracts, we assumed that the amounts for each
counterparty would be netted in accordance with the provisions of the counterparty’s master netting agreements. The net
payment amounts are based on the fair value of the underlying derivative instrument, excluding the credit risk valuation
adjustment, plus any unpaid accrued interest amounts.
Table 21: Rating Triggers for Derivatives
(Dollars in thousands)
Impact of rating downgrade trigger:
Falls below A3/A-(1)...................................... $
Falls below Baa1/BBB+...............................
Falls to or below Baa2/BBB (2).....................
Total.............................................................. $
___________________________
Notional Amount
Payable Due
From CFC
Receivable
Due to CFC
Net (Payable)/
Receivable
41,080 $
(8,168) $
6,031,373
(304,922)
407,712
6,480,165 $
(14,835)
(327,925) $
— $
—
—
— $
(8,168)
(304,922)
(14,835)
(327,925)
(1)
Rating trigger for CFC falls below A3/A-, while rating trigger for counterparty falls below Baa1/BBB+ by Moody’s or S&P, respectively.
(2)
Rating trigger for CFC falls to or below Baa2/BBB, while rating trigger for counterparty falls to or below Ba2/BB+ by Moody’s or S&P, respectively.
Table 21 does not include an interest rate swap agreement with one counterparty that is subject to a ratings trigger and early
termination provision in the event of a downgrade of CFC’s senior unsecured credit ratings below Baa3, BBB- or BBB- by
Moody’s, S&P or Fitch, respectively. The outstanding notional amount of interest rate swaps with this counterparty totaled
$222 million as of May 31, 2021, and the swaps were in an unrealized loss position of $22 million as of May 31, 2021.
61
The aggregate fair value amount, including the credit valuation adjustment, of all interest rate swaps with rating triggers that
were in a net liability position was $344 million as of May 31, 2021, compared with $798 million as of May 31, 2020. There
were no counterparties that fell below the rating trigger levels in our interest swap contracts as of May 31, 2021. If a
counterparty has a credit rating that falls below the rating trigger level specified in the interest swap contract, we have the
option to terminate all derivatives with the counterparty. However, we generally do not terminate such agreements prior to
maturity because our interest rate swaps are critical to our matched funding strategy to mitigate interest rate risk.
See “Item 1A. Risk Factors” for additional information about credit risks related to our business.
LIQUIDITY RISK
We define liquidity as the ability to convert assets into cash quickly and efficiently, maintain access to available funding and
to roll over or issue new debt under normal operating conditions and periods of CFC-specific and/or market stress, to ensure
that we can meet borrower loan requests, pay current and future obligations and fund our operations on a cost-effective
basis. Our primary sources of liquidity include cash flows from operations, member loan repayments, securities held in our
investment portfolio, committed bank revolving lines of credit, committed loan facilities under the Guaranteed Underwriter
Program, revolving note purchase agreements with Farmer Mac and our ability to issue debt in the capital markets, to our
members and in private placements. Our primary uses of liquidity include loan advances to members, principal and interest
payments on borrowings, periodic settlement payments related to derivative contracts and operating expenses.
Liquidity Risk Management
Our liquidity risk-management framework is designed to meet our liquidity objectives of providing a reliable source of
funding to members, meet maturing debt and other financial obligations, issue new debt and fund our operations on a cost-
effective basis under normal operating conditions as well as under CFC-specific and/or market stress conditions. We engage
in various activities to manage liquidity risk and achieve our liquidity objectives. Our Asset Liability Committee establishes
guidelines that are intended to ensure that we maintain sufficient, diversified sources of liquidity to cover potential funding
requirements as well as unanticipated contingencies. Our Treasury group develops strategies to manage our targeted
liquidity position, projects our funding needs under various scenarios, including adverse circumstances, and monitors our
liquidity position on an ongoing basis.
Available Liquidity
As part of our strategy in managing liquidity risk and meeting our liquidity objectives, we seek to maintain various sources
of liquidity that are available to meet our near-term liquidity needs. Table 22 presents the sources of liquidity available for
access as of May 31, 2021 and 2020.
Table 22: Available Liquidity
(Dollars in millions)
Liquidity sources:
Cash and cash equivalents...................................
Debt securities investment portfolio(1).................
Committed bank revolving line of credit
agreements—unsecured(2)................................
Guaranteed Underwriter Program committed
facilities—secured(3).........................................
Farmer Mac revolving note purchase agreement,
dated March 24, 2011, as amended—
secured(4)...........................................................
Total available liquidity.......................................
____________________________
Total
2021
Accessed
Available
Total
2020
Accessed
Available
May 31,
$
295
576
N/A $
N/A
295
576
$
671
309
N/A $
N/A
671
309
2,725
3
2,722
2,725
3
2,722
8,173
7,198
975
7,798
6,898
900
5,500
2,522
2,978
$ 17,269 $ 10,179 $ 7,090
62
5,500
2,440
$ 17,003 $ 9,961 $ 7,042
3,060
(1)
(2)
(3)
Our portfolio of equity securities consists primarily of preferred stock securities that are not as readily redeemable; therefore, we have excluded our
portfolio of equity securities from our sources of available liquidity. As part of a securities repurchase transaction, we pledged $211 million of our debt
investment securities as of May 31, 2021. We repurchased these securities on June 2, 2021.
The committed bank revolving line of credit agreements consist of a three-year and a five-year revolving line of credit agreement. The accessed amount
of $3 million as of both May 31, 2021 and May 31, 2020 relates to letters of credit issued pursuant to the five-year revolving line of credit agreement.
The committed facilities under the Guaranteed Underwriter Program are not revolving.
(4)
Availability subject to market conditions.
Investment Securities Portfolio
We have an investment portfolio of debt securities classified as trading and equity securities, which are reported on our
consolidated balance sheets at fair value. The fair value of the securities in our investment portfolio was $611 million as of
May 31, 2021, consisting of debt securities with a fair value of $576 million and equity securities with a fair value of $35
million. In comparison, the fair value of the securities in our investment portfolio was $370 million as of May 31, 2020,
consisting of debt securities with a fair value of $309 million and equity securities with a fair value of $61 million.
Our debt securities investment portfolio, which increased $267 million to $576 million as of May 31, 2021, is intended to
serve as an additional source of liquidity. The increase in our debt securities investment portfolio during fiscal year 2021
was largely due to the purchase of additional securities. During the fourth quarter of fiscal year 2020, we executed a plan for
the orderly liquidation of a portion of our debt securities from our investment portfolio due to volatility in the financial
markets at that time and the potential for future disruptions caused by the COVID-19 pandemic. As volatility across
financial markets stabilized during the first quarter of our fiscal year 2021, we gradually purchased additional securities to
restore the amount of our debt securities investment portfolio to a level more comparable with the level prior to the
liquidation.
Our debt securities investment portfolio is structured so that the securities generally have active secondary or resale markets
under normal market conditions. The objective of the portfolio is to achieve returns commensurate with the level of risk
assumed subject to CFC’s investment policy and guidelines and liquidity requirements. Pursuant to our investment policy
and guidelines, all fixed-income debt securities, at the time of purchase, must be rated at least investment grade and on
stable outlook based on external credit ratings from at least two of the leading global credit rating agencies, when available,
or the corresponding equivalent, when not available. Securities rated investment grade, that is those rated Baa3 or higher by
Moody’s or BBB- or higher by S&P or BBB- or higher by Fitch, are generally considered by the rating agencies to be of
lower credit risk than non-investment grade securities. We provide additional information on our investment securities
portfolio in “Note 3—Investment Securities.”
Borrowing Capacity Under Current Facilities
Following is a discussion of our borrowing capacity and key terms and conditions under our revolving line of credit
agreements with banks and committed loan facilities under the Guaranteed Underwriter Program and revolving note
purchase agreements with Farmer Mac.
Committed Bank Revolving Line of Credit Agreements—Unsecured
Our committed bank revolving lines of credit may be used for general corporate purposes; however, we generally rely on
them as a backup source of liquidity for our member and dealer commercial paper. We had $2,725 million of commitments
under committed bank revolving line of credit agreements as of May 31, 2021. Under our current committed bank revolving
line of credit agreements, we have the ability to request up to $300 million of letters of credit, which would result in a
reduction in the remaining available amount under the facilities.
Table 23 presents the total commitment amount under our committed bank revolving line of credit agreements, outstanding
letters of credit and the amount available for access as of May 31, 2021. We did not have any outstanding borrowings under
our bank revolving line of credit agreements as of May 31, 2021.
63
Table 23: Committed Bank Revolving Line of Credit Agreements
(Dollars in millions)
Total
Commitment
May 31, 2021
Letters of
Credit
Outstanding
Available
Amount
Maturity
3-year agreement.................. $
1,315 $
— $
1,315 November 28, 2022
5-year agreement..................
1,410
3
1,407 November 28, 2023
Total.....................................
___________________________
$
2,725 $
3 $
2,722
Annual
Facility Fee (1)
7.5 bps
10 bps
(1)
Facility fee based on CFC’s senior unsecured credit ratings in accordance with the established pricing schedules at the inception of the related agreement.
Our committed bank revolving line of credit agreements do not contain a material adverse change clause or rating triggers
that would limit the banks’ obligations to provide funding under the terms of the agreements; however, we must be in
compliance with the covenants to draw on the facilities. We have been and expect to continue to be in compliance with the
covenants under our committed bank revolving line of credit agreements. As such, we could draw on these facilities to repay
dealer or member commercial paper that cannot be rolled over. See “Financial Ratios” and “Debt Covenants” below for
additional information, including the specific financial ratio requirements under our committed bank revolving line of credit
agreements.
Subsequent to our fiscal year-end, on June 7, 2021, we amended the three-year and five-year committed bank revolving line
of credit agreements to extend the maturity dates to November 28, 2024 and November 28, 2025, respectively, and to
terminate certain bank commitments totaling $70 million under the three-year agreement and $55 million under the five-year
agreement. As a result, the total commitment amount under the three-year facility and the five-year facility is $1,245 million
and $1,355 million, respectively, resulting in a combined total commitment amount under the two facilities of $2,600
million.
Guaranteed Underwriter Program Committed Facilities—Secured
Under the Guaranteed Underwriter Program, we can borrow from the Federal Financing Bank and use the proceeds to make
new loans and refinance existing indebtedness. As part of the program, we pay fees, based on outstanding borrowings,
supporting the USDA Rural Economic Development Loan and Grant program. The borrowings under this program are
guaranteed by RUS.
On November 19, 2020, we closed on a $375 million committed loan facility (“Series R”) from the Federal Financing Bank
under the Guaranteed Underwriter Program. Pursuant to this facility, we may borrow any time before July 15, 2025. Each
advance is subject to quarterly amortization and a final maturity not longer than 30 years from the date of the advance. We
borrowed $300 million and redeemed $150 million of notes payable outstanding under the Guaranteed Underwriter Program
during the year ended May 31, 2021. This new commitment increases total funding available to CFC under committed loan
facilities from the Federal Financing Bank (“FFB”) to $975 million. Of this amount, $100 million is available for advance
through July 15, 2023, $500 million is available for advance through July 15, 2024 and $375 million is available for advance
through July 15, 2025.
The notes payable to FFB and guaranteed by RUS under the Guaranteed Underwriter Program contain a provision that if
during any portion of the fiscal year, our senior secured credit ratings do not have at least two of the following ratings: (i)
A3 or higher from Moody’s, (ii) A- or higher from S&P, (iii) A- or higher from Fitch or (iv) an equivalent rating from a
successor rating agency to any of the above rating agencies, we may not make cash patronage capital distributions in excess
of 5% of total patronage capital.
We are required to pledge eligible distribution system loans or power supply system loans as collateral in an amount at least
equal to the total outstanding borrowings under the Guaranteed Underwriter Program. See “Consolidated Balance Sheet
Analysis—Debt—Collateral Pledged” and “Note 4—Loans” for additional information on pledged collateral.
64
Farmer Mac Revolving Note Purchase Agreement—Secured
As indicated in Table 22, we have a revolving note purchase agreement with Farmer Mac, dated March 24, 2011, as
amended, under which we can borrow up to $5,500 million from Farmer Mac, at any time, subject to market conditions. On
May 20, 2021, we amended our revolving note purchase agreement with Farmer Mac to automatically extend the draw
period from January 11, 2022 to June 30, 2026, with successive automatic one-year renewals without notice by either party.
Beginning June 30, 2025, the revolving note purchase agreement is subject to termination of the draw period by Farmer Mac
upon 425 days’ prior written notice. Pursuant to this revolving note purchase agreement, we can borrow, repay and re-
borrow funds at any time through maturity, as market conditions permit, provided that the outstanding principal amount at
any time does not exceed the total available under the agreement. Each borrowing under the revolving note purchase
agreement is evidenced by a pricing agreement setting forth the interest rate, maturity date and other related terms as we
may negotiate with Farmer Mac at the time of each such borrowing. We may select a fixed rate or variable rate at the time of
each advance with a maturity as determined in the applicable pricing agreement. Under this agreement, we had outstanding
secured notes payable totaling $2,978 million and $3,060 million as of May 31, 2021 and 2020, respectively. We
borrowed $500 million under this note purchase agreement with Farmer Mac during the year ended May 31, 2021. The
amount available for borrowing under this agreement was $2,522 million as of May 31, 2021.
We are required to pledge eligible electric distribution system or electric power supply system loans as collateral in an
amount at least equal to the total principal amount of notes outstanding, under this agreement. See “Consolidated Balance
Sheet Analysis—Debt—Collateral Pledged” and “Note 4—Loans” for additional information on pledged collateral.
Short-Term Borrowings and Long-Term and Subordinated Debt
Additional funding is provided by short-term borrowings and issuances of long-term and subordinated debt. We rely on
short-term borrowings as a source to meet our daily, near-term funding needs. Long-term and subordinated debt represents
the most significant component of our funding. The issuance of long-term debt allows us to reduce our reliance on short-
term borrowings and effectively manage our refinancing and interest rate risk.
Short-Term Borrowings
Our short-term borrowings consist of commercial paper, which we offer to members and dealers, select notes and daily
liquidity fund notes offered to members, bank-bid notes, medium-term notes offered to members and dealers and securities
sold under repurchase agreements. Table 24 displays information on the composition, by product type, of our outstanding
short-term borrowings as of May 31, 2021 and 2020.
65
Table 24: Short-Term Borrowings—Outstanding Amount and Weighted-Average Interest Rates
(Dollars in thousands)
Short-term borrowings:
Commercial paper:
May 31,
2021
2020
Outstanding
Amount
Weighted-
Average
Interest Rate
Outstanding
Amount
Weighted-
Average
Interest Rate
Commercial paper sold through dealers, net of discounts..... $
894,977
0.16 % $
—
— %
Commercial paper sold directly to members, at par..............
Total commercial paper...........................................................
Select notes to members..........................................................
Daily liquidity fund notes........................................................
Medium-term notes sold to members......................................
Farmer Mac notes payable (1)...................................................
Securities sold under repurchase agreements..........................
Total short-term borrowings outstanding................................
1,124,607
2,019,584
1,539,150
460,556
362,691
—
200,115
$ 4,582,096
0.14
0.15
0.30
0.08
0.42
—
0.30
0.22
1,318,566
1,318,566
1,597,959
508,618
286,842
250,000
—
$ 3,961,985
0.34
0.34
0.75
0.10
1.64
1.06
—
0.62
___________________________
(1)
Advanced under the revolving note purchase agreement with Farmer Mac dated March 24, 2011. See “Note 7—Long-Term Debt” for additional
information on this revolving note purchase agreement with Farmer Mac.
Our short-term borrowings increased $620 million to $4,582 million as of May 31, 2021, and accounted for 17% of total
debt outstanding, from $3,962 million as of May 31, 2020 and 15% of total debt outstanding. The weighted-average cost of
our outstanding short-term borrowings decreased to 0.22% as of May 31, 2021, from 0.62% as of May 31, 2020. The
weighted-average maturity of our short-term borrowings decreased to 38 days as of May 31, 2021, from 50 days as of
May 31, 2020.
The increase in short-term borrowings was driven primarily by issuances of dealer commercial paper and secured
borrowings under a repurchase agreement. Outstanding dealer commercial paper totaled $895 million as of May 31, 2021.
We had no outstanding dealer commercial paper as of May 31, 2020. Although the intra-period amount of outstanding
dealer commercial paper may fluctuate based on our liquidity requirements, our intent is to manage our short-term wholesale
funding risk by maintaining outstanding dealer commercial paper at an amount below $1,250 million for the foreseeable
future. In fiscal year 2021, we entered into two master repurchase agreements under which we may sell debt securities from
our investment portfolio to the counterparty with a commitment to repurchase such securities back from the counterparty.
The transactions pursuant to these repurchase agreements do not quality for sale accounting. We therefore are required to
account for the transactions as secured borrowings.
Table 25 displays our outstanding short-term borrowings, by funding source, as May 31, 2021 and 2020.
Table 25: Short-Term Borrowings—Funding Sources
(Dollars in thousands)
Funding source:
May 31,
2021
2020
Outstanding
Amount
% of Total
Short-Term
Borrowings
Outstanding
Amount
% of Total
Short-Term
Borrowings
Members..................................................................................
$ 3,487,004
76 % $ 3,711,985
Private placement—Farmer Mac notes payable......................
—
Capital markets........................................................................
1,095,092
—
24
250,000
—
94 %
6
—
Total ........................................................................................
$ 4,582,096
100 % $ 3,961,985
100 %
66
Members accounted for 76% of the source of our outstanding short-term borrowings as of May 31, 2021, down from 94%
as of May 31, 2020.
Long-Term and Subordinated Debt
Long-term and subordinated debt represents the most significant component of our funding. The issuance of long-term debt
allows us to reduce our reliance on short-term borrowings and effectively manage our refinancing and interest rate risk, due
in part to the multi-year contractual maturity structure of long-term debt. In addition to access to private debt facilities, we
also issue debt in the public capital markets. Pursuant to Rule 405 of the Securities Act, we are classified as a “well-known
seasoned issuer.” Under our effective shelf registration statements filed with the U.S. Securities and Exchange Commission
(“SEC”), we may offer and issue the following debt securities:
• an unlimited amount of collateral trust bonds until October 2023;
• an unlimited amount of senior and subordinated debt securities, including medium-term notes, member capital securities
and subordinated deferrable debt, until October 2023; and
• daily liquidity fund notes up to $20,000 million in the aggregate—with a $3,000 million limit on the aggregate principal
amount outstanding at any time—until March 2022.
Although we register member capital securities and the daily liquidity fund notes with the SEC, these securities are not
available for sale to the general public. Medium-term notes are available for sale to both the general public and members.
Notwithstanding the foregoing, we have contractual limitations with respect to the amount of senior indebtedness we may
incur.
As discussed in “Consolidated Balance Sheet Analysis—Debt,” long-term and subordinated debt of $22,844 million and
$22,038 million as of May 31, 2021 and 2020, respectively, accounted for 83% and 85% of total debt outstanding as of each
respective date. The increase in total debt outstanding, including long-term and subordinated debt, was primarily due to the
issuance of debt to fund loan portfolio growth. Table 26 summarizes long-term and subordinated debt issuances and
repayments during fiscal year 2021.
Table 26: Long-Term and Subordinated Debt Issuances and Repayments
(Dollars in thousands)
Debt product type:
Collateral trust bonds...........................................................
Guaranteed Underwriter Program notes payable.................
Farmer Mac notes payable...................................................
Medium-term notes sold to members..................................
Medium-term notes sold to dealers......................................
Other notes payable.............................................................
Members’ subordinated certificates.....................................
Total ....................................................................................
___________________________
Year Ended May 31, 2021
Repayments (1)
Change
Issuances
$
750,000 $
300,000
500,000
60,146
1,461,235
—
755,000 $
292,009
331,728
199,917
604,240
3,564
14,292
84,659
$ 3,085,673 $ 2,271,117 $
(5,000)
7,991
168,272
(139,771)
856,995
(3,564)
(70,367)
814,556
(1)
Repayments include principal maturities, scheduled amortization payments, repurchases and redemptions.
We provide additional information on our financing activities above under “Consolidated Balance Sheet Analysis—Debt”
and on the weighted-average interest rates on our long-term debt and subordinated certificates in “Note 7—Long-Term
Debt,” “Note 8—Subordinated Deferrable Debt” and “Note 9—Members’ Subordinated Certificates.”
Pledged Collateral
Under our secured borrowing agreements we are required to pledge loans, investment debt securities or other collateral and
maintain certain pledged collateral ratios. Of our total debt outstanding of $27,426 million as of May 31, 2021, $16,644
67
million, or 61%, was secured by pledged loans totaling $19,153 million and pledged investments totaling $211 million. In
comparison, of our total debt outstanding of $26,000 million as of May 31, 2020, $16,515 million, or 64%, was secured by
pledged loans totaling $19,643 million. Following is additional information on the collateral pledging requirements for our
secured borrowing agreements.
Secured Borrowing Agreements—Pledged Loan Requirements
We are required to pledge loans or other collateral in transactions under our collateral trust bond indentures, bond
agreements under the Guaranteed Underwriter Program and note purchase agreements with Farmer Mac. Total debt
outstanding is presented on our consolidated balance sheets net of unamortized discounts and issuance costs. Our collateral
pledging requirements are based, however, on the face amount of secured outstanding debt, which excludes net unamortized
discounts and issuance costs. We are required to maintain pledged collateral equal to at least 100% of the face amount of
outstanding borrowings. However, as discussed below, we typically maintain pledged collateral in excess of the required
percentage. Under the provisions of our committed bank revolving line of credit agreements, the excess collateral that we
are allowed to pledge cannot exceed 150% of the outstanding borrowings under our collateral trust bond indentures, the
Guaranteed Underwriter Program or the Farmer Mac note purchase agreements. In certain cases, provided that all conditions
of eligibility under the different programs are satisfied, we may withdraw excess pledged collateral or transfer collateral
from one borrowing program to another to facilitate a new debt issuance. Table 27 displays the collateral coverage ratios
pursuant to these secured borrowing agreements as of May 31, 2021 and 2020.
Table 27: Collateral Pledged
Requirement Coverage Ratios
Maximum
Committed Bank
Revolving Line of
Credit Agreements
Minimum Debt
Indentures
Actual Coverage Ratios(1)
May 31,
2021
2020
Secured borrowing agreement:
Collateral trust bonds 1994 indenture........................
100 %
150 %
116 %
114 %
Collateral trust bonds 2007 indenture........................
Guaranteed Underwriter Program notes payable.......
Farmer Mac notes payable.........................................
Clean Renewable Energy Bonds Series 2009A.........
____________________________
100
100
100
100
150
150
150
150
115
114
116
120
113
120
121
120
(1)
Calculated based on the amount of collateral pledged divided by the face amount of outstanding secured debt.
Table 28 displays the unpaid principal balance of loans pledged for secured debt, the excess collateral pledged and
unencumbered loans as of May 31, 2021 and 2020.
Table 28: Unencumbered Loans
May 31,
(Dollars in thousands)
Total loans outstanding(1)...................................................................
Less: Loans required to be pledged for secured debt (2)....................
Loans pledged in excess of requirement(2)(3)............................
Total pledged loans.................................................................. $ (19,152,759)
(16,704,335)
$ 28,415,107
(2,448,424)
2021
2020
$ 26,690,854
(16,784,728)
(2,858,238)
$ (19,642,966)
Unencumbered loans.......................................................................... $ 9,262,348
$ 7,047,888
Unencumbered loans as a percentage of total loans outstanding.......
____________________________
33 %
26 %
(1)
(2)
Represents the unpaid principal balance of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $12 million and
$11 million as of May 31, 2021 and 2020, respectively.
Reflects unpaid principal balance of pledged loans.
68
(3)
Excludes cash collateral pledged to secure debt. If there is an event of default under most of our indentures, we can only withdraw the excess collateral
if we substitute cash or permitted investments of equal value.
As displayed above in Table 28, we had excess loans pledged as collateral totaling $2,448 million and $2,858 million as of
May 31, 2021 and 2020, respectively. We typically pledge loans in excess of the required amount for the following reasons:
(i) our distribution and power supply loans are typically amortizing loans that require scheduled principal payments over the
life of the loan, whereas the debt securities issued under secured indentures and agreements typically have bullet maturities;
(ii) distribution and power supply borrowers have the option to prepay their loans; and (iii) individual loans may become
ineligible for various reasons, some of which may be temporary.
We provide additional information on our borrowings, including the maturity profile, below in “Liquidity Risk.” Also refer
to “Note 6—Short-Term Borrowings,” “Note 7—Long-Term Debt,” “Note 8—Subordinated Deferrable Debt” and “Note 9
—Members’ Subordinated Certificates” for additional information on each of our debt product types. See “Note 4—Loans
—Pledged Loans” for additional information related to pledged collateral.
Secured Borrowing Agreements—Pledged Investment Securities
In fiscal year 2021, we entered into two master repurchase agreements under which we may transfer debt securities from our
investment debt securities portfolio to the counterparty with a commitment to repurchase the transferred securities back from
the counterparty. The transactions pursuant to these repurchase agreements do not quality for sale accounting. We therefore
are required to account for the transactions as secured borrowings. The transferred debt securities represent pledged
collateral for the secured borrowings under the repurchase agreements.
On May 25, 2021, we borrowed $200 million under the repurchase agreements and transferred debt securities to the
counterparty. On June 2, 2021, we repurchased the transferred debt securities, which had a fair value of $211 million as of
May 31, 2021. We report the transferred debt securities as pledged collateral on our consolidated balance sheet as of
May 31, 2021.
Member Loan Repayments
Table 29 displays future scheduled loan principal payment amounts, by member class and by loan type, on loans outstanding
as of May 31, 2021, disaggregated by amounts due (i) in one year or less; (ii) after one year up to five years; (iii) after five
years up to 15 years; and (iv) after 15 years.
Table 29: Loans—Maturities of Scheduled Principal Payments
Due ≤ 1 Year
Due > 1 Year Up
to 5 Years
May 31, 2021
Due > 5 Years
Up to 15 Years
Due After 15
Years
Total
(Dollars in thousands)
Member class:
CFC:
Distribution.............................
$
2,074,765 $
4,258,198 $
9,123,783 $
6,570,677 $ 22,027,423
Power supply...........................
605,433
1,337,364
1,851,289
1,360,226
5,154,312
Statewide and associate...........
9,316
63,697
16,625
16,483
106,121
Total CFC..................................
2,689,514
5,659,259
10,991,697
7,947,386
27,287,856
NCSC.........................................
RTFC.........................................
106,025
40,619
185,076
150,116
317,343
229,648
98,424
—
706,868
420,383
Total loans outstanding.............. $
2,836,158 $
5,994,451 $ 11,538,688 $
8,045,810 $ 28,415,107
Loan type:
Fixed rate...................................
Variable rate...............................
Total loans outstanding.............. $
$
1,342,258 $
1,493,900
2,836,158 $
5,100,545 $ 11,283,853 $
893,906
254,835
5,994,451 $ 11,538,688 $
7,788,110 $ 25,514,766
2,900,341
8,045,810 $ 28,415,107
257,700
69
Contractual Obligations
Our contractual obligations affect both our short- and long-term liquidity needs. Our most significant contractual obligations
include scheduled payments on our debt obligations. Table 30 displays scheduled amounts due on our debt obligations in
each of the next five fiscal years and thereafter. The amounts presented reflect undiscounted future cash payment amounts
due pursuant to these obligations, aggregated by the type of contractual obligation. The table excludes certain obligations
where the obligation is short-term, such as trade payables, or where the amount is not fixed and determinable, such as
derivatives subject to valuation based on market factors. The timing of actual future payments may differ from those
presented due to a number of factors, such as discretionary debt redemptions or changes in interest rates that may impact our
expected future cash interest payments.
Table 30: Contractual Obligations(1)
(Dollars in millions)
2022
2023
2024
2025
2026
Thereafter
Total
Short-term borrowings..............................
$ 4,582 $ — $ — $ — $ — $ — $ 4,582
Fiscal Year Ended May 31,
Long-term debt..........................................
2,598
1,844
1,652
Subordinated deferrable debt....................
Members’ subordinated certificates(2).......
Total long-term and subordinated debt.....
Contractual interest on long-term debt(3)...
Total .........................................................
____________________________
—
7
—
19
—
11
2,605
1,863
1,663
842
—
10
852
2,428
11,520
20,884
—
55
1,000
1,153
1,000
1,255
2,483
13,673
23,139
644
7,847
$ 7,831 $ 2,460 $ 2,221 $ 1,380 $ 2,965 $ 18,711 $ 35,568
5,038
528
482
558
597
(1)
Callable debt is included in this table at its contractual maturity.
(2
(3)
Member loan subordinated certificates totaling $190 million are amortizing annually based on the unpaid principal balance of the related loan.
Amortization payments on these certificates totaled $13 million in fiscal year 2021 and represented 7% of amortizing loan subordinated certificates
outstanding.
Represents the amounts of future interest payments on long-term and subordinated debt outstanding as of May 31, 2021, based on the contractual terms
of the securities. These amounts were determined based on certain assumptions, including that variable-rate debt continues to accrue interest at the
contractual rates in effect as of May 31, 2021 until maturity, and redeemable debt continues to accrue interest until its contractual maturity.
Off-Balance Sheet Arrangements
In the ordinary course of business, we engage in financial transactions that are not presented on our consolidated balance
sheets, or may be recorded on our consolidated balance sheets in amounts that are different from the full contract or notional
amount of the transaction. Our off-balance sheet arrangements consist primarily of unadvanced loan commitments intended
to meet the financial needs of our members and guarantees of member obligations, which may affect our liquidity
requirements based on the likelihood that borrowers will advance funds under the loan commitments or we will be required
to perform under the guarantee obligations. We provide additional information about our unadvanced loan commitments,
including amounts outstanding, in “Note 4—Loans” and our guarantee obligations in “Note 13—Guarantees.”
Projected Near-Term Sources and Uses of Liquidity
As discussed above, our primary sources of liquidity include cash flows from operations, member loan repayments,
committed bank revolving lines of credit, committed loan facilities, short-term borrowings and funds from the issuance of
long-term and subordinated debt. Our primary uses of liquidity include loan advances to members, principal and interest
payments on borrowings, periodic settlement payments related to derivative contracts and operating expenses.
Table 31 below displays our projected sources and uses of cash from debt and investment activity, by quarter, over the next
six quarters through the quarter ended November 30, 2022. Our assumptions also include the following: (i) the estimated
issuance of long-term debt, including collateral trust bonds and private placement of term debt, is based on maintaining a
matched funding position within our loan portfolio with our bank revolving lines of credit serving as a backup liquidity
facility for commercial paper and on maintaining outstanding dealer commercial paper at an amount below $1,250 million;
(ii) long-term loan scheduled amortization payments represent the scheduled long-term loan payments for loans outstanding
70
as of May 31, 2021, and our current estimate of long-term loan prepayments, which the amount and timing of are subject to
change; (iii) other loan repayments and other loan advances primarily relate to line of credit repayments and advances;
(iv) long-term debt maturities reflect scheduled maturities of outstanding term debt for the periods presented; and (v) long-
term loan advances reflect our current estimate of member demand for loans, the amount and timing of which are subject to
change.
Table 31: Projected Sources and Uses of Liquidity from Debt and Investment Activity(1)
Projected Sources of Liquidity
Projected Uses of Liquidity
(Dollars in
millions)
Long-
Term
Debt
Issuance
Anticipated
Long-Term
Loan
Repayments(2)
Other
Loan
Repayments(3)
Total
Projected
Sources of
Liquidity
Long-Term
Debt
Maturities(4)
Long-
Term
Loan
Advances
Other Loan
Advances(5)
Total
Projected
Uses of
Liquidity
Other
Sources/
(Uses) of
Liquidity(6)
1Q FY 2022.... $ 533 $
2Q FY 2022....
62
1,733
351
307
648
$ 3,634 $
3Q FY 2022....
4Q FY 2022....
1Q FY 2023....
2Q FY 2023....
Total...........
____________________________
372 $
352
350
351
370
357
2,152 $
84 $
196
65
64
—
—
989 $
610
2,148
766
677
1,005
552 $
402
1,408
594
457
733
794 $
450
552
436
572
548
409 $ 6,195 $
4,146 $ 3,352 $
— $ 1,346 $
—
—
—
—
—
— $ 7,498 $
852
1,960
1,030
1,029
1,281
126
239
(229)
205
292
275
908
(1)
The dates presented represent the end of each quarterly period through the quarter ended November 30, 2022.
Anticipated long-term loan repayments include scheduled long-term loan amortizations, anticipated cash repayments at repricing date and sales.
(2)
(3) Other loan repayments include anticipated short-term loan repayments.
(4) Long-term debt maturities also include medium-term notes with an original maturity of one year or less and expected early redemptions of debt.
(5)
Other loan advances include anticipated short-term loan advances.
(6)
Includes net increase or decrease to dealer commercial paper, member commercial paper and select notes, and purchases and maturity of investments.
As displayed in Table 31, we currently project long-term advances of $2,232 million over the next 12 months, which we
anticipate will exceed anticipated long-term loan repayments over the same period of $1,425 million by approximately $807
million. The estimates presented above are developed at a particular point in time based on our expected future business
growth and funding. Our actual results and future estimates may vary, perhaps significantly, from the current projections, as
a result of changes in market conditions, management actions or other factors.
Credit Ratings
Our funding and liquidity, borrowing capacity, ability to access capital markets and other sources of funds and the cost of
these funds are partially dependent on our credit ratings. Rating agencies base their ratings on numerous factors, including
liquidity, funding diversity, capital adequacy, industry position, member support, management, asset quality, earnings
stability and the probability of systemic support. Significant changes in these factors could result in different ratings.
On March 5, 2021, S&P issued a downgrade of our long-term issuer credit rating, citing a shift from “Strong” to “Adequate”
in its view of CFC’s risk position due to CFC’s loan portfolio concentration in the State of Texas. S&P also revised its
outlook on CFC to negative based on the potential for additional elevated credit stress posed by Texas electric cooperatives
due to the February 2021 polar vortex. The downgrade of CFC’s long-term issuer credit rating by S&P resulted in a
downgrade of (i) our senior secured and senior unsecured debt ratings to A- from A; (ii) our subordinated debt rating to
BBB from BBB+; and (iii) our short-term issuer credit and commercial paper ratings to A-2 from A-1, each with a negative
outlook. Table 32 displays our credit ratings as of May 31, 2021. Our credit ratings by Moody’s and Fitch remain unchanged
from May 31, 2020, and as of the date of this Report.
71
Table 32: Credit Ratings
Long-term issuer credit rating(1).........
Senior secured debt(2).........................
Senior unsecured debt(3).....................
Subordinated debt..............................
Commercial paper..............................
Outlook..............................................
___________________________
(1)
Based on our senior unsecured debt rating.
(2)
Applies to our collateral trust bonds.
(3)
Applies to our medium-term notes.
Moody’s
A2
A1
A2
A3
P-1
May 31, 2021
S&P
A-
A-
A-
BBB
A-2
Stable
Negative
Fitch
A
A+
A
BBB+
F1
Stable
The current split ratings have no impact on the pricing of our bank revolving credit facilities, and we do not believe that the
current split ratings have a material impact on our access to the commercial paper markets or on our ability to issue long-
term debt in the capital markets. Due to the S&P ratings downgrade, we have however, experienced a slight increase in the
cost of our commercial paper issuances and we also may experience a slight increase in the credit spread of long-term debt
issuances.
See “Credit Risk—Counterparty Credit Risk—Credit Risk-Related Contingent Features” above for information on credit
rating provisions related to our derivative contracts.
Financial Ratios
Our debt-to-equity ratio decreased to 20.17 as of May 31, 2021, from 42.40 as of May 31, 2020, primarily due to an increase
in equity from our reported net income of $814 million for fiscal year 2021 which was partially offset by a decrease in
equity from the retirement of $60 million in patronage capital authorized by the CFC Board of Directors in July 2020 and
paid to members in September 2020.
Our adjusted debt-to-equity ratio increased above our targeted threshold of 6.00-to-1 to 6.15 as of May 31, 2021, from 5.85
as of May 31, 2020, The increase was primarily attributable to an increase in adjusted liabilities due to additional
borrowings to fund growth in our loan portfolio. We provide a reconciliation of our adjusted debt-to-equity ratio to the most
comparable U.S. GAAP measure and an explanation of the adjustments below in “Non-GAAP Financial Measures.”
Debt Covenants
As part of our short-term and long-term borrowing arrangements, we are subject to various financial and operational
covenants. If we fail to maintain specified financial ratios, such failure could constitute a default by CFC of certain debt
covenants under our committed bank revolving line of credit agreements and senior debt indentures. We believe we were in
compliance with all covenants and conditions under our committed bank revolving line of credit agreements and senior debt
indentures as of May 31, 2021.
As discussed above in “Introduction” and “Selected Financial Data,” the financial covenants set forth in our committed bank
revolving line of credit agreements and senior debt indentures are based on adjusted financial measures, including adjusted
TIER. We provide a reconciliation of adjusted TIER and other non-GAAP measures disclosed in this Report to the most
comparable U.S. GAAP measures and an explanation of the adjustments below in “Non-GAAP Financial Measures.”
72
MARKET RISK
Interest rate risk represents our primary source of market risk, as movements in interest rates can have a significant impact
on the earnings and safety and soundness of a financial institution. We are exposed to interest rate risk primarily from the
differences in the timing between the maturities or repricing of our loans and the liabilities funding our loans. Below we
discuss how we manage and measure interest rate risk. We also include a discussion about the current status of our
preparation in transitioning from LIBOR as an interest reference rate to an alternative rate.
Interest Rate Risk Management
Our interest rate risk management objective is to prudently manage the difference between interest-earning assets and
interest-bearing liabilities in order to mitigate interest rate risk in accordance with CFC’s board policy and risk limits and
guidelines established by the Asset Liability Committee (“ALCO”). The ALCO provides oversight of our exposure to
interest rate risk and ensures that our exposure is compliant with established risk limits and guidelines. We seek to generate
stable adjusted net interest income on a sustained and long-term basis by minimize the mismatch between the cash flows
from our financial assets and our financial liabilities. We use derivatives as a tool in matching the duration and repricing
characteristics of our assets and liabilities, which we discuss above in “Consolidated Results of Operations—Non-Interest
Income—Derivative Gains (Losses) and “Note 10—Derivatives and Hedging Activities.”
Measurement of Interest Rate Risk
We routinely measure and assess our interest rate risk exposure using various methodologies. We implemented
enhancements to our Asset Liability Management (“ALM”) framework that expanded our analytic tools and capabilities,
which allowed us to provide a more comprehensive profile of our interest rate risk exposure. As a result of these
enhancements, we are able to more accurately measure and monitor our interest rate risk exposure under multiple interest
rate scenarios using several different techniques, including, among others, the sensitivity of our net interest and adjusted net
interest income to changes in interest rates and duration gap analysis. Because we believe these measures are more
meaningful and useful in evaluating our interest rate risk exposure, we changed the presentation of our quantitative measures
of interest rate risk during the fourth quarter of fiscal year 2021. Below we present two measures we use to assess our
interest rate risk exposure: (i) the interest rate sensitivity of our projected net interest income and adjusted net interest
income; and (ii) duration gap.
Interest Rate Sensitivity Analysis
Our ALM models, which we use to evaluate the sensitivity of our interest-earning assets and the interest-bearing liabilities
funding those assets under different interest rate scenarios, are updated monthly to reflect our current balance sheet position.
We then overlay our current balance sheet position with management’s forecast assumptions to generate a baseline
projection of net interest income and adjusted net interest income over the next 12 months. Table 33 presents the estimated
percentage impact on our projected base-line net interest income and adjusted net interest income, which includes the impact
of derivative cash settlements interest expense, over the next 12 months resulting from a hypothetical instantaneous parallel
shift of plus or minus 100 basis points in the interest rate yield curve as of May 31, 2021 and 2020. Shorter-term interest
rates were less than 1%, or 100 basis points, as of May 31, 2021 and interest rates across the entire yield curve were less
than 100 basis points as of May 31, 2020. We therefore assumed a floor interest rate of 0% if the hypothetical instantaneous
interest shift of minus 100 would result in a negative interest rate.
73
Table 33: Interest Rate Sensitivity Analysis(1)
Estimated Impact(2)
Net interest income...........................
Derivative cash settlements interest
expense...................................................
Adjusted net interest income(4)............
____________________________
May 31, 2021
May 31, 2020
+ 100 Basis Points
– 100 Basis Points
(3)
+ 100 Basis Points
– 100 Basis Points
(3)
(6.13)%
(3.34)%
(8.20)%
(2.30)%
8.12%
1.99%
(3.01)%
(6.35)%
8.34%
0.14%
(4.32)%
(6.62)%
(1)
(2)
Applies to all rate-sensitive assets and liabilities including fixed-rate loans with a repricing date within the next 12 months and forecasted new loan
growth; no impact on fixed-rate loans that are priced to maturity and nonperforming loans that are held at zero interest rate until maturity.
Actual net interest income (including adjusted) may differ significantly from the below referenced sensitivity analysis.
(3)
Floored at zero percent interest rate.
(4)
Includes derivative cash settlements that represent amounts received from or paid to counterparties.
Duration Gap
The duration gap is the difference between the estimated duration of assets and liabilities, which is calculated using an ALM
model. The duration gap summarizes the extent to which cash-flows for assets and liabilities are matched over time. A
positive duration gap denotes that the duration of our assets is greater than the duration of our debt and derivatives.
Therefore there is increased exposure to rising interest rates over the long term. A negative duration gap indicates increased
exposure to declining interest rates over the long term because the duration of our assets is less than the duration of our
liabilities and derivatives. The duration gap provides a relatively concise and simple measure of the interest rate risk
inherent in our balance sheet; however, it is not directly linked to expected future net interest income and adjusted net
interest income. We had a positive duration gap of 1.69 months as of May 31, 2021, compared with a negative duration gap
of 7.6 months as of May 31, 2020.
Limitations of Interest Rate Risk Measures
While we believe that the interest income sensitivities and duration gap measures provided are useful tools in assessing our
interest rate risk exposure, there are inherent limitations in any methodology used to estimate the exposure to changes in
market interest rates. These measures should be understood as estimates rather than as precise measurements. The interest
rate sensitivity analyses only contemplate certain hypothetical movements in interest rates and are performed at a particular
point in time based on the existing balance sheet and, in some cases, expected future business growth and funding mix
assumptions. The strategic actions that management may take to manage our balance sheet may differ significantly from our
projections, which could cause our actual interest income to differ substantially from the above sensitivity analysis.
LIBOR Transition
In July 2017, the United Kingdom’s Financial Conduct Authority (“FCA”), which regulates the LIBOR index, announced
that it intended to stop compelling banks to submit the rates required to calculate LIBOR after December 31, 2021.
Following this announcement, the Federal Reserve Board and the Federal Reserve Bank of New York established the
Alternative Reference Rates Committee (“ARRC”) which is comprised of private-market participants and ex-officio
members representing banking and financial sector regulators. The ARRC has recommended the Secured Overnight
Financing Rate (“SOFR”) as the alternative reference rate.
In November 2020, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency
and the Federal Deposit Insurance Corporation issued a joint statement encouraging financial institutions to cease entering
into new contracts that use U.S. dollar-denominated (“USD”) LIBOR as a reference rate as soon as practicable and in any
event by December 31, 2021, in order to facilitate an orderly, safe and sound LIBOR transition. The joint statement
indicated that new contracts entered into before December 31, 2021 should either utilize a reference rate other than LIBOR
or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR’s discontinuation.
In March 2021, the FCA and the Intercontinental Exchange (“ICE”) Benchmark Administration, the administrator for
LIBOR, concurrently confirmed the intention to stop requiring banks to submit the rates required to calculate LIBOR after
74
December 31, 2021 for one-week and two-month LIBOR and June 30, 2023 for all remaining LIBOR tenors. Pursuant to the
announcement, one-week and two-month LIBOR will cease to be published or lose representativeness immediately after
December 31, 2021, and all remaining USD LIBOR tenors will cease to be published or lose representativeness immediately
after June 30, 2023.
We established a cross-functional LIBOR working group to identify CFC’s exposure, assess the potential risks related to the
transition from LIBOR to a new index and develop a strategic transition plan. The LIBOR working group has been closely
monitoring and assessing developments with respect to the LIBOR transition and providing regular reports to our Chief
Financial Officer and the CFC Board of Directors. An assessment of all of CFC’s LIBOR-based contracts and financial
instruments and the systems, models and processes that may be impacted has been completed. We have confirmed CFC’s
adherence to the International Swaps and Derivatives Association, Inc. 2020 LIBOR Fallbacks Protocol for our derivative
instruments. We plan to stop originating new LIBOR-based loans prior to December 31, 2021, and we have been working to
ensure that new LIBOR-based loans and existing LIBOR-based loans otherwise being amended include hardwired fallback
language. We are also closely monitoring the development of alternative credit-sensitive rates in addition to SOFR such as
the Bloomberg Short Term Bank Yield index.
Table 34 summarizes our LIBOR-indexed financial instruments outstanding as of May 31, 2021 that have a contractual
maturity date after June 30, 2023. These financial instruments are included in amounts reported on our consolidated balance
sheets.
Table 34: LIBOR-Indexed Financial Instruments
(Dollars in millions)
May 31, 2021
Loans to members, performing................
$
Investment securities................................
Debt..........................................................
413
49
1,733
In addition, we have LIBOR-indexed derivatives with a notional amount of $7,479 million as of May 31, 2021 that have a
contractual maturity date after June 30, 2023.
We discuss the risks related to the uncertainty as to the nature of potential changes and other reforms associated with the
transition away from and expected replacement of LIBOR as a benchmark interest rate in “Item 1A. Risk Factors.”
OPERATIONAL RISK
Operational risk represents the risk of loss resulting from conducting our operations, including, but not limited to, the
execution of unauthorized transactions by employees; errors relating to loan documentation, transaction processing and
technology; the inability to perfect liens on collateral; breaches of internal control and information systems; and the risk of
fraud by employees or persons outside the company. This risk of loss also includes potential legal actions that could arise as
a result of operational deficiencies, noncompliance with covenants in our revolving credit agreements and indentures,
employee misconduct or adverse business decisions. In the event of a breakdown in internal controls, improper access to or
operation of systems or improper employee actions, we could incur financial loss. Operational/business risk also may
include breaches of our technology and information systems resulting from unauthorized access to confidential information
or from internal or external threats, such as cyberattacks.
Operational risk is inherent in all business activities. The management of such risk is important to the achievement of our
objectives. We maintain business policies and procedures, employee training, an internal control framework, and a
comprehensive business continuity and disaster recovery plan that are intended to provide a sound operational environment.
Our business policies and controls have been designed to manage operational risk at appropriate levels given our financial
strength, the business environment and markets in which we operate, the nature of our businesses, and considering factors
such as competition and regulation. Corporate Compliance monitors compliance with established procedures and applicable
law that are designed to ensure adherence to generally accepted conduct, ethics and business practices defined in our
corporate policies. We provide employee compliance training programs, including information protection, Regulation FD
75
(“Fair Disclosure”) compliance and operational risk. Internal Audit examines the design and operating effectiveness of our
operational, compliance and financial reporting internal controls on an ongoing basis.
Our business continuity and disaster recovery plan establishes the basic principles and framework necessary to ensure
emergency response, resumption, restoration and permanent recovery of CFC’s operations and business activities during a
business interruption event. This plan includes a duplication of our operating systems at an off-site facility coupled with an
extensive business continuity and recovery process to leverage those remote systems. Each of our departments is required to
develop, exercise, test and maintain business resumption plans for the recovery of business functions and processing
resources to minimize disruption for our members and other parties with whom we do business. We conduct disaster
recovery exercises periodically that include both the information technology group and business areas. The business
resumption plans are based on a risk assessment that considers potential losses due to unavailability of service versus the
cost of resumption. These plans anticipate a variety of probable scenarios ranging from local to regional crises.
In fiscal year 2020, we enhanced our crisis management framework to provide additional corporate guidance on the
management of and response to significant crises that may have an adverse disruptive impact on our business. The crises
identified include, but are not limited to, man-made and natural disasters including infectious disease pandemics, technology
disruption and workforce issues. The objectives of the enhancements are to ensure, in the event of an identified crisis, we
have well-documented plans in place to protect our employees and the work environment, safeguard CFC’s operations,
protect CFC’s brand and reputation and minimize the impact of business disruptions. We conducted a business impact
analysis for each identified crisis to assess the potential impact on our business operations, financial performance,
technology and staff. The results of the business impact analysis have been utilized to develop management action plans that
align business priorities, clarify responsibilities and establish processes and procedures that enable us to respond in a timely,
proactive manner and take appropriate actions to manage and mitigate the potential disruptive impact of specified crises.
Cybersecurity risk is managed as part of our overall management of operational risk. Cyber-related attacks pose a risk to the
security of our members’ strategic business information and the confidentiality and integrity of our data, which includes
strategic and proprietary information. Because such an attack could have a material adverse impact on our operations, the
CFC Board of Directors is actively engaged in the oversight of our continuous efforts in monitoring and managing the risks
associated with the ever-evolving nature of cybersecurity threats. Each quarter, or more frequently as requested by the board
of directors, management provides reports on CFC’s security operations, including any cybersecurity incidents,
management’s efforts to manage any incidents and any other related information requested from management. On at least an
annual basis, the board of directors reviews management reports concerning the disclosure controls and procedures in place
to enable CFC to make accurate and timely disclosures about any material cybersecurity events. Additionally, upon the
occurrence of a material cybersecurity incident, the board of directors will be notified of the event so it may properly
evaluate such incident, including management’s remediation plan.
76
SELECTED QUARTERLY FINANCIAL DATA
Table 35 provides a summary of condensed quarterly financial information for fiscal years 2021 and 2020.
Table 35: Selected Quarterly Financial Data
(Dollars in thousands)
Aug 31, 2020
Nov 30, 2020
Feb 28, 2021
May 31, 2021
Total
Interest income........................................... $
279,584 $
276,499 $
278,172 $
282,346 $ 1,116,601
Interest expense.........................................
(179,976)
(174,422)
(173,040)
(174,625)
(702,063)
Year Ended May 31, 2021
Net interest income..................................
99,608
102,077
105,132
(326)
(1,638)
(33,023)
107,721
6,480
414,538
(28,507)
99,282
100,439
72,109
114,201
386,031
Benefit (provision) for credit losses...........
Net interest income after benefit
(provision) for credit losses....................
Non-interest income:
Derivative gains.....................................
Other non-interest income.....................
Total non-interest income.......................
60,276
8,175
68,451
81,287
4,971
86,258
330,196
1,012
331,208
34,542
6,266
40,808
506,301
20,424
526,725
Non-interest expense.................................
(22,995)
(25,914)
(23,863)
(25,008)
(97,780)
Income before income taxes......................
144,738
160,783
379,454
130,001
814,976
Income tax provision.................................
(151)
(262)
(507)
(78)
(998)
Net income................................................
Less: Net income attributable to
noncontrolling interests..........................
144,587
160,521
378,947
129,923
813,978
(171)
(505)
(1,213)
(422)
(2,311)
Net income attributable to CFC.............
$
144,416 $
160,016 $
377,734 $
129,501 $
811,667
(Dollars in thousands)
Aug 31, 2019
Nov 30, 2019
Feb 29, 2020
May 31, 2020
Total
Interest income........................................... $
290,015 $
287,037 $
287,195 $
287,039 $ 1,151,286
Interest expense.........................................
(213,271)
(207,871)
(203,040)
(196,907)
(821,089)
Year Ended May 31, 2020
Net interest income..................................
76,744
(30)
79,166
1,045
84,155
90,132
330,197
(2,382)
(34,223)
(35,590)
76,714
80,211
81,773
55,909
294,607
Provision for credit losses..........................
Net interest income after provision for
credit losses............................................
Non-interest income:
Derivative gains (losses).......................
(395,725)
183,450
(337,936)
(239,940)
(790,151)
Other non-interest income.....................
12,561
3,728
4,396
11,707
32,392
Total non-interest income (loss).............
(383,164)
187,178
(333,540)
(228,233)
(757,759)
Non-interest expense.................................
(18,150)
(25,698)
(25,628)
(57,962)
(127,438)
Income (loss) before income taxes............
(324,600)
241,691
(277,395)
(230,286)
(590,590)
Income tax benefit (provision)...................
521
(91)
426
304
1,160
Net income (loss)......................................
Less: Net (income) loss attributable to
noncontrolling interests..........................
(324,079)
241,600
(276,969)
(229,982)
(589,430)
1,657
(8)
1,405
1,136
4,190
Net income (loss) attributable to CFC...
$
(322,422) $
241,592 $
(275,564) $
(228,846) $
(585,240)
77
We experienced a variance of $360 million between our reported net income of $130 million in the fourth quarter of fiscal
year 2021 and our reported net loss of $230 million in the fourth quarter of fiscal year 2020. The variance was primarily
driven by a favorable shift in derivative fair value changes of $275 million. We recorded derivative gains of $35 million in
the fourth quarter of fiscal year 2021, attributable to an increase in the net fair value of our swap portfolio resulting from
increases in medium- and longer-term swap interest rates during the quarter. In contrast, we recorded derivative losses of
$240 million in the fourth quarter of fiscal year 2020, attributable to a decrease in the net fair value of our swap portfolio
due to declines in interest rates across the swap curve.
In addition, net interest income increased $18 million, or 20%, to $108 million in the fourth quarter of fiscal year 2021,
attributable to the combined impact of an increase in the net interest yield and an increase in average interest-earning assets.
We also experienced a favorable shift in the provision of credit losses of $41 million in the fourth quarter of fiscal year
2021. The shift was largely attributable to the absence of the asset-specific addition to the allowance for credit losses of $34
million in the fourth quarter of 2020, which we established for a CFC power supply borrower in conjunction with our
classification of a loan to this borrower totaling $168 million as nonperforming as of May 31, 2020.
Other notable items contributing to the variance between our reported results for the fourth quarter of fiscal year 2021 and
2020 include the absence of a non-cash software impairment charge of $31 million recorded in the fourth quarter of fiscal
year 2020 due to management’s decision to abandon a project to develop an internal-use loan origination and servicing
platform.
NON-GAAP FINANCIAL MEASURES
Below we discuss each of non-GAAP adjusted measures and provide a reconciliation of our adjusted measures to the most
comparable U.S. GAAP measures. We believe our non-GAAP adjusted measures, which are not a substitute for U.S. GAAP
and may not be consistent with similarly titled non-GAAP measures used by other companies, 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.
Statements of Operations Non-GAAP Adjustments
One of our primary performance measures is TIER, which is a measure indicating our ability to cover the interest expense
requirements on our debt. TIER is calculated by adding the interest expense to net income prior to the cumulative effect of
change in accounting principle and dividing that total by the interest expense. We adjust the TIER calculation to add the
derivative cash settlements expense to the interest expense and to remove the derivative forward value gains (losses) and
foreign currency adjustments from total net income. Adding the cash settlements expense back to interest expense also has a
corresponding effect on our adjusted net interest income.
We use derivatives to manage interest rate risk on our funding of the loan portfolio. The derivative cash settlements expense
represents the amount that we receive from or pay to our counterparties based on the interest rate indexes in our derivatives
that do not qualify for hedge accounting. We adjust the reported interest expense to include the derivative cash settlements
expense. We use the adjusted cost of funding to set interest rates on loans to our members and believe that the interest
expense adjusted to include derivative cash settlements expense represents our total cost of funding for the period. TIER
calculated by adding the derivative cash settlements expense to the interest expense reflects management’s perspective on
our operations and, therefore, we believe that it represents a useful financial measure for investors.
The derivative forward value gains (losses) and foreign currency adjustments do not represent our cash inflows or outflows
during the current period and, therefore, do not affect our current ability to cover our debt service obligations. The derivative
forward value gains (losses) included in the derivative gains (losses) line of the statement of operations represents a present
value estimate of the future cash inflows or outflows that will be recognized as net cash settlements expense for all periods
through the maturity of our derivatives that do not qualify for hedge accounting. We have not issued foreign-denominated
debt since 2007, and as of May 31, 2021 and 2020, there were no foreign currency derivative instruments outstanding.
78
For operational management and decision-making purposes, we subtract derivative forward value gains (losses) and foreign
currency adjustments from our net income when calculating TIER and for other net income presentation purposes. In
addition, since the derivative forward value gains (losses) and foreign currency adjustments do not represent current-period
cash flows, we do not allocate such funds to our members and, therefore, exclude the derivative forward value gains (losses)
and foreign currency adjustments from net income in calculating the amount of net income to be allocated to our members.
TIER calculated by excluding the derivative forward value gains (losses) and foreign currency adjustments from net income
reflects management’s perspective on our operations and, therefore, we believe that it represents a useful financial measure
for investors.
Total equity includes the noncash impact of derivative forward value gains (losses) and foreign currency adjustments
recorded in net income. It also includes as a component of accumulated other comprehensive income the impact of changes
in the fair value of derivatives designated as cash flow hedges as well as the remaining transition adjustment recorded when
we adopted the accounting guidance that required all derivatives be recorded on the balance sheet at fair value. In evaluating
our debt-to-equity ratio discussed further below, we make adjustments to equity similar to the adjustments made in
calculating TIER. We exclude from total equity the cumulative impact of changes in derivative forward value gains (losses)
and foreign currency adjustments and amounts included in accumulated other comprehensive income related to derivatives
designated for cash flow hedge accounting and the remaining derivative transition adjustment to derive non-GAAP adjusted
equity.
Adjusted Operational Financial Measures
Table 36 provides a reconciliation of adjusted interest expense, adjusted net interest income, adjusted total revenue and
adjusted net income to the comparable U.S. GAAP measures. These adjusted measures are used in the calculation of our
adjusted net interest yield and adjusted TIER for each fiscal year in the five-year period ended May 31, 2021.
Table 36: Adjusted Financial Measures—Income Statement
(Dollars in thousands)
2021
2020
2019
2018
2017
Year Ended May 31,
Adjusted net interest income:
Interest income.........................................................
Interest expense........................................................
Include: Derivative cash settlements interest
$ 1,116,601 $ 1,151,286 $ 1,135,670 $ 1,077,357 $ 1,036,634
(741,738)
(836,209)
(792,735)
(821,089)
(702,063)
expense(1)...................................................
(115,645)
(84,478)
(826,216)
(817,708)
Adjusted interest expense.........................................
Adjusted net interest income.................................... $ 298,893 $ 274,324 $ 255,850 $ 210,341 $ 210,418
(74,281)
(867,016)
(43,611)
(879,820)
(55,873)
(876,962)
Adjusted total revenue:
Net interest income..................................................
Fee and other income...............................................
Total revenue...........................................................
Include: Derivative cash settlements interest
expense(1)...................................................
Adjusted total revenue.............................................
Adjusted net income:
$ 414,538 $ 330,197 $ 299,461 $ 284,622 $ 294,896
19,713
17,578
18,929
15,355
22,961
433,467
353,158
314,816
302,200
314,609
(115,645)
(55,873)
(43,611)
(74,281)
(84,478)
$ 317,822 $ 297,285 $ 271,205 $ 227,919 $ 230,131
Net income (loss).....................................................
Exclude: Derivative forward value gains (losses)(2).
Adjusted net income................................................. $ 192,032 $ 144,848 $ 168,520 $ 151,362 $ 132,718
____________________________
$ 813,978 $ (589,430) $ (151,210) $ 457,364 $ 312,099
(319,730)
(734,278)
621,946
306,002
179,381
(1)
Represents the net periodic contractual interest amount on our interest rate swaps during the reporting period.
(2)
Represents the change in fair value of our interest rate swaps during the reporting period due to changes in expected future interest rates over the
remaining life of our derivative contracts.
79
We primarily fund our loan portfolio through the issuance of debt. However, we use derivatives as economic hedges as part
of our strategy to manage the interest rate risk associated with funding our loan portfolio. We therefore consider the interest
expense incurred on our derivatives to be part of funding cost in addition to the interest expense on our debt. As such, we
add derivative cash settlements interest expense to our reported interest expense to derive our adjusted interest expense and
adjusted net interest income. We exclude the unrealized derivative forward value gains and losses from our adjusted total
revenue and adjusted net income.
TIER and Adjusted TIER
Table 37 displays the calculation of our TIER and adjusted TIER for each fiscal year in the five-year period ended May 31,
2021.
Table 37: TIER and Adjusted TIER
TIER (1)...........................................................
Adjusted TIER (2) ...........................................
____________________________
Year Ended May 31,
2021
2020
2019
2018
2017
2.16
1.23
0.28
1.17
0.82
1.19
1.58
1.17
1.42
1.16
(1)
TIER is calculated based on our net income (loss) plus interest expense for the period divided by interest expense for the period.
(2)
Adjusted TIER is calculated based on adjusted net income (loss) plus adjusted interest expense for the period divided by adjusted interest expense for
the period.
Debt-to-Equity and Adjusted Debt-to-Equity
Management relies on the adjusted debt-to-equity ratio as a key measure in managing our business. We therefore believe
that this adjusted measure, in combination with the comparable U.S. GAAP measure, is useful to investors in evaluating our
financial condition. We adjust the comparable U.S. GAAP measure to:
•
•
•
exclude debt used to fund loans that are guaranteed by RUS from total liabilities;
exclude from total liabilities, and add to total equity, debt with equity characteristics issued to our members and in the
capital markets; and
exclude the noncash impact of derivative financial instruments and foreign currency adjustments from total liabilities and
total equity.
We are an eligible lender under an RUS loan guarantee program. Loans issued under this program carry the U.S.
government’s guarantee of all interest and principal payments. We have little or no risk associated with the collection of
principal and interest payments on these loans. Therefore, we believe there is little or no risk related to the repayment of the
liabilities used to fund RUS-guaranteed loans and we subtract such liabilities from total liabilities to calculate our adjusted
debt-to-equity ratio.
Members may be required to purchase subordinated certificates as a condition of membership and as a condition to
obtaining a loan or guarantee. The subordinated certificates are accounted for as debt under U.S. GAAP. The subordinated
certificates have long-dated maturities and pay no interest or pay interest that is below market, and under certain conditions
we are prohibited from making interest payments to members on the subordinated certificates. For computing our adjusted
debt-to-equity ratio we subtract members’ subordinated certificates from total liabilities and add members’ subordinated
certificates to total equity.
We also sell subordinated deferrable debt in the capital markets with maturities of up to 30 years and the option to defer
interest payments. The characteristics of subordination, deferrable interest and long-dated maturity are all equity
characteristics. In calculating our adjusted debt-to-equity ratio, we subtract subordinated deferrable debt from total liabilities
and add it to total equity.
We record derivative instruments at fair value on our consolidated balance sheets. For computing our adjusted debt-to-
equity ratio we exclude the noncash impact of our derivative accounting from liabilities and equity. Also, for computing our
80
adjusted debt-to-equity ratio we exclude the impact of foreign currency valuation adjustments from liabilities and equity.
The debt-to-equity ratio adjusted to exclude the effect of foreign currency translation reflect management’s perspective on
our operations and, therefore, we believe is a useful financial measure for investors.
Table 38 provides a reconciliation between our total liabilities and total equity and the adjusted amounts used in the
calculation of our adjusted debt-to-equity ratio as of the end of each fiscal year in the five-year period ended May 31, 2021.
As indicated in the following table, subordinated debt is treated in the same manner as equity in calculating our adjusted
debt-to-equity ratio.
Table 38: Adjusted Financial Measures—Balance Sheet
May 31,
(Dollars in thousands)
Total liabilities.....................................................
Exclude:
Derivative liabilities..........................................
Debt used to fund loans guaranteed by RUS.....
Subordinated deferrable debt.............................
Subordinated certificates...................................
Adjusted total liabilities.......................................
2021
2019
$ 28,238,484 $ 27,508,783 $ 25,820,490 $ 25,184,351 $ 24,106,887
2017
2020
2018
584,989
146,764
139,136
1,258,459
385,337
391,724
167,395
153,991
742,274
986,020
1,419,025
1,357,129
$ 25,273,384 $ 23,777,823 $ 22,931,626 $ 22,625,162 $ 21,392,856
275,932
160,865
742,410
1,379,982
1,254,660
1,339,618
986,315
986,119
Total equity..........................................................
$ 1,399,879 $
648,822 $ 1,303,882 $ 1,505,853 $ 1,098,805
Exclude:
Prior fiscal year-end cumulative derivative
forward value losses(1)...............................
Year-to-date derivative forward value gains
(losses)(1)....................................................
Period-end cumulative derivative forward
value losses(1).............................................
Accumulated other comprehensive income
attributable to derivatives(2).......................
Subtotal............................................................
Include:
(1,088,982)
(354,704)
(34,974)
(340,976)
(520,357)
621,946
(734,278)
(319,730)
306,002
179,381
(467,036) (1,088,982)
(354,704)
(34,974)
(340,976)
1,718
2,130
(465,318) (1,086,852)
2,571
(352,133)
1,980
(32,994)
3,702
(337,274)
Subordinated deferrable debt.............................
742,274
1,419,025
Subordinated certificates ..................................
Subtotal............................................................
2,161,299
Adjusted total equity............................................ $ 4,106,172 $ 4,061,411 $ 3,999,164 $ 3,661,239 $ 3,597,378
742,410
1,379,982
2,122,392
986,020
1,357,129
2,343,149
1,254,660
2,240,975
1,339,618
2,325,737
986,315
986,119
____________________________
(1)
Represents consolidated total derivative forward value gains (losses).
(2)
Represents the AOCI amount related to derivatives. See “Note 11—Equity” for the additional components of AOCI.
Table 39 displays the calculations of our debt-to-equity and adjusted debt-to-equity ratios as of the end of each fiscal year
during the five-year period ended May 31, 2021.
81
Table 39: Debt-to-Equity Ratio and Adjusted Debt-to-Equity Ratio
(Dollars in thousands)
Debt-to-equity ratio:
2021
2020
May 31,
2019
2018
2017
Total liabilities...................................................
$ 28,238,484 $ 27,508,783 $ 25,820,490 $ 25,184,351 $ 24,106,887
Total equity........................................................
Debt-to-equity ratio (1)........................................
1,399,879
648,822
1,303,882
1,505,853
1,098,805
20.17
42.40
19.80
16.72
21.94
Adjusted debt-to-equity ratio:
Adjusted total liabilities(2)..................................
Adjusted total equity(2).......................................
Adjusted debt-to-equity ratio (3).........................
____________________________
$ 25,273,384 $ 23,777,823 $ 22,931,626 $ 22,625,162 $ 21,392,856
4,106,172
4,061,411
3,999,164
3,661,239
3,597,378
6.15
5.85
5.73
6.18
5.95
Calculated based on total liabilities at period end divided by total equity at period end.
(1)
(2) See Table 38 above for details on the calculation of these non-GAAP adjusted measures and the reconciliation to the most comparable U.S. GAAP
(3)
measures.
Calculated based on adjusted total liabilities at period end divided by adjusted total equity at period end.
Members’ Equity
Members’ equity includes the noncash impact of derivative forward value gains (losses) and foreign currency adjustments
recorded in net income. It also includes amounts recorded in accumulated other comprehensive income. We provide the
components of accumulated other comprehensive income in “Note 11—Equity.” Because these amounts generally have not
been realized, they are not available to members and are excluded by CFC’s board of directors in determining the annual
allocation of adjusted net income to patronage capital, to the members’ capital reserve and to other member funds. Table 40
presents a reconciliation of members’ equity to total CFC equity as of May 31, 2021 and 2020.
Table 40: Members’ Equity
(Dollars in thousands)
Members’ equity:
May 31,
2021
2020
Total CFC equity.......................................................................................
$
1,374,948
$
626,121
Exclude:
Accumulated other comprehensive loss............................................
Period-end cumulative derivative forward value losses attributable
to CFC(1).......................................................................................
Subtotal................................................................................................
(25)
(1,910)
(461,162)
(461,187)
(1,079,739)
(1,081,649)
Members’ equity.................................................................................. $
1,836,135
$
1,707,770
____________________________
(1)
Represents period-end cumulative derivative forward value losses for CFC only, as total CFC equity does not include the noncontrolling interests of the
variable interest entities NCSC and RTFC, which we are required to consolidate. We report the separate results of operations for CFC in “Note 16—
Business Segments.” The period-end cumulative derivative forward value total loss amounts as of May 31, 2021 and 2020 are presented above in Table
38.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative disclosures about market risk, see “Item 7. MD&A—Market Risk” and “MD&A—
Consolidated Results of Operations—Non-Interest Income—Derivatives Gains (Losses)”and also “Note 10—Derivative
Instruments and Hedging Activities.”
82
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm............................................................................
Consolidated Statements of Operations for the Years Ended May 31, 2021, 2020 and 2019.........................
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended May 31, 2021, 2020 and
2019..................................................................................................................................................................
Consolidated Balance Sheets as of May 31, 2021 and 2020............................................................................
Consolidated Statements of Changes in Equity for the Years Ended May 31, 2021, 2020 and 2019.............
Consolidated Statements of Cash Flows for the Years Ended May 31, 2021, 2020 and 2019........................
Notes to Consolidated Financial Statements....................................................................................................
Note 1 — Summary of Significant Accounting Policies........................................................................
Note 2 — Interest Income and Interest Expense.....................................................................................
Note 3 — Investment Securities.............................................................................................................
Note 4 — Loans......................................................................................................................................
Note 5 — Allowance for Credit Losses..................................................................................................
Note 6 — Short-Term Borrowings.........................................................................................................
Note 7 — Long-Term Debt.....................................................................................................................
Note 8 — Subordinated Deferrable Debt................................................................................................
Note 9 — Members’ Subordinated Certificates......................................................................................
Note 10 — Derivative Instruments and Hedging Activities.....................................................................
Note 11 — Equity.....................................................................................................................................
Note 12 — Employee Benefits.................................................................................................................
Note 13 — Guarantees..............................................................................................................................
Note 14 — Fair Value Measurement........................................................................................................
Note 15 — Variable Interest Entities........................................................................................................
Note 16 — Business Segments.................................................................................................................
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83
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Members
National Rural Utilities Cooperative Finance Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of National Rural Utilities Cooperative Finance Corporation
and subsidiaries (the Company) as of May 31, 2021 and 2020, the related consolidated statements of operations,
comprehensive income (loss), changes in equity, and cash flows for each of the years in the three-year period ended May 31,
2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of May 31, 2021 and 2020, and
the results of its operations and its cash flows for each of the years in the three-year period ended May 31, 2021, in
conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit
of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal
control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts
or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.
Assessment of the allowance for credit losses of loans evaluated on a collective basis
As discussed in Notes 1 and 5 to the consolidated financial statements, the Company’s allowance for credit losses for
loans evaluated on a collective basis (the collective ACL) was $42.4 million as of May 31, 2021. The collective ACL
includes the measure of expected credit losses on a collective (pool) basis for those loans that share similar risk
characteristics. The Company estimates the collective ACL using a probability of default (PD) and loss given default
(LGD) methodology. The Company segments its loan portfolio into pools based on member borrower type, which is
based on the utility sector of the borrower, and further by internal borrower risk ratings. The Company then applies
84
loss factors, consisting of the PD and LGD, to the scheduled loan-level amortization amounts over the life of the
loans of each of the identified pools. Due to a limited history of defaults in the portfolio, the Company utilizes third-
party default data tables for the utility sector as a proxy to estimate default rates for each of the pools. Based on the
mapping of internal borrower risk rating to equivalent credit rating provided in the third party utility default tables,
the Company applies corresponding cumulative default rates to the scheduled loan amortization amounts over the
remaining life of loan in each of the pools. For estimation of an LGD the Company utilizes its lifetime historical loss
experience for each of the portfolio segments. The Company estimates that, based on historical experience, expected
credit losses will not be affected by changes in economic conditions and therefore, the Company has not made
adjustments to the historical rates for any economic forecasts. The Company considers the need to adjust the
historical loss information for differences in the specific characteristics of its existing loan portfolio based on an
evaluation of relevant qualitative factors, such as differences in the composition of the loan portfolio, underwriting
standards, problem loan trends, the quality of Company’s credit review functions, as well as changes in the regulatory
environment and other pertinent external factors that may impact the amount of future credit losses.
We identified the assessment of the collective ACL as a critical audit matter. A high degree of audit effort, including
specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the
collective ACL due to significant measurement uncertainty. Specifically, the assessment encompassed the evaluation
of the collective ACL methodology, portfolio segmentation, and the methods used to estimate the PD and LGD and
their significant assumptions, including third-party proxy default data for the utility sector, and borrower risk ratings.
The assessment also included an evaluation of the conceptual soundness of the collective ACL methodology. In
addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design
of certain internal controls related to the Company’s measurement of the collective ACL estimate, including controls
over the:
•
•
development of the collective ACL methodology
identification and determination of the method and significant assumptions used to develop the PD and
LGD
analysis of credit quality trends and ratios.
•
We evaluated the Company’s process to develop the collective ACL estimate by testing certain sources of data,
factors, and assumptions that the Company used, and considered the relevance and reliability of such data, factors,
and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who
assisted in:
•
•
•
•
•
evaluating the Company’s collective ACL methodology for compliance with U.S. generally accepted
accounting principles
evaluating the conceptual soundness and the judgments made by the Company relative to the development
of the PD and LGD by comparing them to relevant Company-specific metrics and trends and the
applicable industry and regulatory practices
determining whether the loan portfolio is segmented by similar risk characteristics by comparing to the
Company’s business environment and relevant industry practices
testing individual borrower risk ratings for a selection of borrowers by evaluating the financial
performance of the borrower, sources of repayment, and any relevant guarantees or underlying collateral
evaluating the appropriateness of mapping and alignment of internal borrower risk ratings to equivalent
credit ratings provided in the third party utility default table.
85
We also assessed sufficiency of the audit evidence obtained related to the collective ACL estimate by evaluating the:
•
•
•
cumulative results of the audit procedures
qualitative aspects of the Company’s accounting practices
potential bias in the accounting estimate.
/s/ KPMG LLP
We have served as the Company’s auditor since 2013.
McLean, Virginia
July 30, 2021
86
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
Year Ended May 31,
2021
2020
2019
Interest income................................................................................. $
1,116,601
$
1,151,286
$
1,135,670
Interest expense................................................................................
Net interest income........................................................................
Benefit (provision) for credit losses...........................................
Net interest income after benefit (provision) for credit losses.........
Non-interest income:
Fee and other income.................................................................
Derivative gains (losses)............................................................
Investment securities gains (losses)............................................
Total non-interest income.............................................................
Non-interest expense:
Salaries and employee benefits..................................................
Other general and administrative expenses................................
Losses on early extinguishment of debt.....................................
Other non-interest expense.........................................................
Total non-interest expense............................................................
Income (loss) before income taxes..................................................
Income tax benefit (provision).........................................................
Net income (loss)............................................................................
Less: Net (income) loss attributable to noncontrolling interests.....
(702,063)
414,538
(28,507)
386,031
18,929
506,301
1,495
526,725
(55,258)
(39,447)
(1,456)
(1,619)
(97,780)
814,976
(998)
813,978
(2,311)
(821,089)
330,197
(35,590)
294,607
22,961
(790,151)
9,431
(757,759)
(54,522)
(46,645)
(683)
(25,588)
(127,438)
(590,590)
1,160
(836,209)
299,461
1,266
300,727
15,355
(363,341)
(1,799)
(349,785)
(49,824)
(43,342)
(7,100)
(1,675)
(101,941)
(150,999)
(211)
(589,430)
(151,210)
4,190
1,979
Net income (loss) attributable to CFC.........................................
$
811,667
$
(585,240) $
(149,231)
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
87
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
2021
2020
2019
Net income (loss)............................................................................
$
813,978
$
(589,430) $
(151,210)
Year Ended May 31,
Other comprehensive income (loss):
Unrealized gains on cash flow hedges........................................
Reclassification of derivative gains to earnings..........................
Defined benefit plan adjustments................................................
Other comprehensive income (loss)................................................
Total comprehensive income (loss)...............................................
Less: Total comprehensive (income) loss attributable to
noncontrolling interests................................................................
—
(412)
2,297
1,885
—
(441)
(1,322)
(1,763)
1,059
(468)
(488)
103
815,863
(591,193)
(151,107)
(2,311)
4,190
1,979
Total comprehensive income (loss) attributable to CFC............ $
813,552
$
(587,003) $
(149,128)
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
88
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Assets:
Cash and cash equivalents...........................................................................
Restricted cash (1).........................................................................................
Total cash, cash equivalents and restricted cash..........................................
Investment securities:
May 31,
2021
2020
$
$
295,063
8,298
303,361
671,372
8,647
680,019
Debt securities trading, at fair value ($210,894 pledged as collateral).....
Equity securities, at fair value...................................................................
Total investment securities, at fair value.....................................................
Loans to members........................................................................................
Less: Allowance for credit losses..............................................................
Loans to members, net.................................................................................
Accrued interest receivable..........................................................................
Other receivables.........................................................................................
Fixed assets, net...........................................................................................
Derivative assets..........................................................................................
Other assets..................................................................................................
Total assets.................................................................................................. $
Liabilities:
Accrued interest payable.............................................................................. $
Debt outstanding:
Short-term borrowings..............................................................................
Long-term debt..........................................................................................
Subordinated deferrable debt....................................................................
Members’ subordinated certificates:
Membership subordinated certificates....................................................
Loan and guarantee subordinated certificates........................................
Member capital securities......................................................................
Total members’ subordinated certificates.................................................
Total debt outstanding.................................................................................
Deferred income..........................................................................................
Derivative liabilities.....................................................................................
Other liabilities............................................................................................
Total liabilities............................................................................................
576,175
35,102
611,277
28,426,961
(85,532)
28,341,429
107,856
37,197
91,882
121,259
24,102
29,638,363
$
309,400
60,735
370,135
26,702,380
(53,125)
26,649,255
117,138
41,099
89,137
173,195
37,627
28,157,605
123,672
$
139,619
4,582,096
20,603,123
986,315
628,594
386,896
239,170
1,254,660
27,426,194
51,198
584,989
52,431
28,238,484
3,961,985
19,712,024
986,119
630,483
482,965
226,170
1,339,618
25,999,746
59,303
1,258,459
51,656
27,508,783
Equity:
CFC equity:
Retained equity........................................................................................
Accumulated other comprehensive loss..................................................
Total CFC equity.........................................................................................
Noncontrolling interests...............................................................................
Total equity.................................................................................................
Total liabilities and equity......................................................................... $
____________________________
1,374,973
(25)
1,374,948
24,931
1,399,879
29,638,363
$
628,031
(1,910)
626,121
22,701
648,822
28,157,605
(1)
Restricted cash consists primarily of member funds held in escrow for certain specifically designed cooperative programs.
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
89
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Dollars in thousands)
Balance as of May 31, 2018...
Cumulative effect from
adoption of new accounting
standard................................
Balance as of June 1, 2018
Net income (loss)...................
Other comprehensive income.
Patronage capital retirement...
Other.......................................
Balance as of May 31, 2019...
Net income (loss)...................
Other comprehensive loss......
Patronage capital retirement...
Other.......................................
Balance as of May 31, 2020...
Cumulative effect from
adoption of new accounting
standard................................
Balance as of June 1, 2020
Net income.............................
Other comprehensive income.
Patronage capital retirement...
Other.......................................
Balance as of May 31, 2021...
$
$
$
$
Membership
Fees and
Educational
Fund
Patronage
Capital
Allocated
Members’
Capital
Reserve
Unallocated
Net Income
(Loss)
(36,434) $ 1,465,789 $
CFC
Retained
Equity
Accumulated
Other
Comprehensive
Income (Loss)
2,945 $ 811,493 $ 687,785 $
8,544 $ 1,474,333 $ 31,520 $ 1,505,853
Total
CFC
Equity
Non-
controlling
Interests
Total
Equity
8,794
(27,640)
(318,135)
—
—
—
—
687,785
71,312
—
—
—
—
811,493
96,592
—
(47,507)
—
8,794
1,474,583
(149,231)
—
(47,507)
(963)
—
2,945
1,000
—
—
(963)
2,982 $ 860,578 $ 759,097 $ (345,775) $ 1,276,882 $
1,000
—
—
(789)
3,193 $ 894,066 $ 807,320 $ (1,076,548) $ 628,031 $
(585,240)
—
(62,822)
(789)
(730,773)
—
—
—
96,310
—
(62,822)
—
48,223
—
—
—
(8,794)
(250)
—
103
—
—
—
31,520
(1,979)
—
(2,908)
514
—
1,474,333
(149,231)
103
(47,507)
(963)
—
1,505,853
(151,210)
103
(50,415)
(449)
(147) $ 1,276,735 $ 27,147 $ 1,303,882
(589,430)
(1,763)
(64,755)
888
(1,910) $ 626,121 $ 22,701 $ 648,822
(585,240)
(1,763)
(62,822)
(789)
—
(1,763)
—
—
(4,190)
—
(1,933)
1,677
—
894,066
89,761
—
(59,857)
—
—
3,193
900
—
—
(968)
3,125 $ 923,970 $ 909,749 $ (461,871) $ 1,374,973 $
(3,900)
(1,080,448)
618,577
—
—
—
(3,900)
624,131
811,667
—
(59,857)
(968)
—
807,320
102,429
—
—
—
(3,900)
622,221
811,667
1,885
(59,857)
(968)
(3,900)
—
644,922
(1,910)
813,978
—
1,885
1,885
(61,911)
—
1,005
—
(25) $ 1,374,948 $ 24,931 $ 1,399,879
—
22,701
2,311
—
(2,054)
1,973
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
90
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended May 31,
2020
2019
2021
(Dollars in thousands)
Cash flows from operating activities:
Net income (loss)........................................................................................................ $ 813,978 $ (589,430) $ (151,210)
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred loan fees......................................................................
Amortization of debt issuance costs and deferred charges..................................
Amortization of discount on long-term debt........................................................
Amortization of issuance costs for bank revolving lines of credit.......................
Depreciation and amortization.............................................................................
Provision (benefit) for credit losses.....................................................................
Loss on early extinguishment of debt..................................................................
Fixed assets impairment.......................................................................................
Gain on sale of land.............................................................................................
Unrealized (gains) losses on equity and debt securities.......................................
Derivative forward value (gains) losses...............................................................
(10,009)
10,439
10,605
5,324
9,305
(1,266)
7,100
—
—
1,799
319,730
(9,309)
9,095
10,896
4,972
9,238
35,590
683
31,284
(7,713)
(5,975)
(9,390)
10,608
11,925
4,434
7,959
28,507
1,456
—
—
(1,015)
(621,946) 734,278
Changes in operating assets and liabilities:
Accrued interest receivable..................................................................................
Accrued interest payable......................................................................................
Deferred income..................................................................................................
Other........................................................................................................................
Net cash provided by operating activities................................................................
Cash flows from investing activities:
Advances on loans, net............................................................................................
Investments in fixed assets, net................................................................................
Proceeds from sale of land.......................................................................................
Net proceeds from time deposits.............................................................................
Purchase of trading securities..................................................................................
Proceeds from sales and maturities of trading securities.........................................
Proceeds from redemption of equity securities........................................................
Purchases of held-to-maturity debt securities..........................................................
Proceeds from maturities of held-to-maturity debt securities..................................
Net cash used in investing activities........................................................................
Cash flows from financing activities:
9,282
(15,947)
1,285
(1,181)
16,467
(19,378)
10,973
(12,456)
(6,163)
9,713
2,077
(10,401)
197,043
239,955
219,215
(9,862)
—
—
(9,565)
21,268
—
(3,883)
(1,724,253) (785,190) (738,171)
(14,725)
—
100,000
—
—
—
(80,123)
35,340
(1,973,762) (481,296) (697,679)
(397,522)
127,875
30,000
—
—
277,687
25,000
(76,339)
69,726
Proceeds from (repayments of) short-term borrowings, net....................................
(208,340) (452,618)
808,252
Proceeds from short-term borrowings with original maturity > 90 days.................
3,081,069
1,652,005
3,022,910
Repayments of short-term borrowings with original maturity > 90 days................
(3,269,210) (2,460,311) (1,387,571)
Payments for issuance costs for revolving bank lines of credit...............................
(2,382)
—
Proceeds from issuance of long-term debt, net of discount and issuance costs.......
3,055,220
3,281,595
2,156,711
Payments for retirement of long-term debt..............................................................
(2,186,458) (1,675,288) (2,806,639)
Payments made for early extinguishment of debt....................................................
(7,100)
Payments for issuance costs for subordinated deferrable debt................................
(6,535)
Proceeds from issuance of subordinated deferrable debt.........................................
250,000
Proceeds from issuance of members’ subordinated certificates..............................
1,986
Payments for retirement of members’ subordinated certificates.............................
(24,861)
Payments for retirement of patronage capital..........................................................
(49,860)
Repayments for membership fees, net.....................................................................
(4)
448,016
Net cash provided by financing activities................................................................
Net increase (decrease) in cash, cash equivalents and restricted cash.................
(52,620)
238,824
Beginning cash, cash equivalents and restricted cash...........................................
Ending cash, cash equivalents and restricted cash................................................ $ 303,361 $ 680,019 $ 186,204
(1,456)
—
—
14,292
(84,659)
(59,889)
(12)
(683)
(84)
—
9,621
(24,572)
(63,035)
(8)
1,357,149
755,896
(376,658) 493,815
186,204
680,019
(1,025)
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
91
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Supplemental disclosure of cash flow information:
Year Ended May 31,
2021
2020
2019
Cash paid for interest.............................................................................................
$ 687,145 $ 805,086 $ 801,966
Cash paid for income taxes....................................................................................
219
20
112
Noncash financing and investing activities:
Net decrease in debt service reserve funds/debt service reserve certificates
$
— $
2,560 $
—
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
92
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
National Rural Utilities Cooperative Finance Corporation (“CFC”) is a member-owned cooperative association incorporated
under the laws of the District of Columbia in April 1969. CFC’s principal purpose is to provide its members with financing
to supplement the loan programs of the Rural Utilities Service (“RUS”) of the United States Department of Agriculture
(“USDA”). CFC makes loans to its rural electric members so they can acquire, construct and operate electric distribution
systems, electric generation and transmission (“power supply”) systems and related facilities. CFC also provides its
members with credit enhancements in the form of letters of credit and guarantees of debt obligations. As a cooperative, CFC
is owned by and exclusively serves its membership, which consists of not-for-profit entities or subsidiaries or affiliates of
not-for-profit entities. CFC is exempt from federal income taxes.
National Cooperative Services Corporation (“NCSC”) is a taxable cooperative incorporated in 1981 in the District of
Columbia as a member-owned cooperative association. NCSC’s principal purpose is to provide financing to members of
CFC, entities eligible to be members of CFC and the for-profit and nonprofit entities that are owned, operated or controlled
by or provide significant benefit to certain members of CFC. NCSC’s membership consists of distribution systems, power
supply systems and statewide and regional associations that are members of CFC. CFC is the primary source of funding for
NCSC and manages NCSC’s business operations under a management agreement that is automatically renewable on an
annual basis unless terminated by either party. NCSC pays CFC a fee and, in exchange, CFC reimburses NCSC for loan
losses under a guarantee agreement. As a taxable cooperative, NCSC pays income tax based on its reported taxable income
and deductions. NCSC is headquartered with CFC in Dulles, Virginia.
Rural Telephone Finance Cooperative (“RTFC”) is a taxable Subchapter T cooperative association originally incorporated in
South Dakota in 1987 and reincorporated as a member-owned cooperative association in the District of Columbia in 2005.
RTFC’s principal purpose is to provide financing for its rural telecommunications members and their affiliates. RTFC’s
membership consists of a combination of not-for-profit and for-profit entities. CFC is the sole lender to and manages the
business operations of RTFC through a management agreement that is automatically renewable on an annual basis unless
terminated by either party. RTFC pays CFC a fee and, in exchange, CFC reimburses RTFC for loan losses under a guarantee
agreement. As permitted under Subchapter T of the Internal Revenue Code, RTFC pays income tax based on its net income,
excluding patronage-sourced earnings allocated to its patrons. RTFC is headquartered with CFC in Dulles, Virginia.
Basis of Presentation and Use of Estimates
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect the reported amounts and related disclosures during the
period. Management's most significant estimates and assumptions involve determining the allowance for credit losses and
the fair value of financial assets and liabilities. Actual results could differ from these estimates. Certain reclassifications
have been made to prior periods to conform to the current presentation.
Risks and Uncertainties
While the novel strain of coronavirus that causes coronavirus disease 2019 (“COVID-19”) continues to persist, disruptions
caused by the virus have been significantly reduced as a result of the manufacturing and distribution of recently developed
COVID-19 vaccines. Although most of the initial restrictions have been relaxed or lifted, the risk of future COVID-19
outbreaks remains. New information may emerge regarding the severity of COVID-19 variants or the effectiveness of the
vaccines developed, causing federal, state and local governments to take additional actions to contain COVID-19 or to treat
its impact. We continue to closely monitor developments; however, we cannot predict the future impact of COVID-19 on
93
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
our operational and financial performance, or the specific ways the pandemic uniquely impacts our members, all of which
continue to involve uncertainties.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of CFC, variable interest entities (“VIEs”) where
CFC is the primary beneficiary and subsidiary entities created and controlled by CFC to hold foreclosed assets. CFC did not
have any entities that held foreclosed assets as of May 31, 2021 or May 31, 2020. All intercompany balances and
transactions have been eliminated. NCSC and RTFC are VIEs that are required to be consolidated by CFC. Unless stated
otherwise, references to “we, “our” or “us” relate to CFC and its consolidated entities.
Variable Interest Entities
A VIE is an entity that has a total equity investment at risk that is not sufficient to finance its activities without additional
subordinated financial support provided by another party, or where the group of equity holders does not have (i) the ability
to make decisions about the entity’s activities that most significantly impact its economic performance; (ii) the obligation to
absorb the entity’s expected losses; or (iii) the right to receive the entity’s expected residual returns.
NCSC and RTFC meet the definition of VIEs because they do not have sufficient equity investment at risk to finance their
activities without additional financial support. When evaluating an entity for possible consolidation, we must determine
whether or not we have a variable interest in the entity. If it is determined that we do not have a variable interest in the
entity, no further analysis is required and we do not consolidate the entity. If we have a variable interest in the entity, we
must evaluate whether we are the primary beneficiary based on an assessment of quantitative and qualitative factors. We are
considered the primary beneficiary holder if we have a controlling financial interest in the VIE that provides (i) the power to
direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to
absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. We
consolidate the results of NCSC and RTFC with CFC because CFC is the primary beneficiary holder.
Cash and Cash Equivalents
Cash, certificates of deposit due from banks and other investments with original maturities of less than 90 days are classified
as cash and cash equivalents.
Restricted Cash
Restricted cash, which consists primarily of member funds held in escrow for certain specifically designed cooperative
programs, totaled $8 million and $9 million as of May 31, 2021 and 2020, respectively.
Investment Securities
Our investment securities portfolio consists of equity and debt securities. We record purchases and sales of securities on a
trade-date basis. The accounting and measurement framework for investment securities differs depending on the security
type and the classification. Equity securities are reported at fair value on our consolidated balance sheets with unrealized
gains and losses recorded as a component of other non-interest income. All of our debt securities were classified as trading
as of May 31, 2021 and 2020. Accordingly, we also report our debt securities at fair value on our consolidated balance
sheets and record unrealized gains and losses as a component of non-interest income. Interest income is generally
recognized over the contractual life of the securities based on the effective yield method.
94
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loans to Members
We originate loans to members and classify loans that management has the intent and ability to hold for the foreseeable
future or until maturity or payoff as held for investment. Loans classified as held for investment are reported based on the
unpaid principal balance, net of principal charge-offs, and deferred loan origination costs. Deferred loan origination costs
are amortized using the straight-line method, which approximates the effective interest method, into interest income over the
life of the loan.
Accrued Interest Receivable
As permitted by the current expected credit loss (“CECL”) model, we elected to continue reporting 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 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, which totaled $93
million and $96 million as of May 31, 2021 and May 31, 2020, respectively. We also elected to exclude accrued interest
receivable from the credit quality disclosures required under CECL.
Interest Income
Interest income on performing loans is accrued and recognized as interest income based on the contractual rate of interest.
Loan origination costs and nonrefundable loan fees that meet the definition of loan origination fees are deferred and
generally recognized in interest income as yield adjustments over the period to maturity of the loan using the effective
interest method.
Troubled Debt Restructurings
A loan modification is considered a troubled debt restructuring (“TDR”) if the borrower is experiencing financial difficulties
and a concession is granted to the borrower that we would not otherwise consider. Under CECL, we are required to estimate
an allowance for lifetime expected credit losses for TDR loans. As discussed below under “Allowance for Credit Losses—
Loan Portfolio—Asset-Specific Allowance,” TDR loans are evaluated on an individual basis in estimating expected credit
losses. Credit losses for anticipated TDRs are accounted for similarly to TDRs and are identified when there is a reasonable
expectation that a TDR will be executed with the borrower and when we expect the modification to affect the timing or
amount of payments and/or the payment term.
We generally classify TDR loans as nonperforming and place the loan on nonaccrual status, although in many cases such
loans were already classified as nonperforming prior to modification. These loans may be returned to performing status and
the accrual of interest resumed if the borrower performs under the modified terms for an extended period of time, and we
expect the borrower to continue to perform in accordance with the modified terms. In certain limited circumstances in which
a TDR loan is current at the modification date, the loan may remain on accrual status at the time of modification.
Nonperforming Loans
We classify loans as nonperforming when contractual principal or interest is 90 days past due or when we believe the
collection of principal and interest in full is not reasonably assured. When a loan is classified as nonperforming, we
generally place the loan on nonaccrual status. Interest accrued but not collected at the date a loan is placed on nonaccrual
status is reversed against current-period interest income. Interest income on nonaccrual loans is subsequently recognized
only upon the receipt of cash payments. However, if we believe the ultimate collectability of the loan principal is in doubt,
cash received is applied against the principal balance of the loan. Nonaccrual loans generally are returned to accrual status
when principal and interest becomes and remains current for a specified period and repayment of the remaining contractual
principal and interest is reasonably assured.
95
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Charge-Offs
We charge off loans or a portion of a loan when we determine that the loan is uncollectible. The charge-off of uncollectible
principal amounts results in a reduction to the allowance for credit losses for our loan portfolio. Recoveries of previously
charged off principal amounts result in an increase to the allowance.
Allowance for Credit Losses—Loan Portfolio
Current Allowance Methodology
Beginning June 1, 2020, the allowance for credit losses is determined based on management’s current estimate of expected
credit losses over the remaining contractual term, adjusted as appropriate for estimated prepayments, of loans in our loan
portfolio as of each balance sheet date. The allowance for credit losses for our loan portfolio is reported on our consolidated
balance sheet as a valuation account that is deducted from loans to members to present the net amount we expect to collect
over the life of our loans. We immediately recognize an allowance for expected credit losses upon origination of a loan.
Adjustments to the allowance each period for changes in our estimate of lifetime expected credit losses are recognized in
earnings through the provision for credit losses presented on our consolidated statements of operations.
We estimate our allowance for lifetime expected credit losses for our loan portfolio using a probability of default/loss given
default methodology. Our allowance for credit losses consists of a collective allowance and an asset-specific allowance. The
collective allowance is established for loans in our portfolio that share similar risk characteristics and are therefore evaluated
on a collective, or pool, basis in measuring expected credit losses. The asset-specific allowance is established for loans in
our portfolio that do not share similar risk characteristics with other loans in our portfolio and are therefore evaluated on an
individual basis in measuring expected credit losses. Expected credit losses are estimated based on historical experience,
current conditions and forecasts, if applicable, that affect the collectibility of the reported amount.
Since inception in 1969, CFC has experienced limited defaults and losses as the utility sector generally tends to be less
sensitive to changes in the economy than other sectors largely due to the essential nature of the service provided. The losses
we have incurred were not tied to economic factors, but rather to distinct operating issues related to each borrower. Given
that our borrowers’ creditworthiness, and accordingly our loss experience, has not correlated to specific underlying
macroeconomic variables, such as U.S. unemployment rates or gross domestic product (“GDP”) growth, we have not made
adjustments to our historical loss rates for any economic forecast. We consider the need, however, to adjust our historical
loss information for differences in the specific characteristics of our existing loan portfolio based on an evaluation of relative
qualitative factors, such as differences in the composition of our loan portfolio, our underwriting standards, problem loan
trends, the quality of our credit review function, as well as changes in the regulatory environment and other pertinent
external factors that may impact the amount of future credit losses.
Collective Allowance
We employ a quantitative methodology and a qualitative framework to measure the collective component of our allowance
for expected credit losses. The first element in our quantitative methodology involves the segmentation of our loan portfolio
into loan pools that share similar risk characteristics. We disaggregate our loan portfolio into segments that reflect the
member borrower type, which is based on the utility sector of the borrower because the key operational, infrastructure,
regulatory, environmental, customer and financial risks of each sector are similar in nature. Our primary member borrower
types consist of CFC electric distribution, CFC electric power supply, CFC statewide and associate, NCSC and RTFC
telecommunications. Our portfolio segments align with the sectors generally seen in the utilities industry. We further stratify
each portfolio into loan pools based on our internal borrower risk ratings, as our borrower risk ratings provide important
information on the collectibility of each of our loan portfolio segments. We then apply loss factors, consisting of the
probability of default and loss given default, to the scheduled loan-level amortization amounts over the life of the loans for
each of our loan pools. Below we discuss the source and basis for the key inputs, which include borrower risk ratings and
the loss factors, in measuring expected credit losses for our loan portfolio.
96
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• Borrower Risk Ratings: 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. Our internally assigned borrower risk ratings are intended to assess the general
creditworthiness of the borrower and probability of default. We use our internal borrower risk ratings, which we map to
the equivalent credit ratings by external rating agencies, to differentiate risk within each of our portfolio segments and
loan pools. We provide additional information on our borrower risk ratings below in “Note 4—Loans.”
• Probability of Default: The probability of default, or default rate, represents the likelihood that a borrower will default
over a particular time horizon. Because of our limited default history, we utilize third-party default data for the utility
sector as a proxy to estimate default rates for each of our loan pools. The third-party default data provide historical
default rates, based on credit ratings and remaining maturities of outstanding bonds, for the utility sector. Based on the
mapping and alignment of our internal borrower risk ratings to equivalent credit ratings provided in the third-party utility
default table, we apply the corresponding cumulative default rates to the scheduled amortization amounts over the
remaining term of the loans in each of our loan pools.
• Loss Given Default: The loss given default, or loss severity, represents the estimated loss, net of recoveries, on a loan
that would be realized in the event of a borrower default. While we utilize third-party default data, we utilize our lifetime
historical loss experience to estimate loss given default, or the recovery rate, for each of our loan portfolio segments. We
believe our internal historical loss severity rates provide a more reliable estimate than third-party loss severity data due to
the organizational structure and operating environment of rural utility cooperatives, our lending practice of generally
requiring a senior security position on the assets and revenue of borrowers for long-term loans, the investment our
member borrowers have in CFC and therefore the collaborative approach we generally take in working with members in
the event that a default occurs.
In addition to the quantitative methodology used in our collective measurement of expected credit losses, management
performs a qualitative evaluation and analyses of relevant factors, such as changes in risk-management practices, current and
past underwriting standards, specific industry issues and trends and other subjective factors. Based on our assessment, we
did not make a qualitative adjustment to the collective allowance for credit losses measured under our quantitative
methodology as of May 31, 2021 or at adoption of CECL on June 1, 2020.
Asset-Specific Allowance
We generally consider nonperforming loans as well as loans that have been or are anticipated to be modified under a
troubled debt restructuring for individual evaluation given the risk characteristics of such loans. Factors we consider in
measuring the extent of expected credit loss include the payment status, the collateral value, the borrower’s financial
condition, guarantor support, the probability of collecting scheduled principal and interest payments when due, anticipated
modifications of payment structure or term for troubled borrowers, and recoveries if they can be reasonably estimated. We
generally measure the expected credit loss as the difference between the amortized cost basis in the loan and the present
value of the expected future cash flows from the borrower, which is generally discounted at the loan’s effective interest rate,
or the fair value of the collateral, if the loan is collateral dependent.
Prior Allowance Methodology
Prior to June 1, 2020, the allowance for credit losses was determined based the incurred loss model under which
management estimated probable losses inherent in our loan portfolio as of each balance sheet date. We used a probability of
default/loss given default methodology in estimating probable losses based on a loss emergence period of five years. We
utilized the same portfolio segments, borrower risk-rating framework, third-party default data and internal historical
recovery rates under the incurred loss model that we use in determining the allowance based on the current expected credit
loss model.
97
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unadvanced Loan Commitments
Unadvanced commitments represent amounts for which we have approved and executed loan contracts, but the funds have
not been advanced. The majority of the unadvanced commitments reported represent amounts that are subject to material
adverse change clauses at the time of the loan advance. Prior to making an advance on these facilities, we would confirm
there has been no material adverse change in the business or condition, financial or otherwise, of the borrower since the time
the loan was approved and confirm the borrower is currently in compliance with loan terms and conditions. The remaining
unadvanced commitments relate to line of credit loans that are not subject to a material adverse change clause at the time of
each loan advance. As such, we would be required to advance amounts on these committed facilities as long as the borrower
is in compliance with the terms and conditions of the loan commitment.
Unadvanced loan commitments related to line of credit loans are typically for periods not to exceed five years and are
generally revolving facilities used for working capital and backup liquidity purposes. Historically, we have experienced a
very low utilization rate on line of credit loan facilities, whether or not there is a material adverse change clause. Since we
generally do not charge a fee on the unadvanced portion of the majority of our loan facilities, our borrowers will typically
request long-term facilities to fund construction work plans and other capital expenditures for periods of up to five years and
draw down on the facility over that time. These factors contribute to our expectation that the majority of the unadvanced line
of credit loan commitments will expire without being fully drawn upon and that the total unadvanced amount does not
necessarily represent future cash funding requirements.
Reserve for Credit Losses—Off-Balance Sheet Credit Exposures
We also maintain a reserve for credit losses for our off-balance sheet credit exposures related to unadvanced loan
commitments and financial guarantees. Because our business processes and credit risks associated with our off-balance sheet
credit exposures are essentially the same as for our loans, we measure expected credit losses for our off-balance sheet
exposures, after adjusting for the probability of funding these exposures. consistent with the methodology used for our
funded outstanding exposures. We include the reserve for expected credit losses for our off-balance sheet credit exposures as
a component of other liabilities on our consolidated balance sheets.
Fixed Assets
Fixed assets are recorded at cost less accumulated depreciation. We recognize depreciation expense for each category of our
depreciable fixed assets on a straight-line basis over the estimated useful life, which ranges from three to 40 years. We
recognized depreciation expense of $8 million, $9 million and $9 million in fiscal years 2021, 2020 and 2019, respectively.
The following table displays the components of our fixed assets. Our headquarters facility in Loudoun County, Virginia,
which is owned by CFC, is included as a component of building and building equipment.
98
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table 1.1: Fixed Assets
(Dollars in thousands)
May 31,
2021
2020
Building and building equipment......................
$
50,090
$
Furniture and fixtures.........................................
Computer software and hardware......................
Other..................................................................
Depreciable fixed assets.....................................
Less: Accumulated depreciation........................
Net depreciable fixed assets...............................
Land...................................................................
Software development in progress.....................
6,039
54,582
1,048
111,759
(66,777)
44,982
23,796
23,104
Fixed assets, net.................................................
$
91,882
$
50,087
6,015
49,944
1,051
107,097
(59,007)
48,090
23,796
17,251
89,137
In fiscal year 2020, management made a decision to abandon a project to develop an internal-use loan origination and
servicing platform. The project was intended to update our loan platform to provide increased functionality and flexibility
and enhance the operational efficiency of our lending, loan servicing and loan accounting processes. As a result of the
decision to abandon the project, we wrote off the capitalized amounts related to this project, which were recorded as a
component of computer software and hardware and software development in progress, and recognized a non-cash
impairment charge of $31 million in the fourth quarter of fiscal year 2020. The impairment charge is reported as a
component of other non-interest expense on our consolidated statements of operations.
Foreclosed Assets
Foreclosed assets acquired through our lending activities in satisfaction of indebtedness may be held in operating entities
created and controlled by CFC and presented separately in our consolidated balance sheets under foreclosed assets, net.
These assets are initially recorded at estimated fair value as of the date of acquisition. Subsequent to acquisition, foreclosed
assets not classified as held for sale are evaluated for impairment, and the results of operations and any impairment are
reported on our consolidated statements of operations under results of operations of foreclosed assets. When foreclosed
assets meet the accounting criteria to be classified as held for sale, they are recorded at the lower of cost or fair value less
estimated cost to sell at the date of transfer, with the amount at the date of transfer representing the new cost basis.
Subsequent changes are recognized in our consolidated statements of operations under results of operations of foreclosed
assets. We also review foreclosed assets classified as held for sale each reporting period to determine whether the existing
carrying amounts are fully recoverable in comparison to estimated fair values. We did not carry any foreclosed assets on our
consolidated balance sheet as of May 31, 2021 or May 31, 2020.
Securities Sold Under Repurchase Agreements
We enter into repurchase agreements to sell investment securities. These transactions are accounted for as collateralized
financing transactions and are recorded on our consolidated balance sheets as part of short-term borrowings at the amounts
at which the securities were sold.
Debt
We report debt at cost net of unamortized issuance costs and discounts or premiums. Issuance costs, discounts and premiums
are deferred and amortized into interest expense using the effective interest method or a method approximating the effective
interest method over the legal maturity of each bond issue. Short-term borrowings consist of borrowings with an original
99
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
contractual maturity of one year or less and do not include the current portion of long-term debt. Borrowings with an
original contractual maturity of greater than one year are classified as long-term debt.
Derivative Instruments
We are an end user of derivative financial instruments and do not engage in derivative trading. We use derivatives, primarily
interest rate swaps and Treasury rate locks, to manage interest rate risk. Derivatives may be privately negotiated contracts,
which are often referred to as over-the-counter (“OTC”) derivatives, or they may be listed and traded on an exchange. We
generally engage in OTC derivative transactions.
In accordance with the accounting standards for derivatives and hedging activities, we record derivative instruments at fair
value as either a derivative asset or derivative liability on our consolidated balance sheets. We report derivative asset and
liability amounts on a gross basis based on individual contracts, which does not take into consideration the effects of master
netting agreements or collateral netting. Derivatives in a gain position are reported as derivative assets on our consolidated
balance sheets, while derivatives in a loss position are reported as derivative liabilities. Accrued interest related to
derivatives is reported on our consolidated balance sheets as a component of either accrued interest receivable or accrued
interest payable.
If we do not elect hedge accounting treatment, changes in the fair value of derivative instruments, which consist of net
accrued periodic derivative cash settlements expense and derivative forward value amounts, are recognized in our
consolidated statements of operations under derivative gains (losses). If we elect hedge accounting treatment for derivatives,
we formally document, designate and assess the effectiveness of the hedge relationship. Changes in the fair value of
derivatives designated as qualifying fair value hedges are recorded in earnings together with offsetting changes in the fair
value of the hedged item and any related ineffectiveness. Changes in the fair value of derivatives designated as qualifying
cash flow hedges are recorded as a component of other comprehensive income (“OCI”), to the extent that the hedge
relationships are effective, and reclassified from accumulated other comprehensive income (“AOCI”) to earnings using the
effective interest method over the term of the forecasted transaction. Any ineffectiveness in the hedging relationship is
recognized as a component of derivative gains (losses) in our consolidated statement of operations.
We generally do not designate interest rate swaps, which represent the substantial majority of our derivatives, for hedge
accounting. Accordingly, changes in the fair value of interest rate swaps are reported in our consolidated statements of
operations under derivative gains (losses). Net periodic cash settlements expense related to interest rate swaps are classified
as an operating activity in our consolidated statements of cash flows.
We typically designate Treasury rate locks as cash flow hedges of forecasted debt issuances or repricings. Changes in the
fair value of treasury locks designated as cash flow hedges are recorded as a component of OCI and reclassified from AOCI
into interest expense when the forecasted transaction occurs using the effective interest method. Any ineffectiveness is
recognized as a component of derivative gains (losses) in our consolidated statements of operations.
Guarantee Liability
We maintain a guarantee liability that represents our contingent and noncontingent exposure related to guarantees and
standby liquidity obligations associated with our members’ debt. The guarantee liability is included in the other liabilities
line item on the consolidated balance sheet, and the provision for guarantee liability is reported in non-interest expense as a
separate line item on the consolidated statement of operations.
The contingent portion of the guarantee liability represents management’s estimate of our exposure to losses within the
guarantee portfolio. The methodology used to estimate the contingent guarantee liability is consistent with the methodology
used to determine the allowance for credit losses under the CECL model.
100
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We have recorded a noncontingent guarantee liability for all new or modified guarantees since January 1, 2003. Our
noncontingent guarantee liability represents our obligation to stand ready to perform over the term of our guarantees and
liquidity obligations that we have entered into or modified since January 1, 2003. Our noncontingent obligation is estimated
based on guarantee and liquidity fees charged for guarantees issued, which represents management’s estimate of the fair
value of our obligation to stand ready to perform. The fees are deferred and amortized using the straight-line method into
interest income over the term of the guarantee.
Fair Value Valuation Processes
We present certain financial instruments at fair value, including equity and debt securities, and derivatives. Fair value is
defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market
participants on the measurement date (also referred to as an exit price). We have various processes and controls in place to
ensure that fair value is reasonably estimated. We consider observable prices in the principal market in our valuations where
possible. Fair value estimates were developed at the reporting date and may not necessarily be indicative of amounts that
could ultimately be realized in a market transaction at a future date. With the exception of redeeming debt under early
redemption provisions, terminating derivative instruments under early-termination provisions and allowing borrowers to
prepay their loans, we held and intend to hold all financial instruments to maturity excluding common stock and preferred
stock investments that have no stated maturity and our trading debt securities.
Fair Value Hierarchy
The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This
hierarchy is based on the markets in which the assets or liabilities trade and whether the inputs to the valuation techniques
used to measure fair value are observable or unobservable. Fair value measurement of a financial asset or liability is
assigned a level based on the lowest level of any input that is significant to the fair value measurement in its entirety. The
three levels of the fair value hierarchy are summarized below:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: Observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities
Level 3: Unobservable inputs
The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the
availability of quoted prices in active markets or observable market parameters. When quoted prices and observable data in
active markets are not fully available, management’s judgment is necessary to estimate fair value. Changes in market
conditions, such as reduced liquidity in the capital markets or changes in secondary market activities, may reduce the
availability and reliability of quoted prices or observable data used to determine fair value.
Membership Fees
Members are charged a one-time membership fee based on member class. CFC distribution system members, power supply
system members and national associations of cooperatives pay a $1,000 membership fee. CFC service organization
members pay a $200 membership fee and CFC associates pay a $1,000 fee. RTFC voting members pay a $1,000
membership fee and RTFC associates pay a $100 fee. NCSC members pay a $100 membership fee. Membership fees are
accounted for as members’ equity.
Financial Instruments with Off-Balance Sheet Risk
In the normal course of business, we are a party to financial instruments with off-balance sheet risk to meet the financing
needs of our member borrowers. These financial instruments include committed lines of credit, standby letters of credit and
guarantees of members’ obligations.
101
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Early Extinguishment of Debt
We redeem outstanding debt early from time to time to manage liquidity and interest rate risk. When we redeem outstanding
debt early, we recognize a gain or loss related to the difference between the amount paid to redeem the debt and the net book
value of the extinguished debt as a component of non-interest expense in the gain (loss).
Income Taxes
While CFC is exempt under Section 501(c)(4) of the Internal Revenue Code, it is subject to tax on unrelated business
taxable income. NCSC is a taxable cooperative that pays income tax on the full amount of its reportable taxable income and
allowable deductions. RTFC is a taxable cooperative under Subchapter T of the Internal Revenue Code and is not subject to
income taxes on income from patronage sources that is allocated to its borrowers, as long as the allocation is properly
noticed and at least 20% of the amount allocated is retired in cash prior to filing the applicable tax return.
The income tax benefit (expense) recorded in the consolidated statement of operations represents the income tax benefit
(expense) at the applicable combined federal and state income tax rates resulting in a statutory tax rate. The federal statutory
tax rate for both NCSC and RTFC was 21% for each of fiscal years 2021, 2020 and 2019. Substantially all of the income tax
expense recorded in our consolidated statements of operations relates to NCSC. NCSC had a deferred tax asset of $2 million
and $3 million as of May 31, 2021 and 2020, respectively, primarily arising from differences in the accounting and tax
treatment for derivatives. We believe that it is more likely than not that the deferred tax assets will be realized through
taxable earnings.
New Accounting Standards Adopted in Fiscal Year 2021
Fair Value Measurement—Changes to the Disclosure Requirements for Fair Value Measurement
On June 1, 2020, we adopted Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820):
Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which removes, adds and
modifies certain disclosure requirements on fair value measurements. The adoption of this guidance, which resulted only in
certain changes to the fair value measurement disclosures presented in “Note 14—Fair Value Measurement” did not
otherwise affect our consolidated financial statements.
Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments
On June 1, 2020, we adopted ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments, which replaces the incurred loss methodology for estimating credit losses with an expected
loss methodology that is referred to as the CECL model. The incurred loss model delayed the recognition of credit losses
until it was probable that a loss had occurred, while the CECL model requires the immediate recognition of expected credit
losses over the contractual term, adjusted as appropriate for estimated prepayments, for financial instruments that fall within
the scope of CECL at the date of origination or purchase of the financial instrument. The CECL model, which is applicable
to the measurement of credit losses on financial assets measured at amortized cost and certain off-balance sheet credit
exposures, affects our estimates of the allowance for credit losses for our loan portfolio and our off-balance sheet credit
exposures related to unadvanced loan commitments and financial guarantees. In measuring lifetime expected credit losses,
management is required to take into consideration relevant information about past events, including historical experience,
current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount of the
financial instrument.
102
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We adopted CECL using the modified retrospective approach, which resulted in an increase in our allowance for credit
losses for our loan portfolio of $4 million and a corresponding decrease to retained earnings of $4 million recorded as a
cumulative-effect adjustment. The impact on the allowance for credit losses for our off-balance sheet credit exposures
related to unadvanced loan commitments and financial guarantees was not material. The increase in the allowance for credit
losses for our loan portfolio was attributable to the transition to measuring the allowance based on expected credit losses
over the remaining contractual term of loans in our portfolio as required under the CECL model, whereas the allowance
under the incurred model did not consider the remaining contractual term of our loans. The transition adjustment was
primarily driven by an increase in the allowances for CFC distribution and CFC power supply loans, which have a longer
remaining contractual term than the estimated loss emergence period of five years we used in estimating probable losses in
our loan portfolio under the incurred loss model.
While CECL had no impact on our earnings at adoption on June 1, 2020, subsequent estimates of lifetime expected credit
losses for newly recognized loans, unadvanced loan commitments and financial guarantees, as well as changes during the
period in our estimate of lifetime expected credit losses for existing financial instruments subject to CECL, are now
recognized in earnings. We present the expanded credit quality disclosures required under CECL for financial instruments
measured at amortized cost in “Note 4—Loans” and “Note 5—Allowance for Credit Losses.” Amounts in periods prior to
our adoption of CECL on June 1, 2020 continue to be reported in accordance with previously applicable U.S. GAAP.
New Accounting Standards Issued But Not Yet Adopted
Reference Rate Reform
On March 12, 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform
(Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary
optional expedients and exceptions for applying U.S. GAAP on contracts, hedging relationships and other transactions
subject to modification due to the expected discontinuance of the London Interbank Offered Rate (“LIBOR”) and other
reference rate reform changes to ease the potential accounting and financial burdens related to the expected transition in
market reference rates. This guidance permits entities to elect not to apply certain modification accounting requirements to
contracts affected by reference rate transition, if certain criteria are met. An entity that makes this election would not be
required to remeasure modified contracts at the modification date or reassess a previous accounting determination. The
guidance was effective upon issuance on March 12, 2020, and can generally be applied through December 31, 2022. We
expect to apply certain of the practical expedients and are in the process of evaluating the timing and application of those
elections. Based on our current assessment, we do not believe that the application of this guidance will have a material
impact on our consolidated financial statements.
103
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2—INTEREST INCOME AND INTEREST EXPENSE
The following table displays the components of interest income, by interest-earning asset type, and interest expense, by debt
product type, presented on our consolidated statements of operations for fiscal years 2021, 2020 and 2019.
Table 2.1: Interest Income and Interest Expense
(Dollars in thousands)
Interest income:
Loans(1)(2).................................................................................
Investment securities...............................................................
Total interest income
Interest expense:(3)(4)
Short-term borrowings.............................................................
Long-term debt........................................................................
Subordinated debt....................................................................
Total interest expense............................................................
Year Ended May 31,
2021
2020
2019
$
1,101,505 $
1,129,883 $
1,111,061
15,096
21,403
24,609
1,116,601
1,151,286
1,135,670
14,730
581,292
106,041
702,063
77,995
634,567
108,527
821,089
92,854
647,284
96,071
836,209
Net interest income................................................................
____________________________
$
414,538 $
330,197 $
299,461
(1)
(2)
(3)
(4)
Includes loan conversion fees, which are generally deferred and recognized in interest income over the period to maturity using the effective interest
method.
Includes late payment fees, commitment fees and net amortization of deferred loan fees and loan origination costs.
Includes amortization of debt discounts and debt issuance costs, which are generally deferred and recognized as interest expense over the period to
maturity using the effective interest method. Issuance costs related to dealer commercial paper, however, are recognized in interest expense immediately
as incurred.
Includes fees related to funding arrangements, such as up-front fees paid to banks participating in our committed bank revolving line of credit
agreements. Based on the nature of the fees, the amount is either recognized immediately as incurred or deferred and recognized in interest expense
ratably over the term of the arrangement.
Deferred income reported on our consolidated balance sheets of $51 million and $59 million as of May 31, 2021 and 2020,
respectively, consists primarily of deferred loan conversion fees that totaled $45 million and $53 million as of each
respective date. Deferred loan conversion fees are recognized in interest income over the remaining period to maturity of
loans using the effective interest method.
104
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3—INVESTMENT SECURITIES
We maintain a portfolio of equity and debt securities. Our debt securities portfolio, which is intended to serve as a
supplemental source of liquidity, consists of certificates of deposit with maturities greater than 90 days, commercial paper,
corporate debt securities, municipality debt securities, commercial mortgage-backed securities (“MBS”), foreign
government debt securities and other asset-backed securities (“ABS”).
Equity Securities
The following table presents the composition of our equity security holdings and the fair value as of May 31, 2021 and
2020.
Table 3.1: Investments in Equity Securities, at Fair Value
(Dollars in thousands)
Equity securities, at fair value:
May 31,
2021
2020
Farmer Mac—Series A non-cumulative preferred stock.............................
$
—
$
Farmer Mac—Series C non-cumulative preferred stock.............................
Farmer Mac—Class A common stock.........................................................
27,450
7,652
Total equity securities, at fair value............................................................. $
35,102
$
30,240
25,400
5,095
60,735
On September 19, 2020, Farmer Mac redeemed all of the outstanding shares of its 5.875% Series A non-cumulative
preferred stock at a redemption price of $25.00 per share, plus any declared and unpaid dividends through and including the
redemption date. We held 1.2 million shares of Farmer Mac’s Series A non-cumulative preferred stock at an amortized cost
of $25 per share as of the redemption date, which was equal to the per-share redemption price.
We recognized net unrealized gains on our equity securities of $4 million for the fiscal year ended May 31, 2021 and net
unrealized losses of $2 million for fiscal years ended May 31, 2020 and 2019. These unrealized amounts are reported as a
component of non-interest income on our consolidated statements of operations. For additional information on our
investments in equity securities, see “Note 1—Summary of Significant Accounting Policies” and “Note 11—Equity—
Accumulated Other Comprehensive Income.”
Debt Securities
Pursuant to our investment policy guidelines, all fixed-income debt securities, at the time of purchase, must be rated at least
investment grade and on stable outlook based on external credit ratings from at least two of the leading global credit rating
agencies, when available, or the corresponding equivalent, when not available. Securities rated investment grade, that is
those rated Baa3 or higher by Moody’s Investors Service (“Moody’s”) or BBB- or higher by S&P Global Inc. (“S&P”) or
BBB- or higher by Fitch Ratings Inc. (“Fitch”), are generally considered by the rating agencies to be of lower credit risk
than non-investment grade securities.
105
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Debt Securities
The following table presents the composition of our investments in trading debt securities and the fair value as of May 31,
2021 and 2020.
Table 3.2: Investments in Debt Securities Trading, at Fair Value
(Dollars in thousands)
Debt securities, at fair value:
May 31,
2021
2020
Certificates of deposit......................................................................
$
1,501 $
Commercial paper............................................................................
Corporate debt securities.................................................................
Commercial MBS:
Agency(1).....................................................................................
Non-agency.................................................................................
Total commercial MBS....................................................................
U.S. state and municipality debt securities......................................
Foreign government debt securities.................................................
Other ABS(2)....................................................................................
Total debt securities trading, at fair value........................................ $
____________________________
12,365
497,944
8,683
—
8,683
11,840
999
42,843
576,175 $
5,585
—
253,153
7,655
3,207
10,862
8,296
—
31,504
309,400
(1)
(2)
Consists of securities backed by Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie
Mac”).
Consists primarily of securities backed by auto lease loans, equipment-backed loans, auto loans and credit card loans.
We received cash proceeds of $6 million on the sale of debt securities at fair value during the year ended May 31, 2021, and
recorded realized losses related to the sale of these securities of less than $1 million for the year ended May 31, 2021. We
received cash proceeds of $239 million on the sale of debt securities at fair value during the year ended May 31, 2020, and
recorded realized gains related to the sale of these securities of $3 million for the year ended May 31, 2020. We did not sell
any of our debt investment securities during the year ended May 31, 2019, and therefore have not recorded any realized
gains or losses during fiscal year 2019.
We recognized net unrealized losses on our debt securities of $3 million for the year ended May 31, 2021 and net unrealized
gains of $8 million for the year ended May 31, 2020. These realized and unrealized amounts are reported as a component of
non-interest income on our consolidated statements of operations. For additional information on our investments in debt
securities, see “Note 1—Summary of Significant Accounting Policies.”
We also pledge debt securities as collateral under our repurchase agreements. Debt securities with a carrying value of $211
million as of May 31, 2021 were pledged as collateral for securities sold under repurchase agreements.
106
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4—LOANS
We offer loans under secured long-term facilities with terms up to 35 years and line of credit loans. Under secured long-term
facilities, borrowers have the option of selecting a fixed or variable rate for a period of one to 35 years for each long-term
loan advance. When a selected fixed interest rate term expires, the borrower may select another fixed-rate term or a variable
rate. Line of credit loans are revolving loan facilities that typically have a variable interest rate and are generally unsecured.
Collateral and security requirements for advances on loan commitments are identical to those required at the time of the
initial loan approval.
Loans to Members
Loans to members consist of total loans outstanding, which reflects the unpaid principal balance, net of charge-offs and
recoveries, of loans and deferred loan origination costs. The following table presents loans to members and unadvanced loan
commitments, by member class and by loan type, as of May 31, 2021 and 2020.
Table 4.1: Loans to Members by Member Class and Loan Type
(Dollars in thousands)
Member class:
CFC:
May 31,
2021
2020
Loans
Outstanding
Unadvanced
Commitments (1)
Loans
Outstanding
Unadvanced
Commitments (1)
Distribution.................................................
$
22,027,423 $
9,387,070
$
20,769,653 $
8,992,457
Power supply...............................................
Statewide and associate...............................
5,154,312
106,121
3,970,698
161,340
4,731,506
106,498
3,409,227
153,626
Total CFC.......................................................
27,287,856
13,519,108
25,607,657
12,555,310
NCSC.............................................................
RTFC..............................................................
Total loans outstanding(2)...............................
Deferred loan origination costs......................
706,868
420,383
551,125
286,806
697,862
385,335
551,674
281,642
28,415,107
14,357,039
26,690,854
13,388,626
11,854
—
11,526
—
Loans to members..........................................
$
28,426,961 $
14,357,039
$
26,702,380 $
13,388,626
Loan type:
Long-term loans:
Fixed rate..................................................... $
25,514,766 $
—
$
24,472,003 $
—
Variable rate................................................
658,579
Total long-term loans.....................................
26,173,345
5,771,813
5,771,813
8,585,226
655,704
25,127,707
1,563,147
5,458,676
5,458,676
7,929,950
2,241,762
Lines of credit................................................
Total loans outstanding(2) ..............................
Deferred loan origination costs......................
Loans to members..........................................
____________________________
28,415,107
14,357,039
26,690,854
13,388,626
11,854
—
11,526
—
$
28,426,961 $
14,357,039
$
26,702,380 $
13,388,626
(1)
(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.
Represents the unpaid principal balance, net of charge-offs and recoveries, of loans as of the end of each period.
107
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loan Sales
We transfer, from time to time, whole loans and participating interests to third parties. These transfers are made concurrently
with the closing of the loan or participation agreement at par value and meet the accounting criteria required for sale
accounting. Therefore, we remove the transferred loans or participating interests from our consolidated balance sheets when
control has been surrendered and recognize a gain or loss on the sale. We retain a servicing performance obligation on the
transferred loans and recognize related servicing fees on an accrual basis over the period for which servicing is provided, as
we believe the servicing fee represents adequate compensation. Other than the servicing performance obligation, we have
not retained any interest in the loans sold to date. In addition, we have no obligation to repurchase loans that are sold, except
in the case of breaches of representations and warranties.
We sold CFC loans, at par for cash, totaling $126 million, $151 million and $35 million in fiscal years 2021, 2020 and 2019,
respectively. We recorded immaterial losses on the sale of these loans attributable to the unamortized deferred loan
origination costs associated with the transferred loans.
Credit Concentration
Concentrations may exist when there are amounts loaned to borrowers engaged in similar activities or in geographic areas
that would cause them to be similarly impacted by economic or other conditions or when there are large exposures to single
borrowers. 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 $27,995 million and $26,306 million as of May 31, 2021 and 2020, respectively, accounted for 99% of total
loans outstanding as of both May 31, 2021 and 2020. The remaining loans outstanding in our portfolio were to RTFC
members, affiliates and associates in the telecommunications industry.
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 number of borrowers with outstanding
loans totaled 892 and 889 as of May 31, 2021 and 2020, respectively, located in 49 states. Texas accounted for the largest
number of borrowers in any one state and also the largest concentration of loan exposure in any one state as of each
respective date. Loans outstanding to Texas-based electric utility organizations totaled $4,878 million and $4,222 million as
of May 31, 2021 and 2020, respectively, and accounted for approximately 17% and 16% of total loans outstanding as of
each respective date. Of the loans outstanding to Texas-based electric utility organizations, $172 million and $181 million as
of May 31, 2021 and 2020, respectively, were covered by the Farmer Mac standby repurchase agreement, which slightly
reduces our Texas loan exposure.
Single-Obligor Concentration
The outstanding loan exposure for our 20 largest borrowers totaled $6,182 million and $5,877 million as of May 31, 2021
and 2020, respectively, representing 22% of total loans outstanding as of each respective date. The 20 largest borrowers
consisted of 10 distribution systems and 10 power supply systems as of May 31, 2021. The 20 largest borrowers consisted of
11 distribution systems and nine power supply systems as of May 31, 2020. The largest total outstanding exposure to a
single borrower or controlled group represented less than 2% of total loans outstanding as of both May 31, 2021 and 2020.
As part of our strategy in managing credit exposure to large borrowers, 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
108
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 $512 million and
$569 million as of May 31, 2021 and 2020, respectively. Loan exposure to our 20 largest borrowers covered under the
Farmer Mac agreement totaled $309 million and $314 million as of May 31, 2021 and 2020, respectively, which reduced
our exposure to the 20 largest borrowers to 21% as of each respective date. We have had no loan defaults for loans covered
under this agreement; therefore, no loans had been put to Farmer Mac for purchase pursuant to the standby purchase
agreement as of May 31, 2021. Our credit exposure is also mitigated by long-term loans guaranteed by the RUS. Guaranteed
RUS loans totaled $139 million and $147 million as of May 31, 2021 and 2020, respectively.
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, troubled debt restructurings, 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 member class, of loans outstanding as of May 31, 2021 and 2020.
Table 4.2: Payment Status of Loans Outstanding
(Dollars in thousands)
CFC:
Current
30-89 Days
Past Due
90 Days or
More
Past Due
Total
Past Due
Total Loans
Outstanding
Nonaccrual
Loans
May 31, 2021
Distribution........................ $ 22,027,423 $
— $
— $
— $ 22,027,423 $
—
Power supply.....................
5,069,316
Statewide and associate.....
106,121
CFC total..............................
27,202,860
NCSC...................................
RTFC....................................
706,868
420,383
3,400
—
3,400
—
—
81,596
—
81,596
—
—
84,996
5,154,312
228,312
—
106,121
—
84,996
27,287,856
228,312
—
—
706,868
420,383
—
9,185
Total loans outstanding........
$ 28,330,111 $
3,400 $
81,596 $
84,996 $ 28,415,107 $
237,497
Percentage of total loans......
99.70 %
0.01 %
0.29 %
0.30 %
100.00 %
0.84 %
109
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
CFC:
Current
30-89 Days
Past Due
90 Days or
More
Past Due
Total
Past Due
Total Loans
Outstanding
Nonaccrual
Loans
May 31, 2020
Distribution........................ $ 20,769,653 $
— $
— $
— $ 20,769,653 $
—
Power supply.....................
4,731,506
Statewide and associate.....
106,498
CFC total..............................
25,607,657
NCSC...................................
RTFC....................................
697,862
385,335
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,731,506
106,498
167,708
—
25,607,657
167,708
697,862
385,335
—
—
Total loans outstanding........
$ 26,690,854 $
— $
— $
— $ 26,690,854 $
167,708
Percentage of total loans......
100.00 %
— %
— %
— %
100.00 %
0.63 %
We had one delinquent loan totaling $85 million as of May 31, 2021 to Brazos Electric Power Cooperative, Inc. (“Brazos”),
a CFC Texas-based power supply borrower, which we classified as nonperforming as a result of its bankruptcy filing as
described below under “Nonperforming Loans.” Brazos is unable to make scheduled loan payments without approval of the
bankruptcy court. We had no delinquent loans as of May 31, 2020. Loans outstanding on nonaccrual status increased $69
million to $237 million as of May 31, 2021, primarily due to the Brazos nonperforming loans. No interest income was
recognized on nonaccrual loans for the years ended May 31, 2021 and 2020. See “Nonperforming Loans” below for
additional information.
Troubled Debt Restructurings
We did not have any loan modifications that were required to be accounted for as a TDR during the year ended May 31,
2021, nor have we had any TDR loan modifications since fiscal year 2016. The following table presents the outstanding
balance of modified loans accounted for as TDRs in prior periods and the performance status, by member class, of these
loans as of May 31, 2021 and 2020.
Table 4.3: Trouble Debt Restructurings
(Dollars in thousands)
TDR loans:
CFC—Distribution..............................
RTFC...................................................
Total TDR loans..................................
Performance status of TDR loans:
Performing TDR loans........................
Total TDR loans..................................
____________________________
2021
2020
May 31,
Number of
Borrowers
Outstanding
Amount (1)
% of Total
Loans
Outstanding
Number of
Borrowers
Outstanding
Amount (1)
% of Total
Loans
Outstanding
1
1
2
2
2
$
$
$
$
5,379
4,592
9,971
0.02 %
0.02
0.04 %
9,971
9,971
0.04 %
0.04 %
1
1
2
2
2
$
5,756
5,092
$
10,848
0.02 %
0.02
0.04 %
$
$
10,848
10,848
0.04 %
0.04 %
(1)
Represents the unpaid principal balance net of charge-offs and recoveries as of the end of each period.
The outstanding TDR loans for CFC and RTFC each relate to the modification of a loan for one borrower that, at the time of
the modification, was experiencing financial difficulty. There were no unadvanced commitments related to these loans as of
110
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2021 or May 31, 2020. We did not have any TDR loans classified as nonperforming as of May 31, 2021 or May 31,
2020. TDR loans classified as performing as of May 31, 2021 and 2020 were performing in accordance with the terms of
their respective restructured loan agreement and on accrual status as of the respective reported dates.
The CFC borrower with the TDR loan also had one line of credit as of May 31, 2021 and two lines of credit as of May 31,
2020. The line of credit facility for $6 million as of both May 31, 2021 and 2020, is restricted for fuel purchases only. There
were no outstanding loans under this facility as of May 31, 2021. Outstanding loans under this facility totaled less than $1
million as of May 31, 2020 and were classified as performing. The other line of credit facility for $2 million as of May 31,
2020, was put in place during fiscal year 2019 to provide bridge funding for electric work plan expenditures in anticipation
of receiving RUS funding. Outstanding loans under this facility totaled $2 million as of May 31, 2020, and were classified
as performing.
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 member class, as
of May 31, 2021 and 2020.
Table 4.4: Nonperforming Loans
(Dollars in thousands)
Nonperforming loans:
CFC—Power supply(2)
RTFC...................................................
..............................
Total nonperforming loans..................
____________________________
May 31,
2021
2020
Number of
Borrowers
Outstanding
Amount (1)
% of Total
Loans
Outstanding
Number of
Borrowers
Outstanding
Amount (1)
% of Total
Loans
Outstanding
2
2
4
$ 228,312
9,185
0.81 %
0.03
$ 237,497
0.84 %
1
—
1
$ 167,708
0.63 %
—
—
$ 167,708
0.63 %
(1)
Represents the unpaid principal balance net of charge-offs and recoveries as of the end of each period.
(2)
In addition, we had less than $1 million letters of credit outstanding to Brazos as of May 31, 2021.
Nonperforming loans increased $69 million to $237 million, or 0.84%, of total loans outstanding as of May 31, 2021, from
$168 million, or 0.63%, of total loans outstanding as of May 31, 2020, primarily due to our classification of the loans
outstanding of $85 million to Brazos, a CFC Texas-based power supply borrower, as nonperforming during fiscal year 2021
as a result of its bankruptcy filing as described below.
During the February 2021 polar vortex that affected Texas and several neighboring states, as the freezing conditions
impacted power demand, Brazos had insufficient generation supply and was forced, to purchase power at peak prices to
meet the electric demand of its member distribution customers. On March 1, 2021, we were informed that Brazos filed for
Chapter 11 bankruptcy protection. In the third quarter of fiscal year 2021, we downgraded Brazos’ borrower risk rating from
a rating within the pass category to doubtful, classified its loans outstanding as nonperforming, placed the loans on
nonaccrual status, and reversed unpaid interest amounts previously accrued and recognized in interest income. We had loans
outstanding to Brazos of $85 million as of May 31, 2021, pursuant to a syndicated Bank of America revolving credit
agreement, of which $64 million was unsecured and $21 million was secured based on the set-off provisions of the
revolving credit agreement approved by the bankruptcy court. In addition to Brazos, we classified loans outstanding to two
affiliated RTFC telecommunications borrowers as nonperforming during fiscal year. Loans outstanding to these RTFC
borrowers totaled $9 million as of May 31, 2021.
111
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the terms of the syndicated Bank of America revolving credit agreement, in the event of bankruptcy by Brazos, each
lending participant is permitted to hold any deposited or investment funds from Brazos, up to the amount of the participant’s
exposure to Brazos pursuant to the agreement, for set-off against such exposure to Brazos. The total so held by all
participants is required to be shared among the participants in accordance with the pro rata share of each participant in the
agreement. As of the bankruptcy filing date, funds on deposit from or invested by Brazos with participating lenders of the
agreement, available for set-off against Brazos’ obligations, totaled $124 million. Based on our exposure of $85 million
under the $500 million syndicated Bank of America agreement, our pro rata share set-off right is 17%, or approximately
$21 million. The set-off rights have been agreed to and confirmed by Brazos and the bankruptcy court. In order to allow
Brazos to access such deposited or invested funds, the lenders have been granted adequate protection liens and super-priority
claims in an amount equal to the diminution of value of the amount available for set-off.
One loan to another CFC power supply borrower, with an outstanding balance of $143 million and $168 million as of
May 31, 2021 and 2020, respectively, accounted for the majority of nonperforming loans as of May 31, 2021, and the entire
amount of nonperforming loans as of May 31, 2020. Under the terms of this loan, which matures in December 2026, the
amount the borrower is required to pay in 2024 and 2025 may vary, as the payments are contingent on the borrower’s
financial performance in those years. Based on our review and assessment of the borrower’s forecast and underlying
assumptions provided to us in May 2020, we no longer believed that the future expected cash payments from the borrower
through the maturity of the loan in December 2026 would be sufficient to repay the outstanding loan balance. We therefore
classified this loan as nonperforming, placed the loan on nonaccrual status and established an asset-specific allowance for
credit losses as of May 31, 2020. We received payments from the borrower on this loan during the current year-to-date
period, reducing the outstanding balance to $143 million as of May 31, 2021. While the borrower is not in default and was
current with respect to required payments on the loan as of May 31, 2021, we have continued to report the loan as
nonperforming.
Net Charge-Offs
Charge-offs represent the amount of a loan that has been removed from our consolidated balance sheet when the loan is
deemed uncollectible. Generally the amount of a charge-off is the recorded investment in excess of the fair value of the
expected cash flows from the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral securing
the loan. We report charge-offs net of amounts recovered on previously charged-off loans. We had no charge-offs during the
years ended May 31, 2021, 2020 and 2019. Prior to Brazos’ bankruptcy filing, we had not experienced any defaults or
charge-offs in our electric utility and telecommunications loan portfolios since fiscal year 2013 and 2017, respectively. We
had one delinquent loan to Brazos totaling $85 million as of May 31, 2021, as Brazos is unable to make scheduled loan
payments without approval of the bankruptcy court. We had no delinquent loans as of May 31, 2020.
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 agency 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. Following is a description of the borrower risk-rating categories.
112
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• Pass: Borrowers that are not experiencing difficulty and/or not showing a potential or well-defined credit weakness.
• 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.
We use our internal risk ratings to measure the credit risk of each borrower and loan facility, identify or confirm problem or
potential problem loans in a timely manner, differentiate risk within each of our portfolio segments, assess the overall credit
quality of our loan portfolio and manage overall risk levels. Our internally assigned borrower risk ratings, which we map to
equivalent credit ratings by external credit rating agencies, 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 estimating our allowance for credit losses.
Table 4.5 displays total loans outstanding, by borrower risk-rating category and borrower member class, as of May 31, 2021
and 2020. 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.
In connection with our adoption of CECL, we present term loans outstanding as of May 31, 2021, by fiscal year of
origination for each year during the five-year annual reporting period beginning in fiscal year 2017, and in the aggregate for
periods prior to fiscal year 2017. 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. As indicated in Table 4.5 below, term loan advances made to borrowers prior to fiscal year 2017
totaled $15,825 million, representing 56% of our total loans outstanding of $28,415 million as of May 31, 2021. The
average remaining maturity of our long-term loans, which accounted for 92% of total loans outstanding as of May 31, 2021,
was 18 years.
As discussed above, as a 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. As such, since our inception in 1969 we have had an extended repeat lending and
repayment history with substantially all of member borrowers through our various loan programs. Our secured long-term
loan commitment facilities typically provide a five-year draw period under which a borrower may draw funds prior to the
expiration of the commitment. Because our electric utility cooperative borrowers must make substantial annual capital
investments to maintain operations and ensure delivery of the essential service provided by electric utilities, they require a
continuous inflow of funds to finance infrastructure upgrades and new asset purchases. Due to the funding needs of electric
utility cooperatives, a CFC borrower generally has multiple loans outstanding under advances drawn in different years.
While the number of borrowers with loans outstanding was 892 borrowers as of May 31, 2021, the number of loans
outstanding was 16,575 as of May 31, 2021, resulting in an average of 19 loans outstanding per borrower. Our borrowers,
however, are subject to cross-default under the terms of our loan agreements. Therefore, if a borrower defaults on one loan,
the borrower is considered in default on all outstanding loans. Due to these factors, we historically have not observed a
correlation between the year of origination of our loans and default risk. Instead, default risk on our loans has typically been
more closely correlated to the risk rating of our borrowers.
113
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table 4.5: Loans Outstanding by Borrower Risk Ratings and Origination Year
Term Loans by Fiscal Year of Origination
May 31, 2021
(Dollars in thousands)
2021
2020
2019
2018
2017
Prior
Revolving
Loans
Total
May 31,
2020
Pass
CFC:
Distribution.............
$ 1,768,491 $ 1,935,368 $ 1,227,223 $ 1,497,479 $ 1,520,593
$ 12,654,148 $ 1,204,797 $ 21,808,099 $ 20,643,737
Power supply...........
568,917
201,122
345,496
252,783
259,358
2,510,572
379,160
4,517,408
4,516,595
Statewide and
associate...............
2,491
22,028
3,686
—
547
23,534
37,975
90,261
90,274
CFC total.................
2,339,899
2,158,518
1,576,405
1,750,262
1,780,498
15,188,254
1,621,932
26,415,768
25,250,606
NCSC......................
RTFC.......................
41,506
98,797
241,576
50,011
4,379
12,138
44,848
27,356
14,325
65,035
248,127
112,107
131,936
21,333
706,868
406,606
697,862
371,507
Total pass................
2,480,202
2,450,105
1,592,922
1,822,466
1,859,858
15,568,317
1,755,372
27,529,242
26,319,975
Special mention
CFC:
Distribution.............
5,000
Power supply...........
Statewide and
associate................
CFC total.................
RTFC.......................
Total special
mention.................
Substandard
CFC:
Distribution.............
Power supply...........
CFC total.................
RTFC.......................
—
—
5,000
—
5,000
—
23,600
23,600
—
Total substandard....
23,600
Doubtful
CFC:
Power supply...........
CFC total.................
RTFC.......................
Total doubtful..........
Total criticized
loans......................
Total loans
—
—
—
—
28,600
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,197
—
5,000
10,197
—
950
—
4,000
4,950
—
—
—
5,704
5,704
—
13,177
195,000
29,611
1,156
—
—
43,944
195,000
4,592
—
219,324
29,611
15,860
264,795
4,592
7,743
—
16,224
23,967
8,736
10,197
4,950
5,704
48,536
195,000
269,387
32,703
—
85,839
85,839
—
85,839
—
—
1,411
1,411
—
—
—
—
—
—
—
—
—
—
—
—
64,982
204,560
64,982
204,560
—
—
—
378,981
378,981
—
118,173
47,203
165,376
5,092
64,982
204,560
378,981
170,468
—
—
2,947
2,947
—
—
2,993
2,993
143,316
143,316
—
143,316
84,996
84,996
1,834
86,830
228,312
228,312
9,185
167,708
167,708
—
237,497
167,708
97,447
7,897
8,697
256,834
486,390
885,865
370,879
outstanding............ $ 2,508,802 $ 2,450,105 $ 1,690,369 $ 1,830,363 $ 1,868,555 $ 15,825,151 $ 2,241,762 $ 28,415,107 $ 26,690,854
Criticized loans increased $515 million to $886 million as of May 31, 2021, from $371 million as of May 31, 2020,
representing approximately 3% and 1% of total loans outstanding as of each respective date. The increase was attributable to
increases in loans outstanding in the special mention, substandard and doubtful categories. Each of the borrowers with loans
outstanding in the criticized category, with the exception of Brazos, was current with regard to all principal and interest
114
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
amounts due as of May 31, 2021. As mentioned above, Brazos is unable to make scheduled loan payments without approval
of the bankruptcy court.
Special Mention
One CFC electric distribution borrower totaling $219 million accounted for the substantial majority of the special mention
loan category amount of $269 million as of May 31, 2021. The CFC electric distribution borrower with loans outstanding of
$219 million as of May 31, 2021 was downgraded to special mention in fiscal year 2021, from a rating within the pass
category as of May 31, 2020. The downgrade was attributable to an adverse financial impact from restoration costs incurred
to repair damage caused by two successive hurricanes. We expect that the borrower will receive grant funds from the
Federal Emergency Management Agency and the state where it is located for reimbursement of the hurricane damage-
related restoration costs.
Substandard
Loans outstanding to Rayburn Country Electric Cooperative, Inc. (“Rayburn”), a CFC Texas-based electric power supply
borrower, consisted of secured loans of $167 million and unsecured loans of $212 million, which together totaled
$379 million as of May 31, 2021, and accounted for the substandard loan category amount of $379 million as of May 31,
2021. Rayburn was downgraded to substandard in fiscal year 2021, from a rating within the pass category as of May 31,
2020. The downgrade was attributable to the significant adverse financial impact from exposure to the elevated power costs
during the February 2021 polar vortex.
One CFC electric distribution borrower and its subsidiary with loans totaling $146 million as of May 31, 2021, was
upgraded to a risk rating grade in the pass category in fiscal year 2021, from a substandard rating as of May 31, 2020, based
on the borrower’s improved financial performance.
Doubtful
The increase in loans outstanding in the doubtful category to $237 million as of May 31, 2021, from $168 million as of
May 31, 2020 was attributable to the downgrades in the borrower risk ratings of Brazos and two affiliated RTFC
telecommunications borrowers and the classification of loans outstanding to these borrowers of $85 million and $9 million,
respectively, as nonperforming as of May 31, 2021, discussed above under “Nonperforming Loans.”
On June 18, 2021, the Texas governor signed into law Senate Bill 1580, the electric cooperative securitization bill, which
became effective immediately with the governor’s signature. This bill allows electric cooperatives to securitize
extraordinary costs and expenses incurred due to exposure to high power costs during the February 2021 polar vortex,
including amounts owed to Electric Reliability Council of Texas (“ERCOT”). Qualifying cooperatives may issue bonds
directly or through a special purpose vehicle legal entity. Payments on the bonds are required to be made over a period not
to exceed 30 years. The bill also requires that cooperatives that owe ERCOT use all means necessary to securitize the
amount owed, calculated according to ERCOT’s protocols in effect during the period of the February 2021 polar vortex, and
stipulates that failure to pay such amount may result in being barred from the ERCOT-administered power market by the
Public Utility Commission of Texas. While Brazos and Rayburn are eligible to utilize the provisions of this bill, we are
currently uncertain whether they will elect to do so.
Unadvanced Loan Commitments
Unadvanced loan commitments represent approved and executed loan contracts for which funds have not been advanced to
borrowers. The following table displays, by loan type, the available balance under unadvanced loan commitments as of
May 31, 2021 and the related maturities in each fiscal year during the five-year period ended May 31, 2026, and thereafter.
115
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table 4.6: Unadvanced Loan Commitments
Available
Balance
Notional Maturities of Unadvanced Loan Commitments
2022
2023
2024
2025
2026
Thereafter
(Dollars in thousands)
Line of credit loans......
$ 118,205
758,417
186,814
Long-term loans...........
Total............................. $ 14,357,039 $ 5,474,171 $ 2,281,575 $ 2,842,380 $ 1,951,864 $ 1,502,030 $ 305,019
$ 8,585,226 $ 4,333,891 $ 1,523,158 $ 1,169,922 $ 1,061,235 $ 378,815
1,123,215
5,771,813
1,140,280
1,672,458
890,629
Unadvanced line of credit commitments accounted for 60% of total unadvanced loan commitments as of May 31, 2021,
while unadvanced long-term loan commitments accounted for 40% of total unadvanced loan commitments. Unadvanced line
of credit commitments are typically revolving facilities for periods not to exceed five years. Unadvanced line of credit
commitments 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 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 commitments of $5,772
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 $14,357 million
as of May 31, 2021 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 $11,312
million and $10,532 million as of May 31, 2021 and 2020, 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 otherwise, 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 totaling $3,045 million and $2,857 million as of May 31, 2021 and 2020, 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 and the related maturities by fiscal year and thereafter, as of May 31, 2021.
Table 4.7: Unconditional Committed Lines of Credit—Available Balance
(Dollars in thousands)
Committed lines of credit.....
Available
Balance
Notional Maturities of Unconditional Committed Lines of Credit
2022
2023
2024
2025
2026
Thereafter
$ 3,044,515 $
3,423 $ 1,147,724 $ 682,998 $ 926,344 $ 229,120 $ 54,906
116
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pledged Loans
We are required to pledge eligible mortgage notes in an amount at least equal to the outstanding balance of our secured debt.
The following table summarizes loans outstanding pledged as collateral to secure our collateral trust bonds, notes payable
under the USDA Guaranteed Underwriter Program (“Guaranteed Underwriter Program”), notes payable under the revolving
note purchase agreement with Farmer Mac and Clean Renewable Energy Bonds, and the corresponding debt outstanding as
of May 31, 2021 and 2020. See “Note 6—Short-Term Borrowings” and “Note 7—Long-Term Debt” for information on our
borrowings.
Table 4.8: Pledged Loans
(Dollars in thousands)
Collateral trust bonds:
2007 indenture:
May 31,
2021
2020
Distribution system mortgage notes pledged..............................................
$
8,400,293
$
8,244,202
RUS-guaranteed loans qualifying as permitted investments.......................
121,679
128,361
Total pledged collateral............................................................................... $
8,521,972
$
8,372,563
Collateral trust bonds outstanding..............................................................
7,422,711
7,422,711
1994 indenture:
Distribution system mortgage notes pledged..............................................
$
34,924
$
Collateral trust bonds outstanding...............................................................
30,000
39,785
35,000
Guaranteed Underwriter Program:
Distribution and power supply system mortgage notes pledged................. $
7,150,240
$
7,535,931
Notes payable outstanding..........................................................................
6,269,303
6,261,312
Farmer Mac:
Distribution and power supply system mortgage notes pledged................. $
3,440,307
$
3,687,418
Notes payable outstanding..........................................................................
2,977,909
3,059,637
Clean Renewable Energy Bonds Series 2009A:
Distribution and power supply system mortgage notes pledged................. $
5,316
$
Cash.............................................................................................................
394
Total pledged collateral............................................................................... $
5,710
$
Notes payable outstanding..........................................................................
4,412
7,269
395
7,664
6,068
117
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5—ALLOWANCE FOR CREDIT LOSSES
Upon adoption of CECL on June 1, 2020, we recorded an increase in our allowance for credit losses for our loan portfolio of
$4 million. The impact on the reserve for expected credit losses for our off-balance sheet credit exposures related to
unadvanced loan commitments and financial guarantees was not material. Additional information on our adoption of CECL
is provided in “Note 1—Summary of Significant Accounting Policies.”
Allowance for Credit Losses—Loan Portfolio
The following tables summarize, by member class, changes in the allowance for credit losses for our loan portfolio and
present the allowance components for the years ended May 31, 2021, 2020 and 2019. The changes in the allowance and the
allowance components prior to our adoption of CECL on June 1, 2020 are based on the incurred loss model. The allowance
components, which consist of a collective allowance and an asset-specific allowance, are based on the evaluation method
used to measure our loans for credit losses. Loans that share similar risk characteristics are evaluated on a collective basis in
measuring credit losses, while loans that do not share similar risk characteristics with other loans in our portfolio are
evaluated on an individual basis.
Table 5.1: Changes in Allowance for Credit Losses
Year Ended May 31, 2021
Power
Supply
Statewide
and
Associate
Distribution
8,002 $ 38,027 $ 1,409 $ 47,438 $
(Dollars in thousands)
Balance as of May 31, 2020............. $
Cumulative-effect adjustment from
adoption of CECL accounting
3,900
standard........................................
57,025
Balance as of June 1, 2020...............
Provision (benefit) for credit losses.
28,507
Balance as of May 31, 2021............. $ 13,426 $ 64,646 $ 1,391 $ 79,463 $ 1,374 $ 4,695 $ 85,532
5,645
53,083
(43) 26,380
2,034
40,061
24,585
(1,730)
3,151
1,544
3,586
11,588
1,838
806 $ 4,881 $ 53,125
(15)
791
583
25
1,434
CFC Total
RTFC
NCSC
Total
(Dollars in thousands)
Balance as of May 31, 2019............. $
Provision (benefit) for credit losses.
Balance as of May 31, 2020............. $
Distribution
7,483 $ 4,253 $ 1,384 $ 13,120 $ 2,007 $ 2,408 $ 17,535
35,590
2,473
806 $ 4,881 $ 53,125
8,002 $ 38,027 $ 1,409 $ 47,438 $
34,318
33,774
(1,201)
519
25
Year Ended May 31, 2020
Power
Supply
Statewide
and
Associate
CFC Total
NCSC
RTFC
Total
(Dollars in thousands)
Distribution
Power
Supply
Statewide
and
Associate
CFC Total
NCSC
RTFC
Total
Balance as of May 31, 2018............. $
7,611 $ 4,588 $
101 $ 12,300 $ 2,082 $ 4,419 $ 18,801
Provision (benefit) for credit losses.
(128)
(335)
1,283
820
(75)
(2,011)
(1,266)
Balance as of May 31, 2019............. $
7,483 $ 4,253 $ 1,384 $ 13,120 $ 2,007 $ 2,408 $ 17,535
Year Ended May 31, 2019
The following tables present, by member class, the components of our allowance for credit losses as of May 31, 2021 and
2020.
118
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table 5.2: Allowance for Credit Losses Components
May 31, 2021
Power
Supply
Statewide
and
Associate
CFC Total
NCSC
RTFC
Total
Distribution
(Dollars in thousands)
Allowance components:
Collective allowance..................
Asset-specific allowance(1).........
Total allowance for credit losses $
$
13,426 $ 25,104 $ 1,391 $
39,542
13,426 $ 64,646 $ 1,391 $
—
—
39,921 $ 1,374 $ 1,147 $
39,542
—
79,463 $ 1,374 $ 4,695 $
3,548
42,442
43,090
85,532
Loans outstanding:(2)
Collectively evaluated loans......
Individually evaluated loans(1)...
Total loans outstanding..............
Allowance ratios:
Collective allowance coverage
ratio(3)......................................
Asset-specific allowance
coverage ratio(4)......................
Total allowance coverage
ratio(5)......................................
$ 22,022,044 $ 4,926,000 $ 106,121 $ 27,054,165 $ 706,868 $ 406,606 $ 28,167,639
247,468
$ 22,027,423 $ 5,154,312 $ 106,121 $ 27,287,856 $ 706,868 $ 420,383 $ 28,415,107
228,312
13,777
233,691
5,379
—
—
0.06 %
0.51 % 1.31 %
0.15 % 0.19 % 0.28 %
0.15 %
—
17.32
—
16.92
—
25.75
17.41
0.06
1.25
1.31
0.29
0.19
1.12
0.30
May 31, 2020
Power
Supply
Statewide
and
Associate
CFC Total
NCSC
RTFC
Total
Distribution
(Dollars in thousands)
Allowance components:
Collective allowance..................
Asset-specific allowance............
Total allowance for credit losses $
$
8,002 $
—
4,173 $ 1,409 $
33,854
—
8,002 $ 38,027 $ 1,409 $
13,584 $
33,854
47,438 $
806 $ 3,902 $
—
806 $ 4,881 $
979
18,292
34,833
53,125
Loans outstanding:(2)
Collectively evaluated loans......
Individually evaluated loans......
Total loans outstanding..............
Allowance coverage ratios:
Collective allowance coverage
ratio(3)......................................
Asset-specific allowance
coverage ratio(4)......................
Total allowance coverage
ratio(5)......................................
___________________________
$ 20,763,897 $ 4,563,798 $ 106,498 $ 25,434,193 $ 697,862 $ 380,243 $ 26,512,298
178,556
$ 20,769,653 $ 4,731,506 $ 106,498 $ 25,607,657 $ 697,862 $ 385,335 $ 26,690,854
167,708
173,464
5,756
5,092
—
—
0.04 %
0.09 % 1.32 %
0.05 % 0.12 %
1.03 %
0.07 %
—
20.19
—
19.52
—
19.23
19.51
0.04
0.80
1.32
0.19
0.12
1.27
0.20
(1)
(2)
In addition, we had less than $1 million letters of credit outstanding to Brazos, for which the reserve is included in the asset-specific allowance as of
May 31, 2021.
Represents the unpaid principal amount of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $12 million and
$11 million as of May 31, 2021 and 2020, respectively.
119
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3)
Calculated based on the collective allowance component at period-end divided by collectively evaluated loans outstanding at period-end.
(4)
Calculated based on the asset-specific allowance component at period-end divided by individually evaluated loans outstanding at period-end.
(5)
Calculated based on the total allowance for credit losses at period-end divided by total loans outstanding at period-end.
The allowance for credit losses increased $32 million to $86 million as of May 31, 2021, and the allowance coverage ratio
increased to 0.30%. Of the $32 million increase in the allowance, $24 million was attributable to the collective allowance
and $8 million was attributable to the asset-specific allowance.
The increase in the collective allowance of $24 million was primarily driven by the risk-rating downgrade of Rayburn
Country Electric Cooperative, Inc. (“Rayburn”), a CFC Texas-based power supply borrower with loans outstanding of
$379 million as of May 31, 2021, from a pass rating to a criticized rating in fiscal year 2021 coupled with a decrease we
made in the recovery rate assumption for power supply loans during fiscal year 2021 and the addition to the collective
allowance of $4 million upon our adoption of CECL on June 1, 2020.
The increase in the asset-specific allowance of $8 million was primarily driven by the risk-rating downgrade of Brazos, a
CFC Texas-based power supply borrower, in fiscal year 2021 and the classification of Brazos’ loans outstanding, which
totaled $85 million as of May 31, 2021, as nonperforming due to the bankruptcy filing by Brazos as discussed above in
“Note 4—Loans.”
Individually Impaired Loans Under Incurred Loss Methodology
Prior to our adoption of CECL on June 1, 2020, we assessed loan impairment on a collective basis unless we considered a
loan to be impaired. We assessed loan impairment on an individual basis when, based on current information, it was
probable that we would not receive all principal and interest amounts due in accordance with the contractual terms of the
original loan agreement. In connection with our adoption of CECL, we no longer provide information on impaired loans.
The following table provides information on loans previously classified as individually impaired under the incurred loss
model for determining the allowance for credit losses.
Table 5.3: Individually Impaired Loans—Incurred Loss Model
(Dollars in thousands)
Individually impaired loans:
Recorded
Investment
Related Allowance
With Specific
Allowance
With No Specific
Allowance
May 31, 2020
CFC.............................................................. $
RTFC...........................................................
173,464
5,092
$
$
33,854
979
167,708
5,092
$
Total.............................................................
$
178,556
$
34,833
$
172,800
$
5,756
—
5,756
The following tables present, by company, the components of our recorded investment and interest income recognized for
the years ended May 31, 2020 and 2019.
Table 5.4: Average Recorded Investment and Interest Income Recognized on Individually Impaired Loans—Incurred Loss Model
Year Ended May 31,
Year Ended May 31,
2020
2019
2020
2019
(Dollars in thousands)
Average Recorded Investment
Interest Income Recognized
CFC.............................................................. $
11,834 $
6,322
$
RTFC...........................................................
5,361
5,861
Total impaired loans....................................
$
17,195 $
12,183
$
568 $
268
836 $
553
293
846
120
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Reserve for Credit Losses—Unadvanced Loan Commitments
In addition to the allowance for credit losses for our loan portfolio, we maintain an allowance for credit losses for
unadvanced loan commitments, which we refer to as our “reserve for credit losses” because this amount is reported as a
component of other liabilities on our consolidated balance sheets. Upon adoption of CECL on June 1, 2020, we began
measuring the reserve for credit losses for unadvanced loan commitments based on expected credit losses over the
contractual period of our exposure to credit risk arising from our obligation to extend credit, unless that obligation is
unconditionally cancellable by us. The reserve for credit losses related to our off-balance sheet exposure for unadvanced
loan commitments was less than $1 million as of both May 31, 2021 and 2020.
NOTE 6—SHORT-TERM BORROWINGS
Short-term borrowings consist of borrowings with an original contractual maturity of one year or less and do not include the
current portion of long-term debt. Our short-term borrowings totaled $4,582 million and accounted for 17% of total debt
outstanding as of May 31, 2021, compared with $3,962 million, or 15% of total debt outstanding, as of May 31, 2020. The
following table provides comparative information on our short-term borrowings and weighted-average interest rates as of
May 31, 2021 and 2020.
Table 6.1: Short-Term Borrowings Sources and Weighted-Average Interest Rates
(Dollars in thousands)
Short-term borrowings:
Commercial paper:
May 31,
2021
2020
Amount
Weighted-
Average
Interest Rate
Amount
Weighted-
Average
Interest Rate
Commercial paper sold through dealers, net of discounts.....
$
894,977
0.16 % $
—
— %
Commercial paper sold directly to members, at par...............
1,124,607
Total commercial paper............................................................
2,019,584
Select notes to members...........................................................
1,539,150
Daily liquidity fund notes.........................................................
Medium-term notes sold to members.......................................
Farmer Mac notes payable (1)....................................................
Securities sold under repurchase agreements...........................
Total short-term borrowings.....................................................
___________________________
460,556
362,691
—
200,115
$ 4,582,096
0.14
0.15
0.30
0.08
0.42
—
0.30
0.22
1,318,566
1,318,566
1,597,959
508,618
286,842
250,000
—
$ 3,961,985
0.34
0.34
0.75
0.10
1.64
1.06
—
0.62
(1)
Advanced under the revolving purchase agreement with Farmer Mac dated March 24, 2011. See “Note 7—Long-Term Debt” for additional information
on this revolving note purchase agreement.
We issue commercial paper for periods of one to 270 days. We also issue select notes for periods ranging from 30 to 270
days. Select notes are unsecured obligations that do not require backup bank lines of credit for liquidity purposes. These
notes require a larger minimum investment than our commercial paper sold to members and, as a result, offer a higher
interest rate than our commercial paper. We also issue daily liquidity fund notes, which are unsecured obligations that do not
require backup bank lines of credit for liquidity purposes. We also issue medium-term notes, which represent unsecured
obligations that may be issued through dealers in the capital markets or directly to our members.
121
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We also enter into repurchase agreements to sell investment securities. These transactions are accounted for as collateralized
borrowings. On May 25, 2021, we borrowed $200 million under a securities repurchase agreement and pledged as collateral
investment securities classified as trading, the fair value of which was $211 million as of May 31, 2021. We repurchased
these securities on June 2, 2021.
Committed Bank Revolving Line of Credit Agreements
The total commitment amount under our committed bank revolving line of credit agreements was $2,725 million as of both
May 31, 2021 and 2020. These agreements allow us to request up to $300 million of letters of credit, which, if requested,
results in a reduction in the total amount available for our use. The following table presents the amount available for access
under our bank revolving line of credit agreements as of May 31, 2021 and 2020.
Table 6.2: Committed Bank Revolving Line of Credit Agreements Available Amounts
(Dollars in millions)
Total
Commitment
May 31,
2021
Letters of
Credit
Outstanding
Available
Amount
Total
Commitment
2020
Letters of
Credit
Outstanding
Available
Amount
Maturity
Annual
Facility
Fee (1)
3-year agreement.....
$
1,315 $
— $ 1,315 $
1,315 $
— $ 1,315 November 28, 2022
7.5 bps
5-year agreement.....
1,410
3
1,407
1,410
3
1,407 November 28, 2023
10 bps
Total.........................
___________________________
$
2,725 $
3 $ 2,722 $
2,725 $
3 $ 2,722
(1)
Facility fee determined by CFC’s senior unsecured credit ratings based on the pricing schedules put in place at the inception of the related agreement.
On June 7, 2021, we amended the three-year and five-year committed bank revolving line of credit agreements to extend the
maturity dates to November 28, 2024 and November 28, 2025, respectively, and to terminate certain bank commitments
totaling $70 million under the three-year agreement and $55 million under the five-year agreement. As a result, the total
commitment amount under the three-year facility and the five-year facility is $1,245 million and $1,355 million,
respectively, resulting in a combined total commitment amount under the two facilities of $2,600 million.
As indicated in the table above we had no borrowings outstanding under our committed bank revolving line of credit
agreements as of May 31, 2021 and 2020. We were in compliance with all covenants and conditions under the agreements as
of each respective date.
122
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7—LONG-TERM DEBT
The following table displays long-term debt outstanding, by debt product type, and the weighted-average interest rate and
maturity date for each debt product type, as of May 31, 2021 and 2020. Long-term debt outstanding totaled $20,603 million
and accounted for 75% of total debt outstanding as of May 31, 2021, compared with $19,712 million and 76% of total debt
outstanding as of May 31, 2020. Long-term debt with fixed- and variable-rate accounted for 89% and 11%, respectively, of
our total long-term debt outstanding as of May 31, 2021, compared with 86% and 14%, respectively, of our total long-term
debt outstanding as of May 31, 2020.
Table 7.1: Long-Term Debt—Debt Product Types and Weighted-Average Interest Rates
(Dollars in thousands)
Amount
May 31,
2021
Weighted-
Average
Interest Rate
Maturity
Date
Amount
2020
Weighted-
Average
Interest Rate
Maturity
Date
Secured long-term debt:
Collateral trust bonds .....................
Unamortized discount...................
Debt issuance costs.......................
(227,046)
(33,721)
Total collateral trust bonds..............
7,191,944
(236,461)
(32,697)
7,188,553
$ 7,452,711
3.15 % 2022-2049 $ 7,457,711
3.23 % 2020-2049
Guaranteed Underwriter Program
notes payable...................................
Farmer Mac notes payable..............
Other secured notes payable............
Debt issuance costs.......................
Total other secured notes payable...
Total secured notes payable.............
Total secured long-term debt...........
Unsecured long-term debt:
Medium-term notes sold through
dealers .........................................
Medium-term notes sold to
members ......................................
Subtotal medium-term notes.........
Unamortized discount...................
Debt issuance costs.......................
Total unsecured medium-term
notes.............................................
Unsecured notes payable.................
Unamortized discount...................
Debt issuance costs.......................
Total unsecured notes payable.........
2.76
1.68
3.14
6,269,303
2,977,909
4,412
(22)
4,390
2025-2041 6,261,312
2021-2049 2,809,637
2021-2023
6,068
(117)
5,951
9,251,602
16,443,546
2.74
9,076,900
16,265,453
2.74
2.07
2.69
2.53
2.85
2025-2040
2020-2049
2020-2023
3,943,728
2.31
2021-2032 3,086,733
3.34
2020-2032
232,346
4,176,074
2.61
—
(2,307)
(18,036)
4,155,731
2021-2037
372,117
3,458,850
(997)
(16,943)
3,440,910
2020-2037
2.85
3.29
3,886
—
2021-2023
5,794
—
2020-2023
(35)
(5)
3,846
(107)
(26)
5,661
Total unsecured long-term debt.......
Total long-term debt........................
4,159,577
$ 20,603,123
2.33
2.66
3,446,571
$ 19,712,024
3.29
2.92
123
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the principal amount of long-term debt maturing in each of the five fiscal years subsequent to
May 31, 2021 and thereafter.
Table 7.2: Long-Term Debt—Maturities and Weighted-Average Interest Rates
(Dollars in thousands)
Maturity Amount
Weighted-
Average
Interest Rate
2022.................................................
$
2,597,519
1.81 %
2023.................................................
2024.................................................
2025.................................................
2026.................................................
Thereafter.........................................
1,843,775
1,652,300
842,377
2,428,251
11,520,073
Total.................................................
$
20,884,295
1.65
2.18
2.76
2.86
3.03
2.66
Secured Debt
Long-term secured debt of $16,444 million and $16,265 million as of May 31, 2021 and 2020, respectively, represented
80% and 83% of total long-term debt outstanding as of each respective date. The increase in long-term secured debt of
$179 million for the year ended May 31, 2021 was primarily attributable to advances under the Farmer Mac revolving note
purchase agreement. We are required to pledge eligible mortgage notes in an amount at least equal to the outstanding
balance of our secured debt. We believe we were in compliance with all covenants and conditions under our debt indentures
as of May 31, 2021 and 2020. See “Note 4—Loans” for information on pledged collateral under our secured debt
agreements.
Collateral Trust Bonds
Collateral trust bonds represent secured obligations sold to investors in the capital markets. Collateral trust bonds are
secured by the pledge of mortgage notes or eligible securities in an amount at least equal to the principal balance of the
bonds outstanding.
Collateral trust bonds outstanding increased $3 million to $7,192 million as of May 31, 2021. In June 2020, we redeemed
$400 million outstanding principal amount of our 2.35% collateral trust bonds due June 15, 2020. In October 2020, we
redeemed $350 million outstanding principal amount of our 2.30% collateral trust bonds, due November 1, 2020. On
October 8, 2020, we issued $400 million aggregate principal amount of 1.35% sustainability collateral trust bonds due
March 15, 2031. On February 8, 2021, we issued $350 million aggregate principal amount of 1.65% collateral trust bonds
due June 15, 2031.
Guaranteed Underwriter Program Notes Payable
Notes payable outstanding under the Guaranteed Underwriter Program increased $8 million to $6,269 million as of May 31,
2021. We pay RUS a fee of 30 basis points per year on the total amount outstanding. On November 19, 2020, we closed on
a $375 million committed loan facility (“Series R”) from the Federal Financing Bank under the Guaranteed Underwriter
Program. Pursuant to this facility, we may borrow any time before July 15, 2025. Each advance is subject to quarterly
amortization and a final maturity not longer than 30 years from the date of the advance. We borrowed $300 million and
redeemed $150 million of notes payable outstanding under the Guaranteed Underwriter Program during the year ended
May 31, 2021. We had up to $975 million available for access under the Guaranteed Underwriter Program as of May 31,
2021.
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The notes outstanding under the Guaranteed Underwriter Program contain a provision that if during any portion of the fiscal
year, our senior secured credit ratings do not have at least two of the following ratings: (i) A3 or higher from Moody’s, (ii)
A- or higher from S&P, (iii) A- or higher from Fitch or (iv) an equivalent rating from a successor rating agency to any of the
above rating agencies, we may not make cash patronage capital distributions in excess of 5% of total patronage capital. We
are required to pledge eligible distribution system or power supply system loans as collateral in an amount at least equal to
the total principal amount of notes outstanding under the Guaranteed Underwriter Program.
Farmer Mac Notes Payable
We have a revolving note purchase agreement with Farmer Mac, dated March 24, 2011, as amended, under which we can
borrow up to $5,500 million from Farmer Mac, at any time, subject to market conditions. On May 20, 2021, we amended
our revolving note purchase agreement with Farmer Mac to automatically extend the draw period from January 11, 2022 to
June 30, 2026, with successive automatic one-year renewals without notice by either party. Beginning June 30, 2025, the
revolving note purchase agreement is subject to termination of the draw period by Farmer Mac upon 425 days’ prior written
notice. Pursuant to this revolving note purchase agreement, we can borrow, repay and re-borrow funds at any time through
maturity, as market conditions permit, provided that the outstanding principal amount at any time does not exceed the total
available under the agreement. Each borrowing under the revolving note purchase agreement is evidenced by a pricing
agreement setting forth the interest rate, maturity date and other related terms as we may negotiate with Farmer Mac at the
time of each such borrowing. We may select a fixed rate or variable rate at the time of each advance with a maturity as
determined in the applicable pricing agreement. The amount outstanding under this agreement included $2,978 million of
long-term debt as of May 31, 2021. We advanced notes payable totaling $500 million under the Farmer Mac Note purchase
agreement during the year ended May 31, 2021. The amount available for borrowing totaled $2,522 million as of May 31,
2021.
Unsecured Debt
Long-term unsecured debt of $4,160 million and $3,447 million as of May 31, 2021 and 2020, respectively, represented
20% and 17% of total long-term debt outstanding as of each respective date. The increase in long-term unsecured debt of
$712 million for the year ended May 31, 2021 was primarily attributable to dealer medium-term notes issuances.
Medium-Term Notes
Medium-term notes represent unsecured obligations that may be issued through dealers in the capital markets or directly to
our members.
On February 8, 2021, we issued $500 million aggregate principal amount of 0.35% dealer medium-term notes due February
8, 2024. On February 16, 2021, we issued $250 million aggregate principal amount of 3-month LIBOR dealer medium-term
notes due February 16, 2023. On February 24, 2021, we issued $600 million aggregate principal amount of 1.00% dealer
medium-term notes due June 15, 2026. On February 24, 2021, we also issued $75 million aggregate principal amount of
0.25% dealer medium-term notes due February 24, 2023.
NOTE 8—SUBORDINATED DEFERRABLE DEBT
Subordinated deferrable debt represents long-term debt that is subordinated to all debt other than subordinated certificates
held by our members. Our 4.75% and 5.25% subordinated debt due 2043 and 2046, respectively, was issued for a term of up
to 30 years, pays interest semi-annually, may be called at par after 10 years, converts to a variable rate after 10 years and
allows us to defer the payment of interest for one or more consecutive interest periods not exceeding five consecutive years.
Our 5.50% subordinated debt due 2064 was issued for a term of up to 45 years, pays interest quarterly, may be called at par
after five years and allows us to defer the payment of interest for one or more consecutive interest periods not exceeding 40
consecutive quarterly periods. To date, we have not exercised our right to defer interest payments.
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents, by issuance, subordinated deferrable debt outstanding and the weighted-average interest rates
as of May 31, 2021 and 2020.
Table 8.1: Subordinated Deferrable Debt Outstanding and Weighted-Average Interest Rates
May 31,
2021
2020
Maturity and Call Dates
Outstanding
Amount
Weighted-
Average
Interest
Rate
Outstanding
Amount
Weighted-
Average
Interest
Rate
Term in Years Maturity
Call Date
(Dollars in thousands)
Issuances of subordinated
notes:
4.75% issuance 2013.......
5.25% issuance 2016.......
5.50% issuance 2019.......
$ 400,000
350,000
250,000
4.75 % $ 400,000
350,000
5.25
250,000
5.50
4.75 %
5.25
5.50
30
30
45
April 30, 2023
2043
April 20, 2026
2046
2064 May 15, 2024
Total aggregate principal
amount.................................
Debt issuance costs.............
Total subordinated
deferrable debt....................
1,000,000
(13,685)
1,000,000
(13,881)
$ 986,315
5.11
$ 986,119
5.11
NOTE 9—MEMBERS’ SUBORDINATED CERTIFICATES
Membership Subordinated Certificates
Prior to June 2009, CFC members were required to purchase membership subordinated certificates as a condition of
membership. Such certificates are interest-bearing, unsecured, subordinated debt. Membership certificates typically have an
original maturity of 100 years and pay interest at 5% semi-annually. No requirement to purchase membership certificates
has existed for NCSC or RTFC members.
Loan and Guarantee Subordinated Certificates
Members obtaining long-term loans, certain line of credit loans or guarantees may be required to purchase additional loan or
guarantee subordinated certificates with each such loan or guarantee based on the borrower’s debt-to-equity ratio with CFC.
These certificates are unsecured, subordinated debt and may be interest bearing or non-interest bearing.
Under our current policy, most borrowers requesting standard loans are not required to buy subordinated certificates as a
condition of a loan or guarantee. Borrowers meeting certain criteria, including but not limited to, high leverage ratios, or
borrowers requesting large facilities, may be required to purchase loan or guarantee subordinated certificates or member
capital securities (described below) as a condition of the loan. Loan subordinated certificates have the same maturity as the
related long-term loan. Some certificates may amortize annually based on the outstanding loan balance.
The interest rates payable on guarantee subordinated certificates purchased in conjunction with our guarantee program vary
in accordance with applicable CFC policy. Guarantee subordinated certificates have the same maturity as the related
guarantee.
Member Capital Securities
CFC offers member capital securities to its voting members. Member capital securities are interest-bearing, unsecured
obligations of CFC, which are subordinate to all existing and future senior and subordinated indebtedness of CFC held by
126
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
non-members of CFC, but rank proportionally to our member subordinated certificates. Member capital securities mature 30
years from the date of issuance, typically pay interest at 5% and are callable at par at our option 10 years from the date of
issuance and anytime thereafter. The interest rate for new member capital securities issuance is set at the time of issuance.
These securities represent voluntary investments in CFC by the members. The following table displays members’
subordinated certificates and the weighted-average interest rates as of May 31, 2021 and 2020.
Table 9.1: Members’ Subordinated Certificates Outstanding and Weighted-Average Interest Rates
(Dollars in thousands)
Membership subordinated certificates:
Certificates maturing 2021 through 2119.................... $
Subscribed and unissued (1).........................................
Total membership subordinated certificates..........
Loan and guarantee subordinated certificates:
Interest-bearing loan subordinated certificates
maturing through 2047................................................
Non-interest-bearing loan subordinated certificates
maturing through 2047................................................
Subscribed and unissued (1).........................................
Total loan subordinated certificates....................
Interest-bearing guarantee subordinated
certificates maturing through 2044..........................
Non-interest-bearing guarantee subordinated
certificates maturing through 2037..........................
Total guarantee subordinated certificates...........
Total loan and guarantee subordinated certificates......
May 31,
2021
2020
Amounts
Outstanding
Weighted-
Average
Interest Rate
Amounts
Outstanding
Weighted-
Average
Interest Rate
628,582
12
$
630,467
16
628,594
4.95 %
630,483
4.95 %
223,067
132,203
45
280,372
144,258
45
355,315
2.61
424,675
2.71
31,581
—
31,581
386,896
43,700
14,590
58,290
482,965
226,170
$
1,339,618
6.06
2.89
5.00
4.32
4.43
2.92
5.00
4.22
Member capital securities:
Securities maturing through 2050...............................
239,170
Total members’ subordinated certificates........................
___________________________
$
1,254,660
(1)
The subscribed and unissued subordinated certificates represent subordinated certificates that members are required to purchase. Upon collection of full
payment of the subordinated certificate amount, the certificate will be reclassified from subscribed and unissued to outstanding.
The weighted-average maturity for all membership subordinated certificates outstanding was 56 years as of both May 31,
2021 and 2020. The following table presents the amount of members’ subordinated certificates maturing in each of the five
fiscal years subsequent to May 31, 2021 and thereafter.
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table 9.2: Members’ Subordinated Certificate Maturities and Weighted-Average Interest Rates
(Dollars in thousands)
2022......................................... $
2023.........................................
2024.........................................
2025.........................................
2026.........................................
Amount
Maturing(1)
6,879
18,820
10,635
10,458
55,073
Thereafter................................
1,152,739
Total...................................
___________________________
$
1,254,604
Weighted-
Average
Interest Rate
2.64 %
3.87
2.46
2.87
2.88
4.44
4.32
(1)
Excludes $0.06 million in subscribed and unissued member subordinated certificates for which a payment has been received, but no certificate has been
issued. Amortizing member loan subordinated certificates totaling $190 million are amortizing annually based on the unpaid principal balance of the
related loan. Amortization payments on these certificates totaled $13 million in fiscal year 2021 and represented 7% of amortizing loan subordinated
certificates outstanding.
NOTE 10—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
We are an end user of derivative financial instruments and do not engage in derivative trading. Derivatives may be privately
negotiated contracts, which are often referred to as OTC derivatives, or they may be listed and traded on an exchange. We
generally engage in OTC derivative transactions. Our derivative instruments are an integral part of our interest rate risk-
management strategy. Our principal purpose in using derivatives is to manage our aggregate interest rate risk profile within
prescribed risk parameters. The derivative instruments we use primarily include interest rate swaps, which we typically hold
to maturity. In addition, we may on occasion use treasury locks to manage the interest rate risk associated with future debt
issuance or debt that is scheduled to reprice in the future.
Notional Amount and Maturities of Derivatives Not Designated as Accounting Hedges
The notional amount is used only as the basis on which interest payments are determined and is not the amount exchanged,
nor recorded on our consolidated balance sheets. The following table shows, by derivative instrument type, the notional
amount, the weighted-average rate paid and the weighted-average interest rate received for our interest rate swaps as of May
31, 2021 and 2020. For the substantial majority of interest rate swap agreements, a LIBOR index is currently used as the
basis for determining variable interest payment amounts each period.
Table 10.1: Derivative Notional Amount and Weighted-Average Rates
(Dollars in thousands)
Pay-fixed swaps...................
Receive-fixed swaps............
Subtotal................................
Forward pay-fixed swaps.....
Total interest rate swaps......
Notional
Amount
$ 6,579,516
2,399,000
8,978,516
—
$ 8,978,516
2021
Weighted-
Average
Rate Paid
2.65 %
0.92
2.19
May 31,
Weighted-
Average
Rate Received
Notional
Amount
0.20 % $ 6,604,808
2,699,000
2.80
9,303,808
0.89
3,000
$ 9,306,808
2020
Weighted-
Average
Rate Paid
2.78 %
1.54
2.42
Weighted-
Average
Rate Received
0.88 %
2.75
1.42
The following table presents the maturities, based on the notional amount of our interest rate swaps as of May 31, 2021.
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table 10.2: Derivative Notional Amount Maturities
(Dollars in thousands)
Interest rate swaps......
Notional
Amount
$8,978,516
Notional Amortization and Maturities
2022
$735,554
2023
$558,159
2024
$643,849
2025
$100,000
2026
$798,822
Thereafter
$6,142,132
Impact of Derivatives on Consolidated Balance Sheets
The following table displays the fair value of the derivative assets and derivative liabilities, by derivatives type, recorded on
our consolidated balance sheets and the related outstanding notional amount as of May 31, 2021 and 2020.
Table 10.3: Derivative Assets and Liabilities at Fair Value
(Dollars in thousands)
Derivative assets:
2021
2020
Fair Value
Notional Amount
Fair Value
Notional Amount(1)
May 31,
Interest rate swaps.........................................
$
121,259 $
2,560,618
$
173,195 $
2,699,000
Derivative liabilities:
Interest rate swaps.........................................
$
584,989 $
6,417,898
$
1,258,459 $
6,607,808
____________________________
(1) The notional amount includes $3 million notional amount of forward starting swaps, as shown above in Table 10.1: Derivative Notional Amount and
Weighted Average Rates, with an effective start date of June 5, 2020, outstanding as of May 31, 2020. The fair value of these swaps as of May 31, 2020
is included in the above table and in our consolidated financial statements.
All of our master swap agreements include netting provisions that allow for offsetting of all contracts with a given
counterparty in the event of default by one of the two parties. However, as indicated above, in “Note 1—Summary of
Significant Accounting Policies,” we report derivative asset and liability amounts on a gross basis by individual contracts.
The following table presents the gross fair value of derivative assets and liabilities reported on our consolidated balance
sheets as of May 31, 2021 and 2020, and provides information on the impact of netting provisions and collateral pledged, if
any.
Table 10.4: Derivative Gross and Net Amounts
May 31, 2021
Gross Amount
of Recognized
Assets/
Liabilities
Gross
Amount
Offset in the
Balance Sheet
Net Amount
of Assets/
Liabilities
Presented
in the
Balance Sheet
Gross Amount
Not Offset in the
Balance Sheet
Financial
Instruments
Cash
Collateral
Pledged
Net
Amount
(Dollars in thousands)
Derivative assets:
Interest rate swaps.........
$
121,259
$
—
$ 121,259
$ 121,259
$
—
$
—
Derivative liabilities:
Interest rate swaps.........
584,989
—
584,989
121,259
—
463,730
129
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 2020
Gross Amount
of Recognized
Assets/
Liabilities
Gross
Amount
Offset in the
Balance Sheet
Net Amount
of Assets/
Liabilities
Presented
in the
Balance Sheet
Gross Amount
Not Offset in the
Balance Sheet
Financial
Instruments
Cash
Collateral
Pledged
Net
Amount
(Dollars in thousands)
Derivative assets:
Interest rate swaps.........
$
173,195
$
—
$ 173,195
$ 173,195
$
—
$
—
Derivative liabilities:
Interest rate swaps.........
1,258,459
—
1,258,459
173,195
—
1,085,264
Impact of Derivatives on Consolidated Statements of Operations
The primary factors affecting the fair value of our derivatives and the derivative gains (losses) recorded in our consolidated
statements of operations include changes in interest rates, the shape of the swap curve and the composition of our derivative
portfolio. We generally record derivative losses when interest rates decline and derivative gains when interest rates rise, as
our derivative portfolio consists of a higher proportion of pay-fixed swaps than receive-fixed swaps.
The following table presents the components of the derivative gains (losses) reported in our consolidated statements of
operations for fiscal years 2021, 2020 and 2019. Derivative cash settlements interest expense represents the net periodic
contractual interest amount for our interest-rate swaps during the reporting period. Derivative forward value gains (losses)
represent the change in fair value of our interest rate swaps during the reporting period due to changes in expected future
interest rates over the remaining life of our derivative contracts. We classify the derivative cash settlement amounts for the
net periodic contractual interest expense on our interest rate swaps as an operating activity in our consolidated statements of
cash flows.
Table 10.5: Derivative Gains (Losses)
(Dollars in thousands)
Derivative gains (losses) attributable to:
Derivative cash settlements interest expense........................... $
Derivative forward value gains (losses)..................................
Derivative gains (losses).......................................................... $
Year Ended May 31,
2021
2020
2019
(115,645) $
621,946
506,301
$
(55,873) $
(734,278)
(790,151) $
(43,611)
(319,730)
(363,341)
Credit Risk-Related Contingent Features
Our derivative contracts typically contain mutual early-termination provisions, generally in the form of a credit rating
trigger. Under the mutual credit rating trigger provisions, either counterparty may, but is not obligated to, terminate and
settle the agreement if the credit rating of the other counterparty falls below a level specified in the agreement. If a
derivative contract is terminated, the amount to be received or paid by us would be equal to the prevailing fair value, as
defined in the agreement, as of the termination date.
On March 5, 2021, S&P downgraded our senior unsecured credit ratings from A to A- with a negative outlook. Our senior
unsecured credit ratings from Moody’s, S&P and Fitch were A2, A- and A, respectively, as of May 31, 2021. Moody’s and
Fitch had our ratings on stable outlook as of May 31, 2021. S&P had our ratings on negative outlook as of May 31, 2021. As
of the date of the filing of this Report, no action has been taken by Moody’s and Fitch on our ratings. The following table
displays the notional amounts of our derivative contracts with rating triggers as of May 31, 2021, and the payments that
would be required if the contracts were terminated as of that date because of a downgrade of our unsecured credit ratings or
130
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the counterparty’s unsecured credit ratings below A3/A-, below Baa1/BBB+, to or below Baa2/BBB, or to or below Ba2/
BB+ by Moody’s or S&P, respectively. In calculating the payment amounts that would be required upon termination of the
derivative contracts, we assume that amounts for each counterparty would be netted in accordance with the provisions of the
master netting agreements with the counterparty. The net payment amounts are based on the fair value of the underlying
derivative instrument, excluding the credit risk valuation adjustment, plus any unpaid accrued interest amounts.
Table 10.6: Derivative Credit Rating Trigger Exposure
(Dollars in thousands)
Impact of rating downgrade trigger:
Falls below A3/A-(1)..................................... $
Falls below Baa1/BBB+..............................
Falls to or below Baa2/BBB (2)....................
Total.............................................................
___________________________
$
Notional
Amount
Payable Due
from CFC
Receivable Due
to CFC
Net Payable
41,080 $
(8,168) $
— $
(8,168)
6,031,373
407,712
(304,922)
(14,835)
—
—
(304,922)
(14,835)
6,480,165 $
(327,925) $
— $
(327,925)
(1)
Rating trigger for CFC falls below A3/A-, while rating trigger for counterparty falls below Baa1/BBB+ by Moody’s or S&P, respectively.
(2)
Rating trigger for CFC falls to or below Baa2/BBB, while rating trigger for counterparty falls to or below Ba2/BB+ by Moody’s or S&P, respectively.
We have interest rate swaps with one counterparty that are subject to a ratings trigger and early termination provision in the
event of a downgrade of CFC’s senior unsecured credit ratings below Baa3, BBB- or BBB- by Moody’s, S&P or Fitch,
respectively. The outstanding notional amount of these swaps, which is not included in the above table, totaled $222 million
as of May 31, 2021. These swaps were in an unrealized loss position of $22 million as of May 31, 2021.
Our largest counterparty exposure, based on the outstanding notional amount, accounted for approximately 24% and 25% of
the total outstanding notional amount of derivatives as of May 31, 2021 and 2020, respectively. The aggregate fair value
amount, including the credit valuation adjustment, of all interest rate swaps with rating triggers that were in a net liability
position was $344 million as of May 31, 2021.
NOTE 11—EQUITY
Total equity increased $751 million to $1,400 million as of May 31, 2021, attributable to the combined impact of our
reported net income of $814 million for the year ended May 31, 2021, which was partially offset by the retirement of
patronage capital of $60 million authorized by the CFC Board of Directors in July 2020 and paid to members in September
2020, and a decrease to retained earnings of $4 million from the cumulative-effect adjustment recorded at adoption of the
CECL accounting standard on June 1, 2020.
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table 11.1: Equity
(Dollars in thousands)
May 31,
2021
2020
Membership fees......................................................................................
$
968
$
Educational fund.......................................................................................
Total membership fees and educational fund......................................
Patronage capital allocated...................................................................
Members’ capital reserve.....................................................................
2,157
3,125
923,970
909,749
969
2,224
3,193
894,066
807,320
Unallocated net income (loss):
Prior year-end cumulative derivative forward value losses .....................
Current-year derivative forward value gains (losses)(1)............................
Current year-end cumulative derivative forward value losses ................
Other unallocated net income...................................................................
(1,079,739)
618,577
(461,162)
(709)
(348,965)
(730,774)
(1,079,739)
3,191
Unallocated net loss.............................................................................
(461,871)
(1,076,548)
CFC retained equity.............................................................................
1,374,973
Accumulated other comprehensive loss...............................................
(25)
Total CFC equity......................................................................................
1,374,948
Noncontrolling interests...........................................................................
24,931
Total equity............................................................................................... $
____________________________
1,399,879
$
628,031
(1,910)
626,121
22,701
648,822
(1)
Represents derivative forward value gains (losses) for CFC only, as total CFC equity does not include the noncontrolling interests of the consolidated
variable interest entities NCSC and RTFC. See “Note 16—Business Segments” for the statements of operations for CFC.
Allocation of Net Earnings and Retirement of Patronage Capital—CFC
District of Columbia cooperative law requires cooperatives to allocate net earnings to patrons, to a general reserve in an
amount sufficient to maintain a balance of at least 50% of paid-in capital and to a cooperative educational fund, as well as
permits additional allocations to board-approved reserves. District of Columbia cooperative law also requires that a
cooperative’s net earnings be allocated to all patrons in proportion to their individual patronage and each patron’s allocation
be distributed to the patron unless the patron agrees that the cooperative may retain its share as additional capital.
Annually, the CFC Board of Directors allocates its net earnings to its patrons in the form of patronage capital, to a
cooperative educational fund, to a general reserve, if necessary, and to board-approved reserves. An allocation to the general
reserve is made, if necessary, to maintain the balance of the general reserve at 50% of the membership fees collected. CFC’s
bylaws require the allocation to the cooperative educational fund to be at least 0.25% of its net earnings. Funds from the
cooperative educational fund are disbursed annually to statewide cooperative organizations to fund the teaching of
cooperative principles and for other cooperative education programs.
Currently, CFC has one additional board-approved reserve, the members’ capital reserve. The CFC Board of Directors
determines the amount of net earnings that is allocated to the members’ capital reserve, if any. The members’ capital reserve
represents net earnings that CFC holds to increase equity retention. The net earnings held in the members’ capital reserve
have not been specifically allocated to members, but may be allocated to individual members in the future as patronage
capital if authorized by the CFC Board of Directors.
All remaining net earnings are allocated to CFC’s members in the form of patronage capital. The amount of net earnings
allocated to each member is based on the member’s patronage of CFC’s lending programs during the year. No interest is
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
earned by members on allocated patronage capital. There is no effect on CFC’s total equity as a result of allocating net
earnings to members in the form of patronage capital or to board-approved reserves. The CFC Board of Directors has voted
annually to retire a portion of the patronage capital allocation. Upon retirement, patronage capital is paid out in cash to the
members to whom it was allocated. CFC’s total equity is reduced by the amount of patronage capital retired to its members
and by amounts disbursed from board-approved reserves. CFC’s net earnings for determining allocations is based on CFC’s
non-GAAP adjusted net income, which excludes the impact of derivative forward value gains and losses.
The current policy of the CFC Board of Directors is to retire 50% of the prior year’s allocated patronage capital and hold the
remaining 50% for 25 years. The retirement amount and timing is subject to annual approval by the CFC Board of Directors.
In May 2021, the CFC Board of Directors authorized the allocation of $1 million of net earnings for fiscal year 2021 to the
cooperative educational fund. In July 2021, the CFC Board of Directors authorized the allocation of net earnings for fiscal
year 2021 as follows: $90 million to members in the form of patronage capital and $102 million to the members’ capital
reserve. In July 2021, the CFC Board of Directors also authorized the retirement of patronage capital totaling $58 million, of
which $45 million represented 50% of the patronage capital allocation for fiscal year 2021 and $13 million represented the
portion of the allocation from net earnings for fiscal year 1996 that has been held for 25 years pursuant to the CFC Board of
Directors’ policy.
We expect to return the authorized patronage capital retirement amount of $58 million to members in cash in the second
quarter of fiscal year 2022. The remaining portion of the patronage capital allocation for fiscal year 2021 will be retained by
CFC for 25 years pursuant to the guidelines adopted by the CFC Board of Directors in June 2009.
In May 2020, the CFC Board of Directors authorized the allocation of $1 million of net earnings for fiscal year 2020 to the
cooperative educational fund. In July 2020 the CFC Board of Directors authorized the allocation of net earnings for fiscal
year 2020 as follows: $96 million to members in the form of patronage capital and $48 million to the members’ capital
reserve. In July 2020, the CFC Board of Directors also authorized the retirement of patronage capital totaling $60 million, of
which $48 million represented 50% of the patronage capital allocation for fiscal year 2020 and $12 million represented the
portion of the allocation from net earnings for fiscal year 1995 that has been held for 25 years pursuant to the CFC Board of
Directors’ policy. This amount was returned to members in cash in September 2020. The remaining portion of the patronage
capital allocation for fiscal year 2020 will be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC
Board of Directors in June 2009.
Future allocations and retirements of net earnings may be made annually as determined by the CFC Board of Directors with
due regard for its financial condition. The CFC Board of Directors has the authority to change the current practice for
allocating and retiring net earnings at any time, subject to applicable laws and regulations.
CFC’s total equity includes noncontrolling interests, which consist of 100% of the equity of NCSC and RTFC, as the
members of NCSC and RTFC own or control 100% of the interests in their respective companies. NCSC and RTFC also
allocate annual net earnings, subject to approval by the board of directors for each company. The allocation of net earnings
by NCSC and RTFC to members or board-approved reserves does not affect noncontrolling interests; however, the cash
retirement of amounts allocated to members or to disbursements from board-approved reserves results in a reduction to
noncontrolling interests.
Allocation of Net Earnings and Retirement of Patronage Capital—RTFC
In accordance with District of Columbia cooperative law and its bylaws and board policies, RTFC allocates its net earnings
to its patrons, to a cooperative educational fund and to a general reserve, if necessary. RTFC’s bylaws require that it allocate
at least 1% of net income to a cooperative educational fund. Funds from the cooperative educational fund are disbursed
annually to fund the teaching of cooperative principles and for other cooperative education programs. An allocation to the
general reserve is made, if necessary, to maintain the balance of the general reserve at 50% of the membership fees
collected. The remainder is allocated to borrowers in proportion to their patronage. RTFC retires at least 20% of its annual
133
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allocation, if any, to members in cash prior to filing the applicable tax return. Any additional amounts are retired as
determined by the RTFC Board of Directors, taking into consideration RTFC’s financial condition.
Allocation of Net Earnings—NCSC
NCSC’s bylaws require that it allocate at least 0.25% of its net earnings to a cooperative educational fund and an amount to
the general reserve required to maintain the general reserve balance at 50% of membership fees collected. Funds from the
cooperative educational fund are disbursed annually to fund the teaching of cooperative principles and for other cooperative
education programs.
Accumulated Other Comprehensive Income (Loss)
The following table presents, by component, changes in AOCI for the years ended May 31, 2021 and 2020 and the balance
of each component as of the end of each respective period.
Table 11.2: Changes in Accumulated Other Comprehensive Income (Loss)
(Dollars in thousands)
Beginning balance................................................
Gains reclassified into earnings...........................
Defined benefit plan adjustments.........................
Other comprehensive loss....................................
Ending balance.....................................................
(Dollars in thousands)
Beginning balance................................................
Gains reclassified into earnings...........................
Defined benefit plan adjustments.........................
Other comprehensive loss....................................
Ending balance.....................................................
____________________________
Year Ended May 31, 2021
Derivatives
Unrealized
Gains(1)
Defined
Benefit Plan
Unrealized
Losses (2)
$
$
2,130
(412)
—
(412)
1,718
$
$
(4,040) $
—
2,297
2,297
(1,743) $
Year Ended May 31, 2020
Derivatives
Unrealized
Gains(1)
Defined
Benefit Plan
Unrealized
Losses (2)
$
$
2,571
(441)
—
(441)
2,130
$
$
(2,718) $
—
(1,322)
(1,322)
(4,040) $
Total
(1,910)
(412)
2,297
1,885
(25)
Total
(147)
(441)
(1,322)
(1,763)
(1,910)
(1)
Reclassified to earnings as a component of the derivative gains (losses) line item presented on our consolidated statements of operations.
(2)
Reclassified to earnings as a component of the other non-interest expense line item presented on our consolidated statements of operations.
We expect to reclassify less than $1 million of amounts in AOCI related to unrealized derivative gains to earnings over the
next 12 months.
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12—EMPLOYEE BENEFITS
National Rural Electric Cooperative Association (“NRECA”) Retirement Security Plan
CFC is a participant in the NRECA Retirement Security Plan (“the Retirement Security Plan”), a multiple-employer defined
benefit pension plan. The employer identification number of the Retirement Security Plan is 53-0116145, and the plan
number is 333. Plan information is available publicly through the annual Form 5500, including attachments. The Retirement
Security Plan is a qualified plan in which all employees are eligible to participate upon completion of one year of service.
Under this plan, participating employees are entitled to receive annually, under a 50% joint and surviving spouse annuity,
1.70% of the average of their five highest base salaries during their participation in the plan, multiplied by the number of
years of participation in the plan.
The risks of participating in the multiple-employer plan are different from the risks of single-employer plans due to the
following characteristics of the plan:
• Assets contributed to the multiple-employer plan by one participating employer may be used to provide benefits to
employees of other participating employers.
•
•
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers.
If CFC chooses to stop participating in the plan, CFC may be required to pay a withdrawal liability representing an
amount based on the underfunded status of the plan.
Because of the current funding status of the Retirement Security Plan, it is not subject to a certified zone status
determination under the Pension Protection Act of 2006 (“PPA”). Based on the PPA target and PPA actuarial value of the
plan assets, it was more than 80% funded as of January 1, 2021, 2020 and 2019. We made contributions to the Retirement
Security Plan of $4 million, $5 million and $5 million in fiscal years 2021, 2020 and 2019, respectively. In each of these
years, our contribution represented less than 5% of total contributions made to the plan by all participating employers. Our
contribution did not include a surcharge. CFC’s expense is limited to the annual premium to participate in the Retirement
Security Plan. Because it is a multiple-employer plan, there is no funding liability for CFC for the plan. There were no
funding improvement plans, rehabilitation plans implemented or pending, and no required minimum contributions. There
are no collective bargaining agreements in place that cover CFC’s employees.
Pension Restoration Plan
The Pension Restoration Plan (“PRP”) is a nonqualified defined benefit plan established to provide supplemental benefits to
certain eligible employees whose compensation exceeds the Internal Revenue Service (“IRS”) limits for the qualified
Retirement Security Plan. The PRP restores the value of the Retirement Security Plan for eligible officers to the level it
would be if the IRS limits on annual pay and annual annuity benefits were not in place. The limit was $290,000 for calendar
year 2021. The PRP, which is administered by NRECA, was frozen as of December 31, 2014.
The benefit and payout formula under the nonqualified PRP component of the Retirement Security Plan is similar to that
under the qualified plan component. Under the PRP, the amount NRECA invoices us for the Retirement Security Plan is
based on the full compensation paid to each covered employee. Upon retirement of an employee covered under the PRP,
NRECA will calculate the retirement benefits to be paid both with and without consideration of the IRS compensation
limits. We will then pay the nonqualified supplemental benefit to the covered employee. NRECA will provide a credit for
supplemental benefit payments made by us to covered employees against future contributions we are required to make to the
Retirement Security Plan.
There were two executive officers who were participants in this plan. Both have satisfied the provisions established to
receive the benefit from this plan. Since there is no longer a risk of forfeiture of the benefit under the PRP, we will make
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
distributions of any earned benefit from the plan to each of the executive officers included in the plan and the distributions
will be credited back to us by NRECA. Accordingly, the distributions have no impact on our consolidated financial
statements.
Executive Benefit Restoration Plan
NRECA restricted additional participation in the PRP in December 2014. We therefore adopted a supplemental top-hat
Executive Benefit Restoration (“EBR”) Plan, effective January 1, 2015. The EBR Plan is a nonqualified, unfunded plan
maintained by CFC to provide retirement benefits to a select group of executive officers whose compensation exceeds IRS
limits for qualified defined benefit plans. There is a risk of forfeiture if participants leave the company prior to becoming
fully vested in the EBR Plan. This plan included five and seven participants as of May 31, 2021 and 2020, respectively.
We recognized net periodic pension expense for this plan of approximately $2 million, $2 million and $1 million in fiscal
years 2021, 2020 and 2019, respectively. The unfunded projected benefit obligation of this plan, which is included on our
consolidated balance sheets as a component of other liabilities, decreased to $5 million as of May 31, 2021 from $7 million
as of May 31, 2021 and 2020, respectively. The decrease in the projected benefit obligation was primarily due to lump-sum
settlement payments to plan participants who became fully vested during the year. CFC made contributions to the plan of
$1 million and $2 million in fiscal years 2021 and 2020, respectively, for lump-sum settlement payments to fully-vested
participants of $1 million and $2 million in each respective year. There were no lump-sum settlement payments made in
fiscal year 2019. Unrecognized pension costs recorded in accumulated other comprehensive income decreased to $2 million
as of May 31, 2021, from $4 million as of May 31, 2020, largely due to the lump-sum payments to fully-vested plan
participants. We expect to amortize less than $1 million of the unrecognized pension costs as a component of our net
periodic pension benefit expense in fiscal year 2022.
As a result of the settlement payments in fiscal year 2021 and 2020, we recognized a combined settlement and curtailment
loss of approximately $1 million in fiscal year 2021 and a settlement loss of approximately $1 million in fiscal year 2020.
The curtailment and settlements losses are recorded as a component of non-interest expense on our consolidated statements
of operations.
Defined Contribution Plan
CFC offers a 401(k) defined contribution savings program, the 401(k) Pension Plan, to all employees who have completed a
minimum of 1,000 hours of service in either the first 12 consecutive months or first full calendar year of employment. We
contribute an amount up to 2% of an employee’s salary each year for all employees participating in the program with a
minimum 2% employee contribution. We contributed approximately $1 million to the plan in each of fiscal years 2021,
2020 and 2019.
NOTE 13—GUARANTEES
We guarantee certain contractual obligations of our members so they may obtain various forms of financing. We use the
same credit policies and monitoring procedures in providing guarantees as we do for loans and commitments. If a member
system defaults on its obligation to pay debt service, then we are obligated to pay any required amounts under our
guarantees. Meeting our guarantee obligations satisfies the underlying obligation of our member systems and prevents the
exercise of remedies by the guarantee beneficiary based upon a payment default by a member system. In general, the
member system is required to repay any amount advanced by us with interest, pursuant to the documents evidencing the
member system’s reimbursement obligation.
The following table displays the notional amount of our outstanding guarantee obligations, by guarantee type and by
member class, as of May 31, 2021 and 2020.
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table 13.1: Guarantees Outstanding by Type and Member Class
(Dollars in thousands)
Guarantee type:
May 31,
2021
2020
Long-term tax-exempt bonds(1)...........
Letters of credit(2)................................
Other guarantees..................................
Total.........................................................
$
$
145,025 $
389,735
154,320
689,080 $
263,875
413,839
143,072
820,786
Member class:
CFC:
Distribution.......................................... $
Power supply.......................................
Statewide and associate(3)....................
CFC total...........................................
NCSC....................................................
RTFC.....................................................
Total.........................................................
____________________________
$
251,023 $
415,984
5,523
672,530
16,550
—
689,080 $
266,301
538,532
5,954
810,787
9,999
—
820,786
(1)
Represents the outstanding principal amount of long-term fixed-rate and variable-rate guaranteed bonds.
(2)
Reflects our maximum potential exposure for letters of credit.
(3)
Includes CFC guarantees to NCSC and RTFC members totaling $3 million as of both May 31, 2021 and 2020.
We guarantee debt issued in connection with the construction or acquisition of pollution control, solid waste disposal,
industrial development and electric distribution facilities, classified as long-term tax-exempt bonds in the table above. We
unconditionally guarantee to the holders or to trustees for the benefit of holders of these bonds the full principal, interest,
and in most cases, premium, if any, on each bond when due. If a member system defaults in its obligation to pay debt
service, then we are obligated to pay any required amounts under our guarantees. Such payment will prevent the occurrence
of an event of default that would otherwise permit acceleration of the bond issue. In general, the member system is required
to repay any amount advanced by us with interest, pursuant to the documents evidencing the member system’s
reimbursement obligation.
Long-term tax-exempt bonds of $145 million and $264 million as of May 31, 2021 and 2020, respectively, included $145
million and $244 million, respectively, of adjustable or variable-rate bonds that may be converted to a fixed rate as specified
in the applicable indenture for each bond offering. We are unable to determine the maximum amount of interest that we may
be required to pay related to the remaining adjustable and variable-rate bonds. Many of these bonds have a call provision
that allows us to call the bond in the event of a default, which would limit our exposure to future interest payments on these
bonds. Our maximum potential exposure generally is secured by mortgage liens on the members’ assets and future revenue.
If a member’s debt is accelerated because of a determination that the interest thereon is not tax-exempt, the member’s
obligation to reimburse us for any guarantee payments will be treated as a long-term loan. The maturities for long-term tax-
exempt bonds and the related guarantees extend through calendar year 2037.
Of the outstanding letters of credit of $390 million and $414 million as of May 31, 2021 and 2020, respectively, $104
million and $106 million, respectively, were secured. We did not have any letters of credit outstanding that provided for
standby liquidity for adjustable and floating-rate tax-exempt bonds issued for the benefit of our members as of May 31,
2021. The maturities for the outstanding letters of credit as of May 31, 2021 extend through calendar year 2040. In March
2021, subsequent to Brazos’ bankruptcy filing, we had draws totaling $3 million on the letters of credit for Brazos. With the
exception of Brazos, we were not required to perform pursuant to any of our guarantee obligations during fiscal year 2021.
137
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition to the letters of credit listed in the table above, under master letter of credit facilities in place as of May 31, 2021,
we may be required to issue up to an additional $64 million in letters of credit to third parties for the benefit of our members.
All of our master letter of credit facilities were subject to material adverse change clauses at the time of issuance as of
May 31, 2021. Prior to issuing a letter of credit, we would confirm there has been no material adverse change in the business
or condition, financial or otherwise, of the borrower since the time the loan was approved and confirm that the borrower is
currently in compliance with the letter of credit terms and conditions.
The maximum potential exposure for other guarantees was $154 million and $143 million as of May 31, 2021 and 2020,
respectively, of which $25 million was secured as of both May 31, 2021 and 2020. The maturities for these other guarantees
listed in the table above extend through calendar year 2025. Guarantees under which our right of recovery from our
members was not secured totaled $415 million and $426 million and represented 60% and 52% of total guarantees as of
May 31, 2021 and 2020, respectively.
In addition to the guarantees described above, we were also the liquidity provider for $145 million of variable-rate tax-
exempt bonds as of May 31, 2021, issued for our member cooperatives. While the bonds are in variable-rate mode, in return
for a fee, we have unconditionally agreed to purchase bonds tendered or put for redemption if the remarketing agents are
unable to sell such bonds to other investors. We were not required to perform as liquidity provider pursuant to these
obligations during fiscal years 2021, 2020 or 2019.
Guarantee Liability
We recorded a total guarantee liability for noncontingent and contingent exposures related to guarantees and liquidity
obligations of $10 million and $11 million as of May 31, 2021 and 2020, respectively. The noncontingent guarantee
liability, which pertains to our obligation to stand ready to perform over the term of our guarantees and liquidity obligations
we have entered into or modified since January 1, 2003, was $9 million and $10 million as of May 31, 2021 and 2020,
respectively. The contingent guarantee liability, which is based on management’s estimate of exposure to losses within our
guarantee portfolio, was $1 million as of both May 31, 2021 and 2020.
The following table details the scheduled maturities of our outstanding guarantees in each of the five fiscal years following
May 31, 2021 and thereafter:
Table 13.2: Guarantees Outstanding Maturities
(Dollars in thousands)
2022....................................................
2023....................................................
2024....................................................
2025....................................................
2026....................................................
Thereafter...........................................
Total.................................................
Amount
Maturing
219,647
26,825
52,750
90,964
157,362
141,532
689,080
$
$
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14—FAIR VALUE MEASUREMENT
Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a
liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance
provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on the markets in
which the assets or liabilities trade and whether the inputs to the valuation techniques used to measure fair value are
observable or unobservable. The fair value measurement of a financial asset or liability is assigned a level based on the
lowest level of any input that is significant to the fair value measurement in its entirety. The levels, in priority order based on
the extent to which observable inputs are available to measure fair value, are Level 1, Level 2 and Level 3. The accounting
guidance for fair value measurements requires that we maximize the use of observable inputs and minimize the use of
unobservable inputs in determining fair value. We describe the valuation technique for each level in “Note 1—Summary of
Significant Accounting Policies.”
The following table presents the carrying value and estimated fair value of all of our financial instruments, including those
carried at amortized cost, as of May 31, 2021 and 2020. The table also displays the classification level within the fair value
hierarchy based on the degree of observability of the inputs used in the valuation technique for estimating fair value.
Table 14.1: Fair Value of Financial Instruments
(Dollars in thousands)
Carrying Value
Fair Value
Level 1
Level 2
Level 3
May 31, 2021
Fair Value Measurement Level
Assets:
Cash and cash equivalents.......................
$
295,063
$
295,063
$
295,063 $
— $
Restricted cash.........................................
Equity securities, at fair value..................
Debt securities trading, at fair value........
Deferred compensation investments........
8,298
35,102
576,175
7,222
8,298
35,102
576,175
7,222
Loans to members, net.............................
28,341,429
29,967,692
Accrued interest receivable......................
Derivative assets......................................
107,856
121,259
107,856
121,259
8,298
35,102
—
7,222
—
—
—
—
—
576,175
—
—
107,856
121,259
—
—
—
—
—
29,967,692
—
—
Total financial assets................................ $ 29,492,404
$ 31,118,667
$
345,685 $
805,290 $ 29,967,692
Liabilities:
Short-term borrowings.............................
$ 4,582,096
$ 4,582,329
$
— $ 4,582,329 $
—
Long-term debt.........................................
20,603,123
21,799,736
Accrued interest payable..........................
Guarantee liability....................................
Derivative liabilities.................................
Subordinated deferrable debt...................
123,672
10,041
584,989
986,315
Members’ subordinated certificates.........
1,254,660
123,672
10,841
584,989
1,062,748
1,254,660
—
—
—
—
265,200
—
12,476,073
9,323,663
123,672
—
584,989
797,548
—
10,841
—
—
—
1,254,660
Total financial liabilities..........................
$ 28,144,896
$ 29,418,975
$
265,200 $ 18,564,611 $ 10,589,164
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
Carrying Value
Fair Value
Level 1
Level 2
Level 3
May 31, 2020
Fair Value Measurement Level
Assets:
Cash and cash equivalents.......................
$
671,372
$
671,372
$
671,372 $
— $
Restricted cash.........................................
Equity securities, at fair value..................
Debt securities trading, at fair value........
Deferred compensation investments........
8,647
60,735
309,400
5,496
8,647
60,735
309,400
5,496
Loans to members, net.............................
26,649,255
29,252,065
Accrued interest receivable......................
Debt service reserve funds.......................
Derivative assets......................................
117,138
14,591
173,195
117,138
14,591
173,195
8,647
60,735
—
5,496
—
—
14,591
—
—
309,400
—
—
117,138
—
—
173,195
—
—
—
—
—
29,252,065
—
—
—
Total financial assets................................ $ 28,009,829
$ 30,612,639
$
760,841 $
599,733 $ 29,252,065
Liabilities:
Short-term borrowings.............................
$ 3,961,985
$ 3,963,164
$
— $ 3,713,164 $
250,000
Long-term debt.........................................
19,712,024
21,826,337
Accrued interest payable..........................
Guarantee liability....................................
139,619
10,937
Derivative liabilities.................................
1,258,459
Subordinated deferrable debt...................
986,119
Members’ subordinated certificates.........
1,339,618
139,619
11,948
1,258,459
1,030,108
1,339,618
—
—
—
—
—
—
11,981,580
9,844,757
139,619
—
1,258,459
1,030,108
—
11,948
—
—
—
1,339,618
Total financial liabilities..........................
$ 27,408,761
$ 29,569,253
$
— $ 18,122,930 $ 11,446,323
Loans to Members, Net
Because of the interest rate repricing options we provide to borrowers on loan advances and other characteristics of our
loans, there is no ready market from which to obtain fair value quotes or observable inputs for similar loans. As a result, we
are unable to use the exit price to estimate the fair value of loans to members. We therefore estimate fair value for fixed-rate
loans by discounting the expected future cash flows based on the current rate at which we would make a similar new loan
for the same remaining maturity to a borrower. The assumed maturity date used in estimating the fair value of loans with a
fixed rate for a selected rate term is the next repricing date because at the repricing date, the loan will reprice at the current
market rate. The carrying value of our variable-rate loans adjusted for credit risk approximates fair value since variable-rate
loans are eligible to be reset at least monthly.
The fair value of loans with different risk characteristics, specifically nonperforming and restructured loans, is estimated
using collateral valuations or by adjusting cash flows for credit risk and discounting those cash flows using the current rates
at which similar loans would be made by us to borrowers for the same remaining maturities. See below for information on
how we estimate the fair value of certain individually evaluated loans.
Transfers Between Levels
We monitor the availability of observable market data to assess the appropriate classification of financial instruments within
the fair value hierarchy and transfer between Level 1, Level 2 and Level 3 accordingly. Observable market data include but
are not limited to quoted prices and market transactions. Changes in economic conditions or market liquidity generally will
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
drive changes in availability of observable market data. Changes in availability of observable market data, which also may
result in changes in the valuation technique used, are generally the cause of transfers between levels. We did not have any
transfers into or out of Level 3 of the fair value hierarchy during the fiscal years ended May 31, 2021 and 2020.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents the carrying value and fair value of financial instruments reported in our consolidated financial
statements at fair value on a recurring basis as of May 31, 2021 and 2020, and the classification of the valuation technique
within the fair value hierarchy. We did not have any assets and liabilities measured at fair value on a recurring basis using
significant unobservable inputs for the years ended May 31, 2021 and 2020.
Table 14.2: Assets and Liabilities Measured at Fair Value on a Recurring Basis
May 31,
2021
2020
(Dollars in thousands)
Level 1
Level 2
Total
Level 1
Level 2
Total
Assets:
Equity securities, at fair value................ $ 35,102 $
— $ 35,102
$ 60,735 $
— $ 60,735
Debt securities trading, at fair value......
—
576,175
576,175
—
309,400
309,400
Deferred compensation investments......
7,222
—
7,222
5,496
—
5,496
Derivative assets....................................
—
121,259
121,259
—
173,195
173,195
Liabilities:
Derivative liabilities...............................
—
584,989
584,989
—
1,258,459
1,258,459
Below is a description of the valuation techniques we use to estimate fair value of our financial assets and liabilities
recorded at fair value on a recurring basis, the significant inputs used in those techniques, if applicable, and the classification
within the fair value hierarchy.
Equity Securities
Our investments in equity securities consist of investments in Farmer Mac Class A common stock and Series C preferred
stock. These securities are reported at fair value in our consolidated balance sheets. We determine the fair value based on
quoted prices on the stock exchange where the stock is traded. That stock exchange with respect to Farmer Mac Class A
common stock is an active market based on the volume of shares transacted. Fair values for these securities are classified
within Level 1 of the fair value hierarchy.
Debt Securities Trading
As discussed above in “Note 1—Summary of Significant Accounting Policies” our debt securities consist of investments in
certificates of deposit with maturities greater than 90 days, commercial paper, corporate debt securities, municipality debt
securities, commercial MBS, foreign government debt securities and other ABS and were classified as trading as of May 31,
2021. Management estimates the fair value of our debt securities utilizing the assistance of third-party pricing services.
Methodologies employed, controls relied upon and inputs used by third-party pricing vendors are subject to management
review when such services are provided. This review may consist of, in part, obtaining and evaluating control reports issued
and pricing methodology materials distributed. We review the pricing methodologies provided by the vendors in order to
determine if observable market information is being used to determine the fair value versus unobservable inputs. Investment
securities traded in secondary markets are typically valued using unadjusted vendor prices. These investment securities,
which include those measured using unadjusted vendor prices, are generally classified as Level 2 because the valuation
typically involves using quoted market prices for similar securities, pricing models, discounted cash flow analyses using
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NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
significant observable market where available or a combination of multiple valuation techniques for which all significant
assumptions are observable in the market.
Deferred Compensation Investments
CFC offers a nonqualified 457(b) deferred compensation plan to highly compensated employees and board members. Such
amounts deferred by employees are invested by the company. The deferred compensation investments are presented as other
assets in the consolidated balance sheets in the other assets category at fair value. We calculate fair value based on the daily
published and quoted net asset value, and these investments are classified within Level 1 of the fair value hierarchy.
Derivative Instruments
Our derivatives primarily consist of OTC interest rate swaps. All of our swap agreements are subject to master netting
agreements. There is not an active secondary market for the types of interest rate swaps we use. We determine the fair value
of our derivatives using models that incorporate observable market inputs, such as spot LIBOR rates, Eurodollar futures
contracts and market swap rates. These inputs can vary depending on the type of derivative and nature of the underlying
rate, price or index upon which the derivative’s value is based. The impact of counterparty nonperformance risk is
considered when measuring the fair value of derivative assets. Internal pricing is compared against additional pricing
sources, such as external valuation agents and other sources. Pricing variances among different pricing sources are analyzed
and validated. The technique for determining the fair value for our interest rate swaps is classified as Level 2.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
We may be required, from time to time, to measure certain assets and liabilities at fair value on a nonrecurring basis on our
consolidated balance sheets. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to
fair value adjustments in certain circumstances, such as in the application of lower of cost or fair value accounting or when
we evaluate assets for impairment. We had certain loans measured at fair value on a nonrecurring basis as of and during the
fiscal year ended May 31, 2021. We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of
and during the fiscal year ended May 31, 2020.
Collateral-Dependent Loans
Because our loans are classified as held for investment and carried at amortized cost, we generally do not record loans at fair
value on a recurring basis. However, we periodically record nonrecurring fair value adjustments for nonperforming
collateral-dependent loans through the allowance for credit losses and provision for credit losses. We had nonperforming
collateral-dependent loans outstanding to two affiliated RTFC telecommunications borrowers totaling $9 million as of
May 31, 2021. The collateral underlying these loans consisted primarily of U.S. Federal Communications Commission
(“FCC”) wireless spectrum licenses. Our estimate of the fair value of these loans was $6 million as of May 31, 2021. As a
result, we recorded a nonrecurring fair value adjustment for these loans of $3 million for the year ended May 31, 2021.
Significant Unobservable Level 3 Inputs
We employ various approaches and techniques to estimate the fair value of loans where we expect repayment to be provided
solely by the continued operation or sale of the underlying collateral, including estimated cash flows from the collateral,
valuations obtained from third-party specialists and comparable sales data. The technique depends on the nature of the
collateral and the extent to which observable inputs are available. Our Credit Risk Management group reviews the valuation
technique, including the use of any significant inputs that are not readily observable by market participants, to assess the
appropriateness of the technique and the reasonableness of the assumptions involved. The estimated fair value of $6 million
as of May 31, 2021 for the two affiliated RTFC nonperforming collateral-dependent loans totaling $9 million as of
May 31, 2021 was derived primarily based on the lower end of limited publicly available sales data for the underlying FCC
spectrum licenses collateral.
142
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15—VARIABLE INTEREST ENTITIES
NCSC and RTFC meet the definition of a VIE because they do not have sufficient equity investment at risk to finance their
activities without financial support. CFC is the primary source of funding for NCSC and the sole source of funding for
RTFC. Under the terms of management agreements with each company, CFC manages the business operations of NCSC
and RTFC. CFC also unconditionally guarantees full indemnification for any loan losses of NCSC and RTFC pursuant to
guarantee agreements with each company. CFC earns management and guarantee fees from its agreements with NCSC and
RTFC.
All loans that require NCSC board approval also require CFC board approval. CFC is not a member of NCSC and does not
elect directors to the NCSC board. If CFC becomes a member of NCSC, it would control the nomination process for one
NCSC director. NCSC members elect directors to the NCSC board based on one vote for each member. NCSC is a Class C
member of CFC. All loans that require RTFC board approval also require approval by CFC for funding under RTFC’s credit
facilities with CFC. CFC is not a member of RTFC and does not elect directors to the RTFC board. RTFC is a non-voting
associate of CFC. RTFC members elect directors to the RTFC board based on one vote for each member.
NCSC and RTFC creditors have no recourse against CFC in the event of a default by NCSC and RTFC, unless there is a
guarantee agreement under which CFC has guaranteed NCSC or RTFC debt obligations to a third party. The following table
provides information on incremental consolidated assets and liabilities of VIEs included in CFC’s consolidated financial
statements, after intercompany eliminations, as of May 31, 2021 and 2020.
Table 15.1: Consolidated Assets and Liabilities of Variable Interest Entities
(Dollars in thousands)
Assets:
May 31,
2021
2020
Loans outstanding..............................................................
$
1,127,251
$
1,083,197
Other assets........................................................................
11,343
11,352
Total assets.........................................................................
$
1,138,594
$
1,094,549
Liabilities:
Total liabilities...................................................................
$
30,187
$
38,803
The following table provides information on CFC’s credit commitments to NCSC and RTFC, and potential exposure to loss
under these commitments as of May 31, 2021 and 2020.
143
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table 15.2: CFC Exposure Under Credit Commitments to NCSC and RTFC
(Dollars in thousands)
CFC credit commitments to NCSC and RTFC:
May 31,
2021
2020
Total CFC credit commitments.........................................
$
5,500,000
$
5,500,000
Outstanding commitments:
Borrowings payable to CFC(1)...........................................
Credit enhancements:
CFC third-party guarantees...........................................
Other credit enhancements............................................
Total credit enhancements(2)..............................................
Total outstanding commitments........................................
CFC credit commitments available(3)................................
____________________________
1,107,185
1,062,103
16,550
8,386
24,936
1,132,121
9,999
11,755
21,754
1,083,857
$
4,367,879
$
4,416,143
(1)
Intercompany borrowings payable by NCSC and RTFC to CFC are eliminated in consolidation.
(2)
Excludes interest due on these instruments.
(3)
Represents total CFC credit commitments less outstanding commitments as of each period-end.
CFC loans to NCSC and RTFC are secured by all assets and revenue of NCSC and RTFC. CFC’s maximum potential
exposure, including interest due, for the credit enhancements totaled $25 million. The maturities for obligations guaranteed
by CFC extend through 2031.
NOTE 16—BUSINESS SEGMENTS
Our consolidated financial statements include the financial results of CFC, NCSC and RTFC and certain entities created and
controlled by CFC to hold foreclosed assets. Separate financial statements are produced for CFC, NCSC and RTFC and are
the primary reports that management reviews in evaluating performance. The separate financial statements for CFC
represent the consolidation of the financial results for CFC and the entities controlled by CFC. For more detail on the
requirement to consolidate the financial results of NCSC and RTFC see “Note 1—Summary of Significant Accounting
Policies.”
Our activities are conducted through three operating segments that are based on each of the legal entities included in our
consolidated financial statements: CFC, NCSC and RTFC. We report segment information for CFC separately, while we
aggregate NCSC and RTFC and report combined segment information for these entities. CFC is the primary source of
funding to NCSC. CFC is the sole source of funding to RTFC. Pursuant to a guarantee agreement, CFC has agreed to
indemnify NCSC and RTFC for loan losses. The loan loss allowance at NCSC and RTFC is offset by a guarantee receivable
from CFC. The following tables display segment results for the years ended May 31, 2021, 2020 and 2019, and assets
attributable to each segment as of May 31, 2021 and 2020.
144
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table 16.1: Business Segment Information
(Dollars in thousands)
Statement of operations:
Year Ended May 31, 2021
CFC
Other
Elimination
Consolidated
Interest income................................................................. $ 1,108,543 $
43,632 $
(35,574) $ 1,116,601
Interest expense................................................................
Net interest income........................................................
Provision for credit losses................................................
(702,063)
406,480
(28,507)
Net interest income after provision for credit losses.......
377,973
(35,574)
8,058
35,574
—
—
8,058
—
—
(702,063)
414,538
(28,507)
386,031
Non-interest income:
Fee and other income....................................................
Derivative gains:
23,732
2,800
(7,603)
18,929
Derivative cash settlements interest expense............
(113,951)
(1,694)
Derivative forward value gains ................................
Derivative gains.............................................................
Investment securities gains ...........................................
Total non-interest income..............................................
618,578
504,627
1,495
529,854
3,368
1,674
—
4,474
—
—
—
—
(115,645)
621,946
506,301
1,495
(7,603)
526,725
Non-interest expense:
General and administrative expenses.............................
(93,085)
(7,849)
Losses on early extinguishment of debt.........................
Other non-interest expense............................................
(1,456)
(1,619)
Total non-interest expense............................................
(96,160)
Income before income taxes............................................
811,667
Income tax provision........................................................
—
—
(1,374)
(9,223)
3,309
(998)
6,229
—
1,374
7,603
—
—
(94,705)
(1,456)
(1,619)
(97,780)
814,976
(998)
Net income......................................................................
$
811,667 $
2,311 $
— $
813,978
CFC
Other
Elimination
Consolidated
May 31, 2021
Assets:
Total loans outstanding....................................................
$ 28,395,040 $ 1,127,251 $ (1,107,184) $ 28,415,107
Deferred loan origination costs........................................
11,854
—
—
11,854
Loans to members............................................................
28,406,894
1,127,251
(1,107,184) 28,426,961
Less: Allowance for credit losses..................................
(85,532)
—
—
(85,532)
Loans to members, net.....................................................
28,321,362
1,127,251
(1,107,184) 28,341,429
Other assets......................................................................
1,285,591
100,298
(88,955)
1,296,934
Total assets...................................................................... $ 29,606,953 $ 1,227,549 $ (1,196,139) $ 29,638,363
145
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
Statement of operations:
Year Ended May 31, 2020
CFC
Other
Elimination
Consolidated
Interest income................................................................. $ 1,143,397 $
47,107 $
(39,218) $ 1,151,286
Interest expense................................................................
(820,841)
(39,466)
39,218
(821,089)
Net interest income........................................................
322,556
Provision for credit losses................................................
(35,590)
Net interest income after provision for credit losses.......
286,966
7,641
—
7,641
—
—
—
330,197
(35,590)
294,607
Non-interest income:
Fee and other income....................................................
28,309
9,524
(14,872)
22,961
Derivative losses:
Derivative cash settlements interest expense..............
Derivative forward value losses.................................
Derivative losses...........................................................
(54,707)
(730,774)
(785,481)
Investment securities gains............................................
9,431
Total non-interest income..............................................
(747,741)
(1,166)
(3,504)
(4,670)
—
4,854
—
—
—
—
(55,873)
(734,278)
(790,151)
9,431
(14,872)
(757,759)
Non-interest expense:
General and administrative expenses............................
(98,808)
(8,940)
Losses on early extinguishment of debt........................
(69)
(614)
Other non-interest expense............................................
(25,588)
(8,291)
Total non-interest expense............................................
(124,465)
(17,845)
Loss before income taxes.................................................
(585,240)
(5,350)
Income tax benefit............................................................
—
1,160
6,581
—
8,291
14,872
—
—
(101,167)
(683)
(25,588)
(127,438)
(590,590)
1,160
Net loss............................................................................
$
(585,240) $
(4,190) $
— $
(589,430)
May 31, 2020
CFC
Other
Elimination
Consolidated
Assets:
Total loans outstanding....................................................
$ 26,669,759 $ 1,083,197 $ (1,062,102) $ 26,690,854
Deferred loan origination costs........................................
11,526
—
—
11,526
Loans to members............................................................
26,681,285
1,083,197
(1,062,102) 26,702,380
Less: Allowance for credit losses..................................
(53,125)
—
—
(53,125)
Loans to members, net.....................................................
26,628,160
1,083,197
(1,062,102) 26,649,255
Other assets......................................................................
1,496,998
106,525
(95,173)
1,508,350
Total assets...................................................................... $ 28,125,158 $ 1,189,722 $ (1,157,275) $ 28,157,605
146
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
Statement of operations:
Year Ended May 31, 2019
CFC
Other
Elimination
Consolidated
Interest income..................................................................
$ 1,126,869 $
51,741 $
(42,940) $ 1,135,670
Interest expense.................................................................
(835,491)
(43,658)
42,940
Net interest income..........................................................
Benefit for credit losses.....................................................
Net interest income after benefit for credit losses.............
291,378
1,266
292,644
8,083
—
8,083
—
—
—
(836,209)
299,461
1,266
300,727
Non-interest income:
Fee and other income.....................................................
20,515
2,655
(7,815)
15,355
Derivative losses:
Derivative cash settlements interest expense................
Derivative forward value losses...................................
Derivative losses.............................................................
Investment securities losses............................................
(42,618)
(318,135)
(360,753)
(1,799)
Total non-interest income...............................................
(342,037)
(993)
(1,595)
(2,588)
—
67
—
—
—
—
(43,611)
(319,730)
(363,341)
(1,799)
(7,815)
(349,785)
Non-interest expense:
General and administrative expenses.............................
(91,063)
(8,477)
Losses on early extinguishment of debt.........................
Other non-interest expense.............................................
Total non-interest expense..............................................
Loss before income taxes..................................................
(7,100)
(1,675)
(99,838)
(149,231)
Income tax provision.........................................................
—
—
(1,441)
(9,918)
(1,768)
(211)
6,374
—
1,441
7,815
—
—
(93,166)
(7,100)
(1,675)
(101,941)
(150,999)
(211)
Net loss.............................................................................
$
(149,231) $
(1,979) $
— $
(151,210)
147
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Senior management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of
disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.
At the end of the period covered by this Report, based on this evaluation process, the Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures are effective at the reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
The management of National Rural Utilities Cooperative Finance Corporation (“we,” “our” or “us”) is responsible for
establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed under the supervision of
management, including the Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.
generally accepted accounting principles. Our internal control over financial reporting includes those policies and
procedures that:
(i)
(ii)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of ours are being
made only in accordance with authorizations of management and our directors;
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or dispositions
of our assets that could have a material effect on our financial statements; and
(iv) ensure disclosure controls and procedures include, without limitation, controls and procedures designed to provide
reasonable assurance that information required to be disclosed by us in reports filed under the Exchange Act is
accumulated and communicated to our management, including our principal executive and principal financial officers,
or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Any system of internal control, no matter how well designed, has inherent limitations, including but not limited to the
possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be
detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation.
Our management assessed the effectiveness of internal control over financial reporting as of May 31, 2021. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework (“2013 Framework”).
Based on management’s assessment and those criteria, management believes that we maintained effective internal control
over financial reporting as of May 31, 2021.
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject to attestation by our registered public
accounting firm pursuant to the rules of the U.S. Securities and Exchange Commission that permit us to furnish only
management’s report with this Annual Report on Form 10-K.
148
Changes in Internal Control Over Financial Reporting
As a result of the COVID-19 pandemic, beginning in mid-March 2020, certain of our employees began working remotely.
We have not identified any material changes in our internal control over financial reporting resulting from the changes to the
working environment. We are continually monitoring and assessing the COVID-19 situation to determine any potential
impacts on the design and operating effectiveness of our internal control over financial reporting.
By:
/s/ J. ANDREW DON
J. Andrew Don
Chief Executive Officer
July 30, 2021
By:
/s/ YU LING WANG
Yu Ling Wang
Senior Vice President and Chief Financial Officer
July 30, 2021
By:
/s/ ROBERT E. GEIER
Robert E. Geier
Vice President and Chief Accounting Officer
July 30, 2021
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
149
PART III
Item 10. Directors, Executive Officers and Corporate Governance
(a) Directors
Name
Alan W. Wattles (President of CFC).........................................
Bruce A. Vitosh (Vice President of CFC).................................
David E. Felkel (Secretary-Treasurer of CFC) .........................
Anthony A. Anderson................................................................
Thomas A. Bailey .....................................................................
Kevin M. Bender........................................................................
Robert Brockman ......................................................................
Chris D. Christensen .................................................................
Jared Echternach(2).....................................................................
Timothy Eldridge(2)....................................................................
Dennis Fulk ...............................................................................
Barbara E. Hampton .................................................................
Doyle Jay Hanson(3)...................................................................
William Keith Hayward ............................................................
Michael Heinen(2).......................................................................
Bradley P. Janorschke ...............................................................
Jimmy A. LaFoy(3).....................................................................
Anthony Larson.........................................................................
Brent McRae(2)...........................................................................
John Metcalf(2)...........................................................................
Kendall Montgomery.................................................................
G. Anthony Norton ...................................................................
Jeffrey Allen Rehder..................................................................
Bradley J. Schardin(3).................................................................
Mark A. Suggs...........................................................................
Marsha L. Thompson ................................................................
Todd P. Ware(3)..........................................................................
____________________________
Age
55
55
59
59
79
62
71
57
49
63
70
59
75
56
58
57
80
47
61
55
57
69
54
61
63
65
54
Director
Since
2016
2017
2018
2021
2019
2020
2015
2019
2021
2021
2019
2019
2015
2020
2021
2019
2015
2020
2021
2021
2020
2019
2020
2015
2020
2017
2015
Date Present
Term Expires
2022
2023
2021
2024(1)
2022
2023
2022
2022(1)
2024
2024
2022
2022
2021
2023
2024
2022
2021
2023
2024
2024
2022
2022
2024
2021
2023
2023
2021
(1)
Pursuant to CFC’s bylaws, NRECA determines the method of director election and length of term for the seat occupied by this director.
(2)
(3)
Director seated on June 14, 2021.
Director’s term ended on June 14, 2021.
Under CFC’s bylaws, the board of directors shall be composed of the following individuals:
• 20 directors, which must include one general manager and one director of a member system from each of 10 districts (but
no more than one director from each state except in a district where only one state has members);
• two directors designated by NRECA; and
• if the board determines at its discretion that an at-large director shall be elected, one at-large director who satisfies the
requirements of an audit committee financial expert as defined by the Sarbanes-Oxley Act of 2002 and is a trustee,
director, manager, chief executive officer or chief financial officer of a member.
150
The 20 district-level directors are each elected by a vote of the members within the district for which the director serves. The
at-large director who satisfies the requirements of an audit committee financial expert is elected by the vote of all members.
All CFC directors, other than the two directors designated by NRECA, are elected for a three-year term and can serve a
maximum of two consecutive terms. Each CFC member (other than associates) is entitled to one vote with respect to
elections of directors in their districts.
(b) Executive Officers
Title
Name
Age
Held Present
Office Since(1)
President and Director ............................................................ Alan W. Wattles
Vice President and Director..................................................... Bruce A. Vitosh
Secretary-Treasurer and Director............................................ David E. Felkel
Chief Executive Officer...........................................................
J. Andrew Don
Senior Vice President and Chief Financial Officer ................ Yu Ling Wang
Senior Vice President, Member Services................................
Joel Allen
Senior Vice President and General Counsel............................ Roberta B. Aronson
Senior Vice President and Chief Corporate Affairs Officer.... Brad L. Captain
Senior Vice President and Chief Risk Officer ........................ Gholam M. Saleh
Senior Vice President, Corporate Services ............................. Gary Bradbury
Senior Vice President and Chief Administrative Officer........ Graceann D. Clendenen(2)
John M. Borak(3)
Senior Vice President, Credit Risk Management....................
Senior Vice President, Loan Operations.................................. Robin C. Reed(4)
___________________________
55
55
59
61
46
55
63
51
49
50
63
76
59
2021
2021
2021
2021
2021
2014
2014
2014
2022
2022
2019
2003
2016
(1)
Refers to fiscal year.
(2)
(3)
Retired on June 30, 2021.
Retired on July 30, 2021.
(4)
Retired on May 31, 2021.
The President, Vice President and Secretary-Treasurer are elected annually by the board of directors at its first
organizational meeting immediately following CFC’s annual membership meeting, each to serve a term of one year; the
Chief Executive Officer serves at the pleasure of the board of directors; and the other Executive Officers serve at the
pleasure of the Chief Executive Officer.
(c) Identification of Certain Significant Employees
Not applicable.
(d) Family Relationships
No family relationship exists between any director or executive officer and any other director or executive officer of the
registrant.
(e) (1) and (2) Business Experience and Directorships
Following is biographical information about the business experience for each member of the CFC Board of Directors and
executive officers.
Directors
Mr. Wattles has been president and chief executive officer of Monroe County Electric Cooperative in Waterloo, Illinois
since 2002. He has been a board member of Southern Illinois Power Cooperative since 2002. As president and chief
151
executive officer of Monroe County Electric Cooperative, Mr. Wattles has acquired extensive experience with and
knowledge of the rural electric cooperative industry and, therefore, we believe Mr. Wattles has the qualifications, skills and
experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Vitosh has been general manager and CEO of Norris Public Power District in Beatrice, Nebraska, since 2012. From
2008 to 2012, Mr. Vitosh was the manager of finance and accounting at Norris Public Power District. Mr. Vitosh is a CPA
and is a member of the Nebraska Society of Certified Public Accountants. Mr. Vitosh has also been a self-employed farmer
since 2004. As general manager and CEO of Norris Public Power District, Mr. Vitosh has acquired extensive experience
with and knowledge of the rural electric cooperative industry and, therefore, we believe Mr. Vitosh has the qualifications,
skills and experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Felkel has been president and CEO of Edisto Electric Cooperative, Inc. in Bamberg, South Carolina, since 1997. He has
been a trustee on the Board of Trustees of Central Electric Power Cooperative since 1997. As the president and CEO of
Edisto Electric Cooperative, Inc., Mr. Felkel has acquired extensive experience with and knowledge of the rural electric
cooperative industry and, therefore, we believe Mr. Felkel has the qualifications, skills and experience necessary to act in the
best interests of CFC and to serve as a director on the CFC board.
Mr. Anderson has served as the general manager of Cherryland Electric Cooperative in Grawn, Michigan since 2003.
Additionally, Mr. Anderson has served as a director of NRECA in Arlington, Virginia since 2008 and has been its vice
president since March 4, 2021. He has also served as director of the Michigan Electric Cooperative Association in Lansing,
Michigan, since 2003, and as its vice president since 2016. As the general manager of Cherryland Electric Cooperative, Mr.
Anderson has acquired extensive experience with and knowledge of the rural electric cooperative industry and, therefore, we
believe Mr. Anderson has the qualifications, skills and experience necessary to act in the best interests of CFC and to serve
as a director on the CFC board.
Mr. Bailey has served as a director of Vermont Electric Cooperative in Johnson, Vermont, since January 2004. From 2006
to 2015 Mr. Bailey served as board president of Vermont Electric Cooperative. He has operated a real estate investment
business since 2009. As a director of Vermont Electric Cooperative, Mr. Bailey has acquired extensive experience with and
knowledge of the rural electric cooperative industry and, therefore, we believe Mr. Bailey has the qualifications, skills and
experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Bender has served as a director of Carroll White Rural Electric Membership Corporation in Monticello, Indiana, since
January 2012. Additionally, he has served as president of Carroll White Rural Electric Membership Corporation since July
2017. Mr. Bender also served as the president and CEO of the Bank of Wolcott in Wolcott, Indiana, from January 2010 to
March 2021. He has served as a director of Wolcott Bancorp since March 1995 and was elected chairman of the board in
March 2021. From June 2008 to January 2012, he served as a director of Carroll County Rural Electric Membership
Corporation in Delphi, Indiana. As a director and president of Carroll White Rural Electric Membership Corporation, Mr.
Bender has acquired extensive experience with and knowledge of the rural electric cooperative industry and, therefore, we
believe Mr. Bender has the qualifications, skills and experience necessary to act in the best interests of CFC and to serve as a
director on the CFC board.
Mr. Brockman has been a director at Wheatland Rural Electric Association in Wheatland, Wyoming, since 2006. He has
served as president and real estate broker for Keyhole Land Co. in Wheatland, Wyoming, since 1988. As a director of
Wheatland Rural Electric Association, Mr. Brockman has acquired extensive experience with and knowledge of the rural
electric cooperative industry and, therefore, we believe Mr. Brockman has the qualifications, skills and experience necessary
to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Christensen has served as a director of Norval Electric Cooperative, Inc. in Glasgow, Montana, since 2004. Mr.
Christensen has also served as a director of the NRECA Board of Directors since 2014, and has served as NRECA board
president since March 4, 2021. He has been a self-employed rancher since 1979. As a director of Norval Electric
Cooperative, Inc. and NRECA, Mr. Christensen has acquired extensive experience with and knowledge of the rural electric
cooperative industry and, therefore, we believe Mr. Christensen has the qualifications, skills and experience necessary to act
in the best interests of CFC and to serve as a director on the CFC board.
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Mr. Echternach has been president and CEO of Beltrami Electric Cooperative Inc. in Bemidji, Minnesota, since 2016, and a
director of Cooperative Development, LLC, its subsidiary, since 2016. He also served as CEO of North Itasca Electric
Cooperative Inc. in Big Fork, Minnesota, from 2012 to 2016. Mr. Echternach has also served as president and director of the
Greater Bemidji Economic Development Corporation in Bemidji, Minnesota, since 2016, and as a director of Security Bank
USA in Bemidji, Minnesota, since 2020. As the president and CEO of Beltrami Electric Cooperative, Inc., Mr. Echternach
has acquired extensive experience with and knowledge of the rural electric cooperative industry and, therefore, we believe
Mr. Echternach has the qualifications, skills and experience necessary to act in the best interests of CFC and to serve as a
director on the CFC board.
Mr. Eldridge has served as a director of Fleming-Mason Energy Cooperative, Inc. in Flemingsburg, Kentucky, since 2000,
and as a director of East Kentucky Power Cooperative, Inc. in Winchester, Kentucky, since 2014. Mr. Eldridge has also
been Audit Committee chairman of Fleming-Mason Energy since 2014. He has served as a director of Citizens Bank located
in Morehead, Kentucky since 2013 and served as its Audit Committee chairman throughout that time. Since 2015, Mr.
Eldridge has been a member-owner and Certified Public Accountant at Baldwin CPAs, PLLC in Flemingsburg, Kentucky.
He has held his Kentucky CPA license since 1986. As a director of Fleming-Mason Energy Cooperative, Inc., Mr. Eldridge
has acquired extensive experience with and knowledge of the rural electric cooperative industry and, therefore, we believe
Mr. Eldridge has the qualifications, skills and experience necessary to act in the best interests of CFC and to serve as a
director on the CFC board.
Mr. Fulk has served as a director of Platte-Clay Electric Cooperative in Kearney, Missouri, since 1993, including serving as
board president from 2000 to 2015. He served as a director of NW Electric Power Cooperative from 2004 until April 2019,
serving as board vice president from 2011 to April 2019. Mr. Fulk also served as a director of the Association of Missouri
Electric Cooperatives from 2000 until 2015, serving as board president from 2010 to 2011. As a director of Platte-Clay
Electric Cooperative, Mr. Fulk has acquired extensive experience with and knowledge of the rural electric cooperative
industry and, therefore, we believe Mr. Fulk has the qualifications, skills and experience necessary to act in the best interests
of CFC and to serve as a director on the CFC board.
Mrs. Hampton currently serves as the president and CEO of Georgia Transmission Corporation in Tucker, Georgia, a
position she began in January of 2021. She served as the senior vice president and CFO of the organization from 2005 until
moving to the CEO role. Mrs. Hampton has been a Certified Public Accountant since 1990. As president and CEO of
Georgia Transmission Corporation, Mrs. Hampton has acquired extensive experience with and knowledge of the rural
electric cooperative industry and, therefore, we believe Mrs. Hampton has the qualifications, skills and experience necessary
to act in the best interests of CFC and to serve as a director on the CFC board. We believe Mrs. Hampton’s experience with
accounting principles, financial reporting rules and regulations and evaluating financial results makes her qualified to serve
as an audit committee financial expert as defined by Section 407 of the Sarbanes-Oxley Act of 2002 and as the chairperson
of CFC’s Audit Committee.
Mr. Hanson has been a director of Fall River Rural Electric Cooperative in Ashton, Idaho, since 2005. From 1968 until
2001 Mr. Hanson served as a cooperative extension agent for the University of Idaho and University of Wyoming. He also
chaired the Idaho Consumer-Owned Utilities Association Nominating Committee from 2013 until 2014. As a director of
Fall River Rural Electric Cooperative, Mr. Hanson has acquired extensive experience with and knowledge of the rural
electric cooperative industry and, therefore, we believe Mr. Hanson has the qualifications, skills and experience necessary to
act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Hayward has served as the general manager and CEO of North East Mississippi Electric Power Association in Oxford,
Mississippi, since February 2014. From July 2004 to January 2014, he served as its manager of Engineering and Operations.
Mr. Hayward has also served as a director of SEDC, a software cooperative in Atlanta, Georgia, since 2014. As the general
manager and CEO of North East Mississippi Electric Power Association, Mr. Hayward has acquired extensive experience
with and knowledge of the rural electric cooperative industry and, therefore, we believe Mr. Hayward has the qualifications,
skills and experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Heinen has been general manager of Jefferson Davis Electric Cooperative, Inc. in Jennings, Louisiana, since 1999. He
has also served as a director of the Association of Louisiana Electric Cooperatives in Baton Rouge, Louisiana, since 1999.
As the general manager of Jefferson Davis Electric Cooperative, Inc., Mr. Heinen has acquired extensive experience with
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and knowledge of the rural electric cooperative industry and, therefore, we believe Mr. Heinen has the qualifications, skills
and experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Janorschke has been the general manager at Homer Electric Association, Inc. in Homer, Alaska, since 2004. He has
also been the general manager of Alaska Electric and Energy Cooperative in Homer, Alaska, since 2004. Mr. Janorschke has
also served on the Board of Trustees of the Northwest Public Power Association in Vancouver, Washington, since 2014. As
the general manager of Homer Electric Association, Inc., Mr. Janorschke has acquired extensive experience with and
knowledge of the rural electric cooperative industry and, therefore, we believe Mr. Janorschke has the qualifications, skills
and experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. LaFoy has served as a director and the secretary-treasurer for Baldwin County Electric Membership Corporation in
Summerdale, Alabama, since July 2009. Mr. LaFoy is a Certified Public Accountant and since 1977 has owned and operated
the public accounting firm LaFoy & Associates. He is a founding organizer and has served as a member of the Southern
States Bank Board since August 2007. Mr. LaFoy also was a member of the Farmers National Bank Board of Opelika from
1989 to 2002 and the First American Bank Advisory Board from 2002 to 2006. Mr. LaFoy was a council member from 1981
until 1986 and president from 1985 until 1986 of the Alabama Society of Certified Public Accountants. He was also a
council member of the American Institute of Certified Public Accountants from 1986 until 1990. As a director and
secretary-treasurer of Baldwin County Electric Membership Corporation, Mr. LaFoy has acquired extensive experience with
and knowledge of the rural electric cooperative industry and, therefore, we believe Mr. LaFoy has the qualifications, skills
and experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Larson has served as a director of Slope Electric Cooperative, Inc. in New England, North Dakota, since June 2010,
and as a director of Upper Missouri Power Cooperative in Sidney, Montana, since April 2000. Mr. Larson has served as an
advisory board member of Dakotas America since September 2017, a director of Innovative Energy Alliance since January
2019 and a director of Maintenance Solutions Cooperative since January 2019, each of which provides services to electric
cooperatives. In addition to being a self-employed rancher since 1986 and a supervisor at Adams County Soil Conservation
District in Hetlinger, North Dakota since February 2020, Mr. Larson was an ambulatory care officer at West River Health
Services from August 2016 to September 2019, and an agricultural banker at Dacotah Bank from October 2012 to January
2015. As a director of Slope Electric Cooperative, Inc., Mr. Larson has acquired extensive experience with and knowledge
of the rural electric cooperative industry and, therefore, we believe Mr. Larson has the qualifications, skills and experience
necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. McRae has served as a director of McCone Electric Cooperative, Inc. in Circle, Montana, since 2009. He has also
served as an alternate director of Central Montana Electric Power Cooperative, Inc. in Great Falls, Montana, from March
2018 to March 2021. Mr. McRae has served as a director of the Montana Electric Cooperatives’ Association, Inc. in Great
Falls, Montana, since 2011 and has served as its board president since 2013. He has been a self-employed rancher since
1989. As a director of McCone Electric Cooperative, Inc., Mr. McRae has acquired extensive experience with and
knowledge of the rural electric cooperative industry and, therefore, we believe Mr. McRae has the qualifications, skills and
experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Metcalf has been president and CEO of Mid-Ohio Energy Cooperative Inc. in Kenton, Ohio, since 2004. He has also
served as a director and vice chairman of Buckeye Power Inc. in Columbus, Ohio, since 2004, and has served on its Audit
Committee since 2016. As the president and CEO of Mid-Ohio Energy Cooperative Inc., Mr. Metcalf has acquired extensive
experience with and knowledge of the rural electric cooperative industry and, therefore, we believe Mr. Metcalf has the
qualifications, skills and experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Montgomery has been general manager and CEO of Fort Belknap Electric Cooperative, Inc. in Olney, Texas, since
August 2003. Additionally, Mr. Montgomery has been CEO of Fort Belknap Services Corporation, since August 2003, and
CEO of Link Field Services, Inc. since August 2003, each subsidiaries of Fort Belknap Electric Cooperative, Inc. Mr.
Montgomery has been an alternate director of Brazos Electric Power Cooperative, Inc. in Waco, Texas, since August 2003.
He has also been a Certified Public Accountant since 1988. As the general manager and CEO of Fort Belknap Electric
Cooperative, Inc., Mr. Montgomery has acquired extensive experience with and knowledge of the rural electric cooperative
industry and, therefore, we believe Mr. Montgomery has the qualifications, skills and experience necessary to act in the best
interests of CFC and to serve as a director on the CFC board.
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Mr. Norton has served as a director of Snapping Shoals Electric Membership Corporation in Covington, Georgia, since
1993. Mr. Norton has also served as a director at Georgia Electric Membership Corporation in Tucker, Georgia, since 2009
and Georgia System Operations Corporation in Tucker, Georgia, since 2012. Mr. Norton has owned and operated Conyers
Pharmacy in Conyers, Georgia from 1982 to 2018. As a director of Snapping Shoals Electric Membership Corporation, Mr.
Norton has acquired extensive experience with and knowledge of the rural electric cooperative industry and, therefore, we
believe Mr. Norton has the qualifications, skills and experience necessary to act in the best interests of CFC and to serve as a
director on the CFC board.
Mr. Rehder has served as a director of North West Rural Electric Cooperative in Orange City, Iowa, since 2005, and has
served as its board president since 2012. He has served as a director of Rivers Edge Bank, in Marion, South Dakota, since
2007. Since 2007, he has also served as a director of First State Associates, a bank holding company in Hawarden, Iowa and
has served as its chairman since 2012. Since 2010, he has served as president of Rehder Farms Inc. and director of 3R
Feedlots Inc. in Hawarden, Iowa. As a director of North West Rural Electric Cooperative, Mr. Rehder has acquired
extensive experience with and knowledge of the rural electric cooperative industry and, therefore, we believe Mr. Rehder
has the qualifications, skills and experience necessary to act in the best interests of CFC and to serve as a director on the
CFC board.
Mr. Schardin has served as general manager of Southeastern Electric Cooperative in Marion, South Dakota, since 1990. He
chaired the Managers Advisory Committee for his cooperative’s wholesale power supplier, East River Electric Power
Cooperative from January 2013 to 2015 and at the same time was a member of the Basin Electric Power Cooperative
Managers Advisory Committee. Mr. Schardin has also been a member of the South Dakota Rural Electric Association
Strategic Issues Committee since 2005, having served terms as president, vice president, secretary and treasurer of the
committee during that time. He has also served as a director on the Rural Electric Economic Development Fund Board of
Directors since 1996. As general manager of Southeastern Electric Cooperative, Mr. Schardin has acquired extensive
experience with and knowledge of the rural electric cooperative industry and, therefore, we believe Mr. Schardin has the
qualifications, skills and experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Suggs has served as Executive Vice President and General Manager of Pitt & Greene Electric Membership Cooperative
in Farmville, North Carolina, since September 1983. Mr. Suggs has served as a director of North Carolina Electric
Membership Corporation in Raleigh, North Carolina since 1984 and served as its President from 2015 to 2017. He has also
served as a director of North Carolina Association of Electric Cooperatives in Raleigh, North Carolina since 1984 and
served as its President from 2010 to 2011. Additionally, Mr. Suggs has served as a director of Tarheel Electric Membership
Association in Raleigh, North Carolina, since 1984. As Executive Vice President and General Manager of Pitt & Greene
Electric Membership Cooperative, Mr. Suggs has acquired extensive experience with and knowledge of the rural electric
cooperative industry and, therefore, we believe Mr. Suggs has the qualifications, skills and experience necessary to act in the
best interests of CFC and to serve as a director on the CFC board.
Mrs. Thompson has served as a director of Trico Electric Cooperative in Mariana, Arizona, since 2001, and has served as
vice president of the board since 2019. Mrs. Thompson also serves as a member of Trico Electric Cooperative’s Audit and
Finance Committee and served as its chair from 2013 until 2015. Additionally, Mrs. Thompson has been a director of Grand
Canyon State Electric Cooperative Association since 2002 and served as its board president from 2008 to 2010. As vice
president of the board and a director of Trico Electric Cooperative, Mrs. Thompson has acquired extensive experience with
and knowledge of the rural electric cooperative industry and, therefore, we believe Mrs. Thompson has the qualifications,
skills and experience necessary to act in the best interests of CFC and to serve as a director on the CFC board.
Mr. Ware has been president and CEO of Licking Rural Electrification-The Energy Cooperative in Newark, Ohio, since
2012. Mr. Ware was the vice president and CFO of Licking Rural Electrification-The Energy Cooperative from 2000 until
2011. In May 2019, Mr. Ware was elected as a director of Farmer Mac, a federally chartered and publicly traded corporation
that provides a secondary market for a variety of loans made to borrowers in rural America, where he serves on the Audit
and Enterprise Risk Committees. He served as a director of Licking County United Way and Genesis Healthcare Foundation
from 2009 to 2018. He also served as a director of Altheirs Oil Inc. since 2005, the cooperative’s wholesale power supplier,
Buckeye Power Cooperative, since 2012, and The Ohio State University-Newark Advisory Board since 2016, where he
currently serves as vice-chairman. He is also a member of the Buckeye Power Cooperative Executive and Rate Committees
and the American Gas Association Leadership Council. As president and CEO of Licking Rural Electrification-The Energy
Cooperative, Mr. Ware has acquired extensive experience with and knowledge of the rural electric cooperative industry and,
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therefore, we believe Mr. Ware has the qualifications, skills and experience necessary to act in the best interests of CFC and
to serve as a director on the CFC board.
Executive Officers
Mr. Don joined CFC in September 1999 as Director of Loan Syndications and became Vice President of Capital Market
Relations in June 2005. In June 2010, Mr. Don was named CFC’s Senior Vice President and Treasurer, and on July 1, 2013,
he became Senior Vice President and Chief Financial Officer. Effective May 3, 2021, Mr. Don assumed the position of
Chief Executive Officer. Prior to joining CFC, he held the position of Vice President and Manager of the Washington, D.C.
Office for The Bank of Tokyo-Mitsubishi. Mr. Don started his banking career with the Bank of Montreal in New York in
1984 and subsequently was a Vice President for Corporate Banking for The Bank of New York from 1987 to 1990.
Ms. Wang first joined CFC in 1999. During her 22-year tenure, Ms. Wang has held various positions within the Company’s
finance department. Ms. Wang has been Vice President, Capital Markets since June 2017 after having served as Vice
President, Capital Markets Relations since June 2012. Effective May 3, 2021, Ms. Wang became Senior Vice President and
Chief Financial Officer.
Mr. Allen joined CFC in 1990. Throughout his career with CFC, Mr. Allen has held various positions. He served as a
Director, Portfolio Management through 2010 and as Vice President, Portfolio Management from 2010 until April 2014,
when he became Senior Vice President, Member Services.
Ms. Aronson joined CFC in 1995. She served as Vice President and Deputy General Counsel until June 2013. Effective July
1, 2013, Ms. Aronson became Senior Vice President and General Counsel. Prior to joining CFC, Ms. Aronson was a partner
at the law firm of Thompson Hine LLP.
Mr. Captain joined CFC in 1999. He served as Vice President, Government Relations until 2010 when he became Vice
President, Corporate Communications. In January 2014, Mr. Captain served as Vice President, Corporate Relations until
April 2014 when he became Senior Vice President, Corporate Relations. Effective June 1, 2021, Mr. Captain became Senior
Vice President and Chief Corporate Affairs Officer. Prior to joining CFC, he worked as a Special Assistant to the
Undersecretary of Rural Development at the U.S. Department of Agriculture.
Mr. Saleh first joined CFC in August 1997 in the Treasury and Finance Group. He became the Director of Risk
Management before leaving in November 2005 to pursue a career as Director of Asset-Liability Management at
CapitalSource Inc., followed by an appointment as Director and Financial Industry Fellow at the Financial Industry
Regulatory Authority in Washington, D.C., in October 2009. Mr. Saleh went abroad in December 2010 to focus on
international banking supervision, financial industry regulation and financial stability analysis prior to returning to CFC in
September 2016 as Vice President of Financial Risk Management. Effective June 1, 2021, Mr. Saleh was named the Senior
Vice President and Chief Risk Officer.
Mr. Bradbury joined CFC in May 2001 as the Vice President, Internal Audit. Effective June 1, 2021, Mr. Bradbury became
the Senior Vice President, Corporate Services. Prior to working at CFC, Mr. Bradbury was an Internal Audit Services
Manager at PricewaterhouseCoopers from June 1998 to May 2001.
Ms. Clendenen joined CFC in 1982. Throughout her career with CFC, Ms. Clendenen has held various positions. She
served as Vice President, Human Resources until February 2012. In February 2012, she became Vice President, Human
Resources & Corporate Services until April 2014. In April 2014, she became Senior Vice President, Corporate Services. On
December 17, 2018, Ms. Clendenen was named Senior Vice President and Chief Administrative Officer. Ms. Clendenen
retired from CFC on June 30, 2021.
Mr. Borak joined CFC in June 2002 as Senior Vice President, Credit Risk Management. Previously, he was with Fleet
National Bank, Boston, Massachusetts, from 1992 to 2001 where he was a senior credit officer with risk management and
had loan approval responsibility for several industry banking portfolios including investor-owned utilities. Prior assignments
at Fleet in Hartford, Connecticut, included Manager of Credit Review and Manager of Loan Workout. Mr. Borak retired
from CFC on July 30, 2021.
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Ms. Reed joined CFC in 1987. She served as Vice President, Portfolio Management from 2002 until 2014. On April 16,
2014, Ms. Reed became Senior Vice President, Member Services. On September 14, 2015, Ms. Reed became Senior Vice
President, Loan Operations. Ms. Reed retired from CFC on May 31, 2021.
(f) Involvement in Certain Legal Proceedings
None to our knowledge.
(g) Promoters and Control Persons
Not applicable.
(h) Code of Ethics
We have adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-K. This Code of Ethics applies to our
principal executive officer, principal financial officer and principal accounting officer. This Code of Ethics is publicly
available on our website at www.nrucfc.coop (under the link “Investor Relations/Corporate Governance”).
(i) Nominating Committee
Our board of directors does not have a standing nominating committee. As described above under “Item 10(a) Directors,” 20
of our directors are each elected by members in the district for which the director serves. To nominate director candidates, at
the district meeting before the meeting at which candidates are to be elected from such district, a nominating committee is
elected composed of one person from each state within the district. Each member of these nominating committees must be a
trustee, director or manager of one of our members. Each district nominating committee then submits the names of two or
more nominees for each position in the district for which an election is to be held. We provide members of nominating
committees with director guidelines to use in reviewing applications from potential candidates. One or more candidates for
the at-large director position who satisfies the requirements of an audit committee financial expert are nominated by our
board of directors if the board determines that it is appropriate to fill the seat. Our board of directors believes that it is
appropriate for the full board of directors to nominate this director because of the position’s specific qualification
requirements and the lack of any local district qualification requirement.
While we do not have a formal policy regarding diversity, the director guidelines we provide to each district nominating
committee specify that a variety of perspectives, opinions and backgrounds is critical to the board’s ability to perform its
duties and various roles. We recognize the value of having a board that encompasses a broad range of skills, expertise,
industry knowledge and diversity of professional and personal experience.
(j) Audit Committee
Our Audit Committee currently consists of 14 directors: Mrs. Hampton (Chairperson), Mr. Suggs (Vice Chairperson), Mr.
Wattles (Ex Officio), Mr. Anderson, Mr. Echternach, Mr. Eldridge, Mr. Felkel, Mr. Heinen, Mr. Janorschke, Mr. McRae,
Mr. Metcalf, Mr. Montgomery, Mr. Rehder and Mr. Vitosh. Mrs. Hampton was designated by the board as an “audit
committee financial expert” as defined by Section 407 of the Sarbanes-Oxley Act of 2002. The members of the Audit
Committee are “independent” as that term is defined in Rule 10A-3 under the Securities Exchange Act. Among other things,
the Audit Committee reviews our financial statements and the disclosure under “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K. The Audit Committee
meets with our independent registered public accounting firm, internal auditors, CEO and financial management executives
to review the scope and results of audits and recommendations made by those persons with respect to internal and external
accounting controls and specific accounting and financial reporting issues and to assess corporate risk. The board has
adopted a written charter for the Audit Committee that may be found on our website, www.nrucfc.coop (under the link
“Investor Relations/Corporate Governance”).
The Audit Committee completed its review and discussions with management regarding our audited financial statements for
the year ended May 31, 2021. The Audit Committee has discussed with the independent auditors the matters required to be
discussed by Auditing Standard No. 1301, and received from the independent accountants written disclosures and the letter
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from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board
regarding the independent accountant’s communications with the Audit Committee concerning independence, and discussed
with the accountants their independence.
Based on the review and discussions noted above, the Audit Committee recommended to the board that the audited financial
statements be included in our Annual Report on Form 10-K for the year ended May 31, 2021 for filing with the U.S.
Securities and Exchange Commission.
(k) Compensation Committee
Role of the Compensation Committee
Our Compensation Committee currently consists of seven directors: Mr. Wattles, Mr. Vitosh, Mr. Felkel, Mrs. Hampton,
Mr. Fulk, Mr. Norton and Mr. Larson. The Compensation Committee of the board of directors reviews and makes
appropriate recommendations to the full board of directors regarding CFC’s total compensation philosophy and pay
components, including, but not limited to, base and incentive pay programs. The Compensation Committee is also
responsible for approving the compensation, employment agreements and perquisites for the CEO. The Compensation
Committee annually reviews all approved corporate goals and objectives relevant to compensation, evaluates performance in
light of those goals and approves the CEO’s compensation based on this evaluation, all of which is then submitted to the full
board of directors for ratification. The Compensation Committee has delegated authority to the CEO for evaluating the
performance and approving the annual base compensation for all of the other named executive officers as identified in the
“Summary Compensation Table” below. Other than the CEO, no other named executive officer makes decisions regarding
executive compensation.
The Compensation Committee reports to the board of directors on its actions and recommendations following committee
meetings and meets in executive session without members of management present when making specific compensation
decisions. Although the board has delegated authority to the Compensation Committee with respect to CFC’s executive and
general employee compensation programs and practices, the full board of directors also reviews and ratifies CFC’s
compensation and benefit programs each year.
The Compensation Committee’s charter can be found on our website at www.nrucfc.coop (under the link “Investor
Relations/Corporate Governance”).
The Compensation Committee’s Processes
The Compensation Committee has established a process to assist it in ensuring that CFC’s executive compensation program
is achieving its objectives. Prior to the start of each fiscal year, the board of directors approves performance measures for the
“corporate balanced scorecard,” which is the basis for the short-term incentive plan, and the specific goal and metrics for the
long-term incentive plan. The Compensation Committee reviews and assesses the accomplishment of goals as of the end of
the fiscal year and determines whether to authorize the payment of incentive compensation. This authorization is then
submitted to the full board of directors for ratification.
The President, Vice President and Secretary-Treasurer of the board of directors meet annually with the CEO to review his
performance based on his individual achievements, contribution to CFC’s performance and other leadership
accomplishments. In determining former CEO Mr. Petersen’s base pay, the Compensation Committee subjectively considers
a variety of corporate performance measures, including financial metrics, portfolio management, customer satisfaction and
market share, industry leadership, and peer group compensation data provided by the compensation consultant, as discussed
below.
Role of Compensation Consultant
In fiscal year 2021, the Compensation Committee hired Mercer (US) Inc. (“Mercer US”) to advise it on the CEO’s
compensation as compared with the compensation of CEOs of peer group organizations. Through discussions with the
Compensation Committee, Mercer US established a peer group of companies to use in assessing the competitiveness of the
CEO’s compensation (see “Compensation Analysis” in the “Compensation Discussion and Analysis” section below).
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Mercer US advised the Compensation Committee through an assessment of compensation data from this peer group using a
one-year compensation analysis, which assesses CFC’s CEO compensation and the compensation of peer CEOs for the most
recent fiscal year. The elements of compensation reviewed include current base pay, target and actual annual incentives,
actual long-term incentive granted as well as long-term incentive payouts, and total direct compensation. Mercer US did not
determine or provide the Compensation Committee with a specific recommendation on any component of executive
compensation; it only reviewed benchmark data and discussed what is generally occurring with executive compensation.
Mercer US did not provide any other service to CFC in fiscal year 2021.
In fiscal year 2021, the Compensation Committee conducted an evaluation of Mercer US’ independence considering the
relevant regulations of the U.S. Securities and Exchange Commission and the listing standards of the New York Stock
Exchange, and concluded that the services performed by Mercer US raised no conflicts of interest.
Role of Executive Officers
As described above, the Compensation Committee has delegated the authority for making base pay decisions for the other
named executive officers to the CEO. The CEO exercises his judgment to set base pay rates, based on general market data,
overall corporate performance and leadership accomplishments. For additional information about the CEO’s role in
compensation decisions, see “Base Pay” under the “Compensation Discussion and Analysis” section below.
(l) Section 16(a) Beneficial Ownership Reporting Compliance
Not applicable.
(m) Board Leadership Structure and Role of Risk Oversight by the Board of Directors
Board Leadership Structure
The positions of CEO and president of the CFC Board of Directors are held by two separate individuals. The president must
be a member of the board of directors and is elected annually by the board of directors. The president of the CFC Board of
Directors has authority, among other things, to appoint members of the board to standing committees, to appoint a vice
chairperson to each board standing committee and to appoint members to ad-hoc board committees. The president of the
board presides over board meetings, sets meeting agendas and determines materials to be distributed to the board.
Accordingly, the board president has substantial ability to influence the direction of the board. CFC believes that separation
of the positions of board president and CEO reinforces the independence of the board in its oversight of CFC’s business and
affairs. CFC also believes that this leadership structure is appropriate in light of the cooperative nature of the organization.
The board of directors appoints the CEO. The CEO is not a member of the board of directors. If the CEO position becomes
vacant, the board of directors will appoint an interim CEO who will exercise the responsibilities of the CEO until a
permanent CEO is selected by the board of directors.
Board Role in Risk Oversight
The board of directors has primary responsibility for the oversight and strategic direction of risk management. The board of
directors has adopted a comprehensive risk-management policy that describes the roles and responsibilities of the board and
management within an established framework for identifying and managing risks. The board of directors reviews the risk-
management policy annually and updates it accordingly. The board of directors has developed a risk-management
philosophy, which is reviewed and, if appropriate, updated annually. It states CFC’s set of shared beliefs and attitudes on
how risk is considered from strategy development and implementation to our operations.
The board of directors has also established a risk appetite statement that includes a common understanding between the
board of directors and management regarding acceptable risks and risk tolerances underlying the execution of CFC’s
strategy. The board of directors reviews the risk appetite on at least an annual basis. The risk appetite is also intended as a
benchmark for discussing the implications of pursuing new strategies and business opportunities.
The board of directors has also approved and authorized an Enterprise Risk Management (“ERM”) program for CFC that
provides a holistic view of key risks that may impact CFC’s strategic objectives. ERM provides CFC with a process that
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allows CFC to become more anticipatory and effective at evaluating and managing uncertainties. The ERM activities, which
include risk surveys, risk assessments and risk analyses, are executed within the context of CFC’s strategic objectives,
mission, values, culture, risk-management philosophy and risk appetite. The program provides a consistent approach for
identifying CFC’s key risks and determining appropriate responses in light of the board of directors’ strategic objectives,
risk appetite and tolerances. As part of the ERM program and the board of directors’ strategic planning process, the board of
directors periodically participates in a risk assessment process in order to evaluate each risk identified as part of the ERM
program on the basis of likelihood and impact, and prioritizes the risks in order to effectively manage CFC’s most critical
risks. Management has primary responsibility for the execution of the ERM program in accordance with the risk philosophy,
risk appetite and risk tolerances of the board of directors. Additionally, management is responsible for regularly evaluating
the ERM program, making regular reports to the board of directors about its evaluation of the ERM program, and proposing
to the board of directors changes to the ERM program to reflect best practices.
In fulfilling its risk-management oversight duties, the board of directors receives periodic reports on business activities and
risk-management activities from management and from various operating groups and committees across the organization,
including the Credit Risk Management, the Member Services, the Treasury, the Internal Audit, the Business Technology
Services and the Legal Services groups, as well as Corporate Compliance, the Asset Liability Committee, the Corporate
Credit Committee, the Investment Management Committee and the Disclosure Committee. Management provides reports to
the board of directors at each regularly scheduled board meeting, and more frequently as requested by the board of directors,
relating to, among other things, the ongoing progress of managing risk at CFC through the ERM program, management’s
responses for the critical business risks identified during each risk assessment process and the status of any gaps or
deficiencies, and CFC’s risk profile and trends, as well as emerging risks and opportunities.
The board of directors places particular emphasis on the oversight of cybersecurity risks. Each quarter, or more frequently as
requested by the board of directors, management provides reports on CFC’s security operations, including any cybersecurity
incidents, management’s efforts to manage any incidents, and any other information requested from management. On at
least an annual basis, the board of directors reviews management reports concerning the disclosure controls and procedures
in place to enable CFC to make accurate and timely disclosures about any material cybersecurity events. Additionally, upon
the occurrence of a material cybersecurity incident, the board of directors will be notified of the event so it may properly
evaluate such incident, including management’s remediation plan.
Item 11. Executive Compensation
Compensation Discussion and Analysis
Executive Compensation Philosophy and Objectives
The components of our compensation package for the named executive officers (consisting of Messrs. Petersen, Don,
Starheim and Allen and Mses. Wang and Aronson) are consistent with those offered to all employees.
Our executive compensation program provides a balanced mix of compensation that incorporates the following key
components:
• annual base pay;
• an annual cash incentive that is based on the achievement of short-term (one-year) corporate goals;
• a three-year cash incentive that is based on the achievement of long-term corporate goals; and
• retirement, health and welfare and other benefit programs.
While all elements of executive compensation work together to provide a competitive compensation package, each element
of compensation is determined independently of the other elements.
Our compensation philosophy is to provide a total compensation package for employees—base pay, short-term incentive,
long-term incentive and benefits—that is competitive in the local employment market. However, due to the cooperative
nature of the organization, CFC does not meet the total cash compensation levels of named executive officers of other
financial services organizations since we do not offer stock or other equity compensation. It is important to CFC, however,
to pay the named executive officers of CFC competitively in base pay to retain key talent.
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Performance—Named executive officers receive base pay that is both market competitive and reflective of their role in
developing, implementing and overseeing CFC’s strategy and operations. Other components of compensation—short-term
and long-term incentives—reflect the performance of the organization and its success in achieving corporate performance
metrics established by the board of directors.
Retention—CFC’s success is due in large part to the relationship between our employees and our members. This makes the
retention of employees, including the named executive officers, vital to our business and long-term success. The
compensation package, particularly the long-term incentive plan and the retirement benefits, assist in the retention of a
highly qualified management team.
Compensation Analysis
In fiscal year 2021, Mercer (US), Inc. (“Mercer US”) was engaged by the Compensation Committee to conduct a survey to
provide compensation data for the CEO position using 14 peer organizations identified by Mercer US through discussions
with the Compensation Committee. Mercer US included companies in the peer group that were similar to CFC in asset size,
industry and business description. The peer group included financial institutions that are private market, commercial and/or
mission-driven lenders, offering full-service financing, investment and related services. The companies targeted as peer
companies included two members of the Farm Credit System and 12 regional banks and financial services companies.
The peer group companies had assets ranging from approximately 50% to 200% of CFC’s May 31, 2020 total assets of
$28.2 billion, and included eight companies with greater total assets than CFC’s. The peer group consisted of financial
services organizations New York Community Bancorp, Inc.; Signature Bank; Nelnet, Inc.; Webster Financial Corporation;
Flagstar Bancorp, Inc.; People’s United Financial, Inc.; Hancock Whitney Corporation; Onemain Holdings, Inc.;
BankUnited, Inc.; Synovus Financial Corporation; TFS Financial Corporation; and Federal Agricultural Mortgage
Corporation, as well as two Farm Credit System peers.
Mercer US led the Compensation Committee through an assessment of CEO compensation data for the peer group
companies. Mercer US’ data included both actual compensation and target compensation based on information obtained
from each peer group company’s most recent annual report or proxy statement.
The elements of compensation reviewed include:
• current base salary;
• target and actual annual incentive paid in fiscal year 2020;
• actual long-term incentive granted, which includes restricted stock awards (valued at face value on the date of grant),
stock option awards (valued at grant date utilizing the Black-Scholes option pricing model), other long-term incentive
target awards (valued at target value on date of award) and cash long-term incentive payouts (valued at actual payout on
date of award if target value is not disclosed);
• sign-on awards, special awards and mega-grants annualized over the term of the employment contract or the vesting
schedule; and
• annualized value of retirement, perquisites and other noncash compensation.
The Compensation Committee reviewed total compensation data for the peer group for informational purposes and used this
data solely to determine the competitiveness of our CEO base pay.
In determining the base compensation paid to our other named executive officers, the CEO reviewed national, credible third-
party compensation surveys (including the Mercer US Executive and CompAnalyst surveys) for financial services and other
organizations of similar asset size as CFC in order to obtain a general understanding of current compensation practices and
to ensure that the base pay component of compensation for the named executive officers other than the CEO is competitive
with such institutions. CFC has often recruited non-CEO talent from industries outside the financial services sector. As a
result, the CEO considers data from surveys covering a larger and broader group of for-profit companies in setting
compensation for the other named executive officers than the Compensation Committee considers in setting compensation
for the CEO. The CEO considered the data to gain a general understanding of current compensation practices at institutions
of similar asset size to CFC; he did not review or consider underlying data pertaining to individual organizations comprising
any of the survey groups. Instead, the CEO considered the aggregate compensation data to enhance his understanding of
current practices in setting compensation at competitive levels.
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Elements of Compensation
Base Pay—Our philosophy is to provide annual base pay that reflects the value of the job in the marketplace, targeted at the
50th percentile. To attract and retain a highly skilled workforce, we must remain competitive with the pay of other
employers that compete with us for talent.
After reviewing the performance of the organization and the evaluation of Mr. Petersen’s performance, the CEO at the time,
by each board member, it was the assessment of the Compensation Committee that the CEO and the organization performed
extremely well during this business year. In fact, the business results met or exceeded company targets for many key metrics
of performance, and the CEO continued to demonstrate outstanding leadership. Therefore, in recognition of his strong
performance and leadership, the Committee increased Mr. Petersen’s base pay to $1,286,000 effective January 1, 2021.
Effective May 3, 2021, Mr. Don became CEO following Mr. Petersen’s retirement. Mr. Don’s base pay as CEO was
determined to be $1,000,000.
As discussed under “Compensation Analysis” above, Mr. Petersen, in his then capacity as the CEO, exercised his judgment
to set the annual base pay for the other named executive officers based on general market data, overall company
performance and individual leadership accomplishments.
Mr. Petersen determined that Mr. Don, Mr. Starheim, Ms. Aronson and Mr. Allen all performed well in their various roles as
senior leaders of the organization. They each contributed to the achievement of corporate strategies and objectives in a
positive and meaningful way that would typically warrant a merit-based increase in base pay. Mr. Allen, Mr. Don, Mr.
Starheim and Ms. Aronson received a merit increase. In May 2021, Mr. Don became CEO and Ms. Wang became CFO. At
that time, Mr. Don, as the CEO, exercised his judgment to set the annual base pay for Ms. Wang as CFO. The increases are
included in the total compensation table below.
Short-Term Incentive—Our short-term cash incentive program is a one-year cash incentive that is tied to the annual
performance of the organization as a whole. We believe that by paying a short-term incentive tied to the achievement of
annual operating goals, all employees, including named executive officers, will focus their efforts on the most important
strategic objectives that will help us fulfill our mission to our members and our obligations to the financial markets.
Additionally, the short-term incentive pay enhances our ability to provide competitive compensation while at the same time
tying total compensation paid to the achievement of corporate goals. Every employee participates in the short-term incentive
program, and the corporate strategic goals are the same for all employees, including the named executive officers. The short-
term incentive program provides annual cash incentive opportunities based upon the level of the position within our base
pay structure, ranging from 15% to 25% of base pay. Named executive officers are eligible to receive short-term cash
incentive compensation up to 25% of their base pay. Over the last 10 years, the actual payout percentage has ranged from
52.5% to 100% of total opportunity, with an average over the 10 years of 83.75%. This equates to a 10-year average payout
of 15.97% of base salaries for all employees.
Our approach to establishing corporate goals for short-term incentive compensation has not changed since the plan’s
inception. Corporate performance is measured using a balanced scorecard approved by the board of directors prior to the
start of the fiscal year. The balanced scorecard is a performance management tool that articulates the corporate strategy into
specific, quantifiable and measurable goals. The goals have always been tied to enhancing service to our member-owners
while ensuring all aspects of the business are effectively managed.
The scorecard is divided into four quadrants, reflecting crucial areas of business performance. Specific goals are established
within those quadrants to focus all employees on the target results and measures that must be achieved if we are to succeed
at realizing our strategic plan. The intent is to align organizational, departmental and individual initiatives to achieve a
common set of goals.
The four quadrants for fiscal year 2021, which were the basis for the short-term incentive payment, were: Operational
Excellence; Customer Engagement; Financial Ratios; and Internal Process. For fiscal year 2021, the board of directors
established six corporate goals within these four quadrants. The board of directors establishes corporate goals and measures
they believe are challenging but achievable if each individual performs well in their role and we meet our internal business
plan goals.
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The goals for fiscal year 2021 were:
• Operational Excellence: One goal focusing on maintaining our financial position and meeting the credit needs of our
members.
• Customer Engagement: Two goals supporting our efforts to maintain or increase market share of borrowers in key
segments of the loan portfolio.
• Financial Ratios: Two goals supporting efforts to meet or exceed established financial targets to maintain CFC’s financial
strength.
• Internal Process and Operations: One goal focused on managing CFC’s operating expense levels.
The determination of the extent to which the six goals were achieved and, therefore, the amount to be paid out under the
short-term incentive plan for fiscal year 2021, was confirmed by the board of directors in July 2021. The board determined
that five goals were achieved at 100% and one was not met. Each goal carries a different weight varying between 5% and
75%, resulting in an aggregate payout of 95% of the total opportunity.
Long-Term Incentive—The long-term incentive program is a three-year plan that is tied to CFC’s long-term strategic
objectives. The long-term incentive program was implemented to create dynamic tension between short-term objectives and
long-term goals. It is also an effective retention tool, helping us to keep key employees, and supports CFC’s efforts to
compensate its employees at market-competitive levels.
All individuals employed by CFC on the first day of each fiscal year in which there is a long-term incentive plan in place,
June 1, are eligible to participate in the program for the performance period beginning on that date. Under the long-term
incentive program, performance units covering a three-year performance period are issued to each employee at the start of
each fiscal year. The long-term incentive is paid out in one lump-sum cash payment after the end of the performance period,
subject to approval by the board of directors and the continued employment (or retirement, disability or death) of the
participant by CFC on the date of payment. We sometimes refer to each three-year performance period as a plan cycle.
The performance measure for the active long-term incentive plans is the achievement of bond rating targets for our issuer
credit ratings as rated by S&P Global Inc., Fitch Ratings Inc. and Moody’s Investors Service rating agencies, as outlined in
each plan document. The value of the performance units ranges from $0 to $150 per performance unit according to the level
of CFC’s issuer credit ratings by the rating agencies. To achieve the highest value of $150, which exceeds the targeted
value, the agencies defined in each plan would have to raise CFC’s issuer credit rating to AA (or the equivalent rating at
Moody’s). To determine the payout value of performance units, the ratings by agencies identified in each plan are given a
numerical value, i.e., 2 for A stable, 3 for A positive, etc. The ratings of these agencies are then averaged to achieve the final
value of the performance units.
The number of performance units awarded to each employee for each plan cycle is calculated by dividing a percentage,
ranging from 15% to 25%, of the participant’s base pay for the first fiscal year of the plan cycle by the payout value
assigned to the target rating level. For the program cycle ending May 31, 2021, the target rating level was “A+ Stable,”
which was assigned a payout value of $100 per performance unit. For the named executive officers, the number of
performance units awarded for that program cycle was based on 25% of each named executive officer’s base pay for fiscal
year 2019, the first year of the plan cycle. If the highest rating level was achieved at the end of that plan cycle, resulting in
payout of $150 per performance unit, the long-term incentive pay for named executive officers would have been 37.5% of
fiscal year 2019 base pay.
The following table presents the potential payout values for performance units awarded for the program cycles that end on
May 31, 2021, May 31, 2022 and May 31, 2023:
Issuer Credit Rating—Incentive-Performance Linkage
Rating
Outlook............................
Numerical Score...............
Plan Payout Unit Value....
Negative
1
$20
A
Stable
2
$40
Positive
3
$60
Negative
4
$60
A+
Stable
5
$100
Positive
6
$120
AA-
$150
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____________________________
* The target objective is in bold.
CFC uses our issuer credit rating as the performance measure for the long-term incentive plan because stronger ratings lead
to lower interest cost and more reliable access to the capital markets. We also believe our long-term incentive measure will
better align management’s interests with the interests of our members and investors. Since we have no publicly held equity
securities and our objective is to offer our members cost-based financial products and services consistent with sound
financial management rather than to maximize net income, more traditional performance measures such as net income or
earnings per share would not be appropriate.
As of May 31, 2021, there were three active long-term incentive plans in which named executive officers were participants.
Performance units issued to all named executive officers in fiscal year 2019 had a payout value based on our issuer credit
ratings in place on May 31, 2021. Performance units issued to all named executive officers in fiscal year 2020 will have a
payout value based on issuer credit ratings in place on May 31, 2022; and performance units issued to named executive
officers in fiscal year 2021 will have a payout value based on issuer credit ratings in place on May 31, 2023. The payout
values will be determined based on the table above or a table as amended within the plan by the CFC Board of Directors.
Performance units issued in fiscal year 2019 were paid based on the May 31, 2021 issuer credit ratings. Those ratings were
at an average numerical level of one. The table above previously assigned a value of $0 per performance unit for this level,
however, the CFC Board of Directors approved revisions to the three active long-term incentive plans to increase the
numerical value of one to $20 per performance unit or 20% of the targeted opportunity (5% of fiscal year 2019 base pay).
All current plans will pay out if the three rating agencies rate our issuer credit rating at a high enough level to receive a
payout. The payout will be based on the average of the numerical score associated with the three ratings in the table above
(averages are calculated and rounded down to the next whole number).
Risk Assessment
The Compensation Committee conducts an annual risk assessment of the company’s compensation policies and practices,
particularly the short-term and long-term incentive plan goals, to ensure that the policies and practices do not encourage
excessive risk. For fiscal year 2021 the Compensation Committee concluded that our compensation policies and practices
are not reasonably likely to provide incentives for behavior that could have a material adverse effect on the company.
Benefits
An important retention tool is our defined benefit pension plan, the Retirement Security Plan. CFC participates in a multiple-
employer pension plan managed by NRECA. We balance the effectiveness of this plan as a compensation and retention tool
with the cost of the annual premium incurred to participate in this pension plan. The value of the pension benefit is
determined by base pay only and does not include other cash compensation.
We also offer a Pension Restoration Plan (“PRP”) and an Executive Benefit Restoration Plan (“EBR”). The PRP is a plan
for a select group of management, to increase their retirement benefits above amounts available under the Retirement
Security Plan, which is restricted by Internal Revenue Service (“IRS”) limitations on annual pay levels and maximum
annual annuity benefits. The PRP restores the value of the Retirement Security Plan for named executive officers to the level
it would be if the IRS limits on annual pay and annual annuity benefits were not in place. The PRP was frozen as of
December 31, 2014. We then established the EBR to provide a similar benefit to a select group of management. A named
executive officer may participate in the PRP or the EBR. Unlike the Retirement Security Plan, the PRP and the EBR are
unfunded, unsecured obligations of CFC and are not qualified for tax purposes. Five of the named executive officers are
participants in either the PRP or the EBR.
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Under the PRP, we pay the amount owed to the named executive officers for the pension restoration benefit; amounts paid
are then deducted from the premium due for the next Retirement Security Plan invoice(s) to NRECA. Under the EBR, we
will also pay any amounts owed to the named executive officers for the restoration benefit once the risk of forfeiture has
expired; amounts will be paid directly by CFC. We record an unfunded pension obligation and an offsetting adjustment to
AOCI for this liability.
For more information on the Retirement Security Plan, the PRP and the EBR, see “Pension Benefits Table” below.
As an additional retention tool designed to assist named executive officers in deferring compensation for use in retirement,
each named executive officer is also eligible to participate in CFC’s nonqualified 457(b) deferred compensation savings
plan. Contributions to this plan are limited by IRS regulations. The calendar year 2021 cap for contributions is $19,500.
There is no CFC contribution to the deferred compensation plan. For more information see “Nonqualified Deferred
Compensation” below.
The CEO is eligible to earn retirement benefits in addition to those credited under any of the above-mentioned plans in a
Supplemental Executive Retirement Plan (“SERP”). This plan is an ineligible deferred compensation plan within the
meaning of section 457 of the Internal Revenue Code. The account is considered unfunded and may be credited from time to
time pursuant to the plan at the discretion of the CFC Board of Directors. During fiscal year 2021, the CFC Board of
Directors used its discretion and did not credit this account.
Other Compensation
We provide named executive officers with other benefits, as reflected in the All Other Compensation column in the
“Summary Compensation Table” below, that we believe are reasonable and consistent with our compensation philosophy.
We do not provide significant perquisites or personal benefits to the named executive officers.
The Compensation Committee considers perquisites for the CEO in connection with its annual review of the CEO’s total
compensation package described above. The perquisites provided to Mr. Petersen are limited to an annual automobile
allowance, an annual spousal air travel allowance to permit Mr. Petersen’s spouse to accompany him on business travel, and
home security. To provide the automobile and spousal travel perquisites in an efficient fashion, the board of directors
authorizes an annual allowance rather than providing unlimited reimbursement or use of a company-owned vehicle. The
amount of each allowance is authorized annually by the board of directors and is determined based on the estimated cost for
operation and maintenance of an automobile and the anticipated cost of air travel by the CEO’s spouse. For 2021, the board
of directors authorized an aggregate of $50,000 to cover these two allowances. We provide security for Mr. Petersen,
including security in addition to that provided at business facilities. We believe that all company-incurred security costs are
reasonable and necessary and for the company’s benefit.
Severance/Change-in-Control Agreements
Mr. Petersen, CEO through May 2, 2021, and Mr. Don in his role as CEO effective May 3, 2021, each have an executive
agreement with CFC under which they may continue to receive compensation and benefits in certain circumstances after
resignation or termination of employment. The value of their severance package was determined to be appropriate for a
CEO and approved by the Compensation Committee as part of their employment contract. No other named executive
officers have termination or change-in-control agreements. For more information on these severance arrangements, see
“Termination of Employment and Change-in-Control Arrangements” below.
Compensation Committee Report
The Compensation Committee of the board of directors oversees CFC’s compensation program on behalf of the board. In
fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the
“Compensation Discussion and Analysis” set forth in this Annual Report on Form 10-K. Based on this review and
discussion, the Compensation Committee recommended to the board of directors that the “Compensation Discussion and
Analysis” be included in this Form 10-K.
165
Submitted by the Compensation Committee:
David E. Felkel
Dennis R. Fulk
Barbara E. Hampton
Anthony Larson
G. Anthony Norton
Bruce A. Vitosh
Alan W. Wattles
Summary Compensation Table
The summary compensation table below sets forth the aggregate compensation for the fiscal years ended May 31, 2021,
2020 and 2019 earned by the named executive officers.
Name and Principal Position
Sheldon C. Petersen (5)...
Former Chief
Executive Officer
J. Andrew Don (5)...........
Chief Executive
Officer
Year
2021
2020
2019
2021
2020
2019
Salary
Bonus(1)
Non-Equity
Incentive Plan
Compensation(2)
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings (3)
All Other
Compensation(4)
Total
$ 1,136,833 $ — $
1,173,750
1,118,750
—
—
325,178 $
364,796
246,293
49,387 $
544,784
415,728
321,738 $ 1,833,136
2,131,128
47,798
1,821,641
40,870
560,166
493,500
470,000
—
—
10,000
156,500
155,015
105,688
624,196
648,386
49,564
8,241
7,296
8,125
1,349,103
1,304,197
643,377
Yu Ling Wang( 5)............
Senior Vice President
and Chief Financial
Officer
Gregory J. Starheim (5)...
Senior Vice President,
Business and Industry
Development
Roberta B. Aronson.......
Senior Vice President
and General Counsel
Joel Allen ......................
Senior Vice President,
Member Services
____________________________
2021
278,285
—
66,150
272,437
8,033
624,905
2021
2020
2019
2021
2020
2019
2021
2020
2019
496,292
493,500
459,750
—
—
10,000
478,000
451,000
406,250
—
—
10,000
420,000
396,000
360,000
—
—
—
—
153,015
101,454
133,645
139,306
90,794
117,750
122,383
80,490
1,402,300
553,962
113,379
353,556
10,981
8,292
2,252,148
1,211,458
692,875
—
591,013
114,130
709,253
788,933
5,218
5,925
5,942
5,646
617,570
1,187,261
626,820
8,400
7,400
9,125
1,255,403
1,314,716
454,833
(1)
(2)
(3)
Includes amounts given as one-time cash awards in lieu of or in addition to base pay increases. Details for 2021 can be found in “Elements of
Compensation” in “Compensation Discussion and Analysis” above.
Includes amounts earned during each respective fiscal year and payable as of May 31 under the long-term and short-term incentive plans. For a
discussion of the long-term and short-term incentive plans, see “Elements of Compensation” in “Compensation Discussion and Analysis” above. The
amounts earned by each named executive officer under these incentive plans are listed above.
Represents the aggregate change in the actuarial present value of the accumulated pension benefit under NRECA Retirement Security Plan, the multiple-
employer defined benefit pension plan in which CFC participates, during each respective fiscal year as calculated by NRECA. For Mr. Petersen, in fiscal
years 2019 and 2020 this also includes a payment from the SERP. For a discussion of the SERP, see “Benefits” in “Compensation Discussion and
Analysis” above. Ms. Aronson’s change in pension value was negative for fiscal year 2021 and is not included in total compensation.
166
(4)
(5)
For Mr. Petersen for fiscal year 2021, includes (i) perquisites comprising Mr. Petersen’s automobile allowance and his spousal air travel allowance
prorated through May 2, 2021 (ii) $3,615 representing the approximate aggregate incremental cost to the company for maintaining security arrangements
for Mr. Petersen in addition to security arrangements provided at the headquarters facility and (iii) payout for accrued and unused annual leave. We do
not believe this provides a personal benefit (other than the intended security) nor do we view these security arrangements as compensation to the
individual. We report these security arrangements as perquisites as required under applicable SEC rules. The annual automobile allowance is calculated
based on estimated costs associated with maintenance, use and insurance of a personal automobile. The annual spousal travel allowance is calculated
based on the anticipated air travel for Mrs. Petersen during the fiscal year. The remaining amounts included in this column represent CFC contributions
on behalf of each named executive officer pursuant to the CFC 401(k) defined contribution plan and contributions to health savings accounts. The
amount paid to Mr. Starheim included a lump-sum severance payment made at the end of his employment.
Mr. Petersen retired May 2, 2021. Mr. Don was appointed CEO effective May 3, 2021 and Ms. Wang was appointed CFO effective May 3, 2021. Mr.
Starheim’s employment ended effective May 15, 2021.
The following chart has the amounts paid to each named executive officer under the short-term and long-term incentive
plans for the preceding three years.
Name
Sheldon C. Petersen............
J. Andrew Don....................
Year
2021
2020
2019
2021
2020
2019
Short-Term
Incentive Plan
Long-Term
Incentive Plan
$
271,828 $
261,276
145,773
53,350
103,520
100,520
133,000
109,495
61,688
23,500
45,520
44,000
Yu Ling Wang....................
2021
54,150
12,000
Gregory J. Starheim............
Roberta B. Aronson............
Joel Allen............................
2021
2020
2019
2021
2020
2019
2021
2020
2019
Grants of Plan-Based Awards
—
109,495
60,454
113,525
100,066
53,274
99,750
87,863
47,250
—
43,520
41,000
20,120
39,240
37,520
18,000
34,520
33,240
We have a long-term and a short-term incentive plan for all employees, under which the named executive officers may
receive a cash incentive up to 37.5% and 25% of salary, respectively. The incentive payouts are based on the executive
officer’s salary for the fiscal year in which the program becomes effective. See the “Compensation Discussion and
Analysis” above for further information on these incentive plans.
The following table contains the estimated possible payouts under our short-term incentive plan and possible future payouts
for grants issued under our long-term incentive plan during the year ended May 31, 2021.
167
Name
Sheldon C. Petersen
Long-Term Incentive Plan (1).....
Short-Term Incentive Plan (2) ....
J. Andrew Don
Long-Term Incentive Plan (1).....
Short-Term Incentive Plan (2) ....
Yu Ling Wang
Long-Term Incentive Plan (1).....
Short-Term Incentive Plan (2) ....
Gregory J. Starheim (3)
Long-Term Incentive Plan (1).....
Short-Term Incentive Plan (2) ....
Roberta B. Aronson
Long-Term Incentive Plan (1).....
Short-Term Incentive Plan (2) ....
Joel Allen
Long-Term Incentive Plan (1).....
Short-Term Incentive Plan (2) ....
___________________________
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
Grant Date
Threshold
Target
Maximum
June 1, 2020
$
— $ 303,500 $ 455,250
321,500
—
321,500
June 1, 2020
June 1, 2020
June 1, 2020
June 1, 2020
June 1, 2020
—
—
130,800
250,000
196,200
250,000
67,000
100,000
100,500
100,000
—
—
—
—
119,500
119,500
179,250
119,500
105,000
105,000
157,500
105,000
—
—
—
—
—
—
(1)
(2)
(3)
Target payouts are calculated using unit values of $100 based on our goal of achieving an average long-term senior secured credit rating of A+ stable as
of May 31, 2023.
Target and maximum payouts represent 25% of May 31, 2021 base salary. For the payout earned under the fiscal year 2021 short-term incentive plan,
see the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table” above.
Mr. Starheim became ineligible to receive payouts or grants when his employment ended.
The board of directors approved a new long-term incentive plan cycle with grants of performance units effective June 1,
2021. The performance units will be calculated and issued to the named executive officers in August 2021. The payout
under these grants will be determined on May 31, 2024.
Employment Contracts
Pursuant to an employment agreement effective as of January 1, 2015, CFC employed Mr. Petersen as Chief Executive
Officer on a year-to-year basis, unless otherwise terminated in accordance with the terms of the Agreement. The amended
Agreement provided that CFC would pay Mr. Petersen a base salary at an annual rate of not less than $975,000 per annum,
plus such incentive payments (if any) as may be awarded him. In addition, pursuant to the Agreement, Mr. Petersen was
entitled to certain payments in the event of his termination other than for cause (e.g., Mr. Petersen leaving for good reason,
disability or termination due to death). Mr. Petersen retired effective May 2, 2021; therefore, these provisions are no longer
applicable.
Pursuant to an employment agreement executed on March 20, 2021, CFC employs Mr. Don as Chief Executive Officer
effective May 3, 2021 until May 31, 2024 unless extended as provided by the terms of the contract or unless otherwise
terminated in accordance with the terms of the Agreement. The Agreement provides that CFC shall pay Mr. Don a base
salary at an annual rate of not less than $1,000,000 per annum plus such incentive payments (if any) as may be awarded him.
In addition, pursuant to the Agreement, Mr. Don is entitled to certain payments in the event of his termination other than for
cause (e.g.; Mr. Don leaving for good reason, disability or termination due to death). See “Termination of Employment and
Change-in-Control Arrangements” below for a description of these provisions and for information on these amounts.
Pension Benefits Table
CFC is a participant in a multiple-employer defined benefit pension plan, the Retirement Security Plan, which is
administered by NRECA. Since this plan is a multiple-employer plan in which CFC participates, CFC is not liable for the
168
amounts shown in the table below and such amounts are not reflected in CFC’s audited financial statements. CFC’s expense
is limited to the annual premium to participate in the Retirement Security Plan. There is no funding liability for CFC for this
plan.
The Retirement Security Plan is a qualified plan in which all employees are eligible to participate upon completion of one
year of service. Each of the named executive officers participates in the qualified pension plan component of the Retirement
Security Plan. CFC reduced the value of the pension plan effective September 1, 2010. Under the current pension plan,
participants are entitled to receive annually, under a 50% joint and surviving spouse annuity, 1.70% of the average of their
five highest base salaries during their participation in the Retirement Security Plan, multiplied by the number of years of
participation in the plan. The value of the pension benefit is determined by base pay only and does not include other cash
compensation. Normal retirement age under the qualified pension plan is age 65; however, the plan does allow for early
retirement with reduced benefits beginning at age 55. For early retirement, the pension benefit will be reduced by 1/15 for
each of the first five years and 1/30 for each of the next five years by which the elected early retirement date precedes the
normal retirement date. Benefits accrued prior to September 1, 2010, are based on a benefit level of 1.90% of the average of
their five highest base salaries during their participation in the Retirement Security Plan and a normal retirement age of 62.
CFC also offers a PRP and an EBR. Five of the named executive officers participate in either the PRP or the EBR. The
purpose of these plans is to increase the retirement benefits above amounts available under the Retirement Security Plan,
which is restricted by IRS limitations on annual pay levels and maximum annual annuity benefits. The PRP and the EBR
restore the value of the Retirement Security Plan for the participating officers to the level it would be if the IRS limits on
annual pay and annual annuity benefits were not in place.
The benefit and payout formula under these restoration plans is similar to that under the qualified Retirement Security Plan.
However, one named executive officer has satisfied the provisions established to receive the benefit from the PRP. He was
grandfathered in the plan and no longer has a risk of forfeiture of the benefit under the PRP. Two of the named executive
officers have reached their vesting date in accordance with provisions of the EBR plan. As a result, they no longer have a
risk of forfeiture of the benefit under the EBR plan. Distributions are made from these plans to those named executive
officers annually. The details of theses distributions are shown in the Pension Benefits table below.
In addition, Mr. Petersen was eligible for benefits under the SERP when he was CEO. This plan is an ineligible deferred
compensation plan within the meaning of section 457 of the Internal Revenue Code. The account is considered unfunded
and may be credited from time to time pursuant to the plan at the discretion of the CFC Board of Directors. During fiscal
year 2021, the CFC Board of Directors used its discretion and did not credit the account.
The following table contains the years of service, the present value of the accumulated benefit for the named executive
officers listed in the “Summary Compensation Table” as of May 31, 2021, as calculated by NRECA and distributions from
the plans for the fiscal year then ended.
Name
Plan Name
Sheldon C. Petersen (4)......... NRECA Retirement Security Plan
SERP
J. Andrew Don..................... NRECA Retirement Security Plan
Yu Ling Wang..................... NRECA Retirement Security Plan
Gregory J. Starheim............. NRECA Retirement Security Plan
Roberta B. Aronson............. NRECA Retirement Security Plan
Joel Allen............................. NRECA Retirement Security Plan
___________________________
Number of Years
of Credited
Service (1)
Present Value of
Accumulated
Benefit (2)
Payments During
Last
Fiscal Year(3)
11.33 $
— $
899,736
—
20.66
19.66
15.25
24.83
29.66
—
3,353,040
1,031,316
2,302,028
1,037,523
3,329,389
—
—
—
907,463
19,290
—
(1)
(2)
CFC is a participant in a multiple-employer pension plan. Credited years of service, therefore, includes not only years of service with CFC, but also
years of service with another cooperative participant in the multiple-employer pension plan. All other named executive officers, except for Mr. Starheim,
have credited years of service only with CFC.
Amount represents the actuarial present value of the named executive officer’s accumulated benefit under this plan as of May 31, 2021, as provided by
the plan administrator, NRECA, using interest rates ranging from 0.25% to 3.09% per annum and mortality according to tables prescribed by the IRS as
published in Revenue Rulings 2001-62 and 2007-67.
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(3)
(4)
Distributions during fiscal year 2021 were as a result of named executive officers no longer being at risk of forfeiture with respect to these amounts
provided under the PRP and EBR plan. Mr. Starheim received an accelerated vested benefit due to his termination in accordance with the Plan. Mr. Don,
and Mr. Allen continue to have a risk of forfeiture of the benefits under the EBR; therefore, no payments have been made.
The NRECA Pension Plan allows active employees who have reached normal retirement age to cash in their lump-sum benefit accrued through August
31, 2010, or “quasi-retire.” Due to the quasi-retirement of Mr. Petersen in February 2015 his credited years of service was reduced and he received 12
months of credited service in January of each year thereafter.
Nonqualified Deferred Compensation
The CFC deferred compensation plan is a nonqualified deferred compensation savings program for the senior executive
group, including each of the named executive officers, and other select management or highly compensated employees
designated by CFC. Participants may elect to defer up to the lesser of 100% of their compensation for the year or the
applicable IRS statutory dollar limit in effect for that calendar year. The calendar year 2021 cap for contributions is $19,500.
During the three plan years immediately prior to the date a participant attains normal retirement age, participants may be
eligible for a statutory catch-up provision that allows them to defer more than the annual contribution limit. Compensation
for the purpose of this plan is defined as the total amount of compensation, including incentive pay, if any, paid by CFC.
CFC does not make any contributions to this plan.
The accounts are credited with “earnings” based on the participants’ selection of available investment options (currently,
nine options) within the Homestead Funds. When a participant ceases to be an employee for any reason, distribution of the
account will generally be made in 15 substantially equal annual payments beginning approximately 60 days after
termination (unless an election is made to change the form and timing of the payout). The participant may elect either a
single lump sum or substantially equal annual installments paid over no less than two and no more than 14 years. The
amount paid is based on the accumulated value of the account.
The following table summarizes information related to the nonqualified deferred compensation plan in which the named
executive officers listed in the “Summary Compensation Table” were eligible to participate during the fiscal year ended
May 31, 2021.
Name
Sheldon C. Petersen ......
J. Andrew Don...............
Yu Ling Wang................
Gregory J. Starheim.......
Roberta B. Aronson........
Joel Allen.......................
___________________________
Executive
Contributions
in Last
Fiscal Year (1)
Registrant
Contributions
in Last
Fiscal Year
Aggregate
Earnings in Last
Fiscal Year
$
$
30,875
19,000
—
18,208
18,500
—
$
—
—
—
—
—
—
213,822
40,145
—
75,961
32,261
—
Aggregate
Withdrawals/
Distributions
$
—
—
—
—
Aggregate
Balance at Last
Fiscal Year-End
$
1,163,464
144,250
—
346,448
—
—
210,725
—
(1)
Executive contributions are also included in the fiscal year 2021 Salary column in the “Summary Compensation Table” above.
Termination of Employment and Change-in-Control Arrangements
Mr. Petersen and Mr. Don have an executive agreement with CFC under which they may continue to receive base salary and
benefits in certain circumstances after resignation or termination of employment. No other named executive officers have
termination or change-in-control agreements.
Mr. Petersen
Under the executive agreement with Mr. Petersen, if CFC terminates his employment without “cause,” or Mr. Petersen
terminated his employment for “good reason,” CFC was obligated to pay him a lump-sum payment equal to the product of
three times his annual base salary at the rate in effect at the time of termination and his short-term incentive bonus, if any,
for the previous year. On July 23, 2020, Mr. Petersen notified the Board of Directors of his decision to retire during the first
half of 2021, subject to the successful completion of a search process for a successor by the CFC Board of Directors. This
170
search was completed and Mr. Petersen retired effective May 2, 2021. As a result, these payments were not triggered and the
terms of this executive agreement are no longer applicable.
Mr. Don
Under the executive agreement with Mr. Don, if CFC terminates his employment without “cause” or Mr. Don terminates his
employment for “good reason” (each term as defined below), CFC is obligated to pay him, in substantially equal monthly
installments over the 12-month period following the termination of employment, an amount equal to the product of two
times the sum of (i) his annual base salary at the rate in effect at the time of termination and (ii) the short-term incentive
earned if any, for the year prior to the year in which such termination occurs.
Assuming a triggering event on May 31, 2021, the compensation payable to Mr. Don for termination without cause would
be $2,218,991. The actual payments due on a termination without cause on different dates could materially differ from this
estimate.
For purposes of Mr. Don’s executive agreement, “cause” generally means (i) the willful and continued failure by Mr. Don to
perform his duties under the agreement or comply with written policies of CFC, (ii) willful conduct materially injurious to
CFC or (iii) conviction of a felony involving moral turpitude. “Good reason” generally means (i) a reduction in the rate of
Mr. Don’s base salary, (ii) a decrease in his titles, duties or responsibilities, or the assignment of new responsibilities which,
in either case, is materially less favorable to Mr. Don when compared with his titles, duties and responsibilities that were in
effect immediately prior to such assignment or (iii) the relocation of CFC’s principal office or the relocation of Mr. Don to a
location more than 50 miles from the principal office of CFC.
This estimate does not include amounts to which the named executive officer would be entitled to upon termination, such as
base salary to date, unpaid bonuses earned, unreimbursed expenses, paid vacation time and any other earned benefits under
company plans.
Chief Executive Officer Pay Ratio
The fiscal year 2021 compensation ratio of the median annual total compensation of all of our employees to the annual total
compensation of our Chief Executive Officer is as follows:
Category and Ratio
Median annual total compensation of all employees (excluding Chief Executive Officer)........
Annual total compensation of Sheldon C. Petersen, Chief Executive Officer (1)........................
Ratio of the median annual total compensation of all employees to the annual total
compensation of Sheldon C. Petersen, Chief Executive Officer...............................................
___________________________
Total
Compensation
266,346
$
1,988,038
7.46:1.0
(1)
Mr. Petersen was the CEO in place on the date the median employee was selected and was the CEO for 92% of the fiscal year; therefore, total
compensation for the CEO was annualized in the table above in order to determine the pay ratio.
In determining the median employee, a listing was prepared of all active employees of CFC as of March 31, 2021. We did
not make any assumptions, adjustments or estimates with respect to total compensation. We did not annualize the
compensation for any part-time employees or those who were not employed by us for the full 10-month portion of the fiscal
year. We determined the compensation of our median employee by (i) taking the total gross compensation earned fiscal
year-to-date for all active employees as of March 31, 2021 and (ii) ranking the total gross compensation of all employees,
except the Chief Executive Officer, from lowest to highest.
After identifying the median employee, we calculated annual total compensation for such employee using the same
methodology we use for our named executive officers as set forth in the above Summary Compensation Table.
171
Director Compensation Table
Directors receive an annual fee for their service on the CFC board. Additionally, the directors receive reimbursement for
reasonable travel expenses. The fee is paid on a monthly basis and reimbursement for travel expenses is paid following the
conclusion of each board meeting.
Below is a summary of the total compensation earned by each of CFC’s directors during the fiscal year ended May 31, 2021.
Name
Alan W. Wattles............................................
Anthony A. Anderson...................................
Anthony Larson.............................................
Barbara E. Hampton......................................
Bradley P. Janorschke...................................
Bradley J. Schardin.......................................
Bruce A. Vitosh.............................................
Chris D. Christensen.....................................
Curtis Wynn..................................................
David E. Felkel..............................................
Dean R. Tesch...............................................
Dennis Fulk...................................................
Doyle Jay Hanson..........................................
G. Anthony Norton........................................
Jeffrey Allen Rehder.....................................
Jimmy A. LaFoy............................................
Kendall Montgomery....................................
Kevin M. Bender...........................................
Mark A. Suggs..............................................
Marsha L. Thompson....................................
Robert Brockman..........................................
Thomas A. Bailey..........................................
Timothy J. Rodriguez....................................
Todd P. Ware.................................................
William Keith Hayward................................
Total Fees Earned
70,000
$
15,000
60,000
65,000
60,000
60,000
70,000
60,000
45,000
67,917
29,167
60,000
65,000
62,917
30,000
60,000
40,000
60,000
60,000
60,000
65,000
60,000
45,000
60,000
60,000
Compensation Committee Interlocks and Insider Participation
There were no compensation committee interlocks or insider participation related to executive compensation during the
fiscal year ended May 31, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Not applicable.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Review and Approval of Transactions with Related Persons
Our board of directors has established a written policy governing related-person transactions. The policy covers transactions
between CFC, on the one hand, and its directors, executive officers or key employees and their immediate family members
and entities of which any of our directors, executive officers or key employees (i) is an officer, director, trustee, alternative
director or trustee or employee, (ii) controls or (iii) has a substantial interest. Under this policy, a related-person transaction
172
is any transaction in excess of $120,000 in which CFC was, is or is proposed to be a direct or indirect participant in which a
related person had, has or will have a direct or indirect material interest in the transaction. Related-person transactions do
not include compensation or expense reimbursement arrangements with directors, officers or key employees
(notwithstanding that officer compensation may be disclosed in “Item 13. Certain Relationships and Related Transactions,
and Director Independence” in our Annual Report on Form 10-K, elsewhere in the CFC’s periodic reports filed with the
SEC or otherwise disclosed publicly as a related-person transaction), transactions where the related person’s interest arises
only from the person’s position as a director of another entity that is a party to the transaction, and transactions deemed to be
related credits. Related-person transactions are subject to review by the Executive Committee of the board of directors
(excluding any interested director), based on whether the transaction is fair and reasonable to CFC and consistent with the
best interests of CFC and its members.
Related credits are extensions of credit to, or for the benefit of, related persons and entities that are made on substantially the
same terms as, and follow underwriting procedures that are no less stringent than, those prevailing at the time for
comparable transactions generally offered by CFC. Related credits are not subject to the procedures for transactions with
related persons because we were established for the very purpose of extending financing to our members. We, therefore,
enter into loan and guarantee transactions with members of which our officers and directors are officers, directors, trustees,
alternative directors or trustees, or employees in the ordinary course of our business. All related credits are reviewed from
time to time by our internal Corporate Credit Committee, which monitors our extensions of credit, and our independent
third-party reviewer, which reviews our credit-extension policies on an annual basis. All loans, including related credits, are
approved in accordance with an internal credit approval matrix, with each level of risk or exposure potentially escalating the
required approval from our lending staff to management, a credit committee or the board of directors. Related credits of
$250,000 or less are generally approved by our lending staff or internal Corporate Credit Committee. Any related credit in
excess of $250,000 requires approval by the full board of directors, except that any interested directors may not participate,
directly or indirectly, in the credit approval process, and the CEO has the authority to approve emergency lines of credit and
certain other loans and lines of credit. Notwithstanding the related-person transaction policy, the CEO will extend such loans
and lines of credit in qualifying situations to a member of which a CFC director was a director or officer, provided that all
such credits are underwritten in accordance with prevailing standards and terms. Such situations are typically weather
related and must meet specific qualifying criteria. To ensure compliance with this policy, no related persons may be present
in person or by teleconference while a related credit is being considered. Under no circumstances may we extend credit to a
related person or any other person in the form of a personal loan.
As a cooperative, CFC was established for the very purpose of extending financing to its members, from which our directors
must be drawn. Loans and guarantees to member systems of which directors of CFC are officers, directors, trustees,
alternative directors or trustees, or employees, are made in the ordinary course of CFC business on the same terms, including
interest rates and collateral, as those prevailing at the time for comparable transactions with other members and that do not
involve more than normal risk of uncollectibility or present other unfavorable features. It is anticipated that, consistent with
its loan and guarantee policies in effect from time to time, additional loans and guarantees will be made by CFC to member
systems and trade and service organizations of which directors of CFC or their immediate family members (i) are officers,
directors, trustees, alternative directors or trustees or employees, (ii) control or (iii) have a substantial beneficial interest.
CFC has adopted a policy whereby substantially all extensions of credit to such entities are approved only by the
disinterested directors.
Related-Person Transactions
The following table contains the total compensation earned by CFC’s executive officers during the year ended May 31, 2021
who are not named executive officers but meet the definition of a “related person” as described above. Total compensation
disclosed below is made up of the same components included in the “Summary Compensation Table” under “Item 11.
Executive Compensation.”
173
Name and Principal Position
Graceann D. Clendenen
Senior Vice President and Chief Administrative Officer............
John M. Borak
Senior Vice President, Credit Risk Management........................
Robin C. Reed
Senior Vice President, Loan Operations......................................
Brad L. Captain
Senior Vice President, Corporate Relations.................................
Total
Compensation
$ 1,222,065
595,397
1,010,756
914,417
Independence Determinations
The board of directors has determined the independence of each director based on a review by the full board. The Audit
Committee is subject to the independence requirements of Rule 10A-3 under the Securities Exchange Act. To evaluate the
independence of our directors, the board has voluntarily adopted categorical independence standards consistent with the
New York Stock Exchange (“NYSE”) standards. However, because we only list debt securities on the NYSE, we are not
subject to most of the corporate governance listing standards of the NYSE, including the independence requirements.
No director is considered independent unless the board has affirmatively determined that he or she has no material
relationship with CFC, either directly or as a partner, shareholder or officer of an organization that has a relationship with
CFC. Material relationships can include banking, legal, accounting, charitable and familial relationships, among others. In
addition, a director is not considered independent if any of the following relationships existed:
(i)
(ii)
(iii)
(iv)
(v)
the director is, or has been within the last three years, an employee of CFC or an immediate family member is, or has
been within the last three years, an executive officer of CFC;
the director has received, or has an immediate family member who has received, during any 12-month period within
the last three years, more than $120,000 in direct compensation from CFC, other than director and committee fees and
pension or other forms of deferred compensation for prior service (provided that such compensation is not contingent
in any way on continued service);
(a) the director or an immediate family member is a current partner of a firm that is CFC’s internal or external auditor;
(b) the director is a current employee of such a firm; (c) the director has an immediate family member who is a current
employee of such a firm and personally works on CFC’s audit; or (d) the director or an immediate family member was
within the last three years (but is no longer) a partner or employee of such a firm and personally worked on CFC’s
audit within that time;
the director or an immediate family member is, or has been within the last three years, employed as an executive
officer of another company where any of CFC’s present executive officers at the same time serves or served on that
company’s compensation committee; or
the director is a current employee, or an immediate family member is a current executive officer, of a company that
has made payments to, or received payments from, CFC for property or services in an amount which, in any of the last
three fiscal years, exceeds the greater of $1 million, or 2% of such other company’s consolidated gross revenue.
The board of directors also reviewed directors’ responses to a questionnaire asking about their relationships with CFC and
its affiliates (and those of their immediate family members) and other potential conflicts of interest.
Based on the criteria above, the board of directors has determined that the directors listed below are independent for the
period of time served by such directors during fiscal year 2021. The board determined that none of the directors listed below
had any of the relationships listed in (i)—(v) above or any other material relationship that would compromise their
independence.
174
Thomas A. Bailey
Chris D. Christensen
Barbara E. Hampton
Anthony Larson
Jeffrey Allen Rehder
Marsha L. Thompson
____________________________
Independent Directors
Kevin M. Bender
David E. Felkel
Doyle Jay Hanson
Kendall Montgomery
Bradley J. Schardin
Bruce A. Vitosh
Robert Brockman
Dennis Fulk
Jimmy A. LaFoy
G. Anthony Norton
Dean R. Tesch (1)
(1) This director served during fiscal year 2021; however, he was no longer a director as of May 31, 2021.
Item 14. Principal Accounting Fees and Services
CFC’s Audit Committee is solely responsible for the nomination, approval, compensation, evaluation and discharge of the
independent public accountants. The independent registered public accountants report directly to the Audit Committee, and
the Audit Committee is responsible for the resolution of disagreements between management and the independent registered
public accountants. Consistent with U.S. Securities and Exchange Commission requirements, the Audit Committee has
adopted a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public
accountants, provided such services do not impair the independent public accountant’s independence.
KPMG, LLP was our independent registered public accounting firm for the fiscal years ended May 31, 2021 and 2020.
KPMG, LLP has advised the Audit Committee that they are independent accountants with respect to the Company, within
the meaning of standards established by the Public Company Accounting Oversight Board and federal securities laws
administered by the U.S. Securities and Exchange Commission. The following table displays the aggregate estimated or
actual fees for professional services provided by KPMG, LLP in fiscal years 2021 and 2020, including fees for the 2021 and
2020 audits. All services for fiscal years 2021 and 2020 were pre-approved by the Audit Committee.
(Dollars in thousands)
Description of fees:
Audit fees(1).............................................................................. $
Tax fees(2).................................................................................
All other fees(3).........................................................................
Total......................................................................................... $
____________________________
Year Ended May 31,
2021
2020
1,861
$
1,822
22
55
15
12
1,938
$
1,849
(1)
(2)
Audit fees for fiscal years 2021 and 2020 consist of fees for the quarterly reviews of our interim financial information and the audit of our annual
consolidated financial statements and fees for the preparation of the stand-alone financial statements for RTFC and NCSC. Audit fees for fiscal years
2021 and 2020 also include comfort letter fees and consents related to debt issuances and compliance work required by the independent auditors.
Tax fees consist of assistance with matters related to tax compliance and consulting.
(3)
All other fees for fiscal years 2021 and 2020 consist of fees for certain agreed-upon procedures.
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PART IV
Item 15. Exhibit and Financial Statement Schedules
(a) Financial Statement Schedules
The following documents are filed as part of this Report in Part II, Item 8 and are incorporated herein by
reference.
1. Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm............................................................................
Consolidated Statements of Operations for the Years Ended May 31, 2021, 2020 and 2019.........................
Consolidated Statements of Comprehensive Income for the Years Ended May 31, 2021, 2020 and 2019.....
Consolidated Balance Sheets as of May 31, 2021 and 2020............................................................................
Consolidated Statements of Changes in Equity for the Years Ended May 31, 2021, 2020 and 2019.............
Consolidated Statements of Cash Flows for the Years Ended May 31, 2021, 2020 and 2019........................
Notes to Consolidated Financial Statements....................................................................................................
Page
84
87
88
89
90
91
93
2. Schedules
None.
(b) Exhibits
The following exhibits are incorporated by reference or filed herewith.
176
EXHIBIT INDEX
Exhibit No.
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Description
— Articles of Incorporation. Incorporated by reference to Exhibit 3.1 to our Form 10-K filed on August
28, 2014.
— Amended Bylaws as approved by CFC’s members on August 14, 2020. Incorporated by reference to
Exhibit 3.2 to our Form 10-Q filed on October 15, 2020.
— Description of Securities.
— Form of Capital Term Certificate.
— Indenture dated February 15, 1994, between the Registrant and First Bank National Association as
trustee. Incorporated by reference to Exhibit 4.2 to our Form 10-Q filed on October 15, 2007.
— Form of indenture between CFC and Mellon Bank, N.A., as Trustee. Incorporated by reference to
Exhibit 4.1 to Registration Statement on Form S-3 filed on November 14, 1995 (Registration No.
33-64231).
— Indenture dated as of December 15,1987, between CFC and Chemical Bank, as Trustee. Incorporated
by reference to Exhibit 4.1 to Registration Statement on Form S-3ASR filed on November 24, 2008
(Registration No. 333-155631).
— First Supplemental Indenture between CFC and Chemical Bank, as Trustee. Incorporated by
reference to Exhibit 4.2 to Registration Statement on Form S-3 filed on April 5, 1995 (Registration
No. 33-58445).
— Form of indenture dated May 15, 2000, between the Registrant and Bank One Trust Company,
National Association, as trustee. Incorporated by reference to Exhibit 4.1 to Registration Statement on
Form S-3 filed on May 25, 2000 (Registration No. 333-37940).
— First Supplemental Indenture dated March 12, 2007, between the Registrant and U.S. Bank National
Association, as successor trustee. Incorporated by reference to Exhibit 4.2 to Registration Statement
on Form S-3ASR filed on April 19, 2007 (Registration No. 333-142230).
— Indenture dated October 25, 2007, between the Registrant and U.S. Bank National Association, as
trustee. Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-3ASR filed on
October 26, 2007 (Registration No. 333-146960).
4.10
10.1^
— Indenture dated October 15, 1996, between the Registrant and U.S. Bank National Association, as
successor trustee. Incorporated by reference to Exhibit 4.1 to Form 8-K filed on October 28, 1996.
— Plan Document for CFC’s Deferred Compensation Pension Restoration Plan amended and restated
effective January 1, 2015.
10.2^
— Plan Document for CFC’s Deferred Compensation Program amended and restated February 1, 2014.
Incorporated by reference to Exhibit 10.6 to our Form 10-K filed on August 28, 2014.
10.3^
— Plan Document for CFC's Executive Benefit Restoration Plan dated December 9, 2014. Incorporated
by reference to Exhibit 10.1 to our Form 10-Q filed on April 13, 2015.
10.4^
— Employment Agreement between the Company and Sheldon C. Petersen, effective January 1, 2015.
Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on December 23, 2014.
10.5^
10.6^
— Employment Agreement, entered into and effective as of March 10, 2021, between the Company and
J. Andrew Don. Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on March 11, 2021.
— Supplemental Executive Retirement Plan of the Company, effective January 1, 2015. Incorporated by
reference to Exhibit 10.2 to our Form 8-K filed on December 23, 2014.
10.7
— Amended and Restated Revolving Credit Agreement dated November 19, 2015 maturing on
November 19, 2018. Incorporated by reference to Exhibit 10.1 to our Form 10-Q filed on January 13,
2016.
10.8
— Amended and Restated Revolving Credit Agreement dated November 19, 2015 maturing on
November 19, 2020. Incorporated by reference to Exhibit 10.2 to our Form 10-Q filed on January 13,
2016.
10.9
10.10
— Amendment No.1 dated as of November 18, 2016 to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 maturing on November 19, 2019. Incorporated by
reference to Exhibit 10.1 to our Form 10-Q filed on January 13, 2017.
— Amendment No.1 dated as of November 18, 2016 to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 maturing on November 19, 2021. Incorporated by
reference to Exhibit 10.2 to our Form 10-Q filed on January 13, 2017.
177
Exhibit No.
10.11
10.12
10.13
10.14
10.15
10.16
Description
— Amendment No. 2 dated as of November 20, 2017 to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 maturing on November 20, 2020. Incorporated by
reference to Exhibit 10.01 to our Form 10-Q filed on January 11, 2018.
— Amendment No. 2 dated as of November 20, 2017 to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 maturing on November 20, 2022. Incorporated by
reference to Exhibit 10.02 to our Form 10-Q filed on January 11, 2018.
— Amendment No. 3 dated as of November 28, 2018 to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 maturing on November 21, 2028. Incorporated by
reference to Exhibit 10.1 to our Form 10-Q filed on January 11, 2019.
— Amendment No. 3 dated as of November 28, 2018 to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 maturing on November 28, 2023. Incorporated by
reference to Exhibit 10.2 to our Form 10-Q filed on January 11, 2019.
— Amendment No. 4 dated as of November 26, 2019 to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 maturing on November 28, 2022. Incorporated by
reference to Exhibit 10.1 to our Form 10-Q filed on January 13, 2020.
— Amendment No. 4 dated as of November 26, 2019 to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 maturing on November 28, 2023. Incorporated by
reference to Exhibit 10.2 to our Form 10-Q filed on January 13, 2020.
10.17* — Amendment No. 5 dated as of June 7, 2021 to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 maturing on November 28, 2024.
10.18* — Amendment No. 5 dated as of June 7, 2021 to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 maturing on November 28, 2025.
10.19
— Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural Utilities
Service dated June 14, 2005 for up to $1,000,000,000. Incorporated by reference to Exhibit 4.12 to
our Form 10-K filed on August 24, 2005.
10.20
— Series A Future Advance Bond from the Registrant to the Federal Financing Bank dated June 14,
2005 for up to $1,000,000,000 maturing on July 15, 2028. Incorporated by reference to Exhibit 4.15
to our Form 10-K filed on August 24, 2005.
10.21
— Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural Utilities
Service dated April 28, 2006 for up to $1,500,000,000. Incorporated by reference to Exhibit 4.11 to
our Form 10-K filed on August 25, 2006.
10.22
— Series B Future Advance Bond from the Registrant to the Federal Financing Bank dated April 28,
2006 for up to $1,500,000,000 maturing on July 15, 2029. Incorporated by reference to Exhibit 4.14
to our Form 10-K filed on August 25, 2006.
10.23
— Series C Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated September 19, 2008 for up to $500,000,000. Incorporated by reference to
Exhibit 4.29 to our Form 10-Q filed on October 14, 2008.
10.24
— Series C Future Advance Bond from the Registrant to the Federal Financing Bank dated September
19, 2008 for up to $500,000,000 maturing on October 15, 2031. Incorporated by reference to Exhibit
4.32 to our Form 10-Q filed on October 14, 2008.
10.25
— Series D Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of November 10, 2010 for up to $500,000,000. Incorporated by reference to
Exhibit 4.1 to our Form 10-Q filed on January 14, 2011.
10.26
— Series D Future Advance Bond from the Registrant to the Federal Financing Bank dated as of
November 10, 2010 for up to $500,000,000 maturing on October 15, 2033. Incorporated by reference
to Exhibit 4.4 to our Form 10-Q filed on January 14, 2011.
10.27
— Series E Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of December 1, 2011 for up to $499,000,000. Incorporated by reference to
Exhibit 10.3 to our Form 10-Q filed on January 17, 2012.
10.28
— Series E Future Advance Bond from the Registrant to the Federal Financing Bank dated as of
December 1, 2011 for up to $499,000,000 maturing on October 15, 2034. Incorporated by reference
to Exhibit 10.6 to our Form 10-Q filed on January 17, 2012.
10.29
— Series F Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of December 13, 2012 for up to $424,286,000. Incorporated by reference to
Exhibit 10.1 to our Form 10-Q filed in January 14, 2013.
178
Exhibit No.
10.30
Description
— Series F Future Advance Bond from the Registrant to the Federal Financing Bank dated as of
December 13, 2012 for up to $424,286,000 maturing on October 15, 2035. Incorporated by reference
to Exhibit 10.4 to our Form 10-Q filed in January 14, 2013.
10.31
— Series G Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of November 21, 2013 for up to $500,000,000. Incorporated by reference to
Exhibit 10.1 to our Form 10-Q filed in January 13, 2014.
10.32
— Series G Future Advance Bond from the Registrant to the Federal Financing Bank dated as of
November 21, 2013 for up to $500,000,000 maturing on October 15, 2036. Incorporated by reference
to Exhibit 10.3 to our Form 10-Q filed in January 13, 2014.
10.33
— Series H Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of November 18, 2014 for up to $250,000,000. Incorporated by reference to
Exhibit 10.1 to our Form 10-Q filed on January 14, 2015.
10.34
— Series H Future Advance Bond from the Registrant to the Federal Financing Bank dated as of
November 18, 2014 for up to $250,000,000 maturing on October 15, 2034. Incorporated by reference
to Exhibit 10.3 to our Form 10-Q filed on January 14, 2015.
10.35
— Series K Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of March 29, 2016 for up to $250,000,000. Incorporated by reference to
Exhibit 10.1 to our Form 10-Q filed on April 4, 2016.
10.36
— Series K Future Advance Bond from the Registrant to the Federal Financing Bank dated as of March
29, 2016 for up to $250,000,000 maturing on January 15, 2039. Incorporated by reference to Exhibit
10.2 to our Form 10-Q filed on April 4, 2016.
10.37
— Series L Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of December 1, 2016 for up to $375,000,000. Incorporated by reference to
Exhibit 10.3 to our Form 10-Q filed on January 13, 2017.
10.38
— Series L Future Advance Bond from the Registrant to the Federal Financing Bank dated as of
December 1, 2016 for up to $375,000,000 maturing on October 15, 2039. Incorporated by reference
to Exhibit 10.4 to our Form 10-Q filed on January 13, 2017.
10.39
— Series M Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of November 9, 2017 for up to $750,000,000. Incorporated by reference to
Exhibit 10.03 to our Form 10-Q filed on January 11, 2018.
10.40
— Series M Future Advance Bond from the Registrant to the Federal Financing Bank dated as of
November 9, 2017 for up to $750,000,000 maturing on July 15, 2042. Incorporated by reference to
Exhibit 10.04 to our Form 10-Q filed on January 11, 2018.
10.41
— Series N Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of November 15, 2018 for up to $750,000,000. Incorporated by reference to
Exhibit 10.3 to our Form 10-Q filed on January 11, 2019.
10.42
— Series N Future Advance Bond from the Registrant to the Federal Financing Bank dated as of
November 15, 2018 for up to $750,000,000 maturing on July 15, 2043. Incorporated by reference to
Exhibit 10.3 to our Form 10-Q filed on January 11, 2019.
10.43
— Series P Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of February 1 3, 2020 for up to $500,000,000. Incorporated by reference to
Exhibit 10.1 to our Form 10-Q filed on April 10, 2020.
10.44
— Series P Future Advance Bond from the Registrant to the Federal Financing Bank dated as of April
10, 2020 for up to $500,000,000 maturing on July 15, 2054. Incorporated by reference to Exhibit 10.2
to our Form 10-Q filed on April 10, 2020.
10.45
— Series R Bond Purchase Agreement between the Registrant, Federal Financing Bank and Rural
Utilities Service dated as of November 19, 2020 for up to $375,000,000. Incorporated by reference to
Exhibit 10.1 to our Form 10-Q filed January 12, 2021.
10.46
— Series R Future Advance Bond from the Registrant to the Federal Financing Bank dated as of
November 19, 2020 for up to $375,000,000 maturing on July 15, 2025. Incorporated by reference to
Exhibit 10.2 to our Form 10-Q filed January 12, 2021.
10.47
10.48
— Seventh Amended, Restated and Consolidated Pledge Agreement, dated as of November 19, 2020,
among the Registrant, the Rural Utilities Service and U.S. Bank National Association. Incorporated
by reference to Exhibit 10.3 to our Form 10-Q filed on January 12, 2021.
— Seventh Amended, Restated and Consolidated Bond Guarantee Agreement, dated as of November 19,
2020, between the Registrant and the Rural Utilities Service. Incorporated by reference to Exhibit
10.4 to our Form 10-Q filed January 12, 2021.
179
Exhibit No.
10.49
Description
— Amended and Restated Master Sale and Servicing Agreement, dated as of August 12, 2011, by and
between the Registrant and the Federal Agricultural Mortgage Corporation, as amended by
Amendment No. 1 dated as of November 28, 2016. Incorporated by reference to Exhibit 10.7 to our
Form 10-Q filed on January 13, 2017.
10.50
— Amended and Restated Master Note Purchase Agreement dated March 24, 2011 between the
Registrant and Federal Agricultural Mortgage Corporation. Incorporated by reference to Exhibit 4.4
to our Form 10-Q filed on April 13, 2011.
10.51
— Second Amended and Restated First Supplemental Note Purchase Agreement dated February 26,
2018 for up to $5,500,000,000 between the Registrant and Federal Agricultural Mortgage
Corporation. Incorporated by reference to Exhibit 10.01 to our Form 10-Q filed on April 11, 2018.
10.52* — Third Amended and Restated First Supplemental Note Purchase Agreement dated May 20, 2021 for
10.53
10.54
up to $5,500,000,000 between the Registrant and Federal Agricultural Mortgage Corporation.
— Second Amended, Restated and Consolidated Pledge Agreement dated July 31, 2015, between the
Registrant, Federal Agricultural Mortgage Corporation and U.S. Bank Trust National Association.
Incorporated by reference to Exhibit 10.48 to our Form 10-K filed on August 26, 2015.
— Long Term Standby Commitment to Purchase dated August 31, 2015, between the Registrant and
Federal Agricultural Mortgage Corporation. Incorporated by reference to Exhibit 10.1 to our Form
10-Q filed on October 14, 2015.
10.55
— Amendment No. 1 to Long Term Standby Commitment to Purchase, dated as of May 31, 2016,
between the Registrant and Federal Agricultural Mortgage Corporation. Incorporated by reference to
Exhibit 10.38 to our Form 10-K filed on August 25, 2016.
Registrant agrees to furnish to the Securities and Exchange Commission a copy of all other
instruments defining the rights of holders of its long-term debt upon request.
23.1*
31.1*
— Consent of KPMG LLP.
— Certification of the Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of
2002.
31.2*
— Certification of the Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of
2002.
32.1†
— Certification of the Chief Executive Officer required by Section 906 of the Sarbanes-Oxley Act of
2002.
32.2†
— Certification of the Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of
2002.
101.INS* — Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
101.SCH* — XBRL Taxonomy Extension Schema Document.
101.CAL* — XBRL Taxonomy Calculation Linkbase Document.
101.LAB* — XBRL Taxonomy Label Linkbase Document.
101.PRE* — XBRL Taxonomy Presentation Linkbase Document
101.DEF* — XBRL Taxonomy Definition Linkbase Document
104.00 — Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
___________________________
*Indicates a document being filed with this Report.
^Identifies a management contract or compensatory plan or arrangement.
†Indicates a document that is furnished with this Report, which shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, or otherwise subject to the liability of that Section.
Item 16. Form 10-K Summary
None.
180
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Loudoun,
Commonwealth of Virginia, on the 30th day of July 2021.
NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION
By: /s/ J. ANDREW DON
J. Andrew Don
Chief Executive Officer
181
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the date indicated.
Signature
Title
Chief Executive Officer
Date
July 30, 2021
/s/ J. ANDREW DON
J. Andrew Don
/s/ YU LING WANG
Yu Ling Wang
/s/ ROBERT E. GEIER
Robert E. Geier
Senior Vice President and Chief Financial Officer
July 30, 2021
Vice President and Chief Accounting Officer
July 30, 2021
/s/ ALAN W. WATTLES
President and Director
July 30, 2021
Alan W. Wattles
/s/ BRUCE A. VITOSH
Bruce A. Vitosh
/s/ DAVID E. FELKEL
David E. Felkel
Vice President and Director
July 30, 2021
Secretary-Treasurer and Director
July 30, 2021
/s/ ANTHONY A. ANDERSON
Director
Anthony A. Anderson
/s/ THOMAS A. BAILEY
Thomas A. Bailey
/s/ KEVIN M. BENDER
Kevin M. Bender
Director
Director
/s/ ROBERT BROCKMAN
Director
Robert Brockman
/s/ CHRIS D. CHRISTENSEN
Director
Chris D. Christensen
/s/ JARED ECHTERNACH
Director
Jared Echternach
/s/ TIMOTHY ELDRIDGE
Director
Timothy Eldridge
182
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
/s/ DENNIS FULK
Dennis Fulk
/s/ BARBARA E. HAMPTON
Barbara E. Hampton
Director
Director
/s/ WILLIAM KEITH HAYWARD
Director
William Keith Hayward
/s/ MICHAEL HEINEN
Michael Heinen
Director
/s/ BRADLEY P. JANORSCHKE
Director
Bradley P. Janorschke
/s/ ANTHONY LARSON
Director
Anthony Larson
/s/ BRENT MCRAE
Brent McRae
/s/ JOHN METCALF
John Metcalf
Director
Director
/s/ KENDALL MONTGOMERY
Director
Kendall Montgomery
/s/ G. ANTHONY NORTON
Director
G. Anthony Norton
/s/ JEFFREY ALLEN REHDER
Director
Jeffrey Allen Rehder
/s/ MARK A. SUGGS
Mark A. Suggs
/s/ MARSHA L. THOMPSON
Marsha L. Thompson
Director
Director
183
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
July 30, 2021
AMENDMENT NO. 5
Dated as of June 7, 2021
to the
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Dated as of November 19, 2015
Among
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION,
THE BANKS PARTY HERETO,
MIZUHO BANK, LTD.,
as Administrative Agent and Initial Issuing Bank,
JPMORGAN CHASE BANK, N.A.,
as Syndication Agent
and
PNC BANK, NATIONAL ASSOCIATION, THE BANK OF NOVA SCOTIA,
and
ROYAL BANK OF CANADA
as Co-Documentation Agents
___________________________
MIZUHO BANK, LTD.,
JPMORGAN CHASE BANK, N.A.,
PNC CAPITAL MARKETS LLC, THE BANK OF NOVA SCOTIA
and
RBC CAPITAL MARKETS as Co-Lead Arrangers and Joint Bookrunners
AMENDMENT NO. 5
AMENDMENT NO. 5 dated as of June 7, 2021 (this “Amendment”) to the
Amended and Restated Revolving Credit Agreement dated as of November 19, 2015, as
amended by Amendment No. 1 dated as of November 18, 2016, as further amended by
Amendment No. 2 dated as of November 20, 2017, as further amended by Amendment No. 3
dated as of November 28, 2018 and as further amended by Amendment No. 4 dated as of
November 26, 2019, among NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, a not-for-profit cooperative association incorporated under the laws of the
District of Columbia, the BANKS party thereto from time to time, MIZUHO BANK, LTD., as
Administrative Agent and as Initial Issuing Bank, JPMORGAN CHASE BANK, N.A., as
Syndication Agent, and PNC BANK, NATIONAL ASSOCIATION, THE BANK OF NOVA
SCOTIA and ROYAL BANK OF CANADA, as Co-Documentation Agents (the “Existing
Credit Agreement” and, as amended by this Amendment, the “Amended Credit Agreement”).
W I T N E S S E T H :
WHEREAS, the Borrower has requested that the Banks party to the Existing
Credit Agreement, immediately prior to the effectiveness of this Amendment (each, an
“Existing Bank”), enter into this Amendment pursuant to which (i) the Existing Banks agree to
extend the termination of their Commitments to November 28, 2024 (the “Extended
Commitment Termination Date”) and (ii) certain other provisions of the Existing Credit
Agreement will be amended;
WHEREAS, each financial institution identified on Schedule 1 hereto as an
“Extending Bank” (each, an “Extending Bank”) has agreed, on the terms and conditions set
forth herein, to provide Commitments terminating on the Extended Commitment Termination
Date in the amounts set forth on Schedule 1 hereto opposite such Extending Bank’s name under
the heading “Commitment” (the “Extended Commitments”);
WHEREAS, on the Fifth Amendment Effective Date (as defined in Section 7
below), the existing Commitment of each Extending Bank will be converted into an Extended
Commitment;
WHEREAS, certain other financial institutions referred to herein as “Non-
Extending Banks” (each, a “Non-Extending Bank”) have informed the Borrower of their desire
to terminate their existing Commitments;
WHEREAS, certain other financial institutions referred to herein as “Reducing
Banks” (each, a “Reducing Bank”) have informed the Borrower of their desire to reduce their
existing Commitments; and
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. Defined Terms; References. Unless otherwise specifically defined herein,
each term used herein that is defined in the Existing Credit Agreement or in the Amended
Credit Agreement, as the context shall require, has the meaning assigned to such term in the
Existing Credit Agreement or in the Amended Credit Agreement, as applicable. Each reference
to “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference and each
reference to “this Amendment” and each other similar reference contained in the Existing
Credit Agreement shall, on and after the Fifth Amendment Effective Date, refer to the
Amended Credit Agreement.
Section 2. Amended Terms and Fifth Amendment Effective Date Transactions.
(a) Each of the parties hereto agrees that, effective on the Fifth Amendment
Effective Date, the Existing Credit Agreement shall be amended to delete the stricken text
(indicated textually in the same manner as the following example: stricken text) and to add the
double- underlined text (indicated textually in the same manner as the following example:
double- underlined text) as set forth in the amended pages of the Existing Credit Agreement
attached hereto as Exhibit A, and the Banks party hereto authorize the Administrative Agent
and the Borrower to prepare a conformed copy of the Amended Credit Agreement that includes
the changes contained in, and consistent with, the amended pages attached as Exhibit A.
(b) On the Fifth Amendment Effective Date, the Commitment of each Existing
Bank that is an Extending Bank will be converted into an Extended Commitment under the
Amended Credit Agreement in the amounts set forth on Schedule 1 hereto, so that the
Commitment of such Extending Bank under the Amended Credit Agreement shall equal such
Extended Bank’s Extended Commitments.
(c) On the Fifth Amendment Effective Date, MUFG Bank, Ltd.’s role as a Co-
Documentation Agent shall be terminated and they shall not be entitled to any fees with respect
to that role.
(d) Notwithstanding Section 2.10 of the Existing Credit Agreement, on the Fifth
Amendment Effective Date, (i) the Commitment of each Non-Extending Bank shall be
terminated and such Non-Extending Bank shall no longer be considered as a Bank under the
Amended Credit Agreement and (ii) the Commitment of each Reducing Bank shall be reduced
as reflected on Schedule I hereto.
Section 3. Representations of Borrower. The Borrower represents and warrants, as of
the date hereof, that:
(a) the Borrower has the corporate power and authority to execute, deliver and
perform its obligations under this Amendment and under the Amended Credit Agreement, and
has taken all necessary corporate action to authorize the execution, delivery and performance
by it of this Amendment and the Amended Credit Agreement. The Borrower has duly executed
and
2
delivered this Amendment, and this Amendment and the Amended Credit Agreement
constitutes its legal, valid and binding obligation enforceable in accordance with its terms,
except as enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights
generally and by general equitable principles (regardless of whether enforcement is sought by
proceeding in equity or at law);
(b) no material authorization, consent, approval or license of, or declaration, filing
or registration with or exemption by, any Governmental Authority, body or agency is required
in connection with the execution, delivery and performance by the Borrower of this
Amendment. The Banks acknowledge that the Borrower may file this Amendment with the
Securities and Exchange Commission on or after the Fifth Amendment Effective Date; and
(c) the execution, delivery and performance by the Borrower of this Amendment
and the Amended Credit Agreement, the borrowings contemplated hereunder and the use of the
proceeds thereof will not (i) contravene any material provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or Governmental Authority to
which the Borrower is subject, (ii) require any consent under, or violate or result in any breach
of any of the material terms, covenants, conditions or provisions of, or constitute a material
default under, or give rise to any right to accelerate or to require the prepayment, repurchase or
redemption of any obligation under, or result in the creation or imposition of (or the obligation
to create or impose) any Lien upon any of the property or assets of the Borrower pursuant to the
terms of the Amended Credit Agreement or any material indenture, mortgage, deed of trust,
agreement or instrument, in each case to which the Borrower is a party or by which it or any its
property or assets is bound or to which it may be subject, or (iii) violate any provision of the
articles of incorporation or by-laws, as applicable, of the Borrower.
Section 4. GOVERNING LAW. (a) THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW
YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT
COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AMENDMENT, OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO
AGREES, TO THE FULLEST EXTENT PERMITTED BY LAW, THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN
ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AMENDMENT
SHALL AFFECT ANY RIGHT
3
THAT ANY PARTY HERETO OR ANY BANK MAY OTHERWISE HAVE TO BRING
ANY ACTION OR PROCEEDING RELATING TO THIS AMENDMENT AGAINST ANY
OTHER PARTY HERETO OR ANY BANK OR THEIR RESPECTIVE PROPERTIES IN
THE COURTS OF ANY JURISDICTION.
(c) EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND
EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AMENDMENT IN ANY COURT REFERRED
TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT.
(d) EACH PARTY TO THIS AMENDMENT IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.01
OF THE AMENDED CREDIT AGREEMENT. NOTHING IN THIS AMENDMENT WILL
AFFECT THE RIGHT OF ANY PARTY TO THIS AMENDMENT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.
Section 5. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 6. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. Delivery of an executed counterpart of a signature
page to this Amendment by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be
effective as delivery of a manually executed counterpart of this Amendment. The words
“execution,” “signed,” “signature,” and words of similar import in this Amendment shall be
deemed to include electronic or digital signatures or the keeping of records in electronic form,
each of which shall be of the same effect, validity and enforceability as manually executed
signatures or a paper-based recordkeeping system, as the case may be, to the extent and as
provided for under applicable law, including the Electronic Signatures in Global and National
Commerce Act of 2000, the Electronic Signatures and Records Act of 1999, or any other
similar state Laws based on the Uniform Electronic Transactions Act. Notwithstanding the
foregoing, if the Administrative Agent or any Lender reasonably requests a manually executed
counterpart, the Company shall deliver such manually executed counterpart.
Section 7. Effectiveness. This Amendment shall become effective on the date (the
“Fifth Amendment Effective Date”) on which the Administrative Agent shall have received the
following documents or other items, each dated the Fifth Amendment Effective Date unless
otherwise indicated:
4
(a) receipt by the Administrative Agent of counterparts hereof signed by each of
the parties hereto (or, in the case of any party as to which an executed counterpart shall not
have been received, receipt by the Administrative Agent in form satisfactory to it of
telegraphic, telex or other written confirmation from such party of execution of a counterpart
hereof by such party), including receipt of consent from (i) each Extending Bank, (ii) each Non-
Extending Bank, (iii) each Reducing Bank, and (iv) the Required Banks under the Existing
Credit Agreement;
(b) receipt by the Administrative Agent of an opinion of the General Counsel of the
Borrower, substantially in the form of Exhibit F to the Existing Credit Agreement, provided
that an enforceability opinion under New York law, that is reasonably acceptable to the
Administrative Agent, shall be furnished by the Borrower’s New York counsel, Foley &
Lardner LLP, subject to customary assumptions, qualifications and limitations;
(c) receipt by the Administrative Agent of a certificate signed by any one of the
Chief Financial Officer, the Chief Executive Officer, the Treasurer, an Assistant Secretary-
Treasurer, the Controller or the Vice President, Capital Markets Relations of the Borrower to
the effect that the conditions set forth in clauses (c) through (g), inclusive, of Section 3.03 of
the Amended Credit Agreement have been satisfied as of the Fifth Amendment Effective Date
and, in the case of clauses (c), (d) and (g), setting forth in reasonable detail the calculations
required to establish such compliance;
(d) receipt by the Administrative Agent of a certificate of an officer of the Borrower
acceptable to the Administrative Agent stating that all consents, authorizations, notices and
filings required or advisable in connection with this Amendment are in full force and effect, and
the Administrative Agent shall have received evidence thereof reasonably satisfactory to it;
(e) receipt by the Administrative Agent and the Syndication Agent (or their
respective permitted assigns) and by each Bank Party of all fees, including all such fees that are
owed to each Reducing Bank and Non-Extending Bank required to be paid in the respective
amounts heretofore mutually agreed in writing, and all expenses required to be reimbursed
pursuant to the terms of the Existing Credit Agreement and for which invoices have been
presented, at least one (1) business day prior to the Fifth Amendment Effective Date;
(f) receipt by the Administrative Agent and the Banks of a Beneficial Ownership
Certification on the Fifth Amendment Effective Date and all documentation and other
information required by regulatory authorities under applicable “know your customer” and anti-
money laundering rules and regulations, including, without limitation, the USA PATRIOT Act
(Title III of Pub. L. 107-56) and the FinCEN beneficial ownership regulations under the
Beneficial Ownership Regulation; and
(g) receipt by the Administrative Agent of all documents the Administrative Agent
may reasonably request relating to the existence of the Borrower, the corporate authority for
and the validity of this Amendment all in form and substance reasonably satisfactory to the
Administrative Agent.
5
The Administrative Agent shall promptly notify the Borrower and the Bank Parties of
the Fifth Amendment Effective Date, and such notice shall be conclusive and binding on all
parties hereto.
6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as
of the date first above written.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE
CORPORATION
By:
/s/ LING WANG
Name: Ling Wang
Title: Senior Vice President and
Chief Financial Officer
Signature Page to Amendment No. 5 ‒ 2024 Facility
MIZUHO BANK, LTD., as
Administrative Agent, Initial Issuing
Bank and Extending Bank
By:
/s/ EDWARD SACKS
Name: Edward Sacks
Title: Executive Director
Signature Page to Amendment No. 5 ‒ 2024 Facility
JPMORGAN CHASE BANK, N.A., as
Syndication Agent and Extending Bank
By:
/s/ NANCY R. BARWIG
Name: /s/ Nancy R. Barwig
Title: Executive Director
Signature Page to Amendment No. 5 ‒ 2024 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT DATED AS OF
NOVEMBER 19, 2015, AS AMENDED BY AMENDMENT NO.
1 TO THE EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED BY
AMENDMENT NO. 2 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 20, 2017, AS
FURTHER AMENDED BY AMENDMENT NO. 3 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 28, 2018, AND AS FURTHER AMENDED BY
AMENDMENT NO. 4 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 26, 2019 AMONG
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS PARTY
THERETO, MIZUHO BANK, LTD., AS ADMINISTRATIVE
AGENT, JPMORGAN CHASE BANK, N.A. AS SYNDICATION
AGENT AND THE OTHER AGENTS PARTY THERETO (THE
“EXISTING CREDIT AGREEMENT”).
Check only one of the following:
☐ The undersigned is a Bank with an existing
Commitment and consents to this Amendment with
respect to the full amount set forth on Schedule 1
hereto, which amount will be converted in full to an
Extended Commitment.
Royal Bank of Canada, as Lender
By:
/s/ MARK W. CONDON
Name: Mark W. Condon
Title: Authorized Signatory
Signature Page to Amendment No. 5 ‒ 2024 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT DATED AS OF
NOVEMBER 19, 2015, AS AMENDED BY AMENDMENT NO.
1 TO THE EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED BY
AMENDMENT NO. 2 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 20, 2017, AS
FURTHER AMENDED BY AMENDMENT NO. 3 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 28, 2018, AND AS FURTHER AMENDED BY
AMENDMENT NO. 4 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 26, 2019 AMONG
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS PARTY
THERETO, MIZUHO BANK, LTD., AS ADMINISTRATIVE
AGENT, JPMORGAN CHASE BANK, N.A. AS
SYNDICATION AGENT AND THE OTHER AGENTS PARTY
THERETO (THE “EXISTING CREDIT AGREEMENT”).
Check only one of the following::
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment with
respect to the full amount set forth on Schedule 1
hereto, which amount will be converted in full to an
Extended Commitment.
☐ The undersigned Bank with an existing Commitment
consents to this Amendment with respect to its existing
Commitment and also confirms its willingness to
provide additional Commitment under the Amended
Credit Agreement in an aggregate principal amount of
$_______________.
☐ The undersigned is a ‘‘Non-Extending Bank” and
consents to this Amendment and the termination of its
existing Commitment.
☐ The undersigned is a “Reducing Bank” and consents to
this Amendment and the reduction of its Commitment
under the Amended Credit Agreement to an aggregate
principal amount of $_______________.
Signature Page to Amendment No. 5 ‒ 2024 Facility
THE BANK OF NOVA SCOTIA
By:
/s/ DAVID DEWAR
Name: David Dewar
Title: Director
Signature Page to Amendment No. 5 ‒ 2024 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT DATED AS OF
NOVEMBER 19, 2015, AS AMENDED BY AMENDMENT NO.
1 TO THE EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED BY
AMENDMENT NO. 2 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 20, 2017, AS
FURTHER AMENDED BY AMENDMENT NO. 3 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 28, 2018, AND AS FURTHER AMENDED BY
AMENDMENT NO. 4 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 26, 2019 AMONG
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS PARTY
THERETO, MIZUHO BANK, LTD., AS ADMINISTRATIVE
AGENT, JPMORGAN CHASE BANK, N.A. AS
SYNDICATION AGENT AND THE OTHER AGENTS PARTY
THERETO (THE “EXISTING CREDIT AGREEMENT”).
Check only one of the following:
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment with
respect to the full amount set forth on Schedule 1
hereto, which amount will be converted in full to an
Extended Commitment.
☐ The undersigned Bank with an existing Commitment
consents to this Amendment with respect to its existing
Commitment and also confirms its willingness to
provide additional Commitment under the Amended
Credit Agreement in an aggregate principal amount of
$_______________.
☐ The undersigned is a ‘‘Non-Extending Bank” and
consents to this Amendment and the termination of its
existing Commitment.
☐ The undersigned is a “Reducing Bank” and consents to
this Amendment and the reduction of its Commitment
under the Amended Credit Agreement to an aggregate
principal amount of $_______________.
Signature Page to Amendment No. 5 ‒ 2024 Facility
PNC BANK, NATIONAL ASSOCIATION
By:
/s/ RICHARD G. TUTICH
Name: Richard G. Tutich
Title: Vice President
Signature Page to Amendment No. 5 ‒ 2024 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS AMENDED
BY AMENDMENT NO. 1 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 18, 2016, AS
FURTHER AMENDED BY AMENDMENT NO. 2 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 20, 2017, AS FURTHER AMENDED BY
AMENDMENT NO, 3 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 28, 2018,
AND AS FURTHER AMENDED BY AMENDMENT NO,
4 TO THE EXISTING CREDIT AGREEMENT, DATED
AS OF NOVEMBER 26, 2019 AMONG NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS PARTY
THERETO, MIZUHO BANK, LTD., AS
ADMINISTRATIVE AGENT, JPMORGAN CHASE
BANK, N.A. AS SYNDICATION AGENT AND THE
OTHER AGENTS PARTY THERETO (THE “EXISTING
CREDIT AGREEMENT”).
Check only one of the following:
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment with
respect to the full amount set forth on Schedule 1
hereto, which amount will be converted in full to an
Extended Commitment.
☐ The undersigned Bank with an existing Commitment
consents to this Amendment with respect to its existing
Commitment and also confirms its willingness to
provide additional Commitment under the Amended
Credit Agreement in an aggregate principal amount of
$_______________.
☐ The undersigned is a “Non-Extending Bank” and
consents to this Amendment and the termination of its
existing Commitment.
☐ The undersigned is a “Reducing Bank” and consents to
this Amendment and the reduction of its Commitment
under the Amended Credit Agreement to an aggregate
principal amount of $_______________.
Signature Page to Amendment No. 5 ‒ 2024 Facility
U.S. BANK NATIONAL ASSOCIATION
By:
/s/ MICHAEL E. TEMNICK
Name: Michael E. Temnick
Title: Vice President
Signature Page to Amendment No. 5 ‒ 2024 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS AMENDED BY
AMENDMENT NO. 1 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 18, 2016, AS
FURTHER AMENDED BY AMENDMENT NO. 2 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 20, 2017, AS FURTHER AMENDED BY
AMENDMENT NO. 3 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 28, 2018,
AND AS FURTHER AMENDED BY AMENDMENT NO.
4 TO THE EXISTING CREDIT AGREEMENT, DATED
AS OF NOVEMBER 26, 2019 AMONG NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS PARTY
THERETO, MIZUHO BANK, LTD., AS
ADMINISTRATIVE AGENT, JPMORGAN CHASE
BANK, N.A. AS SYNDICATION AGENT AND THE
OTHER AGENTS PARTY THERETO (THE “EXISTING
CREDIT AGREEMENT”).
Check only one of the following:
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment with
respect to the full amount set forth on Schedule 1
hereto, which amount will be converted in full to an
Extended Commitment.
☐ The undersigned Bank with an existing Commitment
consents to this Amendment with respect to its existing
Commitment and also confirms its willingness to
provide additional Commitment under the Amended
Credit Agreement in an aggregate principal amount of
$_______________.
☐ The undersigned is a “Non-Extending Bank” and
consents to this Amendment and the termination of its
existing Commitment.
☐ The undersigned is a “Reducing Bank” and consents to
this Amendment and the reduction of its Commitment
under the Amended Credit Agreement to an aggregate
principal amount of $_______________.
Signature Page to Amendment No. 5 ‒ 2024 Facility
TRUIST BANK
By:
/s/ JUSTIN LIEN
Name: Justin Lien
Title: Director
Signature Page to Amendment No. 5 ‒ 2024 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT DATED AS OF
NOVEMBER 19, 2015, AS AMENDED BY AMENDMENT NO.
1 TO THE EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED BY
AMENDMENT NO. 2 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 20, 2017, AS
FURTHER AMENDED BY AMENDMENT NO. 3 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 28, 2018, AND AS FURTHER AMENDED BY
AMENDMENT NO. 4 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 26, 2019 AMONG
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS PARTY
THERETO, MIZUHO BANK, LTD., AS ADMINISTRATIVE
AGENT, JPMORGAN CHASE BANK, N.A. AS SYNDICATION
AGENT AND THE OTHER AGENTS PARTY THERETO (THE
“EXISTING CREDIT AGREEMENT”).
Check only one of the following:
☐ The undersigned is a Bank with an existing
Commitment and consents to this Amendment with
respect to the full amount set forth on Schedule 1
hereto, which amount will be converted in full to an
Extended Commitment.
☐ The undersigned Bank with an existing Commitment
consents to this Amendment with respect to its existing
Commitment and also confirms its willingness to
provide additional Commitment under the Amended
Credit Agreement in an aggregate principal amount of
$_______________.
☐ The undersigned is a “Non-Extending Bank” and
consents to this Amendment and the termination of its
existing Commitment.
☒ The undersigned is a “Reducing Bank” and consents to
this Amendment and the reduction of its Commitment
under the Amended Credit Agreement to an aggregate
principal amount of $100,000,000.00
Signature Page to Amendment No. 5 ‒ 2024 Facility
MUFG Bank, Ltd
By:
/s/ MICHAEL AGRIMIS
Name: Michael Agrimis
Title: Director
Signature Page to Amendment No. 5 ‒ 2024 Facility
SIGNATURE PAGE TOAMENDMENTNO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT DATED
AS OF NOVEMBER 19, 2015, AS AMENDED BY
AMENDMENT NO. 1 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 18, 2016, AS
FURTHER AMENDED BY AMENDMENT NO. 2 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 20, 2017, AS FURTHER AMENDED BY
AMENDMENT NO. 3 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 28, 2018, AND
AS FURTHER AMENDED BY AMENDMENT NO. 4 TO
THE EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 26, 2019 AMONG NATIONAL RURAL
UTILITIES COOPERATIVE FINANCE CORPORATION, AS
BORROWER, THE BANKS PARTY THERETO, MIZUHO
BANK, LTD., AS ADMINISTRATIVE AGENT, JPMORGAN
CHASE BANK, N.A. AS SYNDICATION AGENT AND THE
OTHER AGENTS PARTY THERETO (THE “EXISTING
CREDIT AGREEMENT”).
Check only one of the following:
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment with
respect to the full amount set forth on Schedule 1
hereto, which amount will be converted in full to an
Extended Commitment.
☐ The undersigned Bank with an existing Commitment
consents to this Amendment with respect to its existing
Commitment and also confirms its willingness to
provide additional Commitment under the Amended
Credit Agreement in an aggregate principal amount of
$_______________.
☐ The undersigned is a “Non-Extending Bank” and
consents to this Amendment and the termination of its
existing Commitment.
☐ The undersigned is a “Reducing Bank” and consents to
this Amendment and the reduction of its Commitment
under the Amended Credit Agreement to an aggregate
principal amount of $_______________.
Signature Page to Amendment No. 5 ‒ 2024 Facility
REGIONS BANK
By:
/s/ JIM SHARP
Name: Jim Sharp
Title: Managing Director
Signature Page to Amendment No. 5 ‒ 2024 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS AMENDED
BY AMENDMENT NO. 1 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 18, 2016, AS
FURTHER AMENDED BY AMENDMENT NO. 2 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 20, 2017, AS FURTHER AMENDED BY
AMENDMENT NO. 3 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 28, 2018,
AND AS FURTHER AMENDED BY AMENDMENT NO.
4 TO THE EXISTING CREDIT AGREEMENT, DATED
AS OF NOVEMBER 26, 2019 AMONG NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS PARTY
THERETO, MIZUHO BANK, LTD., AS
ADMINISTRATIVE AGENT, JPMORGAN CHASE
BANK, N.A. AS SYNDICATION AGENT AND THE
OTHER AGENTS PARTY THERETO (THE “EXISTING
CREDIT AGREEMENT”).
Check only one of the following:
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment with
respect to the full amount set forth on Schedule 1
hereto, which amount will be converted in full to an
Extended Commitment.
☐ The undersigned Bank with an existing Commitment
consents to this Amendment with respect to its existing
Commitment and also confirms its willingness to
provide additional Commitment under the Amended
Credit Agreement in an aggregate principal amount of
$_______________.
☐ The undersigned is a “Non-Extending Bank” and
consents to this Amendment and the termination of its
existing Commitment.
☐ The undersigned is a “Reducing Bank” and consents to
this Amendment and the reduction of its Commitment
under the Amended Credit Agreement to an aggregate
principal amount of $_______________.
Signature Page to Amendment No. 5 ‒ 2024 Facility
KeyBank National Association
By:
/s/ Benjamin Cooper
Name: Benjamin Cooper
Title: Senior Vice President
Signature Page to Amendment No. 5 ‒ 2024 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT DATED AS OF
NOVEMBER 19, 2015, AS AMENDED BY AMENDMENT NO.
1 TO THE EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED BY
AMENDMENT NO. 2 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 20, 2017, AS
FURTHER AMENDED BY AMENDMENT NO. 3 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 28, 2018, AND AS FURTHER AMENDED BY
AMENDMENT NO. 4 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 26, 2019 AMONG
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS PARTY
THERETO, MIZUHO BANK, LTD., AS ADMINISTRATIVE
AGENT, JPMORGAN CHASE BANK, N.A. AS SYNDICATION
AGENT AND THE OTHER AGENTS PARTY THERETO (THE
“EXISTING CREDIT AGREEMENT”).
Check only one of the following:
☐ The undersigned is a Bank with an existing
Commitment and consents to this Amendment with
respect to the full amount set forth on Schedule 1
hereto, which amount will be converted in full to an
Extended Commitment.
☐ The undersigned Bank with an existing Commitment
consents to this Amendment with respect to its existing
Commitment and also confirms its willingness to
provide additional Commitment under the Amended
Credit Agreement in an aggregate principal amount of
$______________.
☒ The undersigned is a “Non-Extending Bank” and
consents to this Amendment and the termination of its
existing Commitment.
☐ The undersigned is a “Reducing Bank” and consents to
this Amendment and the reduction of its Commitment
under the Amended Credit Agreement to an aggregate
principal amount of $_______________.
APPLE BANK FOR SAVINGS
By:
/s/ DANA R. MACKINNON
Name: Dana R. MacKinnon
Title: Senior Vice President
Signature Page to Amendment No. 5 ‒ 2024 Facility
EXTENDED COMMITMENTS
Extending Banks
Mizuho Bank Ltd.
Royal Bank of Canada
The Bank of Nova Scotia
JPMorgan Chase Bank, N.A.
PNC Bank, National Association
US Bank National Association
Truist Bank
MUFG Bank, Ltd
Regions Bank
KeyBank National Association
Total
SCHEDULE 1
Commitment
$150,000,000.00
$150,000,000.00
$150,000,000.00
$150,000,000.00
$150,000,000.00
$125,000,000.00
$125,000,000.00
$100,000,000.00
$75,000,000.00
$70,000,000.00
$1,245,000,000.00
EXHIBIT A
NOT A LEGAL DOCUMENT
COMPOSITE COPY REFLECTING
AMENDMENT NO. 45
DATED AS OF NOVEMBER 26JUNE 7, 20192021
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
dated as of
November 19, 2015
among
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION,
THE BANKS LISTED HEREIN,
MIZUHO BANK, LTD., as Administrative Agent and Initial Issuing Bank, JPMORGAN CHASE BANK,
N.A.,
as Syndication Agent,
and
MUFGPNC BANK, LTD. NATIONAL ASSOCIATION,
(F/K/A THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.), PNC BANK, NATIONAL
ASSOCIATION,
THE BANK OF NOVA SCOTIA,
and
ROYAL BANK OF CANADA
as Co-Documentation Agents
MIZUHO BANK, LTD.,
JPMORGAN CHASE BANK, N.A.,
MUFG BANK, LTD.
(F/K/A THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.),
PNC CAPITAL MARKETS LLC,
THE BANK OF NOVA SCOTIA
and
RBC CAPITAL MARKETS as Co-Lead Arrangers and Joint Bookrunners
TABLE OF CONTENTS
___________________
ARTICLE 1
Definitions
Section 1.01. Definitions....................................................................................................1
Section 1.02.
Section 1.03.
Determinations......................................................2425
Accounting Terms and
Types of
Borrowings...................................................................................2425
Section 1.04. Letter of Credit............................................................................................2425
Section 1.05. Divisions.........................................................................................................25
PAGE
Section 2.01.
Commitments to Lend
ARTICLE 2
The Credits
and Issue Letters of Credit.....................................2526
Section 2.02. Notice of Committed Borrowings...............................................................2728
Section 2.03. Money Market Borrowings.......................................................................2829
Section 2.04. Notice to Banks; Funding of Loans..........................................................3133
Section 2.05. Notes.........................................................................................................3334
Section 2.06. Maturity of Loans......................................................................................3435
Section 2.07.
Interest Rates............................................................................................3435
Section 2.08. Method of Electing Interest Rates............................................................3745
Section 2.09. Fees............................................................................................................3847
Section 2.10. Optional Termination or Reduction of Commitments..............................4048
Section 2.11. Mandatory Termination of Commitments................................................4048
Section 2.12. Optional Prepayments..............................................................................4048
Section 2.13. General Provisions as to Payments.........................................................4049
Section 2.14. Funding Losses..........................................................................................4150
Section 2.15. Computation of Interest and Fees.............................................................4150
Section 2.16. Taxes.........................................................................................................4150
Section 2.17.
Increase of Commitments..........................................................................4654
Section 2.18. Replacement of Banks...............................................................................4756
Section 2.19. Defaulting Banks.......................................................................................4958
Section 2.20. Issuance of Letters of Credit; Drawings and
Reimbursements; Auto-Extension Letters of Credit;
Funding of Participations.............................................................................................5160
Section 2.21. [Reserved]..................................................................................................6069
Section 2.22. Extension of Commitment Termination Date...............................................6069
ARTICLE 3
Conditions
Section 3.01. Effectiveness.............................................................................................6271
Section 3.02.
[Reserved]..............................................................................................6472
Section 3.03. Borrowings and L/C Credit Extensions.................................................6472
ARTICLE 4
Representations and Warranties
Section 4.01. Corporate Existence, Power and Authority..............................................6574
Section 4.02. Financial Statements.................................................................................6674
Section 4.03. Litigation...................................................................................................6775
Section 4.04. Governmental Authorizations……………………….…………..............6776
Section 4.05. Members’ Subordinated Certificates………………………….................6776
Section 4.06. No Violation of Agreements......................................................................6876
Section 4.07. No Event of Default under the Indentures..................................................6877
Section 4.08. Compliance with ERISA.............................................................................6877
Section 4.09. Compliance with Other Laws.....................................................................6877
Section 4.10. Tax Status..................................................................................................6977
Section 4.11. Investment Company Act............................................................................6977
Section 4.12. Disclosure..................................................................................................6978
Section 4.13. Subsidiaries...............................................................................................6978
Section 4.14. Environmental Matters.............................................................................6978
Section 4.15. Anti-Corruption Laws and Sanctions.......................................................7078
ARTICLE 5
Covenants
Section 5.01. Corporate Existence..................................................................................7079
Section 5.02. Disposition of Assets, Merger, Character of Business, etc......................7179
Section 5.03. Financial Information.............................................................................7180
Section 5.04. Default Certificates..................................................................................7281
Section 5.05. Notice of Litigation and Defaults………………………………...........7382
Section 5.06. ERISA........................................................................................................7382
Section 5.07. Payment of Charges……………………………………………..............7482
Section 5.08. Inspection of Books and Assets...............................................................7483
Section 5.09. Indebtedness……………………………………….................................7483
Section 5.10. Liens.........................................................................................................7584
Section 5.11. Maintenance of Insurance.......................................................................7685
Section 5.12. Subsidiaries and Joint Ventures……………………….…....……..........7685
Section 5.13. Minimum TIER.........................................................................................7786
Section 5.14. Retirement of Patronage Capital.............................................................7786
Section 5.15. Use of Proceeds.......................................................................................7786
Section 5.16. Compliance with Laws.............................................................................7886
ARTICLE 6
Defaults
Section 6.01.
Events of Default................................................................................7887
Section 6.02.
Actions In Respect Of Letters Of Credit Upon Default........................8089
Section 6.03. Notice of Default................................................................................8190
ARTICLE 7
The Administrative Agent
Section 7.01. Appointment and Authorization.............................................................8190
Section 7.02. Administrative Agent and Affiliates.........................................................8190
Section 7.03. General Nature of the Administrative Agent’s Duties.............................8190
Section 7.04. Consultation with Experts.......................................................................8291
Section 7.05. Liability of Administrative Agent......................................... ...................8291
Section 7.06.
Indemnification........................................................................................8391
Section 7.07. Credit Decision........................................................................................8392
Section 7.08. Successor Administrative Agent.......................................................... ..8492
Section 7.09.
Co-Documentation Agents, Syndication Agent and Co-
Lead Arrangers Not Liable .........................................................................................8493
Section 7.10. Calculations............................................................................................8493
Section 7.11. Erroneous Payment...................................................................................93
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair.....................8496
Section 8.02.
Illegality...................................................................................................8597
Increased Cost and Reduced Return......................................................8697
Section 8.03.
Section 8.04. Base Rate Loans Substituted for Affected Euro-Dollar Loans................8899
ARTICLE 9
Miscellaneous
Section 9.01. Notices.....................................................................................................88100
Section 9.02. No Waivers..............................................................................................90101
Section 9.03. Expenses; Documentary Taxes; Indemnification....................................90101
Section 9.04. Sharing of Set-offs...................................................................................90102
Section 9.05. Amendments and Waivers.........................................................................91102
Section 9.06. Successors and Assigns.............................................................................92104
Section 9.07. Collateral..................................................................................................94106
Section 9.08. Governing Law..........................................................................................95106
Section 9.09. Counterparts; Integration.........................................................................95107
Section 9.10. Several Obligations...................................................................................95107
Section 9.11. Severability................................................................................................96107
Section 9.12. Confidentiality...........................................................................................96108
Section 9.13. WAIVER OF JURY TRIAL.......................................................................96108
Section 9.14. USA Patriot Act.......................................................................................97108
Section 9.15. ICC Transactions.....................................................................................97108
Section 9.16. Acknowledgement and Consent to Bail-In................................................98109
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT dated
as of November 19, 2015, is made by and among NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION, a not-for-profit cooperative
association incorporated under the laws of the District of Columbia, as Borrower,
the BANKS listed on the signature pages hereof, MIZUHO BANK, LTD., as
Administrative Agent and as Initial Issuing Bank for the Letters of Credit issued or
to be issued pursuant to this Agreement, JPMORGAN CHASE BANK, N.A., as
Syndication Agent, and MUFG BANK, LTD. (F/K/A THE BANK OF TOKYO-
MITSUBISHI UFJ, LTD.), PNC BANK, NATIONAL ASSOCIATION, THE
BANK OF NOVA SCOTIA and ROYAL BANK OF CANADA, as Co-
Documentation Agents.
WHEREAS, the Borrower, the several Banks, the Administrative Agent, the
Syndication Agent and Co-Documentation Agents (as each is defined hereinafter)
entered into a Revolving Credit Agreement dated as of October 21, 2011, as
amended by Amendment No. 1 dated as of March 28, 2013, Amendment No. 2
dated as of October 28, 2013, Amendment No. 3 dated as of October 28, 2014 and
Amendment No. 4 dated as of October 9, 2015 (collectively, the “Existing Credit
Agreement”); and
WHEREAS, the Borrower has requested that the Banks, the Administrative
Agent, the Syndication Agent and the Co-Documentation Agents agree, on the
terms and conditions set forth herein, to amend and restate the Existing Credit
Agreement. The Banks, Administrative Agent, Syndication Agent and Co-
Documentation Agents have indicated their willingness to amend and restate the
Existing Credit Agreement on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby amend and restate the Existing Credit
Agreement in its entirety and the parties hereto hereby agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. The following terms, as used herein, have
the following meanings:
“1994 Indenture” means the Indenture dated as of February 15,
1994 and as amended as of September 16, 1994 between the Borrower and U.S.
Bank National Association, as trustee, as amended and supplemented from time to
time, providing for the issuance in series of certain collateral trust bonds of the
Borrower.
“2007 Indenture” means the Indenture dated as of October 25, 2007
between the Borrower and U.S. Bank National Association, as trustee, as amended
and supplemented from time to time, providing for the issuance in series of certain
collateral trust bonds of the Borrower.
“2016 Amendment” means Amendment No. 1 to this Agreement
dated as of November 18, 2016 among the Borrower, the Administrative Agent, the
Syndication Agent and the Banks thereto.
“2017 Amendment” means Amendment No. 2 to this Agreement
dated as of November 20, 2017 among the Borrower, the Administrative Agent, the
Syndication Agent and the Banks thereto.
“2017 Fee Letters” means those certain Fee Letters dated October
13, 2017 among the Borrower, the Administrative Agent and the Syndication
Agent.
“2018 Amendment” means Amendment No. 3 to this Agreement
dated as of November 28, 2018 among the Borrower, the Administrative Agent, the
Syndication Agent and the Banks thereto.
“2018 Fee Letters” means those certain Fee Letters dated October
16, 2018 among the Borrower, the Administrative Agent and the Syndication
Agent.
“2019 Amendment” means Amendment No. 4 to this Agreement
dated as of November 26, 2019 among the Borrower, the Administrative Agent, the
Syndication Agent and the Banks thereto.
“2019 Fee Letters” means those certain Fee Letters dated October
16, 2019 among the Borrower, the Administrative Agent, the Syndication Agent
and the Co-Lead Arrangers.
“2021 Amendment” means Amendment No. 5 to this Agreement
dated as of June 7, 2021 among the Borrower, the Administrative Agent, the
Syndication Agent and the Banks thereto.
“2021 Fee Letters” means those certain Fee Letters dated May11,
2021 among the Borrower, the Administrative Agent, the Syndication Agent and
the Co-Lead Arrangers.
“Absolute Rate Auction” means a solicitation of Money Market
Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03.
“Additional Commitment Bank” has the meaning set forth in
Section 2.22(d).
“Adjusted London Interbank Offered Rate” has the meaning set
forth in Section 2.07(b).
2
“Administrative Agent” means Mizuho Bank, Ltd., in its capacity
as administrative agent for the Banks hereunder, and its successors in such capacity.
“Administrative Questionnaire” means, with respect to each Bank,
the administrative questionnaire in the form submitted to such Bank by the
Administrative Agent and submitted to the Administrative Agent (with a copy to
the Borrower) duly completed by such Bank.
“Affected Financial Institution” means (i) any EEA Financial
Institution or (ii) any UK Financial Institution.
“Aggregate Commitment” means the aggregate amount that is
equal to the sum of the amounts of each of the Commitments.
“Agreement” means this Amended and Restated Revolving Credit
Agreement, as the same may be amended from time to time.
“Amendment Effective Date” means the date this Agreement
becomes effective in accordance with Section 3.01.
“Anniversary Date” has the meaning set forth in Section 2.22(a).
“Anti-Corruption Laws” means all laws, rules, and regulations of
any jurisdiction applicable to the Borrower or its Subsidiaries from time to time
concerning or relating to bribery, corruption or money laundering.
“Anniversary Date” has the meaning set forth in Section 2.22(a).
“Applicable Law” means, with respect to any Person, any and all
laws, statutes, regulations, rules, orders, injunctions, decrees, judgments, writs
determinations or awards having the force or effect of binding such Person at law
and issued by any Governmental Authority, applicable to such Person, including all
Environmental Laws.
“Applicable Lending Office” means, with respect to any Bank, (i)
in the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its
Money Market Loans, its Money Market Lending Office.
“ASC 815” means Accounting Standards Codification No. 815
Derivatives and Hedging, as amended from time to time (or any successor provision
thereto).
“ASC 830” means Accounting Standards Codification No. 830
Foreign Currency Matters, as amended from time to time (or any successor
provision thereto).
3
“Assignee” has the meaning set forth in Section 9.06(c).
“Auto-Extension Letter of Credit” has the meaning specified in
Section 2.20(a)(iii).
“Available Tenor” means, as of any date of determination and with
respect to the then-current Benchmark, as applicable, any tenor for such Benchmark
or payment period for interest calculated with reference to such Benchmark, as
applicable, that is or may be used for determining the length of an Interest Period
pursuant to this Agreement as of such date and not including, for the avoidance of
doubt, any tenor for such Benchmark that is then-removed from the definition of
“Interest Period”.
“Back-Up Letter of Credit” has the meaning set forth in Section
2.01(b).
“Bail-In Action” means the exercise of any Write-Down and
Conversion Powers by the applicable EEA Resolution Authority in respect of any
liability of an EEAAffected Financial Institution.
“Bail-In Legislation” means, (i) with respect to any EEA Member
Country implementing Article 55 of Directive 2014/59/EU of the European
Parliament and of the Council of the European Union, the implementing law for
such EEA Member Country from time to time which is described in the EU Bail-In
Legislation Schedule. and (ii) with respect to the United Kingdom, Part I of the
United Kingdom Banking Act 2009 (as amended from time to time) and any other
law, regulation or rule applicable in the United Kingdom relating to the resolution
of unsound or failing banks, investment firms or other financial institutions or their
affiliates (other than through liquidation, administration or other insolvency
proceedings).
“Bank” means at any time, any Bank that has a Commitment
specified on the Commitment Schedule hereto or any Assignee thereof and any
subsequent Assignee of such Assignee which becomes a Bank pursuant to Section
9.06(c).
“Bank Extension Notice Date” has the meaning set forth in Section
2.22(b).
“Bank Parties” mean the Banks and the Issuing Banks.
“Bankruptcy Event” means, with respect to any Person, such
Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee, administrator, custodian, assignee for the benefit of
creditors or similar Person charged with the reorganization or liquidation of its
business appointed for it, or, in the good faith determination of the Administrative
Agent, has taken any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any such proceeding or appointment, provided that a
Bankruptcy Event shall not result solely by virtue of any ownership interest, or the
acquisition of any ownership interest, in such Person by a Governmental
4
Authority or instrumentality thereof, provided, further, that such ownership interest
does not result in or provide such Person with immunity from the jurisdiction of
courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Person (or such Governmental Authority or
instrumentality) to reject, repudiate, disavow or disaffirm any contracts or
agreements made by such Person.
“Base Rate” means, for any day, a rate per annum equal to the
highest of (i) the Prime Rate for such day, (ii) the Federal Funds Rate for such day
plus 0.50% and (iii) the Adjusted London Interbank Offered Rate taking into
account any London Interbank Offered Rate floor under the definition of “London
Interbank Offered Rate”Benchmark, or a comparable or successor rate, which rate
is selected by the Administrative Agent and Borrower as described in the definition
of “London Interbank Offered Rate” in Section 2.07(b), for a one month Interest
Period on such day (or if such day is not a Euro-Dollar Business Day, the
immediately preceding Euro-Dollar Business Day) plus 1.00%.
“Base Rate Loan” means a Committed Loan that bears interest at
the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice
of Interest Rate Election or the last sentence of Section 2.08(a) or Article 8.
“Base Rate Margin” means a rate per annum determined in
accordance with the Pricing Schedule.
“Benchmark” means, initially, USD LIBOR; provided that if a
Benchmark Transition Event, a Term SOFR Transition Event or an Early
Opt-in Election or an Other Benchmark Rate Election, as applicable, and its
related Benchmark Replacement Date have occurred with respect to USD
LIBOR or the then-current Benchmark, then “Benchmark” means the
applicable Benchmark Replacement to the extent that such Benchmark
Replacement has replaced such prior benchmark rate pursuant to Section
2.07.
“Benchmark Replacement” means, for any Available Tenor, the
first alternative set forth in the order below that can be determined by the
Administrative Agent for the applicable Benchmark Replacement Date.
Provided that, in the case of an Other Benchmark Rate Election, “Benchmark
Replacement” shall mean the alternative set forth in (3) below; provided
further, if the Administrative Agent decides that Term SOFR is not
administratively feasible for the Administrative Agent, then Term SOFR will
be deemed unable to be determined for purposes of this definition:
(1) the sum of: (a) Term SOFR and (b) the related Benchmark
Replacement Adjustment;
5
(2) the sum of: (a) Daily Simple SOFR and (b) the related
Benchmark Replacement Adjustment;
(3) the sum of: (a) the alternate benchmark rate that has been
selected by the Administrative Agent and the Borrower as
the replacement for the then-current Benchmark for the
applicable Corresponding Tenor giving due consideration
to (i) any selection or recommendation of a replacement
benchmark rate or the mechanism for determining such a
rate by the Relevant Governmental Body or (ii) any
evolving or then-prevailing market convention for
determining a benchmark rate as a replacement for the
then-current Benchmark for U.S. dollar-denominated
syndicated credit facilities at such time and (b) the related
Benchmark Replacement Adjustment;
provided that, in the case of clause (1), such Unadjusted Benchmark
Replacement is displayed on a screen or other information service that
publishes such rate from time to time as selected by the Administrative Agent
in its reasonable discretion; provided further that, in the case of clause (3),
when such clause is used to determine the Benchmark Replacement in
connection with the occurrence of an Other Benchmark Rate Election, the
alternate benchmark rate selected by the Administrative Agent and the
Borrower shall be the term benchmark rate that is used in lieu of a LIBOR-
based rate in the relevant other Dollar-denominated syndicated credit
facilities; provided further that, notwithstanding anything to the contrary in
this Agreement or in any other Loan Document, upon the occurrence of a
Term SOFR Transition Event, and the delivery of a Term SOFR Notice, on
the applicable Benchmark Replacement Date the “Benchmark Replacement”
shall revert to and shall be deemed to be the sum of (a) Term SOFR and (b)
the related Benchmark Replacement Adjustment, as set forth in clause (1) of
this definition (subject to the first proviso above). If the Benchmark
Replacement as determined pursuant to clause (1), (2) or (3) above would be
less than the Floor, the Benchmark Replacement will be deemed to be the
Floor for the purposes of this Agreement.
“Benchmark Replacement Adjustment” means, with respect to
any replacement of the then- current Benchmark with an Unadjusted
Benchmark Replacement for any applicable Interest Period and Available
Tenor for any setting of such Unadjusted Benchmark Replacement:
(1) for purposes of clauses (1) and (2) of the definition of
“Benchmark Replacement,” the first alternative set forth in the order below
that can be determined by the Administrative Agent:
determining such spread adjustment, (which may be a positive
(a) the spread adjustment, or method for calculating or
6
or negative value or zero) as of the Reference Time such
Benchmark Replacement is first set for such Interest Period that
has been selected or recommended by the Relevant
Governmental Body for the replacement of such Benchmark
with the applicable Unadjusted Benchmark Replacement for the
applicable Corresponding Tenor;
(b) the spread adjustment (which may be a positive or negative value
or zero) as of the Reference Time such Benchmark Replacement
is first set for such Interest Period that would apply to the
fallback rate for a derivative transaction referencing the ISDA
Definitions to be effective upon an index cessation event with
respect to such Benchmark for the applicable Corresponding
Tenor; and
(2) for purposes of clause (3) of the definition of “Benchmark Replacement,”
the spread adjustment, or method for calculating or determining such
spread adjustment, (which may be a positive or negative value or zero)
that has been selected by the Administrative Agent and the Borrower for
the applicable Corresponding Tenor giving due consideration to (i) any
selection or recommendation of a spread adjustment, or method for
calculating or determining such spread adjustment, for the replacement
of such Benchmark with the applicable Unadjusted Benchmark
Replacement by the Relevant Governmental Body on the applicable
Benchmark Replacement Date or (ii) any evolving or then-prevailing
market convention for determining a spread adjustment, or method for
calculating or determining such spread adjustment, for the replacement
of such Benchmark with the applicable Unadjusted Benchmark
Replacement for U.S. dollar-denominated syndicated credit facilities;
provided that, in the case of clause (1) above, such adjustment is displayed on a
screen or other information service that publishes such Benchmark
Replacement Adjustment from time to time as selected by the Administrative
Agent in its reasonable discretion.
“Benchmark Replacement Conforming Changes” means, with
respect to any Benchmark Replacement, any technical, administrative or
operational changes (including changes to the definition of “Business Day,” the
definition of “Interest Period,” timing and frequency of determining rates and
making payments of interest, timing of borrowing requests or prepayment,
conversion or continuation notices, length of lookback periods, the
applicability of breakage provisions, the formula for calculating any successor
rates identified pursuant to the definition of “Benchmark
7
Replacement”, the formula, methodology or convention for applying the
successor Floor to the successor Benchmark Replacement and other technical,
administrative or operational matters) that the Administrative Agent decides
may be appropriate to reflect the adoption and implementation of such
Benchmark Replacement and to permit the administration thereof by the
Administrative Agent in a manner substantially consistent with market
practice (or, if the Administrative Agent decides that adoption of any portion
of such market practice is not administratively feasible or if the Administrative
Agent determines that no market practice for the administration of such
Benchmark Replacement exists, in such other manner of administration as the
Administrative Agent decides is reasonably necessary in connection with the
administration of this Agreement).
“Benchmark Replacement Date” means the earliest to occur of
the following events with respect to the then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of
“Benchmark Transition Event,” the later of (a) the date of the public statement
or publication of information referenced therein and (b) the date on which the
administrator of such Benchmark (or the published component used in the
calculation thereof) permanently or indefinitely ceases to provide all Available
Tenors of such Benchmark (or such component thereof);
(2) in the case of clause (3) of the definition of “Benchmark
Transition Event,” the date of the public statement or publication of
information referenced therein;
(3) in the case of a Term SOFR Transition Event, the date that
is thirty (30) days after the date a Term SOFR Notice is provided to the
Lenders and the Borrower pursuant to clause (b) of this Section titled
“Benchmark Replacement Setting” or such later date as specified in such
notice; or
(4) in the case of an Early Opt-in Election or an Other
Benchmark Rate Election, the sixth (6th) Business Day after the date notice of
such Early Opt-in Election or Other Benchmark Rate Election, as applicable,
is provided to the Lenders, so long as the Administrative Agent has not
received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day
after the date notice of such Early Opt-in Election or Other Benchmark Rate
Election, as applicable, is provided to the Lenders, written notice of objection
to such Early Opt-in Election or Other Benchmark Rate Election, as
applicable, from Lenders comprising the Required Lenders; provided
however, the Administrative Agent and the Borrower may choose a later date
8
as specified in such notice.
For the avoidance of doubt, (i) if the event giving rise to the Benchmark
Replacement Date occurs on the same day as, but earlier than, the Reference
Time in respect of any determination, the Benchmark Replacement Date will
be deemed to have occurred prior to the Reference Time for such
determination and (ii) the “Benchmark Replacement Date” will be deemed to
have occurred in the case of clause (1) or (2) with respect to any Benchmark
upon the occurrence of the applicable event or events set forth therein with
respect to all then-current Available Tenors of such Benchmark (or the
published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or
more of the following events with respect to the then-current Benchmark:
(1) a public statement or publication of information by or on
behalf of the administrator of such Benchmark (or the published component
used in the calculation thereof) announcing that such administrator has ceased
or will cease to provide all Available Tenors of such Benchmark (or such
component thereof), permanently or indefinitely, provided that, at the time of
such statement or publication, there is no successor administrator that will
continue to provide any Available Tenor of such Benchmark (or such
component thereof);
(2) a public statement or publication of information by the
regulatory supervisor for the administrator of such Benchmark (or the
published component used in the calculation thereof), the Board of Governors
of the Federal Reserve System, the Federal Reserve Bank of New York, an
insolvency official with jurisdiction over the administrator for such
Benchmark (or such component), a resolution authority with jurisdiction over
the administrator for such Benchmark (or such component) or a court or an
entity with similar insolvency or resolution authority over the administrator
for such Benchmark (or such component), which states that the administrator
of such Benchmark (or such component) has ceased or will cease to provide all
Available Tenors of such Benchmark (or such component thereof)
permanently or indefinitely, provided that, at the time of such statement or
publication, there is no successor administrator that will continue to provide
any Available Tenor of such Benchmark (or such component thereof); or
(3) a public statement or publication of information by the
regulatory supervisor for the administrator of such Benchmark (or the
published component used in the calculation thereof) announcing
9
that all Available Tenors of such Benchmark (or such component
thereof) are no longer representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed
to have occurred with respect to any Benchmark if a public statement or
publication of information set forth above has occurred with respect to each
then-current Available Tenor of such Benchmark (or the published
component used in the calculation thereof).
“Benchmark Unavailability Period” means the period (if any) (x)
beginning at the time that a Benchmark Replacement Date pursuant to
clauses (1) or (2) of that definition has occurred if, at such time, no
Benchmark Replacement has replaced the then-current Benchmark for all
purposes hereunder and under any Loan Document in accordance with this
Section titled “Benchmark Replacement Setting” and (y) ending at the time
that a Benchmark Replacement has replaced the then-current Benchmark for
all purposes hereunder in accordance with Section 2.07.
“Beneficial Ownership Certification” means a certification
regarding beneficial ownership required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Bonds” means any bonds issued pursuant to any of the Indentures,
as the context may require.
“Borrower” means the National Rural Utilities Cooperative Finance
Corporation, a not-for-profit cooperative association incorporated under the laws of
the District of Columbia, and its successors.
“Borrowing” has the meaning set forth in Section 1.03
.
“Cash Collateral Account” means a deposit account or a non-
interest bearing securities account (as contemplated by Section 2.20(e)) opened, or
to be opened, by the Administrative Agent and in which a Lien has been granted to
the Administrative Agent for the benefit of each Bank and each Issuing Bank
pursuant to documentation in form and substance reasonably satisfactory to the
Administrative Agent and each Issuing Bank (which documents are hereby
consented to by the Banks) to the extent that any Letter of Credit is required to be
Cash Collateralized in accordance with this Agreement.
“Cash Collateralize” means to pledge and deposit with or deliver to
the Administrative Agent, for the benefit of each Issuing Bank and each Bank, as
collateral for the L/C Obligations, cash or deposit account balances, and “Cash
Collateral” shall refer to such cash or deposit account balances.
10
“Central Banking Authority” means any central bank, reserve bank
or monetary authority that is principally engaged in the regulation of the currency,
money supply or commercial banking system of any given sovereign state or states.
“Change in Law” means (a) the adoption of any law, rule,
regulation or treaty after the Effective Date, (b) any change in any law, rule,
regulation or treaty or in the interpretation or application thereof by any
Governmental Authority after the Effective Date or (c) compliance by any Bank
Party (or, for purposes of Section 8.03(b), by its Applicable Lending Office or by
such Bank Party’s holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the Effective Date; provided however, that notwithstanding anything
therein to the contrary, (i) any requirements imposed under the Dodd-Frank Wall
Street Reform and Consumer Protection Act and all requests, rules, regulations,
guidelines or directives thereunder or enacted, adopted or issued in connection
therewith and (ii) any requests, rules, guidelines or directives concerning capital
adequacy promulgated by the Bank for International Settlements, the Basel
Committee on Banking Regulations and Supervisory Practices (or any successor or
similar authority) or the United States financial regulatory authorities, in each case
pursuant to Basel III, shall be deemed to be a “Change in Law”, regardless of the
date adopted, issued, promulgated or implemented, but only if any such
requirements are generally applicable to (and for which reimbursement is generally
being sought by the Banks in respect of) credit transactions similar to this
transaction from borrowers similarly situated to the Borrower.
“Code” means the Internal Revenue Code of 1986, as amended.
“Co-Documentation Agents” means MUFG Bank, Ltd. (f/k/a The
Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank
of Nova Scotia and Royal Bank of Canada, each in their respective capacity as
documentation agent hereunder, and their respective successors in such capacity.
“Co-Lead Arrangers” means Mizuho Bank, Ltd., JPMorgan Chase
Bank, N.A., MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.),
PNC Capital Markets LLC, The Bank of Nova Scotia, and RBC Capital Markets, 1
each in their capacity as co-lead arranger and joint bookrunner.
“Commitment” means (i) with respect to any Bank, the amount, if
any, set forth opposite the name of such Bank on the Commitment Schedule and (ii)
with respect to any Bank that is an Assignee pursuant to Section 9.06(c), the
amount of the transferor Bank’s commitment specified on the Commitment
Schedule that is assigned to such Bank, and further, any subsequent assignment
___________
1 RBC Capital Markets is a brand name for the capital markets businesses of Royal Bank
of Canada and its affiliates.
11
made by an Assignee to another Assignee of such amounts pursuant to Section
9.06(c), in each case as such amount may from time to time be increased or
decreased from time to time in accordance with the terms and conditions of this
Agreement.
“Commitment Schedule” means the commitment schedule attached
hereto under the heading, Commitment Schedule.
“Commitment Termination Date” means November 28, 20222024
or, if such day is not a Euro-Dollar Business Day, the immediately preceding Euro-
Dollar Business Day.
“Committed Borrowing” means a Borrowing under Section
2.01(a).
“Committed Loan” means a Revolving Loan; provided that, if any
such loan or loans (or portions thereof) are combined or subdivided pursuant to a
Notice of Interest Rate Election, the term “Committed Loan” shall refer to the
combined principal amount resulting from such combination or to each of the
separate principal amounts resulting from such subdivision, as the case may be.
“Confidential Information” has the meaning set forth in Section
9.12.
“Consolidated Entity” means at any date any Subsidiary, and any
other entity the accounts of which would be combined or consolidated with those of
the Borrower in its combined or consolidated financial statements if such statements
were prepared as of such date.
“Corresponding Tenor” with respect to any Available Tenor
means, as applicable, either a tenor (including overnight) or an interest
payment period having approximately the same length (disregarding business
day adjustment) as such Available Tenor.
“Credit Documentation” has the meaning set forth in Section 9.15.
“Credit Exposure” means with respect to any Bank at any time,
such Bank’s Pro Rata Share of each of (i) the aggregate principal amount of the
Loans outstanding at such time and (ii) the Outstanding Amount of all L/C
Obligations at such time (for the avoidance of doubt, the aggregate amount of such
Bank’s participation in L/C Obligations are deemed to be “held” by such Bank for
purposes of this definition).
“Daily Simple SOFR” means, for any day, SOFR, with the
conventions for this rate (which will include a lookback) being established by
the Administrative Agent in accordance with the conventions for this rate
selected or recommended by the Relevant Governmental Body for
determining “Daily Simple SOFR” for syndicated business loans; provided,
that if the Administrative Agent decides that any such convention is not
12
administratively feasible for the Administrative Agent, then the
Administrative Agent may establish another convention in its reasonable
discretion.
“Default” means any occurrence or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both (as specified
in Section 6.01) would, unless cured or waived, become an Event of Default.
“Defaulting Bank” means any Bank that (a) has failed, within two
Domestic Business Days of the date required to be funded or paid, to (i) fund any
portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or
(iii) pay over to the Administrative Agent or any Bank Party any other amount
required to be paid by it hereunder, unless, in the case of clause (i) above, such
Bank notifies the Administrative Agent and the Borrower, in writing that such
failure is the result of such Bank’s good faith determination that a condition
precedent to funding (specifically identified and including the particular default, if
any) has not been satisfied, (b) has notified the Borrower, the Administrative Agent
or any Bank Party in writing, or has made a public statement to the effect, that it
does not intend or expect to comply with any of its funding obligations under this
Agreement (unless such writing or public statement indicates that such position is
based on such Bank’s good faith determination that a condition precedent
(specifically identified and including the particular default, if any) to funding a loan
under this Agreement cannot be satisfied) or generally under other agreements in
which it commits to extend credit, (c) has failed, within three Domestic Business
Days after request by the Administrative Agent (the Administrative Agent hereby
agreeing to make any such written request upon a request from the Borrower) or
any Bank Party, acting in good faith, to provide a certification in writing from an
authorized officer of such Bank (with a copy of such certification to be provided to
the Borrower) that it will comply with its obligations to fund prospective Loans and
participations in then outstanding Letters of Credit under this Agreement, provided
that such Bank shall cease to be a Defaulting Bank pursuant to this clause (c) upon
such Bank Party’s receipt of such certification in form and substance satisfactory to
it and the Administrative Agent, or (d) has, or has a Parent, that has become the
subject of (i) a Bankruptcy Event or (ii) a Bail-In Action.
“Derivative Cash Settlements” means, for any period, the line item
“derivative cash settlements” as it appears on the statement of operations of the
Borrower and its Consolidated Entities (or any notes thereto) for such period
delivered to the Banks pursuant to Section 5.03(b), calculated in accordance with
U.S. GAAP as in effect from time to time.
“Derivatives Obligations” of any Person means all obligations of
such Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction, currency swap
13
transaction, cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.
“Determination Date” has the meaning set forth in Section 5.09.
“Dollars” or “$” refers to lawful money of the United States of
America.
“Domestic Business Day” means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are authorized
or required by law to close.
“Domestic Lending Office” means, as to each Bank Party, its office
located at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank Party may hereafter designate as its Domestic Lending Office
by notice to the Borrower and the Administrative Agent.
“Early Opt-in Election” means, if the then-current Benchmark is
USD LIBOR, the occurrence of:
(1) a notification by the Administrative Agent to (or the request by
the Borrower to the Administrative Agent to notify) each of the other parties
hereto that at least five currently outstanding U.S. dollar-denominated
syndicated credit facilities at such time contain (as a result of amendment or as
originally executed) a SOFR-based rate (including SOFR, a term SOFR or any
other rate based upon SOFR) as a benchmark rate (and such syndicated credit
facilities are identified in such notice and are publicly available for review),
and
(2) the joint election by the Administrative Agent and the Borrower
to trigger a fallback from USD LIBOR and the provision by the
Administrative Agent of written notice of such election to the Lenders.
“EEA Financial Institution” means (ai) any institution established
in any EEA Member Country which is subject to the supervision of an EEA
Resolution Authority, (bii) any entity established in an EEA Member Country
which is a parent of an institution described in clause (ai) of this definition, or (ciii)
any institution established in an EEA Member Country which is a subsidiary of an
institution described in clauses (ai) or (bii) of this definition and is subject to
consolidated supervision with its parent.
“EEA Member Country” means any member state of the European
Union, Iceland, Liechtenstein and Norway.
“EEA Resolution Authority” means any public administrative
authority or any Person entrusted with public administrative authority of any EEA
Member
14
Country (including any delegee) having responsibility for the resolution of any
EEA Financial Institution.
“Effective Date” means October 21, 2011.
“Environmental Laws” means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses,
agreements and governmental restrictions relating to the environment, the effect of
the environment on human health or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof.
“ERISA” means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
“ERISA Group” means the Borrower, any Subsidiary and all
members of a controlled group of corporations and all trades or businesses (whether
or not incorporated) under common control which, together with the Borrower or
any Subsidiary, are treated as a single employer under Section 414(b) or (c) of the
Code or, for purposes of Section 412 of the Code, under Section 414(b), (c), (m) or
(o) of the Code.
“Erroneous Payment” has the meaning assigned to it in Section
7.11(a).
“Erroneous Payment Deficiency Assignment” has the meaning
assigned to it in Section 7.11(d).
“Erroneous Payment Return Deficiency” has the meaning
assigned to it in Section 7.11(d).
“EU Bail-In Legislation Schedule” means the document described
as such and published by the Loan Market Association (or any successor person)
from time to time.
“Euro-Dollar Business Day” means any Domestic Business Day on
which commercial banks are open for international business (including dealings in
dollar deposits) in London.
“Euro-Dollar Lending Office” means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office)
or such other office, branch or affiliate of such Bank as it may hereafter designate
15
as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative
Agent.
“Euro-Dollar Loan” means a Committed Loan that bears interest at
a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election.
“Euro-Dollar Margin” means a rate per annum determined in
accordance with the Pricing Schedule.
“Euro-Dollar Rate” means, for any day, a rate per annum
determined in accordance with Section 2.07(b).
“Euro-Dollar Reserve Percentage” has the meaning set forth in
Section 2.07(b).
“Event of Default” has the meaning set forth in Section 6.01.
“Excluded Taxes” means, with respect to any payment made by the
Borrower under this Agreement or the Notes, any of the following Taxes imposed
on or with respect to a Recipient:
(a) income Taxes imposed on (or measured by) net income and
franchise Taxes by the United States of America, or by the jurisdiction under the
laws of which such Recipient is organized or in which its principal office is located
or, in the case of any Bank Party, in which its applicable lending office is located or
are Other Connection Taxes, (b) any branch profits Taxes imposed by the United
States of America or any similar Taxes imposed by any other jurisdiction in which
the Borrower is located or are Other Connection Taxes, (c) in the case of a Non
U.S. Bank Party (other than an assignee pursuant to a request by the Borrower
under Section 2.18(b)), any U.S. Federal withholding Taxes resulting from any law
in effect on the date such Non U.S. Bank Party becomes a party to this Agreement
(or designates a new lending office) or is attributable to such Non U.S. Bank Party’s
failure to comply with Section 2.16(f), except to the extent that such Non U.S. Bank
Party (or its assignor, if any) was entitled, at the time of designation of a new
lending office (or assignment), to receive additional amounts from the Borrower
with respect to such withholding Taxes pursuant to Section 2.16(a) and (d) any U.S.
Federal withholding Taxes imposed under FATCA.
“Existing Commitment Termination Date” has the meaning set
forth in Section 2.22(d).
“Existing Credit Agreement” has the meaning set forth in first
WHEREAS clause above.
16
“Existing Letters of Credit” means the letters of credit issued and
outstanding under the Existing Credit Agreement as of the Amendment Effective
Date and set forth in the Existing Letters of Credit Schedule hereto.
“Extended Commitment” means an Extended Commitment as
defined in the 20192021 Amendment.
“Extension Date” has the meaning set forth in Section 2.22(d).
“Facility Fee Rate” means a rate per annum determined in
accordance with the Pricing Schedule.
“Farmer Mac” means the Federal Agricultural Mortgage
Corporation, a corporation organized and existing under the laws of the United
States of America and a federally-chartered instrumentality of the United States of
America and an institution of the Farm Credit System.
“Farmer Mac Master Note Purchase Agreement” means that
certain Amended and Restated Master Note Purchase Agreement, dated as of July
31, 2015March 24, 2011, as amended by the First Supplemental Note Purchase
Agreement dated as of March 24, 2011, the Amended and Restated First
Supplemental Note Purchase Agreement dated as of January 8, 2015, the
Second Amended and Restated First Supplemental Note Purchase Agreement
dated as of February 26, 2018, and the Third Amended and Restated First
Supplemental Note Purchase Agreement dated as of May 20, 2021, among
Farmer Mac Mortgage Securities Corporation, a wholly owned subsidiary of
Farmer Mac, Farmer Mac and the Borrower.
“Farmer Mac Master Note Purchase Agreement Liens” means
Liens on any assets of the Borrower required to be pledged as collateral to support
obligations of the Borrower with respect to any notes issued pursuant to the Farmer
Mac Master Note Purchase Agreement.
“Farmer Mac Master Note Purchase Agreement Limit” shall be
the lesser of (i) the aggregate purchase amount of notes available for purchase at
any such time, without regards to whether any such notes have been purchased,
pursuant to one or more supplemental note purchase agreements to the Farmer Mac
Master Note Purchase Agreement in effect at such time or (ii) $1,000,000,000.
“Farmer Mac Master Note Purchase Agreement Obligations”
means notes issued pursuant to the Farmer Mac Master Note Purchase Agreement.
“FATCA” means Sections 1471 through 1474 of the Code, as of the
date of this Agreement (or any amended or successor version that is substantively
comparable and not materially more onerous to comply with), any regulations or
official interpretations thereof, any agreements entered into pursuant to Section
1471(b) of the Code, and any applicable intergovernmental agreements and
17
related legislation and official administrative rules or practices with respect thereto.
“Federal Funds Rate” means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day; provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Domestic Business Day as so published on the next succeeding
Domestic Business Day, and (ii) if no such rate is so published on such next
succeeding Domestic Business Day, the Federal Funds Rate for such day shall be
the average rate quoted to the Administrative Agent on such day on such
transactions as determined by the Administrative Agent.
“Fifth Amendment Effective Date” means the Fifth Amendment
Effective Date as defined in the 2021 Amendment.
“First Amendment Effective Date” means the First Amendment
Effective Date as defined in the 2016 Amendment.
“Fitch” means Fitch Ratings, Inc., and its successors
“Fixed Rate Borrowing” means either a Euro-Dollar Borrowing or
a Money Market LIBOR Borrowing.
“Fixed Rate Loans” means Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01) or any combination of the foregoing.
“Floor” means the benchmark rate floor, if any, provided in this
Agreement initially (as of the execution of this Agreement, the modification,
amendment or renewal of this Agreement or otherwise) with respect to USD
LIBOR.
“Foreclosed Asset” has the meaning set forth in Section 5.12.
“Fourth Amendment Effective Date” means the Fourth
Amendment Effective Date as defined in the 2019 Amendment.
“Fronting Fee” has the meaning specified in Section 2.09(d).
“Governmental Authority” means any national, state, county, city,
town, village, municipal or other government department, commission, board,
bureau, agency, authority or instrumentality of a country or any political
subdivision
18
“Interest Period” means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the applicable
Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar
month; and
(c) any Interest Period of any Euro-Dollar Loan included in such
Borrowing which would otherwise end after the Maturity Date shall, with respect
to such Euro-Dollar Loan, end on such Maturity Date;
(2) with respect to each Base Rate Borrowing, the period
commencing on the date of such Borrowing and ending 30 days thereafter; provided
that:
(a) any Interest Period which would otherwise end on a day
which is not a Domestic Business Day shall be extended to the next succeeding
Domestic Business Day; and
(b) any Interest Period of any Base Rate Loan included in such
Borrowing which would otherwise end after the Maturity Date shall, with respect
to such Base Rate Loan, end on such Maturity Date;
(3) with respect to each Money Market LIBOR Borrowing, the
period commencing on the date of such Borrowing and ending any whole number
of months thereafter (but not less than one month) as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period) shall,
21
subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar
month; and
(c) any Interest Period which would otherwise end after the
Commitment Termination Date shall end on the Commitment Termination Date;
and
(4) with respect to each Money Market Absolute Rate
Borrowing, the period commencing on the date of such Borrowing and ending such
number of days thereafter (but not less than 30 days) as the Borrower may elect in
the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Commitment Termination Date shall end on the Commitment Termination Date.
“Interpolated Rate” has the meaning set forth in Section 2.07(b).
“Investments” has the meaning set forth in Section 5.12.
“IRS” means the United States Internal Revenue Service.
“ISDA Definitions” means the 2006 ISDA Definitions published
by the International Swaps and Derivatives Association, Inc. or any successor
thereto, as amended or supplemented from time to time, or any successor
definitional booklet for interest rate derivatives published from time to time
by the International Swaps and Derivatives Association, Inc. or such successor
thereto.
“ISP” means, with respect to any Letter of Credit, the “International
Standby Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of issuance of
such Letter of Credit).
“Issuer Documents” means, with respect to any Letter of Credit, the
Letter of Credit Application and any other document, agreement and instrument
entered into by any Issuing Bank and the Borrower (or any Consolidated Entity of
the Borrower) or in favor of any Issuing Bank and relating to any such Letter of
Credit.
“Issuing Bank” means the Initial Issuing Bank and any Bank
appointed by the Borrower (with the consent of the Administrative Agent) as such
and each Person that shall become an Issuing Bank hereunder pursuant to Section
2.20(l) or Section 9.06(f). Each Issuing Bank may, with the consent of the
Borrower (such
22
“Notice of Borrowing” means a Notice of Committed Borrowing or
a Notice of Money Market Borrowing.
“Notice of Committed Borrowing” has the meaning set forth in
Section 2.02.
“Notice of Interest Rate Election” has the meaning set forth in
Section 2.08(a).
“Notice of Money Market Borrowing” has the meaning set forth in
Section 2.03(f).
“Other Benchmark Rate Election” means, with respect to any
Loan denominated in Dollars, if the then-current Benchmark is the LIBO
Rate, the occurrence of:
(a) a request by the Borrower to the Administrative Agent to
notify each of the other parties hereto that, at the determination of the
Borrower, Dollar-denominated syndicated credit facilities at such time contain
(as a result of amendment or as originally executed), in lieu of a LIBOR-based
rate, a term benchmark rate as a benchmark rate, and
(b) the Administrative Agent, in its sole discretion, and the
Borrower jointly elect to trigger a fallback from the LIBO Rate and the
provision, as applicable, by the Administrative Agent of written notice of such
election to the Borrower and the Lenders.
“Other Connection Taxes” means, with respect to any Recipient,
Taxes imposed as a result of a present or former connection between such Recipient
and the jurisdiction imposing such Taxes (other than a connection arising from such
Recipient having executed, delivered, enforced, become a party to, performed its
obligations under, received payments under, received or perfected a security interest
under, or engaged in any other transaction pursuant to, or enforced, this Agreement
or the Notes, or sold or assigned an interest in this Agreement or the Notes).
“Other Taxes” means any present or future stamp, court,
documentary, intangible, recording, filing or similar excise or property Taxes that
arise from any payment made under, from the execution, delivery, performance,
enforcement or registration of, or from the registration, receipt or perfection of a
security interest under, or otherwise with respect to, this Agreement or the Notes,
except any such Taxes that are Other Connection Taxes imposed with respect to an
assignment (other than an assignment under Section 2.18).
“Outstanding Amount” means with respect to any L/C Obligations
on any date, the amount of such L/C Obligations on such date after giving effect to
any relevant L/C Credit Extension occurring on such date and any other changes in
the aggregate amount of such L/C Obligations as of such date, including as a
26
result of any reimbursements of outstanding unpaid drawings under any relevant
Letters of Credit or any reductions in the maximum amount available for drawing
under any relevant Letters of Credit taking effect on such date.
“Parent” means, with respect to any Bank, any Person as to which
such Bank is, directly or indirectly, a subsidiary.
“Participant” has the meaning set forth in Section 9.06(b).
“Participant Register” has the meaning set forth in Section 9.06(b).
“Patronage Capital Certificates” means those certificates that
evidence the portion of Net Income allocated by the Borrower among its Members
in accordance with applicable cooperative principles
.
“Payment Recipient” has the meaning assigned to it in Section
7.11(a).
“PBGC” means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
“Performance Letter of Credit” means any Existing Letter of
Credit issued under the Existing Credit Agreement or any Letter of Credit issued
under this Agreement, in each case, in order to guarantee performance under a
contract.
“Person” means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
“Plan” means any multiemployer plan or single employer plan
(including any Multiple Employer Plan), as defined in Section 4001 and subject to
Title IV of ERISA, which is maintained or contributed to by, or at any time during
the five calendar years preceding the date of this Agreement was maintained or
contributed to by, the Borrower or a Subsidiary of the Borrower or any member of
the ERISA Group.
“Pricing Schedule” means the Pricing Schedule attached hereto.
“Prime Rate” means the rate of interest announced to all of its
borrowers by the Administrative Agent as its prime rate in effect at such time at its
principal office; provided that if the Administrative Agent does not or ceases to
announce such rate of interest, then the Prime Rate shall mean the rate of interest
published by the Wall Street Journal from time to time as the “Prime Rate”.
“Pro Rata Share” means, with respect to each Bank at any time, a
fraction (expressed as a percentage, carried out to the ninth decimal place), the
numerator of which is the amount of the Commitment of such Bank and the
denominator of which is the total amount of the Commitments, subject to
adjustment as provided in Section 2.19(a)(iv); provided that if the commitment of
27
each Bank to make Revolving Loans and the obligation of each Issuing Bank to
make L/C Credit Extensions have been terminated pursuant to Sections 2.10 or
6.01, then the Pro Rata Share of each Bank shall be determined based on the Pro
Rata Share of such Bank immediately prior to such termination and after giving
effect to any subsequent assignments made pursuant to the terms hereof.
“Qualified Subordinated Indebtedness” means the Borrower’s (i)
the Borrower’s 4.75% Subordinated Deferrable Interest Notes due 2043 and, (ii)
any other Indebtedness of the Borrower having substantially similar terms as to
subordinationthe Borrower’s 5.25% Subordinated Deferrable Interest Notes
due 2046, (iii) the Borrower’s 5.50% Subordinated Deferrable Interest Notes
due 2064 and (iv) any other subordinated as those contained in the instruments
and documents relating to the foregoing Indebtedness or that would be junior to
any of the foregoing; provided that such Indebtedness (a) will not mature prior to
the Maturity Date and (b) does not require payments of principal prior to the
Commitment Termination Date,; except pursuant to acceleration or at the option of
the Borrower.
“Recipient” means, as applicable, (a) the Administrative Agent, (b)
any Bank and (c) the Issuing Bank.
“REDLG Program Liens” means Liens on any asset of the Borrower
required to be pledged as collateral to support obligations of the Borrower with
respect to any government Guarantee provided pursuant to regulations issued under
the Rural Electrification Act of 1936, 7 U.S.C. 901 et. seq., and the Food,
Conservation and Energy Act of 2008, Pub. L. 110-234 Stat. 923 (“REDLG
Obligations”) so long as such Guarantee supports long-term Indebtedness issued by
the Borrower and permitted by Section 5.09.
“REDLG Obligations” has the meaning set forth in the definition of
REDLG Program Liens.
“Reference Time” with respect to any setting of the then-current
Benchmark means (1) if such Benchmark is USD LIBOR, 11:00 a.m. (London
time) on the day that is two London banking days preceding the date of such
setting, and (2) if such Benchmark is not USD LIBOR, the time determined by
the Administrative Agent in its reasonable discretion.
“Regulation U” means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
“Regulation X” means Regulation X of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
“Relevant Governmental Body” means the Board of Governors
of the Federal Reserve System or the Federal Reserve Bank of New York, or a
committee officially endorsed or convened by the Board of Governors of the
28
Federal Reserve System or the Federal Reserve Bank of New York, or any
successor thereto.
“Reportable Event” means an event described in Section 4043(c) of
ERISA or regulations promulgated by the Department of Labor thereunder (with
respect to which the 30 day notice requirement has not been waived by the PBGC).
“Required Banks” means, subject to Section 2.19, at any time
Banks having at least 51% of the sum of (i) the aggregate amount of the unused
Commitments, (ii) the aggregate principal outstanding amount of the Loans and (iii)
the Outstanding Amount of all L/C Obligations (with the aggregate amount of each
Bank’s participation in L/C Obligations deemed “held” by such Bank for purposes
of this definition).
“Resolution Authority” means an EEA Resolution Authority or,
with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” means (i) with respect to the Borrower, the
Chief Financial Officer, the Chief Executive Officer, an Assistant Secretary-
Treasurer, the Controller, the Vice President, Capital Markets Relations or, in each
case, an authorized signatory of such Person and (ii) with respect to any other
Person, the president, any vice-president, the chief financial officer, any assistant-
treasurer or, in each case, an authorized signatory of such Person.
“Revolving Credit Period” means the period from and including the
Effective Date to but excluding the Commitment Termination Date.
“Revolving Loan” means a loan made by a Bank pursuant to
Section 2.01(a).
“RUS” means the Rural Utilities Service of the Department of
Agriculture of the United States of America (as successor to the Rural
Electrification Administration of the Department of Agriculture of the
United States of America) or any other regulatory body which succeeds to
its functions.
“RUS Guaranteed Loan” means any loan made by any Person,
which loan is guaranteed, in whole or in part, as to principal and interest by the
United States of America through the RUS pursuant to a guarantee, which
guarantee contains provisions no less favorable to the holder thereof than the
provisions set forth in the form of Exhibit B-1 or Exhibit B-2 hereto; and
“Guaranteed Portion” of any RUS Guaranteed Loan means that portion of
principal of, and interest on, such RUS Guaranteed Loan which is guaranteed by the
United States of America through the RUS.
29
“S&P” means S&P Global Ratings, a business unit of Standard &
Poor’s Financial Services LLC, or any successor thereto.
“Sanctioned Country” means, at any time, a country or territory
which is the subject or target of any Sanctions.
“Sanctioned Person” means, at any time, (a) any Person listed in
any Sanctions-related list of designated Persons maintained by the Office of Foreign
Assets Control of the U.S. Department of the Treasury, the U.S. Department of
State or any other U.S. Governmental Authority, as may be amended, supplemented
or substituted from time to time, (b) any Person operating, organized or resident in a
Sanctioned Country or (c) any Person controlled by any such Person.
“Sanctions” means economic or financial sanctions or trade
embargoes imposed, administered or enforced from time to time by the U.S.
government, including those administered by the Office of Foreign Assets Control
of the U.S. Department of the Treasury or the U.S. Department of State.
“Second Amendment Effective Date” means the Second
Amendment Effective Date as defined in the 2017 Amendment.
“Securities and Exchange Commission” means the Securities and
Exchange Commission or any other U.S. federal governmental authority succeeding
to any or all of the functions of the Securities and Exchange Commission.
“SOFR” means, with respect to any Business Day, a rate per
annum equal to the secured overnight financing rate for such Business Day
published by the SOFR Administrator on the SOFR Administrator’s Website
on the immediately succeeding Business Day.
“SOFR Administrator” means the Federal Reserve Bank of New
York (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the website of the
Federal Reserve Bank of New York, currently at http://www.newyorkfed.org,
or any successor source for the secured overnight financing rate identified as
such by the SOFR Administrator from time to time.
5.12.
“Special Purpose Subsidiary” has the meaning set forth in Section
“Specified Date” has the meaning set forth in Section 2.22(c).
“Standby Letter of Credit” means any Letter of Credit issued under
this Agreement, other than (i) a Trade Letter of Credit, (ii) a Performance Letter of
30
Credit or (iii) a Backup Letter of Credit in support of either a performance
letter of credit or a trade letter of credit issued by the Borrower.
“Start-up Investments” has the meaning set forth in Section 5.12.
“Subsidiary” of any Person means (i) any corporation more than
50% of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency) is
at the time owned by such Person directly or indirectly through its Subsidiaries, and
(ii) any other Person in which such Person directly or indirectly through
Subsidiaries has more than a 50% voting and equity interest; provided that no
Person whose only assets are RUS Guaranteed Loans and investments incidental
thereto shall be deemed a Subsidiary.
“Superior Indebtedness” means all Indebtedness of the Borrower
and its Consolidated Entities (other than Members’ Subordinated Certificates and
Qualified Subordinated Indebtedness), but excluding (i) Indebtedness of the
Borrower or any of its Consolidated Entities to the extent that the proceeds of such
Indebtedness are used to fund Guaranteed Portions of RUS Guaranteed Loans and
(ii) any indebtedness of any Member Guaranteed by the Borrower or any of its
Consolidated Entities (“Guaranteed Indebtedness”), to the extent that either (x) the
long-term unsecured debt of such Member is rated at least BBB+ by S&P or , Baal
by Moody’s or BBB+ by Fitch, (y) the long-term secured debt of such Member is
rated at least A- by S&P or , A3 by Moody’s or A- by Fitch or (z) the payment of
principal and interest by the Borrower or any of its Consolidated Entities in respect
of such Guaranteed Indebtedness is covered by insurance or reinsurance provided
by an insurer having an insurance financial strength rating of AAA by S&P or , a
financial strength rating of Aaa by Moody’s or a financial strength rating of AAA
by Fitch.
“Syndication Agent” means JPMorgan Chase Bank, N.A., in its
capacity as Syndication Agent hereunder, and its successors in such capacity.
“Taxes” means any present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.
“Term SOFR” means, for the applicable Corresponding Tenor
as of the applicable Reference Time, the forward-looking term rate based on
SOFR that has been selected or recommended by the Relevant Governmental
Body.
“Term SOFR Notice” means a notification by the Administrative
Agent to the Lenders and the Borrower of the occurrence of a Term SOFR
31
Transition Event.
“Term SOFR Transition Event” means the determination by the
Administrative Agent that (a) Term SOFR has been recommended for use by
the Relevant Governmental Body, (b) the administration of Term SOFR is
administratively feasible for the Administrative Agent and (c) a Benchmark
Transition Event or an Early Opt-in Election, as applicable (and, for the
avoidance of doubt, not in the case of an Other Benchmark Rate Election), has
previously occurred resulting in a Benchmark Replacement in accordance
with this Section titled “Benchmark Replacement Setting” that is not Term
SOFR.
“Third Amendment Effective Date” means the Third Amendment
Effective Date as defined in the 2018 Amendment.
“TIER” means, for any period, the ratio of (x) Net Income plus
Interest Expense plus Derivative Cash Settlements to (y) Interest Expense plus
Derivative Cash Settlements, in each case for such period.
“Trade Letter of Credit” means any Existing Letter of Credit
issued under the Existing Credit Agreement or any Letter of Credit issued under this
Agreement, in each case, for the benefit of a supplier of goods or services to effect
payment for such goods or services.
“Type” refers to whether a Loan is a Base Rate Loan, a Euro-Dollar
Loan, a Money Market Absolute Rate Loan or a Money Market LIBOR Loan.
“Unadjusted Benchmark Replacement” means the applicable
Benchmark Replacement excluding the related Benchmark Replacement
Adjustment.
“UK Financial Institution” means any BRRD Undertaking (as
such term is defined under the PRA Rulebook (as amended from time to time)
promulgated by the United Kingdom Prudential Regulation Authority) or any
person falling within IFPRU 11.6 of the FCA Handbook (as amended from
time to time) promulgated by the United Kingdom Financial Conduct
Authority, which includes certain credit institutions and investment firms, and
certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any
other public administrative authority having responsibility for the resolution
of any UK Financial Institution.
“Unreimbursed Amount” has the meaning specified in Section
“USD LIBOR” means the London interbank offered rate for
2.20(b)(i).
U.S.
32
dollars.
“U.S. GAAP” means the generally accepted accounting principles as
promulgated, from time to time, by the Financial Accounting Standards Board.
“U.S. Person” means a “United States person” within the meaning
of Section 7701(a)(30) of the Code.
“U.S. Tax Certificate” has the meaning assigned to such term in
Section 2.16(f)(ii)(D)(2).
“Withholding Agent” means the Borrower and the Administrative
Agent.
“Write-Down and Conversion Powers” means, (i) with respect to
any EEA Resolution Authority, the write-down and conversion powers of such
EEA Resolution Authority from time to time under the Bail-In Legislation for the
applicable EEA Member Country, which write-down and conversion powers are
described in the EU Bail-In Legislation Schedule. and (ii) with respect to any UK
Resolution Authority, any powers of such UK Resolution Authority from time
to time under the Bail-In Legislation to cancel, reduce, modify or change the
form of a liability of any UK Financial Institution or any contract or
instrument under which that liability arises, to convert all or part of that
liability into shares, securities or obligations of that person or any other
person, to provide that any such contract or instrument is to have effect as if a
right had been exercised under it or to suspend any obligation in respect of
that liability or any of the powers under that Bail-In Legislation that are
related to or ancillary to any of those powers.
Section 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made and all financial statements
required to be delivered hereunder shall be prepared in accordance with U.S. GAAP
as in effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower’s independent public accountants) with the most
recent audited financial statements of the Borrower and its Consolidated Entities
delivered to the Bank Parties.
Section 1.03. Types of Borrowings. The term “Borrowing” denotes
the aggregation of Loans of one or more Banks to be made to the Borrower
pursuant to Article 2 on a single date and for a single Interest Period. Borrowings
are classified for purposes of this Agreement either by reference to the pricing of
Loans comprising such Borrowing (e.g., a “Euro-Dollar Borrowing” is a
Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of
Article 2 under which participation therein is determined (i.e., a “Revolving
Borrowing” is a Borrowing under Section 2.01(a) in which all Banks participate in
proportion to their Commitments, while a “Money Market Borrowing” is a
Borrowing under Section 2.03 in which the Bank participants are determined on
33
the basis of their bids in accordance therewith). All Loans and all Borrowings,
including with respect to their respective Interest Periods, under the Existing Credit
Agreement, if any, are listed on the Existing Commitment Schedule, that are
outstanding on the Amendment Effective Date shall become Loans and Borrowings
with the same Interest Period under this Agreement.
Section 1.04. Letter of Credit. Unless otherwise specified, all
references herein to the amount of a Letter of Credit at any time shall be deemed to
mean the stated face amount of such Letter of Credit in effect at such time;
provided, however, that with respect to any Letter of Credit that, by its terms or the
terms of any Issuer Document related thereto, provides for one or more automatic
increases in the stated amount thereof, the amount of such Letter of Credit shall be
deemed the maximum stated amount of such Letter of Credit after giving effect to
all increases or decreases, as applicable, thereof, whether or not such maximum face
amount is in effect at such time. All Existing Letters of Credit issued and
outstanding on the Amendment Effective Date shall be deemed to be Letters of
Credit under this Agreement and from and after the Amendment Effective Date
shall be subject to and governed by the terms and conditions hereof.
Section 1.05. Divisions. For all purposes under this Agreement,
in connection with any division or plan of division under Delaware law (or any
comparable event under a different jurisdiction’s laws): (a) if any asset, right,
obligation or liability of any Person becomes the asset, right, obligation or
liability of a different Person, then it shall be deemed to have been transferred
from the original Person to the subsequent Person, and (b) if any new Person
comes into existence, such new Person shall be deemed to have been organized
on the first date of its existence by the holders of its equity interests at such
time.
ARTICLE 2
The Credits
Section 2.01. Commitments to Lend and Issue Letters of Credit. (a)
Revolving Loans. During the Revolving Credit Period each Bank severally agrees,
on the terms and conditions set forth in this Agreement, to make loans to the
Borrower pursuant to this Section from time to time in amounts such that the sum of
(x) the aggregate principal amount of Revolving Loans by such Bank at any one
time outstanding plus (y) such Bank’s Pro Rata Share of the Outstanding Amount of
all L/C Obligations shall not exceed the amount of its Commitment. Each
Borrowing shall be in an aggregate principal amount of $10,000,000 or any larger
multiple of $1,000,000 (except that any such Borrowing may be in the maximum
aggregate amount available in accordance with Section 3.03(d)) and shall be made
from the several Banks ratably in proportion to their respective Commitments.
Within the foregoing limits, the Borrower may borrow under this Section, repay or,
to the extent permitted by Section 2.12, prepay Loans and reborrow at any time
during the Revolving Credit Period under this Section . All Loans will be made by
all Banks in accordance with their Pro Rata Share of the
34
restrain such Issuing Bank from issuing such Letter of Credit, or any
Applicable Law applicable to such Issuing Bank or any request or directive
(whether or not having the force of law, but if not having the force of law,
being a request or directive which is generally complied with by
comparable financial institutions) from any Governmental Authority with
jurisdiction over such Issuing Bank shall prohibit, or request that the
Issuing Bank refrain from the issuance of Letters of Credit generally or
such Letter of Credit in particular or shall impose upon such Issuing Bank
with respect to such Letter of Credit any restriction, reserve or capital
requirement (for which such Issuing Bank is not otherwise compensated
hereunder) not in effect on the FourthFifth Amendment Effective Date, or
shall impose upon such Issuing Bank any unreimbursed loss, cost or
expense which was not applicable on the FourthFifth Amendment
Effective Date and which such Issuing Bank in good faith reasonably
deems material to it; provided, however, that in the event a Bank Party
participating in the Letters of Credit is not affected by any such restriction,
requirement or imposition, and is able to issue such Letter of Credit and
expressly agrees in its sole discretion to issue such Letter of Credit, such
Bank Party, subject to the consent of the Administrative Agent, such
consent not to be unreasonably withheld, conditioned or delayed, shall
issue such Letter of Credit and shall be deemed the Issuing Bank with
regard to such Letter of Credit for all purposes of this Agreement;
would violate any Applicable Laws;
(B) the making of such L/C Credit Extension
Administrative
is in an initial face amount less than $25,000;
(C) except as otherwise agreed by the
Agent and such Issuing Bank, such Letter of Credit
denominated in a currency other than Dollars;
(D) such L/C Credit Extension is to be
(E) such L/C Credit Extension contains any
provisions for automatic reinstatement of the stated amount after any L/C
Borrowing thereunder; or
(F) a default of any Bank’s obligations to fund
under Section 2.20 exists, or any Bank is then a Defaulting Bank, unless,
after giving effect to Section 2.19(a)(iv)) with respect to such Bank, such
Issuing Bank has entered into satisfactory arrangements, including the
delivery of Cash Collateral
36
such Note shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans and/or L/C
Borrowings of the relevant Type. Each reference in this Agreement to the “Note”
of such Bank Party shall be deemed to refer to and include any or all of such Notes,
as the context may require.
(c) Upon the Administrative Agent’s receipt of each Note that
was requested by a Bank Party pursuant to Section 3.01(b), the Administrative
Agent shall forward such Note to such Bank Party. Each Bank Party shall record
the date, amount, type and maturity of each Loan and/or L/C Borrowings made by
it and the date and amount of each payment of principal made by the Borrower
with respect thereto, and may, if such Bank Party so elects in connection with any
transfer or enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to each
such Loan and/or L/C Borrowings then outstanding; provided that the failure of
any Bank Party to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Bank Party is
hereby irrevocably authorized by the Borrower so to endorse its Note and to attach
to and make a part of its Note a continuation of any such schedule as and when
required.
(d) Any Note evidencing a Loan (as such term is defined in the
Existing Credit Agreement) made prior to the Amendment Effective Date may be
exchanged upon request of the relevant Bank, made through the Administrative
Agent, and simultaneous surrender of such Note to the Borrower through the
Administrative Agent in exchange for one or more new Notes evidencing the
Loans, respectively, outstanding hereunder, if any, as of the Amendment Effective
Date.
Section 2.06. Maturity of Loans. Each Loan hereunder shall mature,
and the principal amount thereof shall be due and payable on the Maturity Date
with respect to such Loan.
Section 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base Rate
plus the applicable Base Rate Margin for such day. Such interest shall be payable
for each Interest Period on the last day thereof and, with respect to the principal
amount of any Base Rate Loan that is prepaid or converted to a Euro-Dollar Loan,
on the date of such prepayment or conversion. Any overdue principal of or interest
on any Base Rate Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable
to Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate per
annum equal to the sum of the Euro-Dollar Margin plus the applicable Adjusted
43
London Interbank Offered RateBenchmark. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is longer
than three months, three months after the first day thereof and, with respect to the
principal amount of any Euro-Dollar Loan that is prepaid or converted to a Base
Rate Loan, on the date of such prepayment or conversion. Notwithstanding
anything to the contrary herein, if a Benchmark Transition Event, an Early
Opt-in Election or an Other Benchmark Rate Election, as applicable, and its
related Benchmark Replacement Date have occurred prior to the Reference
Time in respect of any setting of the then-current Benchmark, then (x) if a
Benchmark Replacement is determined in accordance with clause (1) or (2) of
the definition of “Benchmark Replacement” for such Benchmark
Replacement Date, such Benchmark Replacement will replace such
Benchmark for all purposes hereunder and under any Loan Document in
respect of such Benchmark setting and subsequent Benchmark settings
without any amendment to, or further action or consent of any other party to,
this Agreement or any other Loan Document and (y) if a Benchmark
Replacement is determined in accordance with clause (3) of the definition of
“Benchmark Replacement” for such Benchmark Replacement Date, such
Benchmark Replacement will replace such Benchmark for all purposes
hereunder in respect of any Benchmark setting at or after 5:00 p.m. (New
York City time) on the fifth (5th ) Business Day after the date notice of such
Benchmark Replacement is provided to the Lenders without any amendment
to, or further action or consent of any other party to, this Agreement or any
other Loan Document so long as the Administrative Agent has not received,
by such time, written notice of objection to such Benchmark Replacement
from Lenders comprising the Required Lenders.
(c) Notwithstanding anything to the contrary herein and
subject to the proviso below in this paragraph, if a Term SOFR Transition
Event and its related Benchmark Replacement Date have occurred prior to
the Reference Time in respect of any setting of the then-current Benchmark,
then the applicable Benchmark Replacement will replace the then-current
Benchmark for all purposes hereunder or under any Loan Document in
respect of such Benchmark setting and subsequent Benchmark settings,
without any amendment to, or further action or consent of any other party to,
this; provided that, this clause (c) shall not be effective unless the
Administrative Agent has delivered to the Lenders and the Borrower a Term
SOFR Notice. For the avoidance of doubt, the Administrative Agent shall not
be required to deliver a Term SOFR Notice after a Term SOFR Transition
Event and may do so in its sole discretion.
(d) In connection with the implementation of a Benchmark
Replacement, the Administrative Agent will have the right to make
Benchmark Replacement Conforming Changes from time to time and,
notwithstanding anything to the contrary herein or in any other Loan
Document, any amendments implementing such Benchmark Replacement
44
Conforming Changes will become effective without any further action or
consent of any other party to this Agreement or any other Loan
Document.The Administrative Agent will promptly notify the Borrower and
the Lenders of (i) any occurrence of a Term SOFR Transition Event or an
Early Opt-in Election, as applicable, and its related Benchmark Replacement
Date, (ii) the implementation of any Benchmark Replacement, (iii) the
effectiveness of any Benchmark Replacement Conforming Changes, (iv) the
removal or reinstatement of any tenor of a Benchmark pursuant to clause (e)
below and (v) the commencement or conclusion of any Benchmark
Unavailability Period. Any determination, decision or election that may be
made by the Administrative Agent or, if applicable, any Lender (or group of
Lenders) pursuant to this Section titled “Benchmark Replacement Setting,”
including any determination with respect to a tenor, rate or adjustment or of
the occurrence or non-occurrence of an event, circumstance or date and any
decision to take or refrain from taking any action or any selection, will be
conclusive and binding absent manifest error and may be made in its or their
sole discretion and without consent from any other party to this Agreement,
except, in each case, as expressly required pursuant to this Section titled
“Benchmark Replacement Setting.”
(e) Notwithstanding anything to the contrary herein, at any
time (including in connection with the implementation of a Benchmark
Replacement), (i) if the then-current Benchmark is a term rate (including
Term SOFR or USD LIBOR) and either (A) any tenor for such Benchmark is
not displayed on a screen or other information service that publishes such rate
from time to time as selected by the Administrative Agent in its reasonable
discretion or (B) the regulatory supervisor for the administrator of such
Benchmark has provided a public statement or publication of information
announcing that any tenor for such Benchmark (1) is or will be no longer
representative or (2) will cease to be provided by the administrator
permanently or indefinitely as of a specified date, then the Administrative
Agent may modify the definition of “Interest Period” for any Benchmark
settings at or after such time to remove such affected tenor and (ii) if a tenor
that was removed pursuant to clause (i) above either (A) is subsequently
displayed on a screen or information service for a Benchmark (including a
Benchmark Replacement) or (B) is not, or is no longer, subject to an
announcement that it is or will no longer be representative or will cease to be
provided by the administrator for a Benchmark (including a Benchmark
Replacement), then the Administrative Agent may modify the definition of
“Interest Period” for all Benchmark settings at or after such time to reinstate
such previously removed tenor. However, the Administrative Agent does not
warrant or accept any responsibility for, and shall not have any liability with
respect to, the administration, submission or any other matter related to USD
LIBOR or other rates or with respect to any alternative or successor rate
thereto, or replacement rate thereof.
45
(f) Upon the Borrower’s receipt of notice of the
commencement of a Benchmark Unavailability Period, the Borrower may
revoke any request for a Eurodollar Borrowing of, conversion to or
continuation of Eurodollar Loans to be made, converted or continued during
any Benchmark Unavailability Period and, failing that, the Borrower will be
deemed to have converted any such request into a request for a Borrowing of
or conversion to Base Rate Loans. During any Benchmark Unavailability
Period or at any time that a tenor for the then-current Benchmark is not an
Available Tenor, the component of the Base Rate based upon the then-current
Benchmark or such tenor for such Benchmark, as applicable, will not be used
in any determination of the Base Rate.
(g) The Administrative Agent does not warrant or accept
any responsibility for, and shall not have any liability with respect to, the
administration, submission or any other matter related to LIBOR or the
Screen Page or with respect to any alternative, successor or replacement rate
thereof (including any Benchmark Replacement), or any calculation,
component definition thereof or rate referenced in the definition thereof,
including, without limitation, (i) any such alternative, successor or
replacement rate implemented pursuant to this Section titled “Benchmark
Replacement Setting”, whether upon the occurrence of a Benchmark
Transition Event, Term SOFR Transition Event, an Early Opt-in Election, or
an Other Benchmark Rate Election and (ii) the effect, implementation or
composition of any Benchmark Replacement Conforming Changes pursuant
to clause (d) of this Section 2.07, including without limitation, whether the
composition or characteristics of any such alternative, successor or
replacement reference rate will be similar to, or produce the same value or
economic equivalence of, LIBOR or the Eurodollar Rate or have the same
volume or liquidity as did LIBOR or the Eurodollar Rate prior to the
discontinuance or unavailability of LIBOR. In addition, the discontinuation
of LIBOR and any alternative, successor or replacement reference rate may
result in a mismatch between the reference rate referenced in this Agreement
and your other financial instruments, including potentially those that are
intended as hedges. The Administrative Agent and its Affiliates and/or other
related entities may engage in transactions that affect the calculation of any
alternative, successor or replacement rate and/or any relevant adjustments
thereto, in each case, with all determinations of such alternative, successor or
replacement rate by the Administrative Agent to be conclusive, absent
manifest error. The Administrative Agent may select information sources or
services in its reasonable discretion to ascertain such alternative, successor or
replacement rate, in each case pursuant to the terms of this Agreement (as
amended, amended and restated, supplemented or otherwise modified from
time to time), and shall have no liability to the Borrower, any Lender or any
other person or entity for damages of any kind, including direct or indirect,
special, punitive, incidental or consequential damages, costs, losses or expenses
(whether in tort, contract or otherwise and whether at law or in
46
equity), for any error or calculation of any such rate (or component thereof)
provided by any such information source or service.
The “Adjusted London Interbank Offered Rate” applicable to
any Interest Period means a rate per annum equal to the quotient obtained
(rounded upward, if necessary, to the next higher 1/100 of 1% ) by dividing (i)
the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-
Dollar Reserve Percentage.
The “London Interbank Offered Rate” applicable to any
Interest Period means the rate appearing on pages LIBOR01 or LIBOR02 of
the Reuters screen that displays such rate (or on any successor or substitute
page of such Reuters Service, or if the Reuters Service ceases to be available,
any successor to or substitute for such Reuters Service, providing rate
quotations comparable to those currently provided on such page of such
Reuters Service, as determined by the Administrative Agent from time to time
for purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market) at approximately 11:00 A.M.
(London time) two Euro-Dollar Business Days prior to the commencement of
such Interest Period, as the rate for the offering of dollar deposits with a
maturity comparable to such Interest Period; provided, that if such rate shall
be less than zero, such rate shall be deemed to be zero for the purposes of this
Agreement; provided further, that if the London Interbank Offered Rate is not
available for such Interest Period, then the applicable London Interbank
Offered Rate shall be the Interpolated Rate. “Interpolated Rate” means, at
any time, for any Interest Period, the rate per annum (rounded to the same
number of decimal places as the London Interbank Offered Rate) reasonably
determined by the Administrative Agent (which determination shall be
conclusive absent manifest error) to be equal to the rate that results from
interpolating on a linear basis between: (a) the London Interbank Offered
Rate for the longest period (for which the London Interbank Offered Rate is
available) that is shorter than the Interest Period and (b) the London
Interbank Offered Rate for the shortest period (for which the London
Interbank Offered Rate is available) that exceeds the Interest Period; provided
that, if the Administrative Agent reasonably determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable means
still do not exist for ascertaining the Interpolated Rate, then the
Administrative Agent shall give written notice thereof to the Borrower and the
Banks as promptly as practicable thereafter and, until the Administrative
Agent notifies the Borrower and the Banks that the circumstances giving rise
to such notice no longer exist, (i) any interest election request that requests the
conversion of any Base Rate Loan to, or continuation of any Euro-Dollar Loan
as, a Euro-Dollar Loan shall be ineffective and (ii) if any Loan requests a
Euro-Dollar Loan, such Borrowing shall be made as a Base Rate Loan.
47
If at any time the Administrative Agent determines (which
determination shall be conclusive absent manifest error) that (i) the
circumstances set forth in the paragraph above have arisen and such
circumstances are unlikely to be temporary or (ii) the circumstances set forth
above have not arisen but the supervisor for the administrator of the rate
appearing on pages LIBOR01 or LIBOR02 of the Reuters screen that displays
such rate or a Governmental Authority having jurisdiction over the
Administrative Agent has made a public statement identifying a specific date
after which the rate appearing on pages LIBOR01 or LIBOR02 of the Reuters
screen that displays such rate shall no longer be used for determining interest
rates for loans, then the Administrative Agent and the Borrower shall
endeavor to establish an alternate rate of interest to the London Interbank
Offered Rate that gives due consideration to the then prevailing market
convention for determining a rate of interest for syndicated loans in the
United States at such time, and shall enter into an amendment to this
Agreement to reflect such alternate rate of interest and such other related
changes to this Agreement as may be applicable. Notwithstanding anything to
the contrary in Section 9.05, such amendment shall become effective without
any further action or consent of any other party to this Agreement so long as
the Administrative Agent shall not have received, within five Business Days of
the date notice of such alternate rate of interest is provided to the Banks, a
written notice from the Required Banks stating that such Required Banks
object to such amendment. Until an alternate rate of interest shall be
determined in accordance with this paragraph (but, in the case of the
circumstances described in clause (ii) of the first sentence of this paragraph,
only to the extent the rate appearing on pages LIBOR01 or LIBOR02 of the
Reuters screen that displays such rate for such Interest Period is not available
or published at such time on a current basis), (x) any interest election request
that requests the conversion of any Base Rate Loan to, or continuation of any
Euro-Dollar Loan as, a Euro-Dollar Loan shall be ineffective and (y) if any
Loan requests a Euro-Dollar Loan, such Borrowing shall be made as a Base
Rate Loan; provided that if such alternate rate of interest shall be less than
zero, such rate shall be deemed to be zero for purposes of this Agreement.
To the extent a comparable or successor rate to the London
Interbank Offered Rate is approved by the Administrative Agent in
connection herewith, the approved rate shall be applied in a manner
consistent with market practice; provided that to the extent such market
practice is not administratively feasible for the Administrative Agent, such
approved rate shall be applied in a manner as otherwise reasonably
determined by the Administrative Agent.
“Euro-Dollar Reserve Percentage” means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the | Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member
bank of the
48
Federal Reserve System in New York City with deposits exceeding five billion
Dollars in respect of “Eurocurrency liabilities” (or in respect of any other
category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Bank to United States residents). The Adjusted London Interbank
Offered Rate shall be adjusted automatically on and as of the effective date of
any change in the Euro-Dollar Reserve Percentage.
(h) (c) Any overdue principal of or interest on any Euro-Dollar
Loan and any other overdue amount payable hereunder (other than in respect of
any Money Market Loan as provided in the following paragraph) shall bear
interest, payable on demand, for each day from and including the date payment
thereof was due to but excluding the date of actual payment, at a rate per annum
equal to the sum of 2% plus (i) in the case of principal, the rate otherwise
applicable to Euro-Dollar Loans for such day or (ii) in the case of interest and any
other overdue amount payable hereunder (other than in respect of any Money
Market Loan as provided in the following paragraph), the sum of the Base Rate
plus the applicable Base Rate Margin for such day.
(i) (d) Subject to Section 8.01(a), each Money Market LIBOR
Loan shall bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.07(b)) plus (or minus) the Money Market Margin quoted by the Bank
making such Loan in accordance with Section 2.03. Each Money Market Absolute
Rate Loan shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the Money Market
Absolute Rate quoted by the Bank making such Loan in accordance with Section
2.03. Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three months
after the first day thereof. Any overdue principal of or interest on any Money
Market Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the Prime Rate for such day.
(j) (e) The Administrative Agent shall determine each interest
rate applicable to the Loans hereunder. The Administrative Agent shall give
prompt notice to the Borrower and the participating Banks of each rate of interest
so determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(k) The Administrative Agent does not warrant or accept
responsibility for, and shall not have any liability with respect to (a) the
administration of, submission of, calculation of or any other matter related to
any Benchmark, any component definition thereof or rates referenced in the
definition thereof or any alternative, comparable or successor rate
49
thereto (including any Benchmark Replacement), including whether the
composition or characteristics of any such alternative, comparable or
successor rate (including any Benchmark Replacement) will be similar to, or
produce the same value or economic equivalence of, or have the same volume
or liquidity as, such Benchmark or any other Benchmark, or (b) the effect,
implementation or composition of any Benchmark Replacement Conforming
Changes.
Section 2.08. Method of Electing Interest Rates. (a) The Loans
included in each Committed Borrowing shall bear interest initially at the type of
rate specified by the Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Group of Loans (subject to Section 2.08(d) and
the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower
may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar
Business Day;
(ii) if such Loans are Euro-Dollar Loans, the Borrower
may elect to convert such Loans to Base Rate Loans as of any Domestic Business
Day, subject to Section 2.14 if any such conversion is effective on any day other
than the last day of an Interest Period applicable to such Loans, or may elect to
continue such Loans as Euro-Dollar Loans, as of the end of any Interest Period
applicable thereto, for an additional Interest Period.
Each such election shall be made by delivering a notice (a “Notice of
Interest Rate Election”) to the Administrative Agent not later than 10:30 A.M.
(New York City time) on the third Euro-Dollar Business Day before the conversion
or continuation selected in such notice is to be effective. A Notice of Interest Rate
Election may, if it so specifies, apply to only a portion of the aggregate principal
amount of the relevant Group of Loans; provided that (i) such portion is allocated
ratably among the Loans comprising such Group and (ii) such portion, and the
remaining portion to which such Notice does not apply, are each at least
$10,000,000 (unless such portion is comprised of Base Rate Loans). If no such
notice is timely received before the end of an Interest Period for any Group of
Euro-Dollar Loans, the Borrower shall be deemed to have elected that such Group
of Loans be converted to Base Rate Loans at the end of such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
such notice applies;
(i) the Group of Loans (or portion thereof) to which
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(b) Agents’ Fees. The Borrower shall pay to the Administrative
Agent and the Syndication Agent, each for its own account, one or more fees in
such amounts and at such times as has been previously agreed in writing between
the Borrower and each of them.
(c) Letter of Credit Fees. Upon the issuance of each Letter of
Credit pursuant to Section 2.01(b) and until termination, cancellation or expiration
of such Letter of Credit, subject to Section 2.19(a)(iv), the Borrower agrees to pay
to the Administrative Agent for the account of each Bank in accordance with its
Pro Rata Share a Letter of Credit fee (the “Letter of Credit Fee”) for each Letter of
Credit equal to a rate per annum equal to the Euro-Dollar Margin in effect from
time to time. Letter of Credit Fees shall be (i) computed on a quarterly basis in
arrears on the basis of the actual number of days elapsed in a year of 360 days
(including the first day but excluding the last day), as pro-rated for any partial
quarter, as applicable, and (ii) subject to Section 2.19(a)(ii), due and payable on
each January 1, April 1, July 1 and October 1, commencing with the first such date
to occur after the issuance of such Letter of Credit, on the Letter of Credit
Expiration Date and thereafter on demand. Notwithstanding anything to the
contrary contained herein, upon the request of the Required Banks, while any
payment-related Event of Default exists, all Letter of Credit Fees shall accrue at a
rate per annum equal to the Euro-Dollar Margin plus 2%.
(d) Fronting Fee and Documentary and Processing Charges
Payable to Issuing Banks, Etc. The Borrower shall pay directly to the relevant
Issuing Bank for its own account a fronting fee with respect to each Letter of Credit
issued hereunder on the average daily maximum amount available to be drawn
under such Letter of Credit in an amount to be agreed between the Borrower and
the applicable Issuing Bank of the L/C Obligations (whether or not such maximum
amount is then in effect under such Letter of Credit) (the “Fronting Fee”). The
Fronting Fee shall be computed on a quarterly basis in arrears on the basis of the
actual number of days elapsed in a year of 360 days (including the first day but
excluding the last day), as pro-rated for any partial quarter, as applicable, and shall
be due and payable on each January 1, April 1, July 1 and October 1, commencing
with the first such date to occur after the issuance of such Letter of Credit, on the
Letter of Credit Expiration Date and thereafter on demand. In addition, the
Borrower shall, with respect to all Letters of Credit issued at its request, pay
directly to each Issuing Bank for its own account the customary issuance,
presentation, amendment and other processing fees, and other standard costs and
charges, of such Issuing Bank relating to letters of credit as from time to time in
effect. Such customary fees and standard costs and charges are due and payable on
demand and are nonrefundable.
(e) Amendment Fees. The Borrower agrees to pay to the
Administrative Agent for the account of each Bank on the FourthFifth Amendment
Effective Date the upfront fees required to be paid on such date, as set forth in the
20192021 Fee Letters.
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on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
(l) Replacement or Addition of Issuing Bank. An Issuing Bank
may be replaced or added at any time by written agreement among the Borrower,
the Administrative Agent (unless, in the case of the replacement of an Issuing Bank,
the successor Issuing Bank is a Bank and, if applicable, such agreement not to be
unreasonably withheld, conditioned or delayed) and the successor or additional
Issuing Bank, as applicable. The Administrative Agent shall notify the Banks of
any such replacement or addition, as applicable, of an Issuing Bank. Where an
Issuing Bank is replaced, at the time such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for account of the replaced Issuing
Bank. Furthermore, from and after the effective date of such replacement, the
successor Issuing Bank, shall have all the rights and obligations of the replaced
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter. References herein to the term “Issuing Bank” shall be deemed to refer
to any successor or additional Issuing Bank, as applicable, or to any previous
Issuing Bank, or to any successor or additional Issuing Banks, as applicable, and all
previous Issuing Banks, as the context shall require. After the replacement of an
Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and
shall continue to have all the rights and obligations of an Issuing Bank under this
Agreement with respect to Letters of Credit issued by it prior to such replacement,
but shall not be required to issue additional Letters of Credit.
Section 2.21. [Reserved]
Section 2.22. Extension of Commitment Termination Date. (a) The
Borrower may, by notice to the Administrative Agent (which shall promptly notify
the Banks) not earlier than 45 days prior to any anniversary of the Fourth
Amendment Effective DateNovember 28, 2021 (each, an “Anniversary Date”)
but no later than 30 days prior to any such Anniversary Date, request that each
Bank extend such Bank’s Commitment Termination Date for an additional one
year after the Commitment Termination Date then in effect for such Bank
hereunder (the “Existing Commitment Termination Date”); provided, however, the
Borrower may request no more than two extensions pursuant to this Section.
(b) In the event it receives a notice from the Administrative
Agent pursuant to Section 2.22(a), each Bank, acting in its sole and individual
discretion, shall, by notice to the Administrative Agent given not earlier than 30
days prior to the applicable Anniversary Date and not later than the date (the “Bank
Extension Notice Date”) that is 20 days prior to the applicable Anniversary Date,
advise the Administrative Agent whether or not such Bank agrees to such extension
(and each Bank that determines not to so extend its Existing Commitment
Termination Date (a “Non-Extending Bank”) shall notify the Administrative Agent
of such fact promptly after such determination (but in any event no later than the
Bank Extension Notice Date)), and any Bank that does not so advise the
Administrative Agent on or before the Bank Extension Notice
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Agent shall have received the following, each dated the Extension Date and in form
and substance satisfactory to the Administrative Agent: (1) a certificate signed by
any one of the Chief Financial Officer, the Chief Executive Officer, the Treasurer,
an Assistant Secretary-Treasurer, the Controller or the Vice President, Capital
Markets Relations of the Borrower to the effect that the conditions set forth in
clauses (c) through (g), inclusive, of Section 3.03 have been satisfied as of the
Extension Date and, in the case of clauses (c), (d) and (g), setting forth in
reasonable detail the calculations required to establish such compliance, (2) a
certificate of an officer of the Borrower acceptable to the Administrative Agent
stating that all consents, authorizations, notices and filings required or advisable in
connection with the extension of the Existing Commitment Termination Date are in
full force and effect, and the Administrative Agent shall have received evidence
thereof reasonably satisfactory to it, (3) an opinion of the General Counsel of the
Borrower, substantially in the form of Exhibit F hereof, provided that an
enforceability opinion under New York law, that is reasonably acceptable to the
Administrative Agent, shall be furnished by the Borrower’s New York counsel,
Norton Rose Fulbright USFoley & Lardner LLP, subject to customary
assumptions, qualifications and limitations and (4) such other documents
reasonably requested by the Administrative Agent in connection with any such
transaction.
(g) Subject to subsection (e) above, the Commitment of any
Non-Extending Bank that has not been replaced pursuant to subsection (d) above
shall (i) automatically terminate on its Existing Commitment Termination Date or
(ii) at the option of the Borrower, with respect to the Commitments of all Non-
Extending Banks that have advised the Borrower of their unwillingness to agree to
an extension in response to a notice delivered pursuant to Section 2.22(a), terminate
on any Anniversary Date occurring prior thereto (in each case without regard to
any extension by any other Bank); it being understood and agreed that such Non-
Extending Bank’s participations in Letters of Credit outstanding on such Existing
Commitment Termination Date or such Anniversary Date, as the case may be, shall
terminate thereon and any and all fees and expenses owed to each Non-Extending
Bank as of that date shall be paid by the Borrower to such Non-Extending Bank.
ARTICLE 3
Conditions
Section 3.01. Effectiveness. (i) The Existing Credit Agreement
became effective on the Effective Date and (ii) this Agreement shall become
effective on the date (the “Amendment Effective Date”) on which the
Administrative Agent shall have received the following documents or other items,
each dated the Amendment Effective Date unless otherwise indicated:
(a) receipt by the Administrative Agent of counterparts hereof
signed by each of the parties hereto (or, in the case of any party as to which an
executed counterpart shall not have been received, receipt by the Administrative
Agent in
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form satisfactory to it in facsimile transmission, electronic submission or other
writing from such party of execution of a counterpart hereof by such party);
(b) receipt by the Administrative Agent for the account of each
Bank that has requested a Note of a duly executed Note dated on or before the
Amendment Effective Date complying with the provisions of Section 2.05;
(c) receipt by the Administrative Agent of an opinion of the
General Counsel of the Borrower, substantially in the form of Exhibit F hereto,
provided that an enforceability opinion under New York law, that is reasonably
acceptable to the Administrative Agent, shall be furnished by the Borrower’s New
York counsel, Norton Rose Fulbright USFoley & Lardner LLP, subject to
customary assumptions, qualifications and limitations;
(d) receipt by the Administrative Agent of a certificate signed by
any one of the Chief Financial Officer, the Chief Executive Officer, an Assistant
Secretary-Treasurer, the Controller or the Vice President, Capital Markets
Relations of the Borrower to the effect that the conditions set forth in clauses (c)
through (g), inclusive, of Section 3.03 have been satisfied as of the Amendment
Effective Date and, in the case of clauses (c), (e) and (g), setting forth in reasonable
detail the calculations required to establish such compliance;
(e) receipt by the Administrative Agent, with a copy for each
Bank, of a certificate of an officer of the Borrower acceptable to the Administrative
Agent stating that all consents, authorizations, notices and filings required or
advisable in connection with this Agreement are in full force and effect, and the
Administrative Agent shall have received evidence thereof reasonably satisfactory
to it;
(f) receipt by the Administrative Agent and the Syndication
Agent (or their respective assigns) and by each Bank Party of all fees required to be
paid in the respective amounts heretofore mutually agreed in writing, and all
expenses for which invoices have been presented, on or before the Amendment
Effective Date;
(g) receipt by the Administrative Agent and the Banks of all
documentation and other information requested by the Administrative Agent or
such Bank and required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including, without
limitation, the USA PATRIOT Act (Title III of Pub. L. 107-56); and
(h) receipt by the Administrative Agent of all documents the
Required Banks may reasonably request relating to the existence of the Borrower,
the corporate authority for and the validity of this Agreement and the Notes, and
any other matters relevant hereto, all in form and substance reasonably satisfactory
to the Administrative Agent.
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The Administrative Agent shall promptly notify the Borrower and
the Bank Parties of the Amendment Effective Date, and such notice shall be
conclusive and binding on all parties hereto.
Section 3.02. [Reserved]
Section 3.03. Borrowings and L/C Credit Extensions. The
obligation of any Bank to make a Loan on the occasion of any Borrowing and the
obligation of the Issuing Bank to issue, amend or increase the principal amount
thereof or extend any Letter of Credit (other than an extension pursuant to an
Auto-Extension Letter of Credit in accordance with the original terms thereof) is
subject to the satisfaction of the following conditions, in each case at the time of
such Borrowing or L/C Credit Extensions and immediately thereafter:
(a) The Amendment Effective Date shall have occurred on or
prior to November 19, 2015, the First Amendment Effective Date shall have
occurred on or prior to November 18, 2016, the Second Amendment Effective Date
shall have occurred on or prior to November 20, 2017; the Third Amendment
Effective Date shall have occurred on or prior to November 28, 2018; and the
Fourth Amendment Effective Date shall have occurred on or prior to November 26,
2019; and the Fifth Amendment Effective Date shall have occurred on or prior
to June 7, 2021.
(b) receipt by the Administrative Agent of a Notice of
Borrowing as required by Section 2.02 or 2.03, as the case may be;
(c) the fact that the Borrower is in compliance with Section 7.11
of the 1994 Indenture, as such Indenture is in effect as of the Effective Date and the
Amendment Effective Date;
(d) Prior to the Commitment Termination Date, the fact that the
sum of (i) the aggregate outstanding principal amount of the Loans and (ii) the
Outstanding Amount of L/C Obligations will not exceed the Aggregate
Commitments (as such Commitments may be increased or decreased from time to
time in accordance with the terms and conditions of this Agreement);
(e) the fact that no Default shall have occurred and be
continuing;
(f) the fact that the representations and warranties of the
Borrower (in the case of a Borrowing or L/C Credit Extension, other than the
representations set forth in Section 4.02(c), Section 4.03 and Section 4.14)
contained in this Agreement shall be true in all material respects (other than any
such representations or warranties that, by their terms, refer to a specific date other
than the date of Borrowing or L/C Credit Extension, in which case such
representations and warranties shall be true in all material respects as of such
specific date); provided that, (i) in the case of the representations set forth in
Section 4.02(a) and Section 4.02(b) being made after the Amendment Effective
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Date shall be deemed to refer to the most recent balance sheets and statements
furnished pursuant to Section 5.03(b)(ii) and Section 5.03(b)(i), respectively and
(ii) in the case of the representation set forth in Section 4.06 being made after the
FourthFifth Amendment Effective Date, such representation shall be true except to
the extent not reasonably expected to have a material adverse effect on the
business, financial position or results of operations of the Borrower; and
(g) the fact that (i) there shall be no collateral securing Bonds
issued pursuant to any Indenture of a type other than the types of collateral
permitted to secure Bonds issued pursuant to such Indenture as of the date hereof,
(ii) the allowable amount of eligible collateral then pledged under any Indenture
shall not exceed 150% of the aggregate principal amount of Bonds then
outstanding under such Indenture and (iii) no collateral shall secure Bonds other
than (A) eligible collateral under such Indenture, the allowable amount of which is
included within the computation under subsection (ii) above or (B) collateral
previously so pledged which ceases to be such eligible collateral not as a result of
any acts or omissions to act of the Borrower (other than the declaration of an
“event of default” as defined in a mortgage which results in the exercise of any
right or remedy described in such mortgage).
Each Borrowing or L/C Credit Extension hereunder shall be deemed
to be a representation and warranty by the Borrower on the date of such Borrowing
or L/C Credit Extension as to the facts specified in clauses (c), (d), (e), (f) and (g)
of this Section 3.03.
ARTICLE 4
Representations and Warranties
The Borrower makes the following representations, warranties and
agreements, which shall survive the execution and delivery of this Agreement and
the Notes and the making of the Loans or L/C Credit Extensions:
Section 4.01. Corporate Existence, Power and Authority. The
Borrower is a cooperative association duly incorporated, validly existing and in
good standing under the laws of the District of Columbia and has the corporate
power and authority and all material governmental licenses, authorizations,
consents and approvals required to own its property and assets and to transact the
business in which it is engaged. The Borrower is duly qualified or licensed as a
foreign corporation in good standing in every jurisdiction in which the nature of the
business in which it is engaged makes such qualification or licensing necessary,
except in those jurisdictions in which the failure to be so qualified or licensed
would not (after qualification, assuming that the Borrower could so qualify without
the payment of any fee or penalty and retain the rights as they existed prior to such
qualification all to an extent so that any fees or penalties required to be so paid or
any rights not so retained would not, individually or in the aggregate, have a
material adverse effect on the business or financial position of the Borrower),
individually or in the aggregate, have a material adverse effect
78
consolidated balance sheets of the Borrower and its Consolidated Entities and the
related consolidated statements of operations, changes in equity and cash flow for
such fiscal year for the Borrower and its Consolidated Entities, all in reasonable
detail and certified (without any qualification as to the scope of the audit) by
KPMG LLP or other independent public accountants of nationally recognized
standing selected by the Borrower, who shall have audited the books and accounts
of the Borrower for such fiscal year;
(iii) with reasonable promptness, copies of all regular and
periodical reports (including Current Reports on Form 8-K) filed with, or furnished
to, the Securities and Exchange Commission;
(iv) promptly after the public announcement of, or
promptly after receiving a written notice of, a change (whether an increase or
decrease) in any rating issued by either S&P or , Moody’s or Fitch, solely to the
extent that the Borrower is then under an existing contract with such agency for the
provision of ratings information pertaining to any securities of, or guaranteed by,
the Borrower or any of its Subsidiaries or affiliates, a notice setting forth such
change; and
(v) with reasonable promptness, such other information
respecting the business, operations and financial condition of the Borrower or any
of its Subsidiaries or any Joint Venture as any Bank may, from time to time,
reasonably request, including, without limitation, with respect to the performance
and observance by the Borrower of the covenants and conditions contained in this
Agreement.
Reports or financial information required to be delivered pursuant to
clauses (b)(i), (b)(ii) and (b)(iii) of this Section 5.03 shall be deemed to have been
delivered on the date on which the Borrower posts such reports or financial
information on the Borrower’s website (www.nrucfc.org) or at such other website
as may be notified to the Administrative Agent and the Banks or when such reports
or financial information are posted on the SEC’s website at www.sec.gov;
provided, that the Borrower shall notify the Administrative Agent of any such
posting; and provided further that the Borrower shall deliver paper copies of the
reports or financial information required to be delivered pursuant to clauses (b)(i),
(b)(ii) and (b)(iii) of this Section 5.03 to the Administrative Agent, if so requested
by any Bank to the Administrative Agent, until written notice to cease delivering
such paper copies is given by such Bank to the Administrative Agent.
Section 5.04. Default Certificates. Concurrently with each financial
statement delivered to the Administrative Agent pursuant to clauses (i) and (ii) of
Section 5.03(b), the Borrower will furnish to the Administrative Agent a certificate
signed by the Chief Executive Officer, the Chief Financial Officer, the Treasurer,
an Assistant Secretary-Treasurer or the Controller of the Borrower to the effect that
the review of the activities of the Borrower during such year or the
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appropriate, made its own credit analysis and decision to enter into this Agreement.
Each Bank Party also acknowledges that it will, independently and without reliance
upon the Administrative Agent or any other Bank Party, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under this
Agreement.
Section 7.08. Successor Administrative Agent. The Administrative
Agent may, upon giving 5 Domestic Business Days prior written notice to the
Borrower, and for so long as long as no Event of Default has occurred and is
continuing, at the request of the Borrower, shall, resign at any time by giving
written notice thereof to the Banks and the Borrower. Upon any such resignation,
the Borrower shall have the right, with the consent of the Required Banks, such
consent not to be unreasonably withheld, conditioned or delayed, to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Borrower, and shall have accepted such appointment,
within 15 days after the retiring Administrative Agent gives notice of resignation,
then the retiring Administrative Agent may, on behalf of the Bank Parties, appoint
a successor Administrative Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $1,000,000,000. Upon the
acceptance of its appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent’s resignation hereunder as Administrative Agent, the provisions of this
Article shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent.
Section 7.09. Co-Documentation Agents, Syndication Agent and Co-
Lead Arrangers Not Liable. Nothing in this Agreement shall impose upon the Co-
Documentation Agents, the Syndication Agent or the Co-Lead Arrangers, each in
such capacity, any duties or responsibilities whatsoever.
Section 7.10. Calculations. The Administrative Agent shall not be
liable for any calculation, apportionment or distribution of payments made by it in
good faith. If such calculation, apportionment or distribution is subsequently
determined to have been made in error, the sole recourse of any Lender to whom
payment was due but not made shall be to recover from the other Banks any
payment in excess of the amount to which they are determined to be entitled or, if
the amount due was not paid by the Borrower, to recover such amount from the
Borrower.
Section 7.11. Erroneous Payments.
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(a) If the Administrative Agent notifies a Bank, Issuing
Bank, or any Person who has received funds on behalf of a Bank or Issuing
Bank, such Bank or Issuing Bank (any such Bank, Issuing Bank or other
recipient, a “Payment Recipient”) that the Administrative Agent has
determined in its sole discretion (whether or not after receipt of any notice
under immediately succeeding clause (b)) that any funds received by such
Payment Recipient from the Administrative Agent or any of its affiliates were
erroneously transmitted to, or otherwise erroneously or mistakenly received
by, such Payment Recipient (whether or not known to such Bank, Issuing
Bank or other Payment Recipient on its behalf) (any such funds, whether
received as a payment, prepayment or repayment of principal, interest, fees,
distribution or otherwise, individually and collectively, an “Erroneous
Payment”) and demands the return of such Erroneous Payment (or a portion
thereof), such Erroneous Payment shall at all times remain the property of the
Administrative Agent and shall be segregated by the Payment Recipient and
held in trust for the benefit of the Administrative Agent, and such Bank or
Issuing Bank shall (or, with respect to any Payment Recipient who received
such funds on its behalf, shall cause such Payment Recipient to) promptly, but
in no event later than one Business Day thereafter, return to the
Administrative Agent the amount of any such Erroneous Payment (or portion
thereof) as to which such a demand was made, in same day funds (in the
currency so received), together with interest thereon in respect of each day
from and including the date such Erroneous Payment (or portion thereof) was
received by such Payment Recipient to the date such amount is repaid to the
Administrative Agent in same day funds at the greater of the Federal Funds
Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation from time to time in effect.
A notice of the Administrative Agent to any Payment Recipient under this
clause (a) shall be conclusive, absent manifest error.
(b) Without limiting immediately preceding clause (a), each
Bank and Issuing Bank hereby further agrees that if it receives a payment,
prepayment or repayment (whether received as a payment, prepayment or
repayment of principal, interest, fees, distribution or otherwise) from the
Administrative Agent (or any of its affiliates) (x) that is in a different amount
than, or on a different date from, that specified in a notice of payment,
prepayment or repayment sent by the Administrative Agent (or any of its
affiliates) with respect to such payment, prepayment or repayment, (y) that
was not preceded or accompanied by a notice of payment, prepayment or
repayment sent by the Administrative Agent (or any of its affiliates), or (z)
that such Bank or Issuing Bank, or other such recipient, otherwise becomes
aware was transmitted, or received, in error or by mistake (in whole or in
part) in each case:
(i) (A) in the case of immediately preceding clauses
(x) or (y), an error shall be presumed to have been made (absent written
confirmation from the Administrative Agent to the contrary) or (B)
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an error has been made (in the case of immediately preceding clause (z)), in
each case, with respect to such payment, prepayment or repayment; and
(ii) such Bank or Issuing Bank shall (and shall cause
any other recipient that receives funds on its respective behalf to) promptly
(and, in all events, within one Business Day of its knowledge of such error)
notify the Administrative Agent of its receipt of such payment, prepayment or
repayment, the details thereof (in reasonable detail) and that it is so notifying
the Administrative Agent pursuant to this Section 7.11(b).
(c) Each Bank and Issuing Bank hereby authorizes the
Administrative Agent to set off, net and apply any and all amounts at any time
owing to such Bank or Issuing Bank under this Agreement, or otherwise
payable or distributable by the Administrative Agent to such Bank or Issuing
Bank from any source, against any amount due to the Administrative Agent
under immediately preceding clause (a) or under the indemnification
provisions of this Agreement.
(a) In the event that an Erroneous Payment (or portion
thereof) is not recovered by the Administrative Agent for any reason, after
demand therefor by the Administrative Agent in accordance with immediately
preceding clause (a), from any Bank or Issuing Bank that has received such
Erroneous Payment (or portion thereof) (and/or from any Payment Recipient
who received such Erroneous Payment (or portion thereof) on its respective
behalf) (such unrecovered amount, an “Erroneous Payment Return
Deficiency”), upon the Administrative Agent’s notice to such Bank or Issuing
Bank at any time, (i) such Bank or Issuing Bank shall be deemed to have
assigned its Loans (but not its Commitments) in an amount equal to the
Erroneous Payment Return Deficiency (or such lesser amount as the
Administrative Agent may specify) (such assignment of the Loans (but not
Commitments), the “Erroneous Payment Deficiency Assignment”) at par plus
any accrued and unpaid interest (with the assignment fee to be waived by the
Administrative Agent in such instance), and is hereby (together with the
Borrower) deemed to execute and deliver an Assignment and Assumption
Agreement with respect to such Erroneous Payment Deficiency Assignment,
and such Bank or Issuing Bank shall deliver any Notes evidencing such Loans
to the Borrower or the Administrative Agent, (ii) the Administrative Agent as
the assignee Bank shall be deemed to acquire the Erroneous Payment
Deficiency Assignment, (iii) upon such deemed acquisition, the Administrative
Agent as the assignee Bank shall become a Bank or Issuing Bank, as
applicable, hereunder with respect to such Erroneous Payment Deficiency
Assignment and the assigning Bank or assigning Issuing Bank shall cease to be
a Bank or Issuing Bank, as applicable, hereunder with respect to such
Erroneous Payment Deficiency Assignment, excluding, for the avoidance of
doubt, its obligations under the indemnification provisions
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of this Agreement and its applicable Commitments which shall survive as to
such assigning Bank or assigning Issuing Bank and (iv) the Administrative
Agent may reflect in the register its ownership interest in the Loans subject to
the Erroneous Payment Deficiency Assignment. The Administrative Agent
may, in its discretion, sell any Loans acquired pursuant to an Erroneous
Payment Deficiency Assignment in compliance with the terms set forth in
Section 9.06 hereof and upon receipt of the proceeds of such sale, the
Erroneous Payment Return Deficiency owing by the applicable Bank or
Issuing Bank shall be reduced by the net proceeds of the sale of such Loan (or
portion thereof), and the Administrative Agent shall retain all other rights,
remedies and claims against such Bank or Issuing Bank (and/or against any
recipient that receives funds on its respective behalf). For the avoidance of
doubt, no Erroneous Payment Deficiency Assignment will reduce the
Commitments of any Bank or Issuing Bank and such Commitments shall
remain available in accordance with the terms of this Agreement. In addition,
each party hereto agrees that, except to the extent that the Administrative
Agent has sold a Loan (or portion thereof) acquired pursuant to an Erroneous
Payment Deficiency Assignment, and irrespective of whether the
Administrative Agent may be equitably subrogated, the Administrative Agent
shall be contractually subrogated to all the rights and interests of the
applicable Bank or Issuing Bank under this Agreement with respect to each
Erroneous Payment Return Deficiency.
(b) The parties hereto agree that an Erroneous Payment
shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations
owed by the Borrower, except, in each case, to the extent such Erroneous
Payment is, and solely with respect to the amount of such Erroneous Payment
that is, comprised of funds received by the Administrative Agent from the
Borrower for the purpose of making a payment or prepayment of the
Obligations.
(d) To the extent permitted by Applicable Law, no Payment
Recipient shall assert any right or claim to an Erroneous Payment, and hereby
waives, and is deemed to waive, any claim, counterclaim, defense or right of
set-off or recoupment with respect to any demand, claim or counterclaim by
the Administrative Agent for the return of any Erroneous Payment received,
including without limitation waiver of any defense based on “discharge for
value” or any similar doctrine.
(e) Each party’s obligations, agreements and waivers under
this Section 7.11 shall survive the resignation or replacement of the
Administrative Agent, the termination of the Commitments and/or the
repayment, satisfaction or discharge of all obligations (or any portion thereof)
under this Agreement.
100
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Fixed Rate
Borrowing:
(a) the Administrative Agent determines that the London
Interbank Offered Rate is not available in the manner set forth in the definition of
London Interbank Offered Rate for any such Interest Period (each such Interest
Period an “Affected Interest Period”) or
(b) in the case of a Committed Borrowing, Banks having 50% or
more of the aggregate amount of the Commitments advise the Administrative
Agent in writing that the Adjusted London Interbank Offered RateBenchmark, as
determined by the Administrative Agent, will not adequately and fairly reflect the
cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, in
either the case of clause (a) or clause (b) above, the Administrative Agent shall
forthwith give notice thereof to the Borrower and the Banks, whereupon until the
Administrative Agent notifies the Borrower that the circumstances giving rise to
such suspension no longer exist, (i) the obligations of the Banks to make Euro-
Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar
Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be
converted into a Base Rate Loan on the last day of the then current Interest Period
applicable thereto. Unless the Borrower notifies the Administrative Agent at least
two Domestic Business Days before the date of any Fixed Rate Borrowing for
which a Notice of Borrowing has previously been given that it elects not to borrow
on such date, (i) if such Fixed Rate Borrowing is a Euro-Dollar Borrowing, such
Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Fixed
Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR
Loans comprising such Borrowing shall bear interest for each day from and
including the first day to but excluding the last day of the Interest Period applicable
thereto at the Base Rate for such day.
Section 8.02. Illegality. If a Change in Law shall make it unlawful
or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain
or fund its Euro-Dollar Loans and such Bank shall so notify the Administrative
Agent, the Administrative Agent shall forthwith give notice thereof to the other
Banks and the Borrower, whereupon until such Bank notifies the Borrower and the
Administrative Agent that the circumstances giving rise to such suspension no
longer exist, the obligation of such Bank to make Euro-Dollar Loans or to convert
outstanding Loans into Euro-Dollar Loans or continue outstanding Loans as Euro-
Dollar Loans, shall be suspended. Before giving any notice to the Administrative
Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such notice and
will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank.
The Borrower hereby agrees to pay the reasonable costs and expenses incurred by
such Bank in connection with any such
101
similar writing) and shall be given to such party (subject to subparagraph (b)
below): (w) in the case of the Borrower:
National Rural Utilities Cooperative Finance Corporation
20701 Cooperative Way
Dulles, Virginia 20166
Attn: Capital Markets Relations
Phone: (703) 467-7402467-1628
Fax: (703) 467-5178
Email: BankingRelations@nrucfc.coop
with a copy to:
National Rural Utilities Cooperative Finance Corporation
20701 Cooperative Way
Dulles, Virginia 20166
Attn: General Counsel
Phone: (703) 467-7404467-1872
Fax: (703) 467-5651
Email: Roberta.Aronson@nrucfc.coop
(x) in the case of the Administrative Agent:
Mizuho Bank, Ltd.
1251 Avenue of the Americas
New York, New York 10020
Attn: Cole Darrington
Email: lau_agent@mizuhocbus.com
(y) in the case of any Bank, at its address, email address or telecopier number set
forth in its Administrative Questionnaire or (z) in the case of any other party, such
other address, email address or telecopier number as such party may hereafter
specify for the purpose by notice to the Administrative Agent and the Borrower.
Each such notice, request, direction, consent, approval or other communication shall
be effective (i) if given by facsimile transmission or other electronic submission,
when such facsimile transmission or other electronic submission is transmitted to
the facsimile number or email address specified in this Section and receipt is
confirmed or (ii) if given by any other means, when delivered or received at the
address specified in this Section; provided that (A) notices to the Administrative
Agent under Article 2 or Article 8 shall also be confirmed by telephone call and
shall not be effective until received and (B) any communications deemed received
hereunder must have been received during the recipient’s normal business hours;
provided, however, that any communication that is not received during the
recipient’s normal business hours on a particular Domestic Business Day, shall be
deemed to be received on the immediately following Domestic Business Day.
105
Section 9.09. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same instrument.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as
delivery of a manually executed counterpart of this Agreement. The words
“execution,” “signed,” “signature,” and words of similar import in this
Agreement shall be deemed to include electronic or digital signatures or the
keeping of records in electronic form, each of which shall be of the same effect,
validity and enforceability as manually executed signatures or a paper-based
recordkeeping system, as the case may be, to the extent and as provided for
under applicable law, including the Electronic Signatures in Global and
National Commerce Act of 2000, the Electronic Signatures and Records Act of
1999, or any other similar state Laws based on the Uniform Electronic
Transactions Act. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. Notwithstanding the foregoing, if the Administrative Agent or any
Lender reasonably requests a manually executed counterpart, the Company
shall deliver such manually executed counterpart.
Section 9.10. Several Obligations. The obligations of the Bank
Parties hereunder are several. Neither the failure of any Bank Party to carry out its
obligations hereunder nor of this Agreement to be duly authorized, executed and
delivery by any Bank Party shall relieve any other Bank Party of its obligations
hereunder (or affect the rights hereunder of such other Bank). No Bank Party shall
be responsible for the obligations of, or any action taken or omitted by, any other
Bank Party hereunder.
Section 9.11. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or obligations,
or of such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
Section 9.12. Confidentiality. The Administrative Agent and each
Bank Party represent that they will maintain the confidentiality of any written or
oral information provided by or on behalf of the Borrower or any of its
Consolidated Entities (hereinafter collectively called “Confidential Information”),
subject to the Administrative Agent’s and each Bank’s (a) obligation to disclose
any such Confidential Information pursuant to a request or order under applicable
laws or regulations or from a regulatory authority or pursuant to a subpoena or other
legal process, (b) right to disclose any such Confidential Information to its bank
examiners, auditors, counsel and other professional advisors, and its employees,
officers and directors, and to other Bank Parties (it being understood that such
Persons shall be informed of the confidential nature of such information and
instructed to keep it confidential), (c) right to disclose any such Confidential
112
compliance with, the provisions of the Credit Documentation (including without
limitation, the definitions, representations, warranties, covenants, agreements,
conditions and events of default set forth in the Credit Documentation) and may be
excluded from any certifications, notices, reports or statements delivered or to be
delivered pursuant to the Credit Documentation. Without limiting the generality of
the foregoing, the defined terms “ERISA Group,” “Joint Venture,” “Member” and
“Subsidiary,” among others, as used in the Credit Documentation shall not include
the ICC Related Companies. Notwithstanding the preceding provisions of this
Section 9.15, any new investments in the ICC Related Companies by purchase of
equity and/or debt securities, funding (through capital contributions and/or newly
originated loans) of working capital or capital expenditure needs of the ICC
Related Companies, payment by RTFC (as such term is defined in Schedule 9.15
hereto) or the Borrower of claims of other creditors of the ICC Related Companies,
and/or provision of any new guarantees, letters of credit and/or other new credit
support or credit enhancement of the debt or other obligations of the ICC Related
Companies, in the case of each of the foregoing, made or provided by the Borrower
and/or RTFC at any time from December 9, 2008 shall not exceed in the aggregate
(but without double-counting any such new investments) $275,000,000 without the
consent of the Required Banks. To the extent that the Credit Documentation
provides that any of the ICC Transactions may be implemented if certain advance
notice thereof is given, all such conditions or requirements of advance notice shall
be deemed to have been complied with and all such notices shall be deemed to have
been duly and timely given in accordance with the terms of the Credit
Documentation.
Section 9.16. Acknowledgement and Consent to Bail-In of Affected
Financial Institutions. Notwithstanding anything to the contrary in this
Agreement or any other agreement, arrangement or understanding among any such
parties, each party hereto acknowledges that any liability of any EEAAffected
Financial Institution arising under this Agreement may be subject to the Write-
Down and Conversion Powers of an EEAa Resolution Authority and agrees and
consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers
by an EEAthe applicable Resolution Authority to any such liabilities arising
hereunder which may be payable to it by any party hereto that is an EEAAffected
Financial Institution; and
(b) the effects of any Bail-In Action on any such liability,
including, if applicable (i) a reduction in full or in part or cancellation of any such
liability, (ii) a conversion of all, or a portion of, such liability into shares or other
instruments of ownership in such EEAAffected Financial Institution, its parent
entity, or a bridge institution that may be issued to it or otherwise conferred on it,
and that such shares or other instruments of ownership will be accepted by it in lieu
of any rights with respect to any such liability under this Agreement or any other
Loan Documentagreement, arrangement or understanding among any such
parties or (iii) the variation of the terms of such liability in connection with the
exercise
114
of the Write-Down and Conversion Powers of any EEAthe applicable Resolution
Authority.
[remainder of page intentionally left blank]
115
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and year
first above written.
COOPERATIVE FINANCE CORPORATION
NATIONAL RURAL UTILITIES
By:/s/ J. Andrew DonLing Wang
Name: J. Andrew DonLing Wang
Title: Senior Vice President and
Chief Financial Officer
Signature Page to 2022 2024 Facility
MUFG BANK, LTD. (F/K/A THE BANK
OF TOKYO-MITSUBISHI UFJ, LTD.),
as Co-Documentation Agent and as
aBANK, LTD., as a Bank
By:
/s/ Robert MacFarlaneMichael
Agrimis
Name: Robert
MacFarlaneMichael
Agrimis
Title: Director
Signature Page to 2022 2024 Facility
ROYAL BANK OF CANADA , as Co-
Documentation Agent and as a Bank
By:
/s/Rahul D. ShahMark Condon
Name: Rahul D. ShahMark
Condon
Title: Authorized Signatory
Signature Page to 2022 2024 Facility
SUNTRUSTTRUIST BANK, as a Bank
By:
/s/Shannon JuhanJustin Lien
Name: Shannon JuhanJustin Lien
Title: Director
Signature Page to 2022 2024 Facility
Institution
Title
AGENT SCHEDULE
Mizuho Bank, Ltd.
JPMorgan Chase Bank, N.A.
MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.)
PNC Bank, National Association
The Bank of Nova Scotia
Royal Bank of Canada
Administrative Agent
Syndication Agent
Co-Documentation Agent
Co-Documentation Agent
Co-Documentation Agent
Co-Documentation Agent
Agent Schedule
Institution
Bank
Mizuho Bank Ltd.
Royal Bank of Canada
The Bank of Nova Scotia
EXISTING COMMITMENT SCHEDULE
Commitment Prior
to the FourthFifth
Amendment
Effective Date
Loans Outstanding
on the FourthFifth
Amendment
Effective Date
$187,500,000.00150
,000,000.00
$187,500,000.00150
,000,000.00
$187,500,000.00150
,000,000.00
MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi
UFJ, Ltd.)
$187,500,000.00150
,000,000.00
JPMorgan Chase Bank, N.A.
PNC Bank, National Association
US Bank National Association
SunTrust Bank
Regions Bank
KeyBank National Association
Apple Bank for Savings
Total
$187,500,000.00150
,000,000.00
$125,000,000.00
$125,000,000.00
$125,000,000.00
$75,000,000.00
$70,000,000.00
$17,500,000.0020,0
00,000.00
$1,532500,000.001,
315,000,000.00
Existing Commitment Schedule
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
COMMITMENT SCHEDULE
Commitment Schedule
Bank
Mizuho Bank Ltd.
Royal Bank of Canada
The Bank of Nova Scotia
MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.)
JPMorgan Chase Bank, N.A.
PNC Bank, National Association
US Bank National Association
SunTrustTruist Bank
MUFG Bank, Ltd
Regions Bank
KeyBank National Association
Apple Bank for Savings
Total:
Commitment
$150,000,000.00
$150,000,000.00
$150,000,000.00
$150,000,000.00
$150,000,000.00
$150,000,000.00
$125,000,000.00
$125,000,000.00
$100,000,000.00
$75,000,000.00
$70,000,000.00
$20,000,000.00
$1,315,000,000.001
245,000,000.00
Commitment Schedule
PRICING SCHEDULE
The “Euro-Dollar Margin”, the “Base Rate Margin” and the “Facility Fee Rate” for the
Borrower at any date are the respective percentages set forth below in the applicable row and column
based upon the Status of the Borrower that exists on such date.
Status
Level I
Level II
Level III
Level IV
Level V
Euro-Dollar Margin
0.5750%
0.6900%
0.8000%
0.9000%
0.9750%
Base Rate Margin
Facility Fee Rate
0%
0%
0%
0%
0%
0.0500%
0.0600%
0.0750%
0.1000%
0.1500%
For purposes of this Pricing Schedule, the following terms have the following meanings,
subject to the concluding paragraph of this Pricing Schedule:
“Fitch” means Fitch Ratings, Inc.
“Level I Status” exists at any date if, at such date, the Borrower’s Unsecured Long-Term
Debt is rated AA- or higher by S&P or , Aa3 or higher by Moody’s or AA- or higher by Fitch.
“Level II Status” exists at any date if, at such date, (i) the Borrower’s Unsecured Long-
Term Debt is rated A+ or higher by S&P or , A1 or higher by Moody’s or A+ or higher by Fitch, and (ii)
Level I Status does not exist.
“Level III Status” exists at any date if, at such date, (i) the Borrower’s Unsecured Long-
Term Debt is rated A or higher by S&P or , A2 or higher by Moody’s or A or higher by Fitch, and (ii)
Level II Status does not exist.
“Level IV Status” exists at any date if, at such date, (i) the Borrower’s Unsecured Long-
Term Debt is rated A- or higher by S&P or , A3 or higher by Moody’s or A- or higher by Fitch, and (ii)
Level III Status does not exist.
“Level V Status” exists at any date if, at such date, neither Level I Status, Level II Status,
Level III Status or Level IV Status exists.
“Moody’s” means Moody’s Investors Services, Inc.
“Rating Agencies” means each of S&P and, Moody’s and Fitch.
“S&P” means S&P Global Ratings, a business unit of Standard & Poor’s Financial
Services LLC, or any successor thereto.
“Status” refers to the determination of which of Level I Status, Level II Status, Level III
Status, Level IV Status or Level V Status exists at any date.
Pricing Schedule
The credit ratings to be utilized for purposes of this Pricing Schedule are those assigned to
the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement (the
“Borrower’s Unsecured Long-Term Debt”), and any ratings assigned to any other debt security of the
Borrower shall be disregarded; provided that if at any date there is no such rating assigned by a particular
Rating Agency, such Rating Agency’s rating of the Borrower’s Unsecured Long-Term Debt shall be
deemed to be one notch below such Rating Agency’s rating of the senior secured debt of the Borrower at
such date. In the event that the twothree assigned ratings differ, then the(i) if two of the ratings are higher
than the third rating, the higher rating assigned to the Borrower’s Unsecured Long-Term Debt (after
giving effect to the proviso in the first sentence of this paragraph) shall be used, (ii) if two of the ratings
assigned differ by only one rating (e.g., A+/A2 results in Level II Status). In the event the two assigned
ratings differ by more than oneare lower than the third rating, the lower rating below the highest rating
shall be used (e.g., A+/A3 results in Level III Status).
assigned to the Borrower’s Unsecured Long-Term Debt (after giving effect to the proviso
in the first sentence of this paragraph) shall be used or (iii) if all three ratings are different, the
intermediate shall be used.
Pricing Schedule
SCHEDULE 5.03(a)
NON-GAAP SUBSIDIARIES
NONE
Schedule 5.03(a)
FORM OF NOTE
EXHIBIT A
New York, New York [DATE]
For value received, National Rural Utilities Cooperative Finance Corporation, a
not-for-profit cooperative association incorporated under the laws of the District of
Columbia (the “Borrower”), promises to pay to the order of [●] (the “Bank”), for the
account of its Applicable Lending Office, the principal sum of $[_________]
($_________), or, if less, the aggregate unpaid principal amount of each Loan and L/C
Borrowing made by the Bank to the Borrower pursuant to the Revolving Credit
Agreement referred to below on the Maturity Date with respect to such Loan or L/C
Borrowing. The Borrower promises to pay interest on the unpaid principal amount of
each such Loan and L/C Borrowing on the dates and at the rate or rates provided for in
the Revolving Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other immediately available
funds at the office of Mizuho Bank, Ltd., 1251 Avenue of the Americas, New York, New
York 10020, Attn: Cole Darrington, Email: lau_agent@mizuhocbus.com.
All Loans and L/C Borrowings made by the Bank, the respective types
and maturities thereof and all repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding may be endorsed by the
Bank on the schedule attached hereto, or on a continuation of such schedule attached to
and made a part hereof; provided that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower hereunder or
under the Revolving Credit Agreement.
This note is one of the Notes referred to in that certain Amended and Restated Revolving
Credit Agreement, dated as of November 19, 2015, among the Borrower, the Banks listed
on the signature pages thereof, Mizuho Bank, Ltd., as Administrative Agent and Initial
Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and MUFG Bank, Ltd.
(f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The
Bank of Nova Scotia and Royal Bank of Canada as Co-Documentation Agents (as the
same may be amended, supplemented or otherwise modified, from time to time, in each
case, pursuant to the terms and conditions thereof, the “Revolving Credit Agreement”).
Terms defined in the Revolving Credit Agreement are used herein with the same
meanings. Reference is made to the Revolving Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof. This Note shall be
governed by and construed in accordance with the laws of the State of New York.
A-1
FORM OF MONEY MARKET QUOTE REQUEST
EXHIBIT C
[Date]
To: Mizuho Bank, Ltd. (the “Administrative Agent”)
From: National Rural Utilities Cooperative Finance Corporation (the “Borrower”)
Re: Amended and Restated Revolving Credit Agreement, dated as of November 19, 2015,
among the Borrower, the Banks listed on the signature pages thereof, Mizuho Bank, Ltd., as
Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication
Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank,
National Association, The Bank of Nova Scotia and Royal Bank of Canada as Co-
Documentation Agents (as amended, supplemented, or otherwise modified from time to
time, in each case, pursuant to the terms and conditions thereof the “Revolving Credit
Agreement”)
We hereby give notice pursuant to Section 2.03 of the Revolving Credit Agreement that we
request Money Market Quotes for the following proposed Money Market Borrowing(s):
Date of Borrowing:
Principal Amount1 Interest Period2
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute Rate]. [The
applicable base rate is the London Interbank Offered Rate.]
Terms used herein have the meanings assigned to them in the Revolving Credit Agreement.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE
CORPORATION
By:
1Amount must be $10,000,000 or a larger multiple of $1,000,000.
2Any number of whole months (but not less than one month) (LIBOR Auction) or not less than 30 days
Name:
(Absolute Rate Auction), subject to the provisions of the definition of Interest Period.
C-1
FORM OF INVITATION FOR MONEY MARKET QUOTES
EXHIBIT D
[Date]
To:
[Name of Bank]
Re:
Invitation for Money Market Quotes to the National Rural Utilities Cooperative
Finance Corporation (the “Borrower”)
Pursuant to Section 2.03 of the Amended and Restated Revolving Credit
Agreement, dated as of November 19, 2015, among the Borrower, the Banks listed on the
signature pages thereof, Mizuho Bank, Ltd., as Administrative Agent and Initial Issuing
Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and MUFG Bank, Ltd. (f/k/a
The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank of
Nova Scotia and Royal Bank of Canada as Co-Documentation Agents (as amended,
supplemented or otherwise modified from time to time, in each case, pursuant to the terms
and conditions thereof, the “Revolving Credit Agreement”):
Date of Borrowing:
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than 9:30 A.M. (New York City time)
on [date].
MIZUHO BANK, LTD.
Name:_____________________
Title: Authorized Officer
By:
D-1
[provided, that the aggregate principal amount of Money Market Loans for which the above
offers may be accepted shall not exceed $ .]**
We understand and agree that the offer[s] set forth above [is][are] subject to the
satisfaction of the applicable conditions set forth in the Amended and Restated Revolving
Credit Agreement, dated as of November 19, 2015, among the Borrower, the Banks listed
on the signature pages thereof, Mizuho Bank, Ltd., as Administrative Agent and Initial
Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and MUFG Bank, Ltd.
(f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The
Bank of Nova Scotia and Royal Bank of Canada as Co-Documentation Agents, as
amended, supplemented or otherwise modified from time to time, in each case, pursuant to
the terms and conditions thereof.
Very truly yours,
[NAME OF BANK]
By: ________________________
Name:
Title: Authorized Officer
Dated: _______________
E-2
OPINION OF GENERAL COUNSEL OF THE BORROWER
EXHIBIT F
November 26June 7, 20192021
To the Administrative Agent and each of the Banks party
to the Revolving Credit Agreement referred to below
c/o Mizuho Bank, Ltd.
1251 Avenue of the Americas
New York, New York 10020
Ladies and Gentlemen:
Reference is hereby made to (i) that certain Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 (as amended by the Amendments (defined
below), the “Extended Agreement”), by and among the Borrower, the Banks listed on the
signature pages thereof, Mizuho Bank, Ltd., as Administrative Agent and Initial Issuing
Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and MUFG Bank, Ltd. (f/k/a
The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank of
Nova Scotia, and Royal Bank of Canada, as Co-Documentation Agents, (ii) that certain
Amendment No. 1 dated as of November 18, 2016 (“Amendment No. 1”), by and among
the Borrower, the Banks listed on the signature pages thereof, Mizuho Bank, Ltd., as
Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as
Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ,
Ltd.), The Bank of Nova Scotia, and Royal Bank of Canada, as Co-Documentation Agents,
(iii) that certain Amendment No. 2 dated as of November 20, 2017 (“Amendment No. 2”),
by and among the Borrower, the Banks listed on the signature pages thereof, Mizuho
Bank, Ltd., as Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A.,
as Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ,
Ltd.), The Bank of Nova Scotia, and Royal Bank of Canada, as Co-Documentation Agents,
(iv) that certain Amendment No. 3 dated as of November 1828, 20162018 (“Amendment
No. 3”), by and among the Borrower, the Banks listed on the signature pages thereof,
Mizuho Bank, Ltd., as Administrative Agent and Initial Issuing Bank, JPMorgan Chase
Bank, N.A., as Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank of Nova Scotia, and
Royal Bank of Canada, as Co-Documentation Agents and; (v) that certain Amendment No.
4 dated as of November 26, 2019 (“Amendment No. 4” and together with Amendment No.
1, Amendment No. 2 and Amendment No. 3, the “Amendments”), by and among the
Borrower, the Banks listed on the signature pages thereof, Mizuho Bank, Ltd., as
Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as
Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ,
Ltd.),, PNC Bank, National Association, The Bank of Nova Scotia, and Royal Bank of
Canada,
F-1
as Co-Documentation Agents and (vi) that certain Amendment No. 5 dated as
of June 7, 2021 (“Amendment No. 5”, and together with Amendment No. 1,
Amendment No. 2, Amendment No. 3 and Amendment No. 4, the “Amendments”), by
and among the Borrower, the Banks listed on the signature pages thereof, Mizuho
Bank, Ltd., as Administrative Agent and Initial Issuing Bank, JPMorgan Chase
Bank, N.A., as Syndication Agent, and PNC Bank, National Association, The Bank of
Nova Scotia, and Royal Bank of Canada, as Co-Documentation Agents. I, Roberta B.
Aronson, General Counsel of the National Rural Utilities Cooperative Finance Corporation
(the “Borrower”), am delivering this opinion at the request of the Borrower pursuant to
Section 7(b) of Amendment No. 45. Terms defined in the Extended Agreement are used
herein as therein defined.
I have examined originals or copies, certified or otherwise identified to my satisfaction, of
such documents, corporate records, certificates of public officials and other instruments and
have conducted such other investigations of fact and law as I have deemed necessary or
advisable for purposes of this opinion. This opinion is limited to the laws of the District of
Columbia.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a cooperative association duly incorporated, validly
existing and in good standing under the laws of the District of Columbia and has the
corporate power and authority and all material governmental licenses, authorizations,
consents and approvals required to own its property and assets and to transact the business
in which it is engaged. The Borrower is duly qualified or licensed as a foreign corporation
in good standing in every jurisdiction in which the nature of the business in which it is
engaged makes such qualification or licensing necessary, except in those jurisdictions in
which the failure to be so qualified or licensed would not (after qualification, assuming that
the Borrower could so qualify without the payment of any fee or penalty and retain its
rights as they existed prior to such qualification all to an extent so that any fees or penalties
required to be so paid or any rights not so retained would not, individually or in the
aggregate, have a material adverse effect on the business or financial position of the
Borrower), individually or in the aggregate, have a material adverse effect upon the
business or financial position of the Borrower.
2. The Borrower has the corporate power and authority to execute,
deliver and carry out the terms and provisions of the Extended Agreement and each of the
Notes dated the date hereof (the “Subject Notes”). The Extended Agreement and the
Subject Notes have been duly and validly authorized, executed and delivered by the
Borrower.1
_________________
1The opinion with respect to the enforceability of the Amended and Restated Revolving
Credit Agreement under New York law shall be provided by Borrower’s New York counsel, Norton Rose
Fulbr ight USFoley & Lardner LLP, subject to customary assumptions, qualifications and limitations.
F-2
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _______________, 20____ among [ASSIGNOR] (the “Assignor”),
[ASSIGNEE] (the “Assignee”), NATIONAL RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION (the “Borrower”) and MIZUHO BANK, LTD., as Administrative Agent (the
“Agent”).
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the “Agreement”) relates to the
Amended and Restated Revolving Credit Agreement, dated as of November 19, 2015 (as amended,
supplemented or otherwise modified from time to time, in each case pursuant to the terms and conditions
thereof, (the “Credit Agreement”), among the Borrower, the Banks listed on the signature pages thereof,
Mizuho Bank, Ltd., as Administrative Agent and Initial Issuing Bank (the “Agent”), and JPMorgan Chase
Bank, N.A., as Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ,
Ltd.), PNC Bank, National Association, The Bank of Nova Scotia and Royal Bank of Canada, as Co-
Documentation Agents.
WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make
Loans and/or make or participate in L/C Obligations to the Borrower in an aggregate principal amount at
any time outstanding not to exceed $___________;
WHEREAS, Committed Loans and L/C Obligations made to the Borrower |by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date
hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor
under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to
$_________ (the “Assigned Amount”), together with a corresponding portion of its outstanding
Committed Loans and/or L/C Obligations, and the Assignee proposes to accept assignment of such rights
and assume the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained
herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the
respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights
of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee
hereby accepts such assignment
G-1
EXHIBIT H-1
[FORM OF]
U.S. TAX CERTIFICATE
(For Non-U.S. Bank Parties That Are Not Partnerships For U.S. Federal Income
Tax Purposes)
Reference is hereby made to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), among the Borrower, the Banks
listed on the signature pages thereof, Mizuho Bank, Ltd., as Administrative Agent and
Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and MUFG
Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank, National
Association, The Bank of Nova Scotia and Royal Bank of Canada, as Co-Documentation
Agents.
Pursuant to the provisions of Section 2.16 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner of the
Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is
providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A)
of the Code, (iii) it is not a member of Borrower, it does not exercise voting power over
Borrower and is not a ten percent shareholder of the Borrower within the meaning of
Section 871(h)(3)(B) of the Code, (iv) it is not a controlled foreign corporation related to
the Borrower as described in Section 881(c)(3)(C) of the Code and (v) the interest
payments in question are not effectively connected with the undersigned’s conduct of a
U.S. trade or business.
The undersigned has furnished the Administrative Agent and the Borrower
with a certificate of its non-U.S. person status on IRS Form W-8BEN. By executing this
certificate, the undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform the Borrower and the Administrative
Agent and (2) the undersigned shall have at all times furnished the Borrower and the
Administrative Agent with a properly completed and currently effective certificate in
either the calendar year in which each payment is to be made to the undersigned, or in
either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF BANK PARTY]
By: _______________________________
Name:
Title:
H-1-1
[FORM OF]
U.S. TAX CERTIFICATE
EXHIBIT H-2
(For Non-U.S. Bank Parties That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Amended and Restated Revolving Credit Agreement dated as of
November 19, 2015 (as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Borrower, the Banks listed on the signature pages thereof, Mizuho Bank, Ltd., as
Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and
MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank, National Association,
The Bank of Nova Scotia and Royal Bank of Canada, as Co-Documentation Agents.
Pursuant to the provisions of Section 2.16 of the Credit Agreement, the undersigned hereby
certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s))
in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole
beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)),
(iii) with respect to the extension of credit pursuant to this Credit Agreement, neither the
undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan
agreement entered into in the ordinary course of its trade or business within the meaning of Section
881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a member of Borrower,
exercise voting power over Borrower or otherwise is a ten percent shareholder of the Borrower within the
meaning of Section 871(h)(3)(B) of the Code, (v) none of its partners/members is a controlled foreign
corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest
payments in question are not effectively connected with the undersigned’s or its partners/members’
conduct of a U.S. trade or business.
The undersigned has furnished the Administrative Agent and the Borrower with IRS Form
W-8IMY accompanied by an IRS Form W-8BEN from each of its partners/members claiming the
portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly so inform the Borrower
and the Administrative Agent and (2) the undersigned shall have at all times furnished the Borrower and
the Administrative Agent with a properly completed and currently effective certificate in either the
calendar year in which each payment is to be made to the undersigned, or in either of the two calendar
years preceding such payments.
H-2-1
[FORM OF]
U.S. TAX CERTIFICATE
EXHIBIT H-3
(For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Amended and Restated Revolving Credit Agreement dated as of
November 19, 2015 (as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Borrower, the Banks listed on the signature pages thereof, Mizuho Bank, Ltd., as
Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and
MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank National Association,
The Bank of Nova Scotia and Royal Bank of Canada, as Co-Documentation Agents.
Pursuant to the provisions of Section 2.16 of the Credit Agreement, the undersigned hereby
certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is
providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii)
it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the
Code, (iv) it is not a controlled foreign corporation related to the Borrower as described in Section
881(c)(3)(C) of the Code, and (v) the interest payments in question are not effectively connected with the
undersigned’s conduct of a U.S. trade or business.
The undersigned has furnished its participating Bank with a certificate of its non-U.S. person status
on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information
provided on this certificate changes, the undersigned shall promptly so inform such Bank in writing and
(2) the undersigned shall have at all times furnished such Bank with a properly completed and currently
effective certificate in either the calendar year in which each payment is to be made to the undersigned, or
in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have
the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT]
By: ______________________________
Name:
Title:
Date: ______ , 20[ ]
H-3-1
EXHIBIT H-4
U.S. TAX CERTIFICATE
[FORM OF]
(For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is hereby made to the Amended and Restated Revolving Credit Agreement dated as of
November 19, 2015 (as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Borrower, the Banks listed on the signature pages thereof, Mizuho Bank, Ltd., as
Administrative Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and
MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank, National Association,
The Bank of Nova Scotia and Royal Bank of Canada, as Co-Documentation Agents.
Pursuant to the provisions of Section 2.16 of the Credit Agreement, the undersigned hereby
certifies that (i) it is the sole record owner of the participation in respect of which it is providing this
certificate, (ii) its partners/members are the sole beneficial owners of such participation, (iii) with respect
such participation, neither the undersigned nor any of its partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning
of Section 881(c)(3)(A) of the Code, (iv) none of its partners/members is a ten percent shareholder of the
Borrower within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its partners/members is a
controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code,
and (vi) the interest payments in question are not effectively connected with the undersigned’s or its
partners/members’ conduct of a U.S. trade or business.
The undersigned has furnished its participating Bank with IRS Form W-8IMY accompanied by an
IRS Form W-8BEN from each of its partners/members claiming the portfolio interest exemption. By
executing this certificate, the undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Bank and (2) the undersigned shall have at all
times furnished such Bank with a properly completed and currently effective certificate in either the
calendar year in which each payment is to be made to the undersigned, or in either of the two calendar
years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have
the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT]
By:
H-4-1
AMENDMENT NO. 5
Dated as of June 7, 2021
to the
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Dated as of November 19, 2015
Among
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION,
THE BANKS PARTY HERETO,
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent and Initial Issuing Bank,
MIZUHO BANK, LTD.
as Syndication Agent
and
PNC BANK, NATIONAL ASSOCIATION,
THE BANK OF NOVA SCOTIA,
and
ROYAL BANK OF CANADA,
as Co-Documentation Agents
________________________________
J.P. MORGAN CHASE BANK, N.A.
MIZUHO BANK, LTD.
PNC CAPITAL MARKETS LLC
THE BANK OF NOVA SCOTIA,
and
RBC CAPITAL MARKETS
as Co-Lead Arrangers and Joint Bookrunners
AMENDMENT NO. 5
AMENDMENT NO. 5 dated as of June 7, 2021 (this “Amendment”) to the
Amended and Restated Revolving Credit Agreement dated as of November 19, 2015, as
amended by Amendment No. 1 dated as of November 18, 2016, as further amended by
Amendment No. 2 dated as of November 20, 2017, as further amended by Amendment
No. 3 dated as of November 28, 2018 and as further amended by Amendment No. 4 dated
as of November 26, 2019, among NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION, a not-for-profit cooperative association incorporated under
the laws of the District of Columbia, the BANKS party thereto from time to time,
JPMORGAN CHASE BANK, N.A., as Administrative Agent and as Initial Issuing Bank,
MIZUHO BANK (USA), as Syndication Agent, and PNC BANK, NATIONAL
ASSOCIATION, THE BANK OF NOVA SCOTIA and ROYAL BANK OF CANADA,
as Co-Documentation Agents (the “Existing Credit Agreement” and, as amended by this
Amendment, the “Amended Credit Agreement”).
W I T N E S S E T H :
WHEREAS, the Borrower has requested that the Banks party to the Existing
Credit Agreement, immediately prior to the effectiveness of this Amendment (each, an
“Existing Bank”) enter into this Amendment pursuant to which (i) the Existing Banks
agree to extend the termination of their Commitments to November 28, 2025 (the
“Extended Commitment Termination Date”) and (ii) certain other provisions of the
Existing Credit Agreement will be amended;
WHEREAS, each financial institution identified on Schedule 1 hereto as an
“Extending Bank” (each, an “Extending Bank”) has agreed, on the terms and conditions set forth
herein, to provide Commitments terminating on the Extended Commitment Termination Date in
the amounts set forth on Schedule 1 hereto opposite such Extending Bank’s name under the
heading “Commitment” (the “Extended Commitments”);
WHEREAS, on the Fifth Amendment Effective Date (as defined in Section 7
below), the existing Commitment of each Extending Bank will be converted into an Extended
Commitment;
WHEREAS, certain other financial institutions referred to herein as “Non-
Extending Banks” (each, a “Non-Extending Bank”) have informed the Borrower of their desire
to terminate their existing Commitments;
WHEREAS, certain other financial institutions referred to herein as “Reducing
Banks” (each, a “Reducing Bank”) have informed the Borrower of their desire to reduce their
existing Commitments; and
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
Section 1. Defined Terms; References. Unless otherwise specifically defined herein,
each term used herein that is defined in the Existing Credit Agreement or in the Amended Credit
Agreement, as the context shall require, has the meaning assigned to such term in the Existing
Credit Agreement or in the Amended Credit Agreement, as applicable. Each reference to
“hereof”, “hereunder”, “herein” and “hereby” and each other similar reference and each
reference to “this Amendment” and each other similar reference contained in the Existing Credit
Agreement shall, on and after the Fifth Amendment Effective Date, refer to the Amended Credit
Agreement.
Section 2. Amended Terms and Fifth Amendment Effective Date Transactions.
(a)
Each of the parties hereto agrees that, effective on the Fifth Amendment Effective
Date, the Existing Credit Agreement shall be amended to delete the stricken text (indicated
textually in the same manner as the following example: stricken text) and to add the double-
underlined text (indicated textually in the same manner as the following example: double-
underlined text) as set forth in the amended pages of the Existing Credit Agreement attached
hereto as Exhibit A, and the Banks party hereto authorize the Administrative Agent and the
Borrower to prepare a conformed copy of the Amended Credit Agreement that includes the
changes contained in, and consistent with, the amended pages attached as Exhibit A.
(b)
On the Fifth Amendment Effective Date, the Commitment of each Existing Bank
that is an Extending Bank will be converted into an Extended Commitment under the Amended
Credit Agreement in the amounts set forth on Schedule 1 hereto, so that the aggregate
Commitment of such Extending Bank under the Amended Credit Agreement shall equal such
Extended Bank’s Extended Commitments.
(c)
On the Fifth Amendment Effective Date, MUFG Bank, Ltd.’s role as a Co-
Documentation Agent shall be terminated and they shall not be entitled to any fees with respect
to that role.
(d) Notwithstanding Section 2.10 of the Existing Credit Agreement, on the Fifth
Amendment Effective Date, (i) the Commitment of each Non-Extending Bank shall be
terminated and such Non-Extending Bank shall no longer be considered as a Bank under the
Amended Credit Agreement and (ii) the Commitment of each Reducing Bank shall be reduced as
reflected on Schedule I hereto.
Section 3. Representations of Borrower. The Borrower represents and warrants, as of
the date hereof, that:
(a)
the Borrower has the corporate power and authority to execute, deliver and
perform its obligations under this Amendment and under the Amended Credit Agreement, and
has taken all necessary corporate action to authorize the execution, delivery and performance by
it of this Amendment and the Amended Credit Agreement. The Borrower has duly executed and
2
delivered this Amendment, and this Amendment and the Amended Credit Agreement constitutes
its legal, valid and binding obligation enforceable in accordance with its terms, except as
enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles (regardless of whether enforcement is sought by proceeding in
equity or at law);
(b)
no material authorization, consent, approval or license of, or declaration, filing or
registration with or exemption by, any Governmental Authority, body or agency is required in
connection with the execution, delivery and performance by the Borrower of this Amendment.
The Banks acknowledge that the Borrower may file this Amendment with the Securities and
Exchange Commission on or after the Fifth Amendment Effective Date; and
(c)
the execution, delivery and performance by the Borrower of this Amendment and
the Amended Credit Agreement, the borrowings contemplated hereunder and the use of the
proceeds thereof will not (i) contravene any material provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or Governmental Authority to
which the Borrower is subject, (ii) require any consent under, or violate or result in any breach of
any of the material terms, covenants, conditions or provisions of, or constitute a material default
under, or give rise to any right to accelerate or to require the prepayment, repurchase or
redemption of any obligation under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Borrower pursuant to the
terms of the Amended Credit Agreement or any material indenture, mortgage, deed of trust,
agreement or instrument, in each case to which the Borrower is a party or by which it or any its
property or assets is bound or to which it may be subject, or (iii) violate any provision of the
articles of incorporation or by-laws, as applicable, of the Borrower.
Section 4. GOVERNING LAW. (a) THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF
THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK
COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN
DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AMENDMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT,
AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK
STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL
COURT. EACH OF THE PARTIES HERETO AGREES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS AMENDMENT SHALL AFFECT ANY RIGHT
THAT ANY PARTY HERETO OR ANY BANK MAY OTHERWISE HAVE TO BRING ANY
3
THAT ANY PARTY HERETO OR ANY BANK MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AMENDMENT AGAINST ANY OTHER
PARTY HERETO OR ANY BANK OR THEIR RESPECTIVE PROPERTIES IN THE
COURTS OF ANY JURISDICTION.
(c)
EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND
EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AMENDMENT IN ANY COURT REFERRED TO IN
PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING IN ANY SUCH COURT.
(d)
EACH PARTY TO THIS AMENDMENT IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.01
OF THE AMENDED CREDIT AGREEMENT. NOTHING IN THIS AMENDMENT WILL
AFFECT THE RIGHT OF ANY PARTY TO THIS AMENDMENT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.
Section 5. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AMENDMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 6. Counterparts. This Amendment may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. Delivery of an executed counterpart of a signature page to this
Amendment by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery
of a manually executed counterpart of this Amendment. The words “execution,” “signed,”
“signature,” and words of similar import in this Amendment shall be deemed to include
electronic or digital signatures or the keeping of records in electronic form, each of which shall
be of the same effect, validity and enforceability as manually executed signatures or a paper-
based recordkeeping system, as the case may be, to the extent and as provided for under
applicable law, including the Electronic Signatures in Global and National Commerce Act of
2000, the Electronic Signatures and Records Act of 1999, or any other similar state Laws based
on the Uniform Electronic Transactions Act. Notwithstanding the foregoing, if the
Administrative Agent or any Lender reasonably requests a manually executed counterpart, the
Company shall deliver such manually executed counterpart.
Section 7. Effectiveness. This Amendment shall become effective on the date (the “Fifth
Amendment Effective Date”) on which the Administrative Agent shall have received the
following documents or other items, each dated the Fifth Amendment Effective Date unless
otherwise indicated:
4
(a)
receipt by the Administrative Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed counterpart shall not have
been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telex
or other written confirmation from such party of execution of a counterpart hereof by such
party), including receipt of consent from (i) each Extending Bank, (ii) each Non-Extending
Bank, (iii) each Reducing Bank, and (iv) the Required Banks under the Existing Credit
Agreement;
(b)
receipt by the Administrative Agent of an opinion of the General Counsel of the
Borrower, substantially in the form of Exhibit F to the Existing Credit Agreement, provided that
an enforceability opinion under New York law, that is reasonably acceptable to the
Administrative Agent, shall be furnished by the Borrower’s New York counsel, Foley & Lardner
LLP, subject to customary assumptions, qualifications and limitations;
(c)
receipt by the Administrative Agent of a certificate signed by any one of the Chief
Financial Officer, the Chief Executive Officer, the Treasurer, an Assistant Secretary-Treasurer,
the Controller or the Vice President, Capital Markets Relations of the Borrower to the effect that
the conditions set forth in clauses (c) through (g), inclusive, of Section 3.03 of the Amended
Credit Agreement have been satisfied as of the Fifth Amendment Effective Date and, in the case
of clauses (c), (d) and (g), setting forth in reasonable detail the calculations required to establish
such compliance;
(d)
receipt by the Administrative Agent of a certificate of an officer of the Borrower
acceptable to the Administrative Agent stating that all consents, authorizations, notices and
filings required or advisable in connection with this Amendment are in full force and effect, and
the Administrative Agent shall have received evidence thereof reasonably satisfactory to it;
(e)
receipt by the Administrative Agent and the Syndication Agent (or their
respective permitted assigns) and by each Bank Party of all fees, including all such fees that are
owed to each Reducing Bank and Non-Extending Bank required to be paid in the respective
amounts heretofore mutually agreed in writing, and all expenses required to be reimbursed
pursuant to the terms of the Existing Credit Agreement and for which invoices have been
presented, at least one (1) business day prior to the Fifth Amendment Effective Date;
(f)
receipt by the Administrative Agent and the Banks of a Beneficial Ownership
Certification on the Fifth Amendment Effective Date and all documentation and other
information required by regulatory authorities under applicable “know your customer” and anti-
money laundering rules and regulations, including, without limitation, the USA PATRIOT Act
(Title III of Pub. L. 107-56) and the FinCEN beneficial ownership regulations under the
Beneficial Ownership Regulation; and
(g)
receipt by the Administrative Agent of all documents the Administrative Agent
may reasonably request relating to the existence of the Borrower, the corporate authority for and
the validity of this Amendment all in form and substance reasonably satisfactory to the
Administrative Agent.
5
The Administrative Agent shall promptly notify the Borrower and the Bank Parties of the
Fifth Amendment Effective Date, and such notice shall be conclusive and binding on all parties
hereto.
6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE
CORPORATION
By:
/s/ Ling Wang
Name: Ling Wang
Title: Senior Vice President and
Chief Financial Officer
Signature Page to Amendment No. 5 – 2025 Facility
JPMORGAN CHASE BANK, N.A., as
Administrative Agent, Initial Issuing Bank
and Bank
By:
/s/ Nancy R Barwig
Name: Nancy R. Barwig
Title: Executive Director
Signature Page to Amendment No. 5 – 2025 Facility
MIZUHO BANK, LTD., as Syndication Agent
and Bank
By:
/s/ Edward Sacks
Name: Edward Sacks
Title: Executive Director
Signature Page to Amendment No. 5 – 2025 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS
AMENDED BY AMENDMENT NO. 1 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED BY
AMENDMENT NO. 2 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 20,
2017, AS FURTHER AMENDED BY AMENDMENT
NO. 3 TO THE EXISTING CREDIT AGREEMENT,
DATED AS OF NOVEMBER 28, 2018, AS FURTHER
AMENDED BY AMENDMENT NO. 4 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 26, 2019 AMONG NATIONAL RURAL
UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS
PARTY THERETO, JPMORGAN CHASE BANK,
N.A., AS ADMINISTRATIVE AGENT, MIZUHO
BANK (USA) AS SYNDICATION AGENT AND THE
OTHER AGENTS PARTY THERETO (THE
“EXISTING CREDIT AGREEMENT”).
☐ The undersigned is a Bank with an existing
Commitment and consents to this Amendment
with respect to the full amount set forth on
Schedule 1 hereto, which amount will be
converted in full to an Extended Commitment.
Royal Bank of Canada, as Leader
By:
/s/ Mark W. Condon
Name: Mark W. Condon
Title: Authorized Signatory
Signature Page to Amendment No. 5 – 2025 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS
AMENDED BY AMENDMENT NO. 1 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED
BY AMENDMENT NO. 2 TO THE EXISTING
CREDIT AGREEMENT, DATED AS OF
NOVEMBER 20, 2017, AS FURTHER AMENDED
BY AMENDMENT NO. 3 TO THE EXISTING
CREDIT AGREEMENT, DATED AS OF
NOVEMBER 28, 2018, AS FURTHER AMENDED
BY AMENDMENT NO. 4 TO THE EXISTING
CREDIT AGREEMENT, DATED AS OF
NOVEMBER 26, 2019 AMONG NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS
PARTY THERETO, JPMORGAN CHASE BANK,
N.A., AS ADMINISTRATIVE AGENT, MIZUHO
BANK (USA) AS SYNDICATION AGENT AND
THE OTHER AGENTS PARTY THERETO (THE
“EXISTING CREDIT AGREEMENT”) .
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment
with respect to the full amount set forth on
Schedule 1 hereto, which amount will be
converted in full to an Extended Commitment
☐ The undersigned Bank with an existing
Commitment consents to this Amendment
with respect to its existing Commitment and
also confirms its willingness to provide
additional Commitment under the Amended
Credit Agreement in an aggregate principal
amount of $_______________.
☐ The undersigned is a ‘‘Non-Extending Bank”
and consents to this Amendment and the
termination of its existing Commitment.
☐ The undersigned is a “Reducing Bank” and
consents to this Amendment and the reduction
of its Commitment under the Amended Credit
Agreement to an aggregate principal amount
of $_______________.
Signature Page to Amendment No. 5 – 2025 Facility
THE BANK OF NOVA SCOTIA
By:
/s/ David Dewar
Name: David Dewar
Title: Director
Signature Page to Amendment No. 5 – 2025 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT DATED
AS OF NOVEMBER 19, 2015, AS AMENDED BY
AMENDMENT NO. 1 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 18, 2016, AS
FURTHER AMENDED BY AMENDMENT NO. 2 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 20, 2017, AS FURTHER AMENDED BY
AMENDMENT NO. 3 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 28, 2018, AS
FURTHER AMENDED BY AMENDMENT NO. 4 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 26, 2019 AMONG NATIONAL RURAL
UTILITIES COOPERATIVE FINANCE CORPORATION,
AS BORROWER, THE BANKS PARTY THERETO,
JPMORGAN CHASE BANK, N.A., AS ADMINISTRATIVE
AGENT, MIZUHO BANK (USA) AS SYNDICATION
AGENT AND THE OTHER AGENTS PARTY THERETO
(THE “EXISTING CREDIT AGREEMENT”).
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment
with respect to the full amount set forth on
Schedule 1 hereto, which amount will be
converted in full to an Extended Commitment
☐ The undersigned Bank with an existing
Commitment consents to this Amendment
with respect to its existing Commitment and
also confirms its willingness to provide
additional Commitment under the Amended
Credit Agreement in an aggregate principal
amount of $_______________.
☐ The undersigned is a ‘‘Non-Extending Bank”
and consents to this Amendment and the
termination of its existing Commitment.
☐ The undersigned is a “Reducing Bank” and
consents to this Amendment and the reduction
of its Commitment under the Amended Credit
Agreement to an aggregate principal amount
of $_______________.
Signature Page to Amendment No. 5 – 2025 Facility
PNC BANK, NATIONAL
ASSOCIATION
By:
/s/ Richard G, Tutich
Name: Richard G. Tutich
Title: Vice President
Signature Page to Amendment No. 5 – 2025 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS
AMENDED BY AMENDMENT NO. 1 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED BY
AMENDMENT NO. 2 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 20,
2017, AS FURTHER AMENDED BY AMENDMENT
NO. 3 TO THE EXISTING CREDIT AGREEMENT,
DATED AS OF NOVEMBER 28, 2018, AS FURTHER
AMENDED BY AMENDMENT NO. 4 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 26, 2019 AMONG NATIONAL RURAL
UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS
PARTY THERETO, JPMORGAN CHASE BANK,
N.A., AS ADMINISTRATIVE AGENT, MIZUHO
BANK (USA) AS SYNDICATION AGENT AND THE
OTHER AGENTS PARTY THERETO (THE
“EXISTING CREDIT AGREEMENT”).
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment
with respect to the full amount set forth on
Schedule 1 hereto, which amount will be
converted in full to an Extended Commitment
☐ The undersigned Bank with an existing
Commitment consents to this Amendment
with respect to its existing Commitment and
also confirms its willingness to provide
additional Commitment under the Amended
Credit Agreement in an aggregate principal
amount of $_______________.
☐ The undersigned is a ‘‘Non-Extending Bank”
and consents to this Amendment and the
termination of its existing Commitment.
☐ The undersigned is a “Reducing Bank” and
consents to this Amendment and the reduction
of its Commitment under the Amended Credit
Agreement to an aggregate principal amount
of $_______________.
Signature Page to Amendment No. 5 – 2025 Facility
ROYAL BANK OF CANADA
By:
/s/ Benjamin Cooper
Name: Benjamin Cooper
Title: Senior Vice President
Signature Page to Amendment No. 5 – 2025 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS
AMENDED BY AMENDMENT NO. I TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED
BY AMENDMENT NO. 2 TO THE EXISTING
CREDIT AGREEMENT, DATED AS OF
NOVEMBER 20, 2017, AS FURTHERAMENDEDBY
AMENDMENT NO. 3 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 28,
2018, AS FURTHER AMENDED BY AMENDMENT
NO. 4 TO THE EXISTING CREDIT AGREEMENT,
DATED AS OF NOVEMBER 26, 2019 AMONG
NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION, AS BORROWER, THE
BANKS PARTY THERETO, JPMORGAN CHASE
BANK, N.A., AS ADMINISTRATIVE AGENT,
MIZUHO BANK (USA) AS SYNDICATION AGENT
AND THE OTHER AGENTS PARTY THERETO
(THE “EXISTING CREDIT AGREEMENT”).
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment
with respect to the full amount set forth on
Schedule 1 hereto, which amount will be
converted in full to an Extended Commitment
☐ The undersigned Bank with an existing
Commitment consents to this Amendment
with respect to its existing Commitment and
also confirms its willingness to provide
additional Commitment under the Amended
Credit Agreement in an aggregate principal
amount of $_______________.
☐ The undersigned is a ‘‘Non-Extending Bank”
and consents to this Amendment and the
termination of its existing Commitment.
☐ The undersigned is a “Reducing Bank” and
consents to this Amendment and the reduction
of its Commitment under the Amended Credit
Agreement to an aggregate principal amount
of $_______________.
Signature Page to Amendment No. 5 – 2025 Facility
By:
U.S. Bank National Association
/s/ Michael E. Temnick
Name: Michael E. Temnick
Title: Vice President
Signature Page to Amendment No. 5 – 2025 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS
AMENDED BY AMENDMENT NO. 1 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED
BY AMENDMENT NO. 2 TO THE EXISTING
CREDIT AGREEMENT, DATED AS OF NOVEMBER
20, 2017, AS FURTHER AMENDED BY
AMENDMENT NO. 3 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 28,
2018, AS FURTHER AMENDED BY AMENDMENT
NO. 4 TO THE EXISTING CREDIT AGREEMENT,
DATED AS OF NOVEMBER 26, 2019 AMONG
NATIONAL RURAL UTILITIES COOPERATIVE
FINANCE CORPORATION, AS BORROWER, THE
BANKS PARTY THERETO, JPMORGAN CHASE
BANK, N.A., AS ADMINISTRATIVE AGENT,
MIZUHO BANK (USA) AS SYNDICATION AGENT
AND THE OTHER AGENTS PARTY THERETO
(THE “EXISTING CREDIT AGREEMENT”).
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment
with respect to the full amount set forth on
Schedule 1 hereto, which amount will be
converted in full to an Extended Commitment
☐ The undersigned Bank with an existing
Commitment consents to this Amendment
with respect to its existing Commitment and
also confirms its willingness to provide
additional Commitment under the Amended
Credit Agreement in an aggregate principal
amount of $_______________.
☐ The undersigned is a ‘‘Non-Extending Bank”
and consents to this Amendment and the
termination of its existing Commitment.
☐ The undersigned is a “Reducing Bank” and
consents to this Amendment and the reduction
of its Commitment under the Amended Credit
Agreement to an aggregate principal amount
of $_______________.
Signature Page to Amendment No. 5 – 2025 Facility
Truist Bank
By:
/s/ Justin Lien
Name: Justin Lien
Title: DIRECTOR
Signature Page to Amendment No. 5 – 2025 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS
AMENDED BY AMENDMENT NO. 1 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED BY
AMENDMENT NO. 2 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 20,
2017, AS FURTHER AMENDED BY AMENDMENT
NO. 3 TO THE EXISTING CREDIT AGREEMENT,
DATED AS OF NOVEMBER 28, 2018, AS FURTHER
AMENDEDBYAMENDMENTNO.4TOTHE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 26, 2019 AMONG NATIONAL RURAL
UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS
PARTY THERETO, JPMORGAN CHASE BANK,
N.A., AS ADMINISTRATIVE AGENT, MIZUHO
BANK (USA) AS SYNDICATION AGENT AND THE
OTHERAGENTSPARTYTHERETO(THE
“EXISTING CREDIT AGREEMENT”).
☐ The undersigned is a Bank with an existing
Commitment and consents to this Amendment
with respect to the full amount set forth on
Schedule 1 hereto, which amount will be
converted in full to an Extended Commitment.
☐ The undersigned Bank with an existing
Commitment consents to this Amendment
with respect to its existing Commitment and
also confirms its willingness to provide
additional Commitment under the Amended
Credit Agreement in an aggregate principal
amount of $_______________.
☐ The undersigned is a “Non-Extending Bank”
and consents to this Amendment and the
termination of its existing Commitment.
☒ The undersigned is a “Reducing Bank” and
consents to this Amendment and the reduction
of its Commitment under the Amended Credit
Agreement to an aggregate principal amount
of $100,000,000.00
Signature Page to Amendment No. 5 – 2025 Facility
MUFG Bank, Ltd.
By: Michael Agrimis
Name: Michael Agrimis
Title: Director
Signature Page to Amendment No. 5 – 2025 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS
AMENDED BY AMENDMENT NO. 1 TO THE
EXISTING CREDIT AGREEMENT, DATED AS
OF NOVEMBER 18, 2016, AS FURTHER
AMENDED BY AMENDMENT NO. 2 TO THE
EXISTING CREDIT AGREEMENT, DATED AS
OF NOVEMBER 20, 2017, AS FURTHER
AMENDED BY AMENDMENT NO. 3 TO THE
EXISTING CREDIT AGREEMENT, DATED AS
OF NOVEMBER 28, 2018, AS FURTHER
AMENDED BYAMENDMENT NO.4TOTHE
EXISTING CREDIT AGREEMENT, DATED AS
OF NOVEMBER 26, 2019 AMONG NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS
PARTY THERETO, JPMORGAN CHASE BANK,
N.A., AS ADMINISTRATIVE AGENT, MIZUHO
BANK (USA) AS SYNDICATION AGENT AND
THE OTHER AGENTS PARTY THERETO (THE
“EXISTING CREDIT AGREEMENT”).
☒ The undersigned is a Bank with an existing
Commitment and consents to this Amendment
with respect to the full amount set forth on
Schedule 1 hereto, which amount will be
converted in full to an Extended Commitment
☐ The undersigned Bank with an existing
Commitment consents to this Amendment
with respect to its existing Commitment and
also confirms its willingness to provide
additional Commitment under the Amended
Credit Agreement in an aggregate principal
amount of $_______________.
☐ The undersigned is a ‘‘Non-Extending Bank”
and consents to this Amendment and the
termination of its existing Commitment.
☐ The undersigned is a “Reducing Bank” and
consents to this Amendment and the reduction
of its Commitment under the Amended Credit
Agreement to an aggregate principal amount
of $_______________.
Signature Page to Amendment No. 5 – 2025 Facility
REGIONS BANK
By:
/s/ Jim Sharp
Name: Jim Sharp
Title: Managing Director
Signature Page to Amendment No. 5 – 2025 Facility
SIGNATURE PAGE TO AMENDMENT NO. 5 (THE
“AMENDMENT”) TO THE AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 19, 2015, AS
AMENDED BY AMENDMENT NO. 1 TO THE
EXISTING CREDIT AGREEMENT, DATED AS OF
NOVEMBER 18, 2016, AS FURTHER AMENDED BY
AMENDMENT NO. 2 TO THE EXISTING CREDIT
AGREEMENT, DATED AS OF NOVEMBER 20,
2017, AS FURTHER AMENDED BY AMENDMENT
NO. 3 TO THE EXISTING CREDIT AGREEMENT,
DATED AS OF NOVEMBER 28, 2018, AND AS
FURTHER AMENDED BY AMENDMENT NO. 4 TO
THE EXISTING CREDIT AGREEMENT, DATED AS
OF NOVEMBER 26, 2019 AMONG NATIONAL
RURAL UTILITIES COOPERATIVE FINANCE
CORPORATION, AS BORROWER, THE BANKS
PARTY THERETO, MIZUHO BANK, LTD., AS
ADMINISTRATIVE AGENT, JPMORGAN CHASE
BANK, N.A. AS SYNDICATION AGENT AND THE
OTHER AGENTS PARTY THERETO (THE
“EXISTING CREDIT AGREEMENT”).
Check only one of the following:
☐ The undersigned is a Bank with an existing
Commitment and consents to this Amendment
with respect to the full amount set forth on
Schedule 1 hereto, which amount will be
converted in full to an Extended Commitment.
☐ The undersigned Bank with an existing
Commitment consents to this Amendment
with respect to its existing Commitment and
also confirms its willingness to provide
additional Commitment under the Amended
Credit Agreement in an aggregate principal
amount of $______________.
☒ The undersigned is a “Non-Extending Bank”
and consents to this Amendment and the
termination of its existing Commitment.
☐ The undersigned is a “Reducing Bank” and
consents to this Amendment and the reduction
of its Commitment under the Amended Credit
Agreement to an aggregate principal amount
of $_______________.
APPLE BANK FOR SAVINGS
By: /s/ Dana R. MacKinnon___________________
Name: Dana R. MacKinnon
Title: Senior Vice President
Signature Page to Amendment No. 5 – 2025 Facility
EXTENDED COMMITMENTS
Extending Banks
JPMorgan Chase Bank, N.A.
Mizuho Bank, Ltd.
Royal Bank of Canada
The Bank of Nova Scotia
PNC Bank, National Association
KeyBank National Association
US Bank National Association
Truist Bank
MUFG Bank, Ltd.
Regions Bank
Total:
SCHEDULE 1
Commitment
$150,000,000.00
$150,000,000.00
$150,000,000.00
$150,000,000.00
$150,000,000.00
$180,000,000.00
$125,000,000.00
$125,000,000.00
$100,000,000.00
$75,000,000.00
$1,355,000,000.00
EXHIBIT A
NOT A LEGAL DOCUMENT
COMPOSITE COPY REFLECTING
AMENDMENT NO. 45
DATED AS OF NOVEMBER 26JUNE 7, 20192021
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
dated as of
November 19, 2015
among
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION,
THE BANKS LISTED HEREIN,
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent and Initial Issuing Bank,
MIZUHO BANK, LTD.,
as successor Syndication Agent,
and
MUFGPNC BANK, LTD. NATIONAL ASSOCIATION,
(F/K/A THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.),
PNC BANK, NATIONAL ASSOCIATION,A,
THE BANK OF NOVA SCOTIA,
and
ROYAL BANK OF CANADA
as Co-Documentation Agents
___________________________
J.P. MORGAN CHASE BANK, N.A.
MIZUHO BANK, LTD.
MUFG BANK, LTD.
(F/K/A THE BANK OF TOKYO MITSUBISHI UFJ, LTD.),
PNC CAPITAL MARKETS LLC
THE BANK OF NOVA SCOTIA,
and
RBC CAPITAL MARKETS
TABLE OF CONTENTS
——————————
ARTICLE 1
Definitions
Section 1.01. Definitions....................................................................................................1
Section 1.02.
Section 1.03.
Determinations......................................................24
Accounting Terms and
Types of
Borrowings...................................................................................2425
Section 1.04. Letter of Credit............................................................................................25
Section 1.05. Divisions.....................................................................................................25
PAGE
Section 2.01.
Commitments to Lend and
ARTICLE 2
The Credits
Issue Letters of Credit.....................................25
Section 2.02. Notice of Committed Borrowings...............................................................2728
Section 2.03. Money Market Borrowings.........................................................................28
Section 2.04. Notice to Banks; Funding of Loans............................................................32
Section 2.05. Notes...........................................................................................................33
Section 2.06. Maturity of Loans........................................................................................34
Section 2.07.
Interest Rates..............................................................................................34
Section 2.08. Method of Electing Interest Rates..............................................................37
Section 2.09. Fees............................................................................................................3839
Section 2.10. Optional Termination or Reduction of Commitments................................40
Section 2.11. Mandatory Termination of Commitments..................................................40
Section 2.12. Optional Prepayments...............................................................................40
Section 2.13. General Provisions as to Payments...........................................................41
Section 2.14. Funding Losses..........................................................................................4142
Section 2.15. Computation of Interest and Fees...............................................................42
Section 2.16. Taxes...........................................................................................................42
Section 2.17.
Increase of Commitments...........................................................................46
Section 2.18. Replacement of Banks...............................................................................4748
Section 2.19. Defaulting Banks.......................................................................................4950
Section 2.20. Issuance of Letters of Credit; Drawings and
Reimbursements; Auto-Extension Letters of Credit;
Funding of Participations..........................................................................52
Section 2.21. [Reserved]..................................................................................................6061
Section 2.22. Extension of Commitment Termination Date...............................................6061
ARTICLE 3
Conditions
Section 3.01. Effectiveness..............................................................................................63
i
Section 3.02.
[Reserved]...............................................................................................64
Section 3.03. Borrowings and L/C Credit Extensions...................................................64
ARTICLE 4
Representations and Warranties
Section 4.01. Corporate Existence, Power and Authority..............................................6566
Section 4.02. Financial Statements.................................................................................6667
Section 4.03. Litigation...................................................................................................6768
Section 4.04. Governmental Authorizations……………………….…………..............6768
Section 4.05. Members’ Subordinated Certificates………………………….................6768
Section 4.06. No Violation of Agreements........................................................................68
Section 4.07. No Event of Default under the Indentures..................................................6869
Section 4.08. Compliance with ERISA.............................................................................6869
Section 4.09. Compliance with Other Laws......................................................................69
Section 4.10. Tax Status....................................................................................................69
Section 4.11. Investment Company Act............................................................................6970
Section 4.12. Disclosure..................................................................................................6970
Section 4.13. Subsidiaries...............................................................................................6970
Section 4.14. Environmental Matters.............................................................................6970
Section 4.15. Anti-Corruption Laws and Sanctions.........................................................70
ARTICLE 5
Covenants
Section 5.01. Corporate Existence...................................................................................71
Section 5.02. Disposition of Assets, Merger, Character of Business, etc........................71
Section 5.03. Financial Information.............................................................................7172
Section 5.04. Default Certificates....................................................................................73
Section 5.05. Notice of Litigation and Defaults………………………………...........7374
Section 5.06. ERISA.........................................................................................................74
Section 5.07. Payment of Charges……………………………………………...............74
Section 5.08. Inspection of Books and Assets.............................................................7475
Section 5.09. Indebtedness……………………………………….................................7475
Section 5.10. Liens.......................................................................................................7576
Section 5.11. Maintenance of Insurance......................................................................7677
Section 5.12. Subsidiaries and Joint Ventures…………………………....……..........7677
Section 5.13. Minimum TIER.......................................................................................7778
Section 5.14. Retirement of Patronage Capital............................................................7778
Section 5.15. Use of Proceeds.........................................................................................78
Section 5.16. Compliance with Laws.........................................................................7879
ARTICLE 6
Defaults
Section 6.01.
Events of Default................................................................................7879
Section 6.02.
Actions In Respect Of Letters Of Credit Upon Default..........................81
ii
Section 6.03. Notice of Default................................................................................8182
ARTICLE 7
The Administrative Agent
Section 7.01. Appointment and Authorization.............................................................8182
Section 7.02. Administrative Agent and Affiliates..........................................................82
Section 7.03. General Nature of the Administrative Agent’s Duties..............................82
Section 7.04. Consultation with Experts........................................................................82
Section 7.05. Liability of Administrative Agent......................................... ....................82
Indemnification.....................................................................................8283
Section 7.06.
Section 7.07. Credit Decision.........................................................................................83
Section 7.08. Successor Administrative Agent........................................................ ..8384
Section 7.09.
Co-Documentation Agents, Syndication Agent and Co-
Lead Arrangers Not Liable ......................................................................84
Section 7.10. Calculations..............................................................................................84
Section 7.11. Erroneous Payment...................................................................................84
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair.....................8485
Illegality.....................................................................................................85
Section 8.02.
Increased Cost and Reduced Return......................................................8586
Section 8.03.
Section 8.04. Base Rate Loans Substituted for Affected Euro-Dollar Loans..................88
ARTICLE 9
Miscellaneous
Section 9.01. Notices.......................................................................................................88
Section 9.02. No Waivers.................................................................................................90
Section 9.03. Expenses; Documentary Taxes; Indemnification.......................................90
Section 9.04. Sharing of Set-offs...................................................................................9091
Section 9.05. Amendments and Waivers............................................................................91
Section 9.06. Successors and Assigns................................................................................92
Section 9.07. Collateral................................................................................................9495
Section 9.08. Governing Law...........................................................................................95
Section 9.09. Counterparts; Integration.......................................................................9596
Section 9.10. Several Obligations.................................................................................9596
Section 9.11. Severability..................................................................................................96
Section 9.12. Confidentiality.............................................................................................96
Section 9.13. WAIVER OF JURY TRIAL.......................................................................9697
Section 9.14. USA Patriot Act.......................................................................................9697
Section 9.15. ICC Transactions.......................................................................................97
Section 9.16. Acknowledgement and Consent to Bail-In.................................................98
iii
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
dated as of November 19, 2015, is made by and among NATIONAL RURAL
UTILITIES COOPERATIVE FINANCE CORPORATION, a not-for-profit
cooperative association incorporated under the laws of the District of Columbia,
as Borrower, the BANKS listed on the signature pages hereof, JPMORGAN
CHASE BANK, N.A., as Administrative Agent and as Initial Issuing Bank for the
Letters of Credit issued or to be issued pursuant to this Agreement, MIZUHO
BANK, LTD., as successor Syndication Agent, and MUFG BANK, LTD. (F/K/
A THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.), PNC BANK,
NATIONAL ASSOCIATION, THE BANK OF NOVA SCOTIA and ROYAL
BANK OF CANADA, as Co-Documentation Agents.
WHEREAS, the Borrower, the several Banks, the Administrative Agent, the
Syndication Agent and Co-Documentation Agents (as each is defined hereinafter)
entered into a Revolving Credit Agreement dated as of October 21, 2011, as
amended by Amendment No. 1 dated as of March 28, 2013, Amendment No. 2
dated as of October 28, 2013 and Amendment No. 3 dated as of October 28, 2014
(collectively, the “Existing Credit Agreement”); and
WHEREAS, the Borrower has requested that the Banks, the Administrative
Agent, the Syndication Agent and the Co-Documentation Agents agree, on the
terms and conditions set forth herein, to amend and restate the Existing Credit
Agreement. The Banks, Administrative Agent, Syndication Agent and Co-
Documentation Agents have indicated their willingness to amend and restate the
Existing Credit Agreement on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby amend and restate the Existing Credit
Agreement in its entirety and the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. The following terms, as used herein, have the
following meanings:
“1994 Indenture” means the Indenture dated as of February 15, 1994 and
as amended as of September 16, 1994 between the Borrower and U.S. Bank
National Association, as trustee, as amended and supplemented from time to time,
providing for the issuance in series of certain collateral trust bonds of the
Borrower.
“2007 Indenture” means the Indenture dated as of October 25, 2007
between the Borrower and U.S. Bank National Association, as trustee, as
amended and supplemented from time to time, providing for the issuance in series
of certain collateral trust bonds of the Borrower.
“2016 Amendment” means Amendment No. 1 to this Agreement dated as
of November 18, 2016 among the Borrower, the Administrative Agent, the
Syndication Agent and the Banks thereto.
“2017 Amendment” means Amendment No. 2 to this Agreement dated as
of November 20, 2017 among the Borrower, the Administrative Agent, the
Syndication Agent and the Banks thereto.
“2017 Fee Letters” means those certain Fee Letters dated October 13,
2017 among the Borrower, the Administrative Agent and the Syndication Agent.
“2018 Amendment” means Amendment No. 3 to this Agreement dated as
of November 28, 2018 among the Borrower, the Administrative Agent, the
Syndication Agent and the Banks thereto.
“2018 Fee Letters” means those certain Fee Letters dated October 16,
2018 among the Borrower, the Administrative Agent and the Syndication Agent.
“2019 Amendment” means Amendment No. 4 to this Agreement dated as
of November [26], 2019 among the Borrower, the Administrative Agent, the
Syndication Agent and the Banks thereto.
“2019 Fee Letters” means those certain Fee Letters dated October 16,
2019 among the Borrower, the Administrative Agent, the Syndication Agent and
the Co-Lead Arrangers; provided, that, it is understood that the Agency Fee and
Fronting Letter, dated October 16, 2018 between the Borrower and the
Administrative Agent is still in effect and shall be considered a 2019 Fee Letter.
“2021 Amendment” means Amendment No. 5 to this Agreement dated
as of June 7, 2021 among the Borrower, the Administrative Agent, the
Syndication Agent and the Banks thereto.
“2021 Fee Letters” means those certain Fee Letters dated May 11,
2021 among the Borrower, the Administrative Agent, the Syndication Agent
and the Co-Lead Arrangers.
“Absolute Rate Auction” means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
“Additional Commitment Bank” has the meaning set forth in Section
2.22(d).
“Adjusted London Interbank Offered Rate” has the meaning set forth
in Section 2.07(b).
2
“Administrative Agent” means JPMorgan Chase Bank, N.A., in its
capacity as administrative agent for the Banks hereunder, and its successors in
such capacity.
“Administrative Questionnaire” means, with respect to each Bank, the
administrative questionnaire in the form submitted to such Bank by the
Administrative Agent and submitted to the Administrative Agent (with a copy to
the Borrower) duly completed by such Bank.
“Affected Financial Institution” means (i) any EEA Financial
Institution or (ii) any UK Financial Institution.
“Aggregate Commitment” means the aggregate amount that is equal to
the sum of the amounts of each of the Commitments.
“Agreement” means this Amended and Restated Revolving Credit
Agreement, as the same may be amended from time to time.
“Amendment Effective Date” means the date this Agreement becomes
effective in accordance with Section 3.01.
“Anti-Corruption Laws” means all laws, rules, and regulations of any
jurisdiction applicable to the Borrower or its Subsidiaries from time to time
concerning or relating to bribery, corruption or money laundering
.
“Anniversary Date” has the meaning set forth in Section 2.22(a).
“Applicable Law” means, with respect to any Person, any and all laws,
statutes, regulations, rules, orders, injunctions, decrees, judgments, writs
determinations or awards having the force or effect of binding such Person at law
and issued by any Governmental Authority, applicable to such Person, including
all Environmental Laws.
“Applicable Lending Office” means, with respect to any Bank, (i) in the
case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its
Money Market Loans, its Money Market Lending Office.
“ASC 815” means Accounting Standards Codification No. 815
Derivatives and Hedging, as amended from time to time (or any successor
provision thereto).
“ASC 830” means Accounting Standards Codification No. 830 Foreign
Currency Matters, as amended from time to time (or any successor provision
thereto).
“Assignee” has the meaning set forth in Section 9.06(c).
3
“Auto-Extension Letter of Credit” has the meaning specified in Section
2.20(a)(iii).
“Available Tenor” means, as of any date of determination and with
respect to the then-current Benchmark, as applicable, any tenor for such
Benchmark or payment period for interest calculated with reference to such
Benchmark, as applicable, that is or may be used for determining the length
of an Interest Period pursuant to this Agreement as of such date and not
including, for the avoidance of doubt, any tenor for such Benchmark that is
then-removed from the definition of “Interest Period”.
“Back-Up Letter of Credit” has the meaning set forth in Section 2.01(b).
“Bail-In Action” means the exercise of any Write-Down and Conversion
Powers by the applicable EEA Resolution Authority in respect of any liability of
an EEAAffected Financial Institution.
“Bail-In Legislation” means, (i) with respect to any EEA Member
Country implementing Article 55 of Directive 2014/59/EU of the European
Parliament and of the Council of the European Union, the implementing law for
such EEA Member Country from time to time which is described in the EU Bail-
In Legislation Schedule. and (ii) with respect to the United Kingdom, Part I of
the United Kingdom Banking Act 2009 (as amended from time to time) and
any other law, regulation or rule applicable in the United Kingdom relating
to the resolution of unsound or failing banks, investment firms or other
financial institutions or their affiliates (other than through liquidation,
administration or other insolvency proceedings).
“Bank” means at any time, any Bank that has a Commitment specified on
the Commitment Schedule hereto or any Assignee thereof and any subsequent
Assignee of such Assignee which becomes a Bank pursuant to Section 9.06(c).
“Bank Extension Notice Date” has the meaning set forth in Section
2.22(b).
“Bank Parties” mean the Banks and the Issuing Banks.
“Bankruptcy Event” means, with respect to any Person, such Person
becomes the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee, administrator, custodian, assignee for the benefit of
creditors or similar Person charged with the reorganization or liquidation of its
business appointed for it, or, in the good faith determination of the Administrative
Agent, has taken any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any such proceeding or appointment, provided
that a Bankruptcy Event shall not result solely by virtue of any ownership
interest, or the acquisition of any ownership interest, in such Person by a
Governmental Authority or instrumentality thereof, provided, further, that such
ownership interest does not result in or provide such Person with immunity from
4
the jurisdiction of courts within the United States or from the enforcement of
judgments or writs of attachment on its assets or permit such Person (or such
Governmental Authority or instrumentality) to reject, repudiate, disavow or
disaffirm any contracts or agreements made by such Person.
“Base Rate” means, for any day, a rate per annum equal to the highest of
the Prime Rate for such day, (ii) the Federal Funds Rate for such day plus 0.50%
and (iii) the Adjusted London Interbank Offered Rate, taking into account
any London Interbank Offered Rate floor under the definition of “London
Interbank Offered Rate”Benchmark, or a comparable or successor rate, which
rate is selected by the Administrative Agent and the Borrower as described in the
definition of London Interbank Offered Rate in Section 2.07(b), for a one
month Interest Period on such day (or if such day is not a Euro-Dollar Business
Day, the immediately preceding Euro-Dollar Business Day) plus 1.00%.
“Base Rate Loan” means a Committed Loan that bears interest at the
Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of
Interest Rate Election or the last sentence of Section 2.08(a) or Article 8.
“Base Rate Margin” means a rate per annum determined in accordance
with the Pricing Schedule.
“Benchmark” means, initially, USD LIBOR; provided that if a
Benchmark Transition Event, a Term SOFR Transition Event or an Early
Opt-in Election or an Other Benchmark Rate Election, as applicable, and its
related Benchmark Replacement Date have occurred with respect to USD
LIBOR or the then-current Benchmark, then “Benchmark” means the
applicable Benchmark Replacement to the extent that such Benchmark
Replacement has replaced such prior benchmark rate pursuant to Section
2.07.
“Benchmark Replacement” means, for any Available Tenor, the first
alternative set forth in the order below that can be determined by the
Administrative Agent for the applicable Benchmark Replacement Date.
Provided that, in the case of an Other Benchmark Rate Election,
“Benchmark Replacement” shall mean the alternative set forth in (3) below;
provided further, if the Administrative Agent decides that Term SOFR is not
administratively feasible for the Administrative Agent, then Term SOFR will
be deemed unable to be determined for purposes of this definition:
(1) the sum of: (a) Term SOFR and (b) the related Benchmark
Replacement Adjustment;
(2) the sum of: (a) Daily Simple SOFR and (b) the related Benchmark
Replacement Adjustment;
5
(3) the sum of: (a) the alternate benchmark rate that has been
selected by the Administrative Agent and the Borrower as the
replacement for the then-current Benchmark for the applicable
Corresponding Tenor giving due consideration to (i) any selection
or recommendation of a replacement benchmark rate or the
mechanism for determining such a rate by the Relevant
Governmental Body or (ii) any evolving or then-prevailing market
convention for determining a benchmark rate as a replacement for
the then-current Benchmark for U.S. dollar-denominated
syndicated credit facilities at such time and (b) the related
Benchmark Replacement Adjustment;
provided that, in the case of clause (1), such Unadjusted Benchmark
Replacement is displayed on a screen or other information service that
publishes such rate from time to time as selected by the Administrative
Agent in its reasonable discretion; provided further that, in the case of
clause (3), when such clause is used to determine the Benchmark
Replacement in connection with the occurrence of an Other Benchmark
Rate Election, the alternate benchmark rate selected by the Administrative
Agent and the Borrower shall be the term benchmark rate that is used in
lieu of a LIBOR-based rate in the relevant other Dollar-denominated
syndicated credit facilities; provided further that, notwithstanding anything
to the contrary in this Agreement or in any other Loan Document, upon the
occurrence of a Term SOFR Transition Event, and the delivery of a Term
SOFR Notice, on the applicable Benchmark Replacement Date the
“Benchmark Replacement” shall revert to and shall be deemed to be the
sum of (a) Term SOFR and (b) the related Benchmark Replacement
Adjustment, as set forth in clause (1) of this definition (subject to the first
proviso above). If the Benchmark Replacement as determined pursuant to
clause (1), (2) or (3) above would be less than the Floor, the Benchmark
Replacement will be deemed to be the Floor for the purposes of this
Agreement.
“Benchmark Replacement Adjustment” means, with respect to any
replacement of the then- current Benchmark with an Unadjusted
Benchmark Replacement for any applicable Interest Period and Available
Tenor for any setting of such Unadjusted Benchmark Replacement:
(1) for purposes of clauses (1) and (2) of the definition of “Benchmark
Replacement,” the first alternative set forth in the order below
that can be determined by the Administrative Agent:
(a) the spread adjustment, or method for calculating or
determining such spread adjustment, (which may be a positive
or negative value or zero) as of the Reference Time such
Benchmark Replacement is first set for such Interest Period
that has been selected or recommended by the Relevant
6
Governmental Body for the replacement of such Benchmark
with the applicable Unadjusted Benchmark Replacement for
the applicable Corresponding Tenor;
(b) the spread adjustment (which may be a positive or negative
value or zero) as of the Reference Time such Benchmark
Replacement is first set for such Interest Period that would
apply to the fallback rate for a derivative transaction
referencing the ISDA Definitions to be effective upon an index
cessation event with respect to such Benchmark for the
applicable Corresponding Tenor; and
(2) for purposes of clause (3) of the definition of “Benchmark
Replacement,” the spread adjustment, or method for calculating
or determining such spread adjustment, (which may be a positive
or negative value or zero) that has been selected by the
Administrative Agent and the Borrower for the applicable
Corresponding Tenor giving due consideration to (i) any selection
or recommendation of a spread adjustment, or method for
calculating or determining such spread adjustment, for the
replacement of such Benchmark with the applicable Unadjusted
Benchmark Replacement by the Relevant Governmental Body on
the applicable Benchmark Replacement Date or (ii) any evolving
or then-prevailing market convention for determining a spread
adjustment, or method for calculating or determining such spread
adjustment, for the replacement of such Benchmark with the
applicable Unadjusted Benchmark Replacement for U.S. dollar-
denominated syndicated credit facilities;
provided that, in the case of clause (1) above, such adjustment is displayed on
a screen or other information service that publishes such Benchmark
Replacement Adjustment from time to time as selected by the Administrative
Agent in its reasonable discretion.
“Benchmark Replacement Conforming Changes” means, with respect
to any Benchmark Replacement, any technical, administrative or operational
changes (including changes to the definition of “Business Day,” the definition
of “Interest Period,” timing and frequency of determining rates and making
payments of interest, timing of borrowing requests or prepayment,
conversion or continuation notices, length of lookback periods, the
applicability of breakage provisions, the formula for calculating any
successor rates identified pursuant to the definition of “Benchmark
Replacement”, the formula, methodology or convention for applying the
successor Floor to the successor Benchmark Replacement and other
technical, administrative or operational matters) that the Administrative
7
Agent decides may be appropriate to reflect the adoption and
implementation of such Benchmark Replacement and to permit the
administration thereof by the Administrative Agent in a manner
substantially consistent with market practice (or, if the Administrative Agent
decides that adoption of any portion of such market practice is not
administratively feasible or if the Administrative Agent determines that no
market practice for the administration of such Benchmark Replacement
exists, in such other manner of administration as the Administrative Agent
decides is reasonably necessary in connection with the administration of this
Agreement).
“Benchmark Replacement Date” means the earliest to occur of the
following events with respect to the then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of “Benchmark
Transition Event,” the later of (a) the date of the public statement or
publication of information referenced therein and (b) the date on which
the administrator of such Benchmark (or the published component used
in the calculation thereof) permanently or indefinitely ceases to provide
all Available Tenors of such Benchmark (or such component thereof);
(2) in the case of clause (3) of the definition of “Benchmark Transition
Event,” the date of the public statement or publication of information
referenced therein;
(3) in the case of a Term SOFR Transition Event, the date that is thirty
(30) days after the date a Term SOFR Notice is provided to the Lenders
and the Borrower pursuant to clause (b) of this Section titled
“Benchmark Replacement Setting” or such later date as specified in
such notice; or
(4) in the case of an Early Opt-in Election or an Other Benchmark Rate
Election, the sixth (6th) Business Day after the date notice of such Early
Opt-in Election or Other Benchmark Rate Election, as applicable, is
provided to the Lenders, so long as the Administrative Agent has not
received, by 5:00 p.m. (New York City time) on the fifth (5th) Business
Day after the date notice of such Early Opt-in Election or Other
Benchmark Rate Election, as applicable, is provided to the Lenders,
written notice of objection to such Early Opt-in Election or Other
Benchmark Rate Election, as applicable, from Lenders comprising the
Required Lenders; provided however, the Administrative Agent and
the Borrower may choose a later date as specified in such notice.
For the avoidance of doubt, (i) if the event giving rise to the Benchmark
8
Replacement Date occurs on the same day as, but earlier than, the Reference
Time in respect of any determination, the Benchmark Replacement Date will
be deemed to have occurred prior to the Reference Time for such
determination and (ii) the “Benchmark Replacement Date” will be deemed to
have occurred in the case of clause (1) or (2) with respect to any Benchmark
upon the occurrence of the applicable event or events set forth therein with
respect to all then-current Available Tenors of such Benchmark (or the
published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more
of the following events with respect to the then-current Benchmark:
(1) a public statement or publication of information by or on behalf of
the administrator of such Benchmark (or the published component
used in the calculation thereof) announcing that such administrator
has ceased or will cease to provide all Available Tenors of such
Benchmark (or such component thereof), permanently or
indefinitely, provided that, at the time of such statement or
publication, there is no successor administrator that will continue to
provide any Available Tenor of such Benchmark (or such component
thereof);
(2) a public statement or publication of information by the regulatory
supervisor for the administrator of such Benchmark (or the
published component used in the calculation thereof), the Board of
Governors of the Federal Reserve System, the Federal Reserve Bank
of New York, an insolvency official with jurisdiction over the
administrator for such Benchmark (or such component), a resolution
authority with jurisdiction over the administrator for such
Benchmark (or such component) or a court or an entity with similar
insolvency or resolution authority over the administrator for such
Benchmark (or such component), which states that the administrator
of such Benchmark (or such component) has ceased or will cease to
provide all Available Tenors of such Benchmark (or such component
thereof) permanently or indefinitely, provided that, at the time of
such statement or publication, there is no successor administrator
that will continue to provide any Available Tenor of such Benchmark
(or such component thereof); or
(3) a public statement or publication of information by the regulatory
supervisor for the administrator of such Benchmark (or the
published component used in the calculation thereof) announcing
that all Available Tenors of such Benchmark (or such component
thereof) are no longer representative.
9
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed
to have occurred with respect to any Benchmark if a public statement or
publication of information set forth above has occurred with respect to each
then-current Available Tenor of such Benchmark (or the published
component used in the calculation thereof).
“Benchmark Unavailability Period” means the period (if any) (x)
beginning at the time that a Benchmark Replacement Date pursuant to
clauses (1) or (2) of that definition has occurred if, at such time, no
Benchmark Replacement has replaced the then-current Benchmark for all
purposes hereunder and under any Loan Document in accordance with this
Section titled “Benchmark Replacement Setting” and (y) ending at the time
that a Benchmark Replacement has replaced the then-current Benchmark
for all purposes hereunder in accordance with Section 2.07.
“Beneficial Ownership Certification” means a certification regarding
beneficial ownership required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Bonds” means any bonds issued pursuant to any of the Indentures, as the
context may require.
“Borrower” means the National Rural Utilities Cooperative Finance
Corporation, a not-for-profit cooperative association incorporated under the laws
of the District of Columbia, and its successors.
“Borrowing” has the meaning set forth in Section 1.03.
“Cash Collateral Account” means a deposit account or a non-interest
bearing securities account (as contemplated by Section 2.20(e)) opened, or to be
opened, by the Administrative Agent and in which a Lien has been granted to the
Administrative Agent for the benefit of each Bank and each Issuing Bank
pursuant to documentation in form and substance reasonably satisfactory to the
Administrative Agent and each Issuing Bank (which documents are hereby
consented to by the Banks) to the extent that any Letter of Credit is required to be
Cash Collateralized in accordance with this Agreement.
“Cash Collateralize” means to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of each Issuing Bank and each Bank, as
collateral for the L/C Obligations, cash or deposit account balances, and “Cash
Collateral” shall refer to such cash or deposit account balances.
“Central Banking Authority” means any central bank, reserve bank or
monetary authority that is principally engaged in the regulation of the currency,
10
money supply or commercial banking system of any given sovereign state or
states.
“Change in Law” means (a) the adoption of any law, rule, regulation or
treaty after the Effective Date, (b) any change in any law, rule, regulation or treaty
or in the interpretation or application thereof by any Governmental Authority after
the Effective Date or (c) compliance by any Bank Party (or, for purposes of
Section 8.03(b), by its Applicable Lending Office or by such Bank Party’s
holding company, if any) with any request, guideline or directive (whether or not
having the force of law) of any Governmental Authority made or issued after the
Effective Date; provided however, that notwithstanding anything therein to the
contrary, (i) any requirements imposed under the Dodd-Frank Wall Street Reform
and Consumer Protection Act and all requests, rules, regulations, guidelines or
directives thereunder or enacted, adopted or issued in connection therewith and
(ii) any requests, rules, guidelines or directives concerning capital adequacy
promulgated by the Bank for International Settlements, the Basel Committee on
Banking Regulations and Supervisory Practices (or any successor or similar
authority) or the United States financial regulatory authorities, in each case
pursuant to Basel III, shall be deemed to be a “Change in Law”, regardless of the
date adopted, issued, promulgated or implemented, but only if any such
requirements are generally applicable to (and for which reimbursement is
generally being sought by the Banks in respect of) credit transactions similar to
this transaction from borrowers similarly situated to the Borrower.
“Code” means the Internal Revenue Code of 1986, as amended.
“Co-Documentation Agents” means MUFG Bank, Ltd. (f/k/a The
Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The
Bank of Nova Scotia and Royal Bank of Canada, each in their respective capacity
as documentation agent hereunder, and their respective successors in such
capacity.
“Co-Lead Arrangers” means J.P. Morgan Chase Bank, N.A., Mizuho
Bank, Ltd., MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ,
Ltd.), PNC Capital Markets LLC, The Bank of Nova Scotia, and RBC Capital
Markets,[1] each in their capacity as co-lead arranger and joint bookrunner.
“Commitment” means (i) with respect to any Bank, the amount, if any,
set forth opposite the name of such Bank on the Commitment Schedule and (ii)
with respect to any Bank that is an Assignee pursuant to Section 9.06(c), the
amount of the transferor Bank’s commitment specified on the Commitment
Schedule that is assigned to such Bank, and further, any subsequent assignment
made by an Assignee to another Assignee of such amounts pursuant to Section
9.06(c), in each case as such amount may from time to time be increased or
11
1RBC Capital Markets is a brand name for the capital markets businesses of Royal Bankof Canada and its
affiliates.
decreased from time to time in accordance with the terms and conditions of this
Agreement.
“Commitment Schedule” means the commitment schedule attached
hereto under the heading, Commitment Schedule.
“Commitment Termination Date” means November 28, 20232025 or, if
such day is not a Euro-Dollar Business Day, the immediately preceding Euro-
Dollar Business Day.
“Committed Borrowing” means a Borrowing under Section 2.01(a).
“Committed Loan” means a Revolving Loan; provided that, if any such
loan or loans (or portions thereof) are combined or subdivided pursuant to a
Notice of Interest Rate Election, the term “Committed Loan” shall refer to the
combined principal amount resulting from such combination or to each of the
separate principal amounts resulting from such subdivision, as the case may be.
“Confidential Information” has the meaning set forth in Section 9.12.
“Consolidated Entity” means at any date any Subsidiary, and any other
entity the accounts of which would be combined or consolidated with those of the
Borrower in its combined or consolidated financial statements if such statements
were prepared as of such date.
“Corresponding Tenor” with respect to any Available Tenor means,
as applicable, either a tenor (including overnight) or an interest payment
period having approximately the same length (disregarding business day
adjustment) as such Available Tenor.
“Credit Documentation” has the meaning set forth in Section 9.15.
“Credit Exposure” means with respect to any Bank at any time, such
Bank’s Pro Rata Share of each of (i) the aggregate principal amount of the Loans
outstanding at such time and (ii) the Outstanding Amount of all L/C Obligations
at such time (for the avoidance of doubt, the aggregate amount of such Bank’s
participation in L/C Obligations are deemed to be “held” by such Bank for
purposes of this definition).
“Daily Simple SOFR” means, for any day, SOFR, with the
conventions for this rate (which will include a lookback) being established by
the Administrative Agent in accordance with the conventions for this rate
selected or recommended by the Relevant Governmental Body for
determining “Daily Simple SOFR” for syndicated business loans; provided,
that if the Administrative Agent decides that any such convention is not
administratively feasible for the Administrative Agent, then the
12
Administrative Agent may establish another convention in its
reasonable discretion.
“Default” means any occurrence or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both (as specified in
Section 6.01) would, unless cured or waived, become an Event of Default.
“Defaulting Bank” means any Bank that (a) has failed, within two
Domestic Business Days of the date required to be funded or paid, to (i) fund any
portion of its Loans, (ii) fund any portion of its participations in Letters of Credit
or (iii) pay over to the Administrative Agent or any Bank Party any other amount
required to be paid by it hereunder, unless, in the case of clause (i) above, such
Bank notifies the Administrative Agent and the Borrower, in writing that such
failure is the result of such Bank’s good faith determination that a condition
precedent to funding (specifically identified and including the particular default, if
any) has not been satisfied, (b) has notified the Borrower, the Administrative
Agent or any Bank Party in writing, or has made a public statement to the effect,
that it does not intend or expect to comply with any of its funding obligations
under this Agreement (unless such writing or public statement indicates that such
position is based on such Bank’s good faith determination that a condition
precedent (specifically identified and including the particular default, if any) to
funding a loan under this Agreement cannot be satisfied) or generally under other
agreements in which it commits to extend credit, (c) has failed, within three
Domestic Business Days after request by the Administrative Agent (the
Administrative Agent hereby agreeing to make any such written request upon a
request from the Borrower) or any Bank Party, acting in good faith, to provide a
certification in writing from an authorized officer of such Bank (with a copy of
such certification to be provided to the Borrower) that it will comply with its
obligations to fund prospective Loans and participations in then outstanding
Letters of Credit under this Agreement, provided that such Bank shall cease to be
a Defaulting Bank pursuant to this clause (c) upon such Bank Party’s receipt of
such certification in form and substance satisfactory to it and the Administrative
Agent, or (d) has, or has a Parent, that has become the subject of (i) a Bankruptcy
Event or (ii) a Bail-In Action.
“Derivative Cash Settlements” means, for any period, the line item
“derivative cash settlements” as it appears on the statement of operations of the
Borrower and its Consolidated Entities (or any notes thereto) for such period
delivered to the Banks pursuant to Section 5.03(b), calculated in accordance with
U.S. GAAP as in effect from time to time.
“Derivatives Obligations” of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any other
13
similar transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.
“Determination Date” has the meaning set forth in Section 5.09.
“Dollars” or “$” refers to lawful money of the United States of America.
“Domestic Business Day” means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or
required by law to close.
“Domestic Lending Office” means, as to each Bank Party, its office
located at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank Party may hereafter designate as its Domestic Lending Office
by notice to the Borrower and the Administrative Agent.
“Early Opt-in Election” means, if the then-current Benchmark is
USD LIBOR, the occurrence of:
(1) a notification by the Administrative Agent to (or the request by the
Borrower to the Administrative Agent to notify) each of the other parties
hereto that at least five currently outstanding U.S. dollar-denominated
syndicated credit facilities at such time contain (as a result of amendment
or as originally executed) a SOFR-based rate (including SOFR, a term
SOFR or any other rate based upon SOFR) as a benchmark rate (and
such syndicated credit facilities are identified in such notice and are
publicly available for review), and
(2) the joint election by the Administrative Agent and the Borrower to
trigger a fallback from USD LIBOR and the provision by the
Administrative Agent of written notice of such election to the Lenders.
“EEA Financial Institution” means (a) any institution established in any
EEA Member Country which is subject to the supervision of an EEA Resolution
Authority, (b) any entity established in an EEA Member Country which is a
parent of an institution described in clause (a) of this definition, or (c) any
institution established in an EEA Member Country which is a subsidiary of an
institution described in clauses (a) or (b) of this definition and is subject to
consolidated supervision with its parent.
“EEA Member Country” means any member state of the European
Union, Iceland, Liechtenstein and Norway
.
“EEA Resolution Authority” means any public administrative authority
or any Person entrusted with public administrative authority of any EEA Member
14
Country (including any delegee) having responsibility for the resolution of any
EEA Financial Institution.
“Effective Date” means October 21, 2011.
“Environmental Laws” means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders,
decrees, plans, injunctions, permits, concessions, grants, franchises, licenses,
agreements and governmental restrictions relating to the environment, the effect
of the environment on human health or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof.
“ERISA” means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
“ERISA Group” means the Borrower, any Subsidiary and all members of
a controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414(b) or (c) of the
Code or, for purposes of Section 412 of the Code, under Section 414(b), (c), (m)
or (o) of the Code.
“Erroneous Payment” has the meaning assigned to it in Section
7.11(a).
“Erroneous Payment Deficiency Assignment” has the meaning
assigned to it in Section 7.11(d).
“Erroneous Payment Return Deficiency” has the meaning assigned to
it in Section 7.11(d).
“EU Bail-In Legislation Schedule” means the document described as
such and published by the Loan Market Association (or any successor person)
from time to time.
“Euro-Dollar Business Day” means any Domestic Business Day on
which commercial banks are open for international business (including dealings in
dollar deposits) in London.
“Euro-Dollar Lending Office” means, as to each Bank, its office, branch
or affiliate located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Euro-Dollar Lending Office)
or such other office, branch or affiliate of such Bank as it may hereafter designate
15
“Existing Letters of Credit” means the letters of credit issued and
outstanding under the Existing Credit Agreement as of the Amendment Effective
Date and set forth in the Existing Letters of Credit Schedule hereto.
“Extended Commitment” means an Extended Commitment as defined in
the 20182021 Amendment.
“Extension Date” has the meaning set forth in Section 2.22(d).
“Facility Fee Rate” means a rate per annum determined in accordance
with the Pricing Schedule.
“Farmer Mac” means the Federal Agricultural Mortgage Corporation, a
corporation organized and existing under the laws of the United States of America
and a federally-chartered instrumentality of the United States of America and an
institution of the Farm Credit System.
“Farmer Mac Master Note Purchase Agreement” means that certain
Amended and Restated Master Note Purchase Agreement, dated as of July 31,
2015March 24, 2011, as amended by the First Supplemental Note Purchase
Agreement dated as of March 24, 2011, the Amended and Restated First
Supplemental Note Purchase Agreement dated as of January 8, 2015, the
Second Amended and Restated First Supplemental Note Purchase
Agreement dated as of February 26, 2018, and the Third Amended and
Restated First Supplemental Note Purchase Agreement dated as of May 20,
2021, among Farmer Mac Mortgage Securities Corporation, a wholly owned
subsidiary of Farmer Mac, Farmer Mac and the Borrower.
“Farmer Mac Master Note Purchase Agreement Liens” means Liens
on any assets of the Borrower required to be pledged as collateral to support
obligations of the Borrower with respect to any notes issued pursuant to the
Farmer Mac Master Note Purchase Agreement.
“Farmer Mac Master Note Purchase Agreement Limit” shall be the
lesser of (i) the aggregate purchase amount of notes available for purchase at any
such time, without regards to whether any such notes have been purchased,
pursuant to one or more supplemental note purchase agreements to the Farmer
Mac Master Note Purchase Agreement in effect at such time or (ii)
$1,000,000,000.
“Farmer Mac Master Note Purchase Agreement Obligations” means
notes issued pursuant to the Farmer Mac Master Note Purchase Agreement.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date
of this Agreement (or any amended or successor version that is substantively
comparable and not materially more onerous to comply with), any regulations or
official interpretations thereof, any agreements entered into pursuant to Section
1471(b) of the Code, and any applicable intergovernmental agreements and
17
related legislation and official administrative rules or practices with respect
thereto.
“Federal Funds Rate” means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day; provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day, and (ii) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to the Administrative Agent on such day on
such transactions as determined by the Administrative Agent.
“Fifth Amendment Effective Date” means the Fifth Amendment
Effective Date as defined in the 2021 Amendment.
“First Amendment Effective Date” means the First Amendment
Effective Date as defined in the 2016 Amendment.
“Fitch” means Fitch Ratings, Inc., and its successors
“Fixed Rate Borrowing” means either a Euro-Dollar Borrowing or a
Money Market LIBOR Borrowing.
“Fixed Rate Loans” means Euro-Dollar Loans or Money Market Loans
(excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01) or any combination of the foregoing.
“Floor” means the benchmark rate floor, if any, provided in this
Agreement initially (as of the execution of this Agreement, the modification,
amendment or renewal of this Agreement or otherwise) with respect to USD
LIBOR.
“Foreclosed Asset” has the meaning set forth in Section 5.12.
“Fourth Amendment Effective Date” means the Fourth Amendment
Effective Date as defined in the 2019 Amendment.
“Fronting Fee” has the meaning specified in Section 2.09(d).
“Governmental Authority” means any national, state, county, city, town,
village, municipal or other government department, commission, board, bureau,
agency, authority or instrumentality of a country or any political subdivision
18
Consolidated Entities for such period delivered to the Banks pursuant to Section
“Interest Period” means: (1) with respect to each Euro-Dollar Borrowing,
the period commencing on the date of such Borrowing and ending one, two, three
or six months thereafter, as the Borrower may elect in the applicable Notice of
Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-
Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Euro-Dollar Business Day of a
calendar month; and
(c). any Interest Period of any Euro-Dollar Loan included in such
Borrowing which would otherwise end after the Maturity Date shall, with respect
to such Euro-Dollar Loan, end on such Maturity Date;
(2) with respect to each Base Rate Borrowing, the period commencing
on the date of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Domestic Business Day shall be extended to the next succeeding Domestic
Business Day; and
(b) any Interest Period of any Base Rate Loan included in such
Borrowing which would otherwise end after the Maturity Date shall, with respect
to such Base Rate Loan, end on such Maturity Date;
(3) with respect to each Money Market LIBOR Borrowing, the period
commencing on the date of such Borrowing and ending any whole number of
months thereafter (but not less than one month) as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding Euro-
Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
21
corresponding day in the calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Euro-Dollar Business Day of a
calendar month; and
(c). any Interest Period which would otherwise end after the Commitment
Termination Date shall end on the Commitment Termination Date; and
(4) with respect to each Money Market Absolute Rate Borrowing, the
period commencing on the date of such Borrowing and ending such number of
days thereafter (but not less than 30 days) as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day; and
(b) any Interest Period which would otherwise end after the Commitment
Termination Date shall end on the Commitment Termination Date.
“Interpolated Rate” has the meaning set forth in Section 2.07(b).
“Investments” has the meaning set forth in Section 5.12.
“IRS” means the United States Internal Revenue Service.
“ISDA Definitions” means the 2006 ISDA Definitions published by
the International Swaps and Derivatives Association, Inc. or any successor
thereto, as amended or supplemented from time to time, or any successor
definitional booklet for interest rate derivatives published from time to time
by the International Swaps and Derivatives Association, Inc. or such
successor thereto.
“ISP” means, with respect to any Letter of Credit, the “International
Standby Practices 1998” published by the Institute of International Banking Law
& Practice (or such later version thereof as may be in effect at the time of
issuance of such Letter of Credit).
“Issuer Documents” means, with respect to any Letter of Credit, the
Letter of Credit Application and any other document, agreement and instrument
entered into by any Issuing Bank and the Borrower (or any Consolidated Entity of
the Borrower) or in favor of any Issuing Bank and relating to any such Letter of
Credit.
“Issuing Bank” means the Initial Issuing Bank and any Bank appointed
by the Borrower (with the consent of the Administrative Agent) as such and each
Person that shall become an Issuing Bank hereunder pursuant to Section 2.20(l) or
Section 9.06(f). Each Issuing Bank may, with the consent of the Borrower (such
22
of the Borrower to repay the Loans, and “Note” means any one of such
promissory notes issued hereunder.
“Notice of Borrowing” means a Notice of Committed Borrowing or a
Notice of Money Market Borrowing.
“Notice of Committed Borrowing” has the meaning set forth in Section
2.02.
“Notice of Interest Rate Election” has the meaning set forth in Section
2.08(a).
“Notice of Money Market Borrowing” has the meaning set forth in
Section 2.03(f).
“Other Benchmark Rate Election” means, with respect to any Loan
denominated in Dollars, if the then-current Benchmark is the LIBO Rate,
the occurrence of:
(a) a request by the Borrower to the Administrative Agent to notify
each of the other parties hereto that, at the determination of the Borrower,
Dollar-denominated syndicated credit facilities at such time contain (as a
result of amendment or as originally executed), in lieu of a LIBOR-based
rate, a term benchmark rate as a benchmark rate, and
(b) the Administrative Agent, in its sole discretion, and the Borrower
jointly elect to trigger a fallback from the LIBO Rate and the provision, as
applicable, by the Administrative Agent of written notice of such election to
the Borrower and the Lenders.
“Other Connection Taxes” means, with respect to any Recipient, Taxes
imposed as a result of a present or former connection between such Recipient and
the jurisdiction imposing such Taxes (other than a connection arising from such
Recipient having executed, delivered, enforced, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, or engaged in any other transaction pursuant to, or enforced, this
Agreement or the Notes, or sold or assigned an interest in this Agreement or the
Notes).
“Other Taxes” means any present or future stamp, court, documentary,
intangible, recording, filing or similar excise or property Taxes that arise from
any payment made under, from the execution, delivery, performance, enforcement
or registration of, or from the registration, receipt or perfection of a security
interest under, or otherwise with respect to, this Agreement or the Notes, except
any such Taxes that are Other Connection Taxes imposed with respect to an
assignment (other than an assignment under Section 2.18).
26
“Outstanding Amount” means with respect to any L/C Obligations on
any date, the amount of such L/C Obligations on such date after giving effect to
any relevant L/C Credit Extension occurring on such date and any other changes
in the aggregate amount of such L/C Obligations as of such date, including as a
result of any reimbursements of outstanding unpaid drawings under any relevant
Letters of Credit or any reductions in the maximum amount available for drawing
under any relevant Letters of Credit taking effect on such date.
“Parent” means, with respect to any Bank, any Person as to which such
Bank is, directly or indirectly, a subsidiary.
“Participant” has the meaning set forth in Section 9.06(b).
“Participant Register” has the meaning set forth in Section 9.06(b).
“Patronage Capital Certificates” means those certificates that evidence
the portion of Net Income allocated by the Borrower among its Members in
accordance with applicable cooperative principles.
“Payment Recipient” has the meaning assigned to it in Section 7.11(a).
“PBGC” means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
“Performance Letter of Credit” means any Existing Letter of Credit
issued under the Existing Credit Agreement or any Letter of Credit issued under
this Agreement, in each case, in order to guarantee performance under a contract.
“Person” means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
“Plan” means any multiemployer plan or single employer plan (including
any Multiple Employer Plan), as defined in Section 4001 and subject to Title IV
of ERISA, which is maintained or contributed to by, or at any time during the five
calendar years preceding the date of this Agreement was maintained or
contributed to by, the Borrower or a Subsidiary of the Borrower or any member
of the ERISA Group.
“Pricing Schedule” means the Pricing Schedule attached hereto.
“Prime Rate” means the rate of interest publically announced by the
Administrative Agent as its prime rate in effect at such time at its principal office
in New York City; provided that if the Administrative Agent ceases to publically
announce such rate of interest, then the Prime Rate shall mean the rate of interest
published by the Wall Street Journal from time to time as the “Prime Rate”.
27
“Pro Rata Share” means, with respect to each Bank at any time, a
fraction (expressed as a percentage, carried out to the ninth decimal place), the
numerator of which is the amount of the Commitment of such Bank and the
denominator of which is the total amount of the Commitments, subject to
adjustment as provided in Section 2.19(a)(iv); provided that if the commitment of
each Bank to make Revolving Loans and the obligation of each Issuing Bank to
make L/C Credit Extensions have been terminated pursuant to Sections 2.10 or
6.01, then the Pro Rata Share of each Bank shall be determined based on the Pro
Rata Share of such Bank immediately prior to such termination and after giving
effect to any subsequent assignments made pursuant to the terms hereof.
“Qualified Subordinated Indebtedness” means the Borrower’s (i) the
Borrower’s 4.75% Subordinated Deferrable Interest Notes due 2043 and, (ii)
any other Indebtedness of the Borrower having substantially similar terms
as to subordinationthe Borrower’s 5.25% Subordinated Deferrable Interest
Notes due 2046, (iii) the Borrower’s 5.50% Subordinated Deferrable Interest
Notes due 2064 and (iv) any other subordinated as those contained in the
instruments and documents relating to the foregoing Indebtedness or that would
be junior to any of the foregoing; provided that such Indebtedness (a) will not
mature prior to the Maturity Date and (b) does not require payments of principal
prior to the Commitment Termination Date,; except pursuant to acceleration or at
the option of the Borrower.
“Recipient” means, as applicable, (a) the Administrative Agent, (b) any
Bank and (c) the Issuing Bank.
“REDLG Program Liens” means Liens on any asset of the Borrower
required to be pledged as collateral to support obligations of the Borrower with
respect to any government Guarantee provided pursuant to regulations issued
under the Rural Electrification Act of 1936, 7 U.S.C. 901 et. seq., and the Food,
Conservation and Energy Act of 2008, Pub. L. 110-234 Stat. 923 (“REDLG
Obligations”) so long as such Guarantee supports long-term Indebtedness issued
by the Borrower and permitted by Section 5.09.
“REDLG Obligations” has the meaning set forth in the definition of
REDLG Program Liens.
“Reference Time” with respect to any setting of the then-current
Benchmark means (1) if such Benchmark is USD LIBOR, 11:00 a.m.
(London time) on the day that is two London banking days preceding the
date of such setting, and (2) if such Benchmark is not USD LIBOR, the time
determined by the Administrative Agent in its reasonable discretion.
“Regulation U” means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
28
“Regulation X” means Regulation X of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
“Relevant Governmental Body” means the Board of Governors of the
Federal Reserve System or the Federal Reserve Bank of New York, or a
committee officially endorsed or convened by the Board of Governors of the
Federal Reserve System or the Federal Reserve Bank of New York, or any
successor thereto.
“Reportable Event” means an event described in Section 4043(c) of
ERISA or regulations promulgated by the Department of Labor thereunder (with
respect to which the 30 day notice requirement has not been waived by the
PBGC).
“Required Banks” means, subject to Section 2.19, at any time Banks
having at least 51% of the sum of (i) the aggregate amount of the unused
Commitments, (ii) the aggregate principal outstanding amount of the Loans and
the Outstanding Amount of all L/C Obligations (with the aggregate amount of
each Bank’s participation in L/C Obligations deemed “held” by such Bank for
purposes of this definition).
“Resolution Authority” means an EEA Resolution Authority or, with
respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” means (i) with respect to the Borrower, the Chief
Financial Officer, the Chief Executive Officer, an Assistant Secretary-Treasurer,
the Controller, the Vice President, Capital Markets Relations or, in each case, an
authorized signatory of such Person and (ii) with respect to any other Person, the
president, any vice-president, the chief financial officer, any assistant-treasurer or,
in each case, an authorized signatory of such Person.
“Revolving Credit Period” means the period from and including the
Effective Date to but excluding the Commitment Termination Date.
“Revolving Loan” means a loan made by a Bank pursuant to Section
2.01(a).
“RUS” means the Rural Utilities Service of the Department of Agriculture
of the United States of America (as successor to the Rural Electrification
Administration of the Department of Agriculture of the United States of America)
or any other regulatory body which succeeds to its functions.
“RUS Guaranteed Loan” means any loan made by any Person, which
loan is guaranteed, in whole or in part, as to principal and interest by the United
States of America through the RUS pursuant to a guarantee, which guarantee
contains provisions no less favorable to the holder thereof than the provisions set
forth in the form of Exhibit B-1 or Exhibit B-2 hereto; and “Guaranteed
Portion” of any RUS Guaranteed Loan means that portion of principal of, and
29
interest on, such RUS Guaranteed Loan which is guaranteed by the United States
of America through the RUS.
“S&P” means S&P Global Ratings, a business unit of Standard & Poor’s
Financial Services LLC, or any successor thereto.
“Sanctioned Country” means, at any time, a country or territory which is
the subject or target of any Sanctions.
“Sanctioned Person” means, at any time, (a) any Person listed in any
Sanctions-related list of designated Persons maintained by the Office of Foreign
Assets Control of the U.S. Department of the Treasury, the U.S. Department of
State or any other U.S. Governmental Authority, as may be amended,
supplemented or substituted from time to time, (b) any Person operating,
organized or resident in a Sanctioned Country or (c) any Person controlled by any
such Person.
“Sanctions” means economic or financial sanctions or trade embargoes
imposed, administered or enforced from time to time by the U.S. government,
including those administered by the Office of Foreign Assets Control of the U.S.
Department of the Treasury or the U.S. Department of State.
“Second Amendment Effective Date” means the Second Amendment
Effective Date as defined in the 2017 Amendment.
“Securities and Exchange Commission” means the Securities and
Exchange Commission or any other U.S. federal governmental authority
succeeding to any or all of the functions of the Securities and Exchange
Commission.
“SOFR” means, with respect to any Business Day, a rate per annum
equal to the secured overnight financing rate for such Business Day
published by the SOFR Administrator on the SOFR Administrator’s
Website on the immediately succeeding Business Day.
“SOFR Administrator” means the Federal Reserve Bank of New
York (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the website of the Federal
Reserve Bank of New York, currently at http://www.newyorkfed.org, or any
successor source for the secured overnight financing rate identified as such
by the SOFR Administrator from time to time.
“Special Purpose Subsidiary” has the meaning set forth in Section 5.12.
“Specified Date” has the meaning set forth in Section 2.22(c).
30
“Standby Letter of Credit” means any Letter of Credit issued under this
Agreement, other than (i) a Trade Letter of Credit, (ii) a Performance Letter of
Credit or (iii) a Backup Letter of Credit in support of either a performance letter
of credit or a trade letter of credit issued by the Borrower.
“Start-up Investments” has the meaning set forth in Section 5.12.
“Subsidiary” of any Person means (i) any corporation more than 50% of
whose stock of any class or classes having by the terms thereof ordinary voting
power to elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency)
is at the time owned by such Person directly or indirectly through its Subsidiaries,
and (ii) any other Person in which such Person directly or indirectly through
Subsidiaries has more than a 50% voting and equity interest; provided that no
Person whose only assets are RUS Guaranteed Loans and investments incidental
thereto shall be deemed a Subsidiary.
“Superior Indebtedness” means all Indebtedness of the Borrower and its
Consolidated Entities (other than Members’ Subordinated Certificates and
Qualified Subordinated Indebtedness), but excluding (i) Indebtedness of the
Borrower or any of its Consolidated Entities to the extent that the proceeds of
such Indebtedness are used to fund Guaranteed Portions of RUS Guaranteed
Loans and (ii) any indebtedness of any Member Guaranteed by the Borrower or
any of its Consolidated Entities (“Guaranteed Indebtedness”), to the extent that
either (x) the long-term unsecured debt of such Member is rated at least BBB+ by
S&P or, Baal by Moody’s or BBB+ by Fitch, (y) the long-term secured debt of
such Member is rated at least A- by S&P or, A3 by Moody’s or A- by Fitch or
(z) the payment of principal and interest by the Borrower or any of its
Consolidated Entities in respect of such Guaranteed Indebtedness is covered by
insurance or reinsurance provided by an insurer having an insurance financial
strength rating of AAA by S&P or, a financial strength rating of Aaa by Moody’s
or a financial strength rating of AAA by Fitch.
“Syndication Agent” means Mizuho Bank, Ltd., in its capacity as
Syndication Agent hereunder, and its successors in such capacity.
“Taxes” means any present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges imposed by any
Governmental Authority, including any interest, additions to tax or penalties
applicable thereto.
“Term SOFR” means, for the applicable Corresponding Tenor as of
the applicable Reference Time, the forward-looking term rate based on
SOFR that has been selected or recommended by the Relevant
Governmental Body.
“Term SOFR Notice” means a notification by the Administrative
31
Agent to the Lenders and the Borrower of the occurrence of a Term SOFR
Transition Event.
“Term SOFR Transition Event” means the determination by the
Administrative Agent that (a) Term SOFR has been recommended for use by
the Relevant Governmental Body, (b) the administration of Term SOFR is
administratively feasible for the Administrative Agent and (c) a Benchmark
Transition Event or an Early Opt-in Election, as applicable (and, for the
avoidance of doubt, not in the case of an Other Benchmark Rate Election),
has previously occurred resulting in a Benchmark Replacement in
accordance with this Section titled “Benchmark Replacement Setting” that is
not Term SOFR.
“Third Amendment Effective Date” means the Third Amendment
Effective Date as defined in the 2018 Amendment.
“TIER” means, for any period, the ratio of (x) Net Income plus Interest
Expense plus Derivative Cash Settlements to (y) Interest Expense plus Derivative
Cash Settlements, in each case for such period.
“Trade Letter of Credit” means any Existing Letter of Credit issued
under the Existing Credit Agreement or any Letter of Credit issued under this
Agreement, in each case, for the benefit of a supplier of goods or services to effect
payment for such goods or services, the conditions to drawing under which
include the presentation to an Issuing Bank.
“Type” refers to whether a Loan is a Base Rate Loan, a Euro-Dollar Loan,
a Money Market Absolute Rate Loan or a Money Market LIBOR Loan.
“Unadjusted Benchmark Replacement” means the applicable
Benchmark Replacement excluding the related Benchmark Replacement
Adjustment.
“UK Financial Institution” means any BRRD Undertaking (as such
term is defined under the PRA Rulebook (as amended from time to time)
promulgated by the United Kingdom Prudential Regulation Authority) or
any person falling within IFPRU 11.6 of the FCA Handbook (as amended
from time to time) promulgated by the United Kingdom Financial Conduct
Authority, which includes certain credit institutions and investment firms,
and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other
public administrative authority having responsibility for the resolution of
any UK Financial Institution.
32
“Unreimbursed Amount” has the meaning specified in Section
2.20(b)(i).
“USD LIBOR” means the London interbank offered rate for U.S.
dollars.
“U.S. GAAP” means the generally accepted accounting principles as
promulgated, from time to time, by the Financial Accounting Standards Board.
“U.S. Person” means a “United States person” within the meaning of
Section 7701(a)(30) of the Code.
“U.S. Tax Certificate” has the meaning assigned to such term in Section
2.172.16(f)(ii)(D)(2).
“Withholding Agent” means the Borrower and the Administrative Agent.
“Write-Down and Conversion Powers” means, (i) with respect to any
EEA Resolution Authority, the write-down and conversion powers of such EEA
Resolution Authority from time to time under the Bail-In Legislation for the
applicable EEA Member Country, which write-down and conversion powers are
described in the EU Bail-In Legislation Schedule. and (ii) with respect to any
UK Resolution Authority, any powers of such UK Resolution Authority from
time to time under the Bail-In Legislation to cancel, reduce, modify or
change the form of a liability of any UK Financial Institution or any contract
or instrument under which that liability arises, to convert all or part of that
liability into shares, securities or obligations of that person or any other
person, to provide that any such contract or instrument is to have effect as if
a right had been exercised under it or to suspend any obligation in respect of
that liability or any of the powers under that Bail-In Legislation that are
related to or ancillary to any of those powers.
Section 1.02 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made and all financial statements
required to be delivered hereunder shall be prepared in accordance with U.S.
GAAP as in effect from time to time, applied on a basis consistent (except for
changes concurred in by the Borrower’s independent public accountants) with the
most recent audited financial statements of the Borrower and its Consolidated
Entities delivered to the Bank Parties.
Section 1.03 Types of Borrowings. The term “Borrowing” denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant
to Article 2 on a single date and for a single Interest Period. Borrowings are
classified for purposes of this Agreement either by reference to the pricing of
Loans comprising such Borrowing (e.g., a “Euro-Dollar Borrowing” is a
Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of
33
Article 2 under which participation therein is determined (i.e., a “Revolving
Borrowing” is a Borrowing under Section 2.01(a) in which all Banks participate
in proportion to their Commitments, while a “Money Market Borrowing” is a
Borrowing under Section 2.03 in which the Bank participants are determined on
the basis of their bids in accordance therewith). All Loans and all Borrowings,
including with respect to their respective Interest Periods, under the Existing
Credit Agreement, if any, are listed on the Existing Commitment Schedule, that
are outstanding on the Amendment Effective Date shall become Loans and
Borrowings with the same Interest Period under this Agreement.
Section 1.04 Letter of Credit. Unless otherwise specified, all references
herein to the amount of a Letter of Credit at any time shall be deemed to mean
the stated face amount of such Letter of Credit in effect at such time; provided,
however, that with respect to any Letter of Credit that, by its terms or the terms
of any Issuer Document related thereto, provides for one or more automatic
increases in the stated amount thereof, the amount of such Letter of Credit shall
be deemed the maximum stated amount of such Letter of Credit after giving
effect to all increases or decreases, as applicable, thereof, whether or not such
maximum face amount is in effect at such time. All Existing Letters of Credit
issued and outstanding on the Amendment Effective Date shall be deemed to be
Letters of Credit under this Agreement and from and after the Amendment
Effective Date shall be subject to and governed by the terms and conditions
hereof.
Section 1.05. Divisions. For all purposes under this Agreement, in
connection with any division or plan of division under Delaware law (or any
comparable event under a different jurisdiction’s laws): (a) if any asset,
right, obligation or liability of any Person becomes the asset, right, obligation
or liability of a different Person, then it shall be deemed to have been
transferred from the original Person to the subsequent Person, and (b) if any
new Person comes into existence, such new Person shall be deemed to have
been organized on the first date of its existence by the holders of its equity
interests at such time.
ARTICLE 2 THE CREDITS
Section 2.01. Commitments to Lend and Issue Letters of Credit.
(a)Revolving Loans. During the Revolving Credit Period each Bank severally
agrees, on the terms and conditions set forth in this Agreement, to make loans to
the Borrower pursuant to this Section from time to time in amounts such that the
sum of (x) the aggregate principal amount of Revolving Loans by such Bank at
any one time outstanding plus (y) such Bank’s Pro Rata Share of the Outstanding
Amount of all L/C Obligations shall not exceed the amount of its Commitment.
Each Borrowing shall be in an aggregate principal amount of $10,000,000 or any
larger multiple of $1,000,000 (except that any such Borrowing may be in the
maximum aggregate amount available in accordance with Section 3.03(d)) and
34
shall be made from the several Banks ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrower may borrow under this
Section, repay or, to the extent permitted by Section 2.12, prepay Loans and
reborrow at any time during the Revolving Credit Period under this Section. All
Loans will be made by all Banks in accordance with their Pro Rata Share of the
Aggregate Commitments until the Commitment Termination Date, and in each
case subject to the limitations set forth in Section 3.03(d).
(b) Letters of Credit. Subject to the terms and conditions set forth herein, (i)
each Issuing Bank agrees, in reliance upon the agreements of the other Banks set
forth in Section 2.20, (A) from time to time on any Domestic Business Day during
the period from the Amendment Effective Date until the Letter of Credit
Expiration Date, to make L/C Credit Extensions either (i) for the account of the
Borrower, its Consolidated Entities, its Members or members of its Consolidated
Entities or (ii) in support of a letter of credit issued by the Borrower as a back-up
confirmation or backup credit support of such letter of credit (“Back-Up Letter
of Credit”), and to amend or extend Letters of Credit previously issued by it, in
accordance with Section 2.20(a)(i) and (ii), and (B) to honor drawings under the
Letters of Credit issued by it; and (ii) the Banks severally agree to participate in
Letters of Credit issued for the account of the Borrower, its Consolidated Entities,
its Members or members of its Consolidated Entities and any L/C Borrowings
thereunder; provided that after giving effect to any L/C Credit Extension with
respect to any Letter of Credit, (1) the sum of (x) the aggregate principal amount
of Revolving Loans of any Bank, plus (y) such Bank’s Pro Rata Share of the
Outstanding Amount of all L/C Obligations shall not exceed such Bank’s
Commitment, (2) the Outstanding Amount of all L/C Obligations shall not exceed
the Letter of Credit Sublimit and (3) the Outstanding Amount of all L/C
Obligations of each Initial Issuing Bank shall not exceed the Initial Issuing Bank
Sublimit of such Initial Issuing Bank unless otherwise agreed by such Initial
Issuing Bank. Each request by the Borrower for the issuance of, or an amendment
to increase the amount of, any Letter of Credit shall be deemed to be a
representation by the Borrower that the L/C Credit Extension so requested
complies with the condition set forth in the proviso to the preceding sentence.
Within the foregoing limits, and subject to the terms and conditions hereof, the
Borrower’s ability to obtain Letters of Credit shall be fully revolving, and
accordingly the Borrower may, during the foregoing period, obtain Letters of
Credit to replace Letters of Credit that have expired or that have been drawn upon
and reimbursed.
(c). Letters of Credit Generally. (i) No Issuing Bank shall issue any Letter of
Credit if the expiry date of such requested Letter of Credit would occur after the
Letter of Credit Expiration Date, unless all the Banks have approved such expiry
date; provided that in no event shall the expiry date of any requested Letter of
Credit occur on or after the Domestic Business Day immediately preceding the
Commitment Termination Date.
35
(ii) No Issuing Bank shall be under any obligation to make any L/C Credit
Extension if:
(A) any order, judgment or decree of any Governmental Authority or
arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from
issuing such Letter of Credit, or any Applicable Law applicable to such Issuing
Bank or any request or directive (whether or not having the force of law, but if
not having the force of law, being a request or directive which is generally
complied with by comparable financial institutions) from any Governmental
Authority with jurisdiction over such Issuing Bank shall prohibit, or request that
the Issuing Bank refrain from the issuance of Letters of Credit generally or such
Letter of Credit in particular or shall impose upon such Issuing Bank with respect
to such Letter of Credit any restriction, reserve or capital requirement (for which
such Issuing Bank is not otherwise compensated hereunder) not in effect on the
FourthFifth Amendment Effective Date, or shall impose upon such Issuing Bank
any unreimbursed loss, cost or expense which was not applicable on the
FourthFifth Amendment Effective Date and which such Issuing Bank in good
faith reasonably deems material to it; provided, however, that in the event a Bank
Party participating in the Letters of Credit is not affected by any such restriction,
requirement or imposition, and is able to issue such Letter of Credit and expressly
agrees in its sole discretion to issue such Letter of Credit, such Bank Party,
subject to the consent of the Administrative Agent, such consent not to be
unreasonably withheld, conditioned or delayed, shall issue such Letter of Credit
and shall be deemed the Issuing Bank with regard to such Letter of Credit for all
purposes of this Agreement;
(B) the making of such L/C Credit Extension would violate any
Applicable Laws;
(C). except as otherwise agreed by the Administrative Agent and such
Issuing Bank, such Letter of Credit is in an initial face amount less than $25,000;
(D) such L/C Credit Extension is to be denominated in a currency other
than Dollars;
(E) such L/C Credit Extension contains any provisions for automatic
reinstatement of the stated amount after any L/C Borrowing thereunder; or
(F) a default of any Bank’s obligations to fund under Section 2.20 exists, or
any Bank is then a Defaulting Bank, unless,
36
such Note shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans and/or L/C
Borrowings of the relevant Type. Each reference in this Agreement to the “Note”
of such Bank Party shall be deemed to refer to and include any or all of such
Notes, as the context may require.
(c). Upon the Administrative Agent’s receipt of each Note that was
requested by a Bank Party pursuant to Section 3.01(b), the Administrative Agent
shall forward such Note to such Bank Party. Each Bank Party shall record the
date, amount, type and maturity of each Loan and/or L/C Borrowings made by it
and the date and amount of each payment of principal made by the Borrower with
respect thereto, and may, if such Bank Party so elects in connection with any
transfer or enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to each
such Loan and/or L/C Borrowings then outstanding; provided that the failure of
any Bank Party to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Bank Party is
hereby irrevocably authorized by the Borrower so to endorse its Note and to
attach to and make a part of its Note a continuation of any such schedule as and
when required.
(d) Any Note evidencing a Loan (as such term is defined in the Existing
Credit Agreement) made prior to the Amendment Effective Date may be
exchanged upon request of the relevant Bank, made through the Administrative
Agent, and simultaneous surrender of such Note to the Borrower through the
Administrative Agent in exchange for one or more new Notes evidencing the
Loans, respectively, outstanding hereunder, if any, as of the Amendment
Effective Date.
Section 2.06. Maturity of Loans. Each Loan hereunder shall mature, and
the principal amount thereof shall be due and payable on the Maturity Date with
respect to such Loan.
Section 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on
the outstanding principal amount thereof, for each day from the date such Loan is
made until it becomes due, at a rate per annum equal to the Base Rate plus the
applicable Base Rate Margin for such day. Such interest shall be payable for each
Interest Period on the last day thereof and, with respect to the principal amount of
any Base Rate Loan that is prepaid or converted to a Euro-Dollar Loan, on the
date of such prepayment or conversion. Any overdue principal of or interest on
any Base Rate Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 2% plus the rate otherwise applicable
to Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a rate per annum
equal to the sum of the Euro-Dollar Margin plus the applicable Adjusted
43
London Interbank Offered RateBenchmark. Such interest shall be payable for
each Interest Period on the last day thereof and, if such Interest Period is longer
than three months, three months after the first day thereof and, with respect to the
principal amount of any Euro-Dollar Loan that is prepaid or converted to a Base
Rate Loan, on the date of such prepayment or conversion. Notwithstanding
anything to the contrary herein, if a Benchmark Transition Event, an Early
Opt-in Election or an Other Benchmark Rate Election, as applicable, and its
related Benchmark Replacement Date have occurred prior to the Reference
Time in respect of any setting of the then-current Benchmark, then (x) if a
Benchmark Replacement is determined in accordance with clause (1) or (2)
of the definition of “Benchmark Replacement” for such Benchmark
Replacement Date, such Benchmark Replacement will replace such
Benchmark for all purposes hereunder and under any Loan Document in
respect of such Benchmark setting and subsequent Benchmark settings
without any amendment to, or further action or consent of any other party
to, this Agreement or any other Loan Document and (y) if a Benchmark
Replacement is determined in accordance with clause (3) of the definition of
“Benchmark Replacement” for such Benchmark Replacement Date, such
Benchmark Replacement will replace such Benchmark for all purposes
hereunder in respect of any Benchmark setting at or after 5:00 p.m. (New
York City time) on the fifth (5th) Business Day after the date notice of such
Benchmark Replacement is provided to the Lenders without any amendment
to, or further action or consent of any other party to, this Agreement or any
other Loan Document so long as the Administrative Agent has not received,
by such time, written notice of objection to such Benchmark Replacement
from Lenders comprising the Required Lenders.
(c). Notwithstanding anything to the contrary herein and subject to the
proviso below in this paragraph, if a Term SOFR Transition Event and its
related Benchmark Replacement Date have occurred prior to the Reference
Time in respect of any setting of the then-current Benchmark, then the
applicable Benchmark Replacement will replace the then-current
Benchmark for all purposes hereunder or under any Loan Document in
respect of such Benchmark setting and subsequent Benchmark settings,
without any amendment to, or further action or consent of any other party
to, this; provided that, this clause (c) shall not be effective unless the
Administrative Agent has delivered to the Lenders and the Borrower a Term
SOFR Notice. For the avoidance of doubt, the Administrative Agent shall
not be required to deliver a Term SOFR Notice after a Term SOFR
Transition Event and may do so in its sole discretion.
(d) In connection with the implementation of a Benchmark
Replacement, the Administrative Agent will have the right to make
Benchmark Replacement Conforming Changes from time to time and,
notwithstanding anything to the contrary herein or in any other Loan
Document, any amendments implementing such Benchmark Replacement
Conforming Changes will become effective without any further action or
44
consent of any other party to this Agreement or any other Loan Document.
The Administrative Agent will promptly notify the Borrower and the
Lenders of (i) any occurrence of a Term SOFR Transition Event, an Early
Opt-in Election, or an Other Benchmark Rate Election, as applicable, and its
related Benchmark Replacement Date, (ii) the implementation of any
Benchmark Replacement, (iii) the effectiveness of any Benchmark
Replacement Conforming Changes, (iv) the removal or reinstatement of any
tenor of a Benchmark pursuant to clause (e) below and (v) the
commencement or conclusion of any Benchmark Unavailability Period. Any
determination, decision or election that may be made by the Administrative
Agent or, if applicable, any Lender (or group of Lenders) pursuant to this
Section titled “Benchmark Replacement Setting,” including any
determination with respect to a tenor, rate or adjustment or of the
occurrence or non-occurrence of an event, circumstance or date and any
decision to take or refrain from taking any action or any selection, will be
conclusive and binding absent manifest error and may be made in its or their
sole discretion and without consent from any other party to this Agreement,
except, in each case, as expressly required pursuant to this Section titled
“Benchmark Replacement Setting.”
(e) the contrary herein, at any time (including in connection with the
implementation of a Benchmark Replacement), (i) if the then-current
Benchmark is a term rate (including Term SOFR or USD LIBOR) and either
(A) any tenor for such Benchmark is not displayed on a screen or other
information service that publishes such rate from time to time as selected by
the Administrative Agent in its reasonable discretion or (B) the regulatory
supervisor for the administrator of such Benchmark has provided a public
statement or publication of information announcing that any tenor for such
Benchmark (1) is or will be no longer representative or (2) will cease to be
provided by the administrator permanently or indefinitely as of a specified
date, then the Administrative Agent may modify the definition of “Interest
Period” for any Benchmark settings at or after such time to remove such
affected tenor and (ii) if a tenor that was removed pursuant to clause (i)
above either (A) is subsequently displayed on a screen or information service
for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no
longer, subject to an announcement that it is or will no longer be
representative or will cease to be provided by the administrator for a
Benchmark (including a Benchmark Replacement), then the Administrative
Agent may modify the definition of “Interest Period” for all Benchmark
settings at or after such time to reinstate such previously removed tenor.
However, the Administrative Agent does not warrant or accept any
responsibility for, and shall not have any liability with respect to, the
administration, submission or any other matter related to USD LIBOR or
other rates or with respect to any alternative or successor rate thereto, or
replacement rate thereof.
45
(f) Upon the Borrower’s receipt of notice of the commencement of a
Benchmark Unavailability Period, the Borrower may revoke any request for
a Eurodollar Borrowing of, conversion to or continuation of Eurodollar
Loans to be made, converted or continued during any Benchmark
Unavailability Period and, failing that, the Borrower will be deemed to have
converted any such request into a request for a Borrowing of or conversion
to Base Rate Loans. During any Benchmark Unavailability Period or at any
time that a tenor for the then-current Benchmark is not an Available Tenor,
the component of the Base Rate based upon the then-current Benchmark or
such tenor for such Benchmark, as applicable, will not be used in any
determination of the Base Rate.
(g) The Administrative Agent does not warrant or accept any
responsibility for, and shall not have any liability with respect to, the
administration, submission or any other matter related to LIBOR or the
Screen Page or with respect to any alternative, successor or replacement rate
thereof (including any Benchmark Replacement), or any calculation,
component definition thereof or rate referenced in the definition thereof,
including, without limitation, (i) any such alternative, successor or
replacement rate implemented pursuant to this Section titled “Benchmark
Replacement Setting”, whether upon the occurrence of a Benchmark
Transition Event, Term SOFR Transition Event, an Early Opt-in Election,
or an Other Benchmark Rate Election, and (ii) the effect, implementation or
composition of any Benchmark Replacement Conforming Changes pursuant
to clause (d) of this Section 2.07, including without limitation, whether the
composition or characteristics of any such alternative, successor or
replacement reference rate will be similar to, or produce the same value or
economic equivalence of, LIBOR or the Eurodollar Rate or have the same
volume or liquidity as did LIBOR or the Eurodollar Rate prior to the
discontinuance or unavailability of LIBOR. In addition, the discontinuation
of LIBOR and any alternative, successor or replacement reference rate may
result in a mismatch between the reference rate referenced in this Agreement
and your other financial instruments, including potentially those that are
intended as hedges. The Administrative Agent and its Affiliates and/or other
related entities may engage in transactions that affect the calculation of any
alternative, successor or replacement rate and/or any relevant adjustments
thereto, in each case, with all determinations of such alternative, successor or
replacement rate by the Administrative Agent to be conclusive, absent
manifest error. The Administrative Agent may select information sources or
services in its reasonable discretion to ascertain such alternative, successor or
replacement rate, in each case pursuant to the terms of this Agreement (as
amended, amended and restated, supplemented or otherwise modified from
time to time), and shall have no liability to the Borrower, any Lender or any
other person or entity for damages of any kind, including direct or indirect,
special, punitive, incidental or consequential damages, costs, losses or
expenses (whether in tort, contract or otherwise and whether at law or in
46
equity), for any error or calculation of any such rate (or component thereof)
provided by any such information source or service.
The “Adjusted London Interbank Offered Rate” applicable to any
Interest Period means a rate per annum equal to the quotient obtained
(rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i)
the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-
Dollar Reserve Percentage.
The “London Interbank Offered Rate” applicable to any Interest
Period means the rate appearing on pages LIBOR01 or LIBOR02 of the
Reuters screen that displays such rate (or on any successor or substitute page
of such Reuters Service, or if the Reuters Service ceases to be available, any
successor to or substitute for such Reuters Service, providing rate quotations
comparable to those currently provided on such page of such Reuters
Service, as determined by the Administrative Agent from time to time for
purposes of providing quotations of interest rates applicable to dollar
deposits in the London interbank market) at approximately 11:00 A.M.
(London time) two Euro-Dollar Business Days prior to the commencement of
such Interest Period, as the rate for the offering of dollar deposits with a
maturity comparable to such Interest Period; provided, that if such rate shall
be less than zero, such rate shall be deemed to be zero for the purposes of this
Agreement; provided further, that if the London Interbank Offered Rate is
not available for such Interest Period, then the applicable London Interbank
Offered Rate shall be the Interpolated Rate. “Interpolated Rate” means, at
any time, for any Interest Period, the rate per annum (rounded to the same
number of decimal places as the London Interbank Offered Rate) reasonably
determined by the Administrative Agent (which determination shall be
conclusive absent manifest error) to be equal to the rate that results from
interpolating on a linear basis between: (a) the London Interbank Offered
Rate for the longest period (for which the London Interbank Offered Rate is
available) that is shorter than the Interest Period and (b) the London
Interbank Offered Rate for the shortest period (for which the London
Interbank Offered Rate is available) that exceeds the Interest Period;
provided that, if the Administrative Agent reasonably determines (which
determination shall be conclusive absent manifest error) that adequate and
reasonable means still do not exist for ascertaining the Interpolated Rate,
then the Administrative Agent shall give written notice thereof to the
Borrower and the Banks as promptly as practicable thereafter and, until the
Administrative Agent notifies the Borrower and the Banks that the
circumstances giving rise to such notice no longer exist, (i) any interest
election request that requests the conversion of any Base Rate Loan to, or
continuation of any Euro-Dollar Loan as, a Euro-Dollar Loan shall be
ineffective and (ii) if any Loan requests a Euro-Dollar Loan, such Borrowing
shall be made as a Base Rate Loan.
47
If at any time the Administrative Agent determines (which
determination shall be conclusive absent manifest error) that (i) the
circumstances set forth in the paragraph above have arisen and such
circumstances are unlikely to be temporary or (ii) the circumstances set forth
above have not arisen but the supervisor for the administrator of the rate
appearing on pages LIBOR01 or LIBOR02 of the Reuters screen that
displays such rate or a Governmental Authority having jurisdiction over the
Administrative Agent has made a public statement identifying a specific date
after which the rate appearing on pages LIBOR01 or LIBOR02 of the
Reuters screen that displays such rate shall no longer be used for
determining interest rates for loans, then the Administrative Agent and the
Borrower shall endeavor to establish an alternate rate of interest to the
London Interbank Offered Rate that gives due consideration to the then
prevailing market convention for determining a rate of interest for
syndicated loans in the United States at such time, and shall enter into an
amendment to this Agreement to reflect such alternate rate of interest and
such other related changes to this Agreement as may be applicable.
Notwithstanding anything to the contrary in Section 9.05, such amendment
shall become effective without any further action or consent of any other
party to this Agreement so long as the Administrative Agent shall not have
received, within five Business Days of the date notice of such alternate rate of
interest is provided to the Banks, a written notice from the Required Banks
stating that such Required Banks object to such amendment. Until an
alternate rate of interest shall be determined in accordance with this
paragraph (but, in the case of the circumstances described in clause (ii) of the
first sentence of this paragraph, only to the extent the rate appearing on
pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate
for such Interest Period is not available or published at such time on a
current basis), (x) any interest election request that requests the conversion
of any Base Rate Loan to, or continuation of any Euro-Dollar Loan as, a
Euro-Dollar Loan shall be ineffective and (y) if any Loan requests a Euro-
Dollar Loan, such Borrowing shall be made as a Base Rate Loan; provided
that if such alternate rate of interest shall be less than zero, such rate shall be
deemed to be zero for purposes of this Agreement.
To the extent a comparable or successor rate to the London Interbank
Offered Rate is approved by the Administrative Agent in connection
herewith, the approved rate shall be applied in a manner consistent with
market practice; provided that to the extent such market practice is not
administratively feasible for the Administrative Agent, such approved rate
shall be applied in a manner as otherwise reasonably determined by the
Administrative Agent.
“Euro-Dollar Reserve Percentage” means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the
48
Federal Reserve System in New York City with deposits exceeding five billion
Dollars in respect of “Eurocurrency liabilities” (or in respect of any other
category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States office of any Bank to United States residents). The Adjusted London
Interbank Offered Rate shall be adjusted automatically on and as of the
effective date of any change in the Euro-Dollar Reserve Percentage.
(ch) Any overdue principal of or interest on any Euro-Dollar Loan and
any other overdue amount payable hereunder (other than in respect of any Money
Market Loan as provided in the following paragraph) shall bear interest, payable
on demand, for each day from and including the date payment thereof was due to
but excluding the date of actual payment, at a rate per annum equal to the sum of
2% plus (i) in the case of principal, the rate otherwise applicable to Euro-Dollar
Loans for such day or (ii) in the case of interest and any other overdue amount
payable hereunder (other than in respect of any Money Market Loan as provided
in the following paragraph), the sum of the Base Rate plus the applicable Base
Rate Margin for such day.
(di) Subject to Section 8.01(a), each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.07(b)) plus (or minus) the Money Market Margin quoted by the Bank making
such Loan in accordance with Section 2.03. Each Money Market Absolute Rate
Loan shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the Money Market
Absolute Rate quoted by the Bank making such Loan in accordance with Section
2.03. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at intervals of
three months after the first day thereof. Any overdue principal of or interest on
any Money Market Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 2% plus the Prime Rate for such
day.
(ej) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(k) The Administrative Agent does not warrant or accept
responsibility for, and shall not have any liability with respect to (a) the
administration of, submission of, calculation of or any other matter related
to any Benchmark, any component definition thereof or rates referenced in
the definition thereof or any alternative, comparable or successor rate
49
thereto (including any Benchmark Replacement), including whether the
composition or characteristics of any such alternative, comparable or successor
rate (including any Benchmark Replacement) will be similar to, or produce
the same value or economic equivalence of, or have the same volume or
liquidity as, such Benchmark or any other Benchmark, or (b) the effect,
implementation or composition of any Benchmark Replacement Conforming
Changes.
Section 2.08. Method of Electing Interest Rates. (a) The Loans included
in each Committed Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Committed Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Group of Loans (subject to Section 2.08(d) and
the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans as of any Domestic Business Day, subject
to Section 2.14 if any such conversion is effective on any day other than the last
day of an Interest Period applicable to such Loans, or may elect to continue such
Loans as Euro-Dollar Loans, as of the end of any Interest Period applicable
thereto, for an additional Interest Period.
Each such election shall be made by delivering a notice (a “Notice of
Interest Rate Election”) to the Administrative Agent not later than 10:30 A.M.
(New York City time) on the third Euro-Dollar Business Day before the
conversion or continuation selected in such notice is to be effective. A Notice of
Interest Rate Election may, if it so specifies, apply to only a portion of the
aggregate principal amount of the relevant Group of Loans; provided that (i) such
portion is allocated ratably among the Loans comprising such Group and (ii) such
portion, and the remaining portion to which such Notice does not apply, are each
at least $10,000,000 (unless such portion is comprised of Base Rate Loans). If no
such notice is timely received before the end of an Interest Period for any Group
of Euro-Dollar Loans, the Borrower shall be deemed to have elected that such
Group of Loans be converted to Base Rate Loans at the end of such Interest
Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
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as from time to time in effect. Such customary fees and standard costs and charges
are due and payable on demand and are nonrefundable.
(e) Amendment Fees. The Borrower agrees to pay to the
Administrative Agent for the account of each Bank on the FourthFifth
Amendment Effective Date the upfront fees required to be paid on such date, as
set forth in the 20192021 Fee Letters.
Section 2.010. Optional Termination or Reduction of Commitments.
During the Revolving Credit Period, the Borrower may, upon at least three
Domestic Business Days’ notice to the Administrative Agent (which notice the
Administrative Agent will promptly deliver to the Banks), (i) terminate all
Commitments at any time, if no Loans are outstanding at such time or (ii) ratably
reduce from time to time by an aggregate amount of $10,000,000 or any larger
multiple of $1,000,000, the aggregate amount of the Commitments in excess of
the aggregate outstanding principal amount of the Loans.
Section 2.011. Mandatory Termination of Commitments. The
Commitments shall terminate on the Commitment Termination Date.
Section 2.012. Optional Prepayments. (a) Subject in the case of Euro-
Dollar Loans to Section 2.14, the Borrower may (i) on any Domestic Business
Day, upon notice to the Administrative Agent, prepay any Group of Base Rate
Loans (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 8.01(a)) or (ii) upon at least three Euro-Dollar Business Days’
notice to the Administrative Agent, prepay any Group of Euro-Dollar Loans, in
each case in whole at any time, or from time to time in part in amounts
aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the date
of prepayment. Each such optional prepayment shall be applied to prepay ratably
the Loans of the several Banks included in such Group of Loans (or such Money
Market Borrowing).
(b) Except as provided in Section 2.12(a), the Borrower may not prepay
all or any portion of the principal amount of any Money Market Loan prior to the
maturity thereof.
(c). Upon receipt of a notice of prepayment pursuant to this Section, the
Administrative Agent shall promptly notify each Bank of the contents thereof and
of such Bank’s ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
Section 2.013. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans or L/C Obligations
and of fees hereunder, not later than 1:00 P.M. (New York City time) on the date
when due, in Federal or other funds immediately available in New York City, to
the Administrative Agent at its address referred to in Section 9.01.
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circumstances whatsoever in making or failing to make payment under any Letter
of Credit, except that, anything in such clauses (i) through (iv) to the contrary
notwithstanding, the Borrower shall have a claim against such Issuing Bank, and
such Issuing Bank shall be liable to the Borrower, to the extent of any direct (but
not special, indirect, consequential or punitive) damages suffered by the Borrower
that the Borrower proves were caused by (A) such Issuing Bank’s willful
misconduct or gross negligence as determined in a final, non-appealable judgment
by a court of competent jurisdiction in determining whether documents presented
under any Letter of Credit comply with the terms thereof or (B) such Issuing
Bank’s willful failure to make lawful payment under any Letter of Credit after the
presentation to it by the beneficiary of a draft and certificate(s) strictly complying
with the terms and conditions of any Letter of Credit. In furtherance and not in
limitation of the foregoing, such Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
(l) Replacement or Addition of Issuing Bank. An Issuing Bank may
be replaced or added at any time by written agreement among the Borrower, the
Administrative Agent (unless, in the case of the replacement of an Issuing Bank,
the successor Issuing Bank is a Bank and, if applicable, such agreement not to be
unreasonably withheld, conditioned or delayed) and the successor or additional
Issuing Bank, as applicable. The Administrative Agent shall notify the Banks of
any such replacement or addition, as applicable, of an Issuing Bank. Where an
Issuing Bank is replaced, at the time such replacement shall become effective, the
Borrower shall pay all unpaid fees accrued for account of the replaced Issuing
Bank. Furthermore, from and after the effective date of such replacement, the
successor Issuing Bank, shall have all the rights and obligations of the replaced
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter. References herein to the term “Issuing Bank” shall be deemed to refer
to any successor or additional Issuing Bank, as applicable, or to any previous
Issuing Bank, or to any successor or additional Issuing Banks, as applicable, and
all previous Issuing Banks, as the context shall require. After the replacement of
an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto
and shall continue to have all the rights and obligations of an Issuing Bank under
this Agreement with respect to Letters of Credit issued by it prior to such
replacement, but shall not be required to issue additional Letters of Credit.
Section 2.021. [Reserved]
Section 2.022. Extension of Commitment Termination Date. (a) The
Borrower may, by notice to the Administrative Agent (which shall promptly
notify the Banks) not earlier than 45 days prior to any anniversary of the Third
Amendment Effective DateNovember 28, 2021 (each, an “Anniversary Date”)
but no later than 30 days prior to any such Anniversary Date, request that each
Bank extend such Bank’s Commitment Termination Date for an additional one
year after the Commitment Termination Date then in effect for such Bank
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that is one year after the Existing Commitment Termination Date, and each
Additional Commitment Bank shall thereupon become a “Bank” for all purposes
of this Agreement.
a. Notwithstanding the foregoing, the extension of any Bank’s Existing
Commitment Termination Date (and the accession of each Additional
Commitment Bank) pursuant to this Section shall be effective on the
Extension Date only if (i) the following statements shall be true: (A) no
Default or Event of Default has occurred and is continuing, or would
result from the extension of the Existing Commitment Termination Date
and (B) all the representations and warranties of the Borrower set forth in
this Agreement shall be true and correct in all material respects (without
duplication of materiality qualifications otherwise set forth in such
representations and warranties, before and after giving effect to such
extension), and (ii) on or prior to the Extension Date the Administrative
Agent shall have received the following, each dated the Extension Date
and in form and substance satisfactory to the Administrative Agent: (1) a
certificate signed by any one of the Chief Financial Officer, the Chief
Executive Officer, the Treasurer, an Assistant Secretary-Treasurer, the
Controller or the Vice President, Capital Markets Relations of the
Borrower to the effect that the conditions set forth in clauses (c) through
(g), inclusive, of Section 3.03 have been satisfied as of the Extension Date
and, in the case of clauses (c), (d) and (g), setting forth in reasonable detail
the calculations required to establish such compliance, (2) a certificate of
an officer of the Borrower acceptable to the Administrative Agent stating
that all consents, authorizations, notices and filings required or advisable
in connection with the extension of the Existing Commitment Termination
Date are in full force and effect, and the Administrative Agent shall have
received evidence thereof reasonably satisfactory to it, (3) an opinion of
the General Counsel of the Borrower, substantially in the form of Exhibit
F hereof, provided that an enforceability opinion under New York law,
that is reasonably acceptable to the Administrative Agent, shall be
furnished by the Borrower’s New York counsel, Norton Rose Fulbright
USFoley & Lardner LLP, subject to customary assumptions,
qualifications and limitations and (4) such other documents reasonably
requested by the Administrative Agent in connection with any such
transaction.
(g) Subject to subsection (e) above, the Commitment of any Non-Extending
Bank that has not been replaced pursuant to subsection (d) above shall (i) automatically
terminate on its Existing Commitment Termination Date or at the option of the Borrower,
with respect to the Commitments of all Non-Extending Banks that have advised the
Borrower of their unwillingness to agree to an extension in response to a notice delivered
pursuant to Section 2.22(a), terminate on any Anniversary Date occurring prior thereto
(in each case without regard to any extension by any other Bank); it being understood and
agreed that such Non-Extending Bank’s participations in Letters of Credit outstanding on
such Existing Commitment Termination Date or such Anniversary Date, as the
case may be, shall terminate thereon and any and all fees and
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expenses owed to each Non-Extending Bank as of that date shall be paid by the
Borrower to such Non-Extending Bank.
ARTICLE 3
CONDITIONS
Section 3.01. Effectiveness. (i) The Existing Credit Agreement became
effective on the Effective Date and (ii) this Agreement shall become effective on
the date (the “Amendment Effective Date”) on which the Administrative Agent
shall have received the following documents or other items, each dated the
Amendment Effective Date unless otherwise indicated:
(a) receipt by the Administrative Agent of counterparts hereof signed by
each of the parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Administrative Agent in
form satisfactory to it in facsimile transmission, electronic submission or other
writing from such party of execution of a counterpart hereof by such party);
(b) receipt by the Administrative Agent for the account of each Bank that
has requested a Note of a duly executed Note dated on or before the Amendment
Effective Date complying with the provisions of Section 2.05;
(c). receipt by the Administrative Agent of an opinion of the General
Counsel of the Borrower, substantially in the form of Exhibit F hereto, provided
that an enforceability opinion under New York law, that is reasonably acceptable
to the Administrative Agent, shall be furnished by the Borrower’s New York
counsel, Norton Rose Fulbright USFoley & Lardner LLP, subject to customary
assumptions, qualifications and limitations;
(d) receipt by the Administrative Agent of a certificate signed by any one
of the Chief Financial Officer, the Chief Executive Officer, an Assistant
Secretary-Treasurer, the Controller or the Vice President, Capital Markets
Relations of the Borrower to the effect that the conditions set forth in clauses (c)
through (g), inclusive, of Section 3.03 have been satisfied as of the Amendment
Effective Date and, in the case of clauses (c), (e) and (g), setting forth in
reasonable detail the calculations required to establish such compliance;
(e) receipt by the Administrative Agent, with a copy for each Bank, of a
certificate of an officer of the Borrower acceptable to the Administrative Agent
stating that all consents, authorizations, notices and filings required or advisable
in connection with this Agreement are in full force and effect, and the
Administrative Agent shall have received evidence thereof reasonably
satisfactory to it;
(f) receipt by the Administrative Agent and the Syndication Agent (or their
respective assigns) and by each Bank Party of all fees required to be paid in
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the respective amounts heretofore mutually agreed in writing, and all expenses for which
invoices have been presented, on or before the Amendment Effective Date;
(g) receipt by the Administrative Agent and the Banks of all documentation and
other information requested by the Administrative Agent or such Bank and
required by regulatory authorities under applicable “know your customer” and
anti-money laundering rules and regulations, including, without limitation, the
USA PATRIOT Act (Title III of Pub. L. 107-56); and
(h) receipt by the Administrative Agent of all documents the Required Banks
may reasonably request relating to the existence of the Borrower, the corporate
authority for and the validity of this Agreement and the Notes, and any other
matters relevant hereto, all in form and substance reasonably satisfactory to the
Administrative Agent.
The Administrative Agent shall promptly notify the Borrower and the
Bank Parties of the Amendment Effective Date, and such notice shall be
conclusive and binding on all parties hereto.
Section 3.02. [Reserved]
Section 3.03. Borrowings and L/C Credit Extensions. The obligation of
any Bank to make a Loan on the occasion of any Borrowing and the obligation of
the Issuing Bank to issue, amend or increase the principal amount thereof or
extend any Letter of Credit (other than an extension pursuant to an Auto-
Extension Letter of Credit in accordance with the original terms thereof) is subject
to the satisfaction of the following conditions, in each case at the time of such
Borrowing or L/C Credit Extensions and immediately thereafter:
(a) The Amendment Effective Date shall have occurred on or prior to
November 19, 2015, the First Amendment Effective Date shall have occurred on
or prior to November 18, 2016, the Second Amendment Effective Date shall have
occurred on or prior to November 20, 2017, the Third Amendment Effective Date
shall have occurred on or prior to November 28, 2018 and, the Fourth
Amendment Effective Date shall have occurred on or prior to November 26, 2019
and the Fifth Amendment Effective Date shall have occurred on or prior to
June 7, 2021;
(b) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02 or 2.03, as the case may be;
(c). the fact that the Borrower is in compliance with Section 7.11 of the
1994 Indenture, as such Indenture is in effect as of the Effective Date and the
Amendment Effective Date;
(d) Prior to the Commitment Termination Date, the fact that the sum of
(i) the aggregate outstanding principal amount of the Loans and (ii) the
Outstanding Amount of L/C Obligations will not exceed the Aggregate
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Commitments (as such Commitments may be increased or decreased
(e) the fact that no Default shall have occurred and be continuing;
(f) the fact that the representations and warranties of the Borrower (in the
case of a Borrowing or L/C Credit Extension, other than the representations set
forth in Section 4.02(c), Section 4.03 and Section 4.14) contained in this
Agreement shall be true in all material respects (other than any such
representations or warranties that, by their terms, refer to a specific date other than
the date of Borrowing or L/C Credit Extension, in which case such representations
and warranties shall be true in all material respects as of such specific date);
provided that, (i) in the case of the representations set forth in Section 4.02(a) and
Section 4.02(b) being made after the Amendment Effective Date shall be deemed
to refer to the most recent balance sheets and statements furnished pursuant to
Section 5.03(b)(ii) and Section 5.03(b)(i), respectively and (ii) in the case of the
representation set forth in Section 4.06 being made after the FourthFifth
Amendment Effective Date, such representation shall be true except to the extent
not reasonably expected to have a material adverse effect on the business,
financial position or results of operations of the Borrower; and
(g) the fact that (i) there shall be no collateral securing Bonds issued
pursuant to any Indenture of a type other than the types of collateral permitted to
secure Bonds issued pursuant to such Indenture as of the date hereof, (ii) the
allowable amount of eligible collateral then pledged under any Indenture shall not
exceed 150% of the aggregate principal amount of Bonds then outstanding under
such Indenture and (iii) no collateral shall secure Bonds other than (A) eligible
collateral under such Indenture, the allowable amount of which is included within
the computation under subsection (ii) above or (B) collateral previously so
pledged which ceases to be such eligible collateral not as a result of any acts or
omissions to act of the Borrower (other than the declaration of an “event of
default” as defined in a mortgage which results in the exercise of any right or
remedy described in such mortgage).
Each Borrowing or L/C Credit Extension hereunder shall be deemed to be
a representation and warranty by the Borrower on the date of such Borrowing or
L/C Credit Extension as to the facts specified in clauses (c), (d), (e), (f) and (g) of
this Section 3.03.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower makes the following representations, warranties and
agreements, which shall survive the execution and delivery of this Agreement and
the Notes and the making of the Loans or L/C Credit Extensions:
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and the related unaudited consolidated statements of operations, changes in equity
and cash flow of the Borrower and its Consolidated Entities for such quarter and
for the portion of the Borrower’s fiscal year ended at the end of such quarter,
setting forth in each case in comparative form the figures for the corresponding
quarter and the corresponding portion of the Borrower’s previous fiscal year, all
in reasonable detail and certified (subject to normal year-end adjustments) as to
fairness of presentation in accordance with U.S. GAAP in all material respects
and consistency (except for changes concurred in by the Borrower’s independent
public accountants) by the Chief Executive Officer, the Chief Financial Officer,
an Assistant Secretary-Treasurer or the Controller of the Borrower;
(ii) as soon as practicable and in any event within the earlier of
(i) two Domestic Business Days after filing with the Securities and Exchange
Commission and (ii) 120 days after the close of each fiscal year of the Borrower,
as at the end of and for the fiscal year just closed, consolidated balance sheets of
the Borrower and its Consolidated Entities and the related consolidated statements
of operations, changes in equity and cash flow for such fiscal year for the
Borrower and its Consolidated Entities, all in reasonable detail and certified
(without any qualification as to the scope of the audit) by KPMG LLP or other
independent public accountants of nationally recognized standing selected by the
Borrower, who shall have audited the books and accounts of the Borrower for
such fiscal year;
(iii) with reasonable promptness, copies of all regular and
periodical reports (including Current Reports on Form 8-K) filed with, or
furnished to, the Securities and Exchange Commission;
(iv) promptly after the public announcement of, or promptly
after receiving a written notice of, a change (whether an increase or decrease) in
any rating issued by either S&P or, Moody’s or Fitch, solely to the extent that the
Borrower is then under an existing contract with such agency for the provision of
ratings information pertaining to any securities of, or guaranteed by, the Borrower
or any of its Subsidiaries or affiliates, a notice setting forth such change; and
(v) with reasonable promptness, such other information
respecting the business, operations and financial condition of the Borrower or any
of its Subsidiaries or any Joint Venture as any Bank may, from time to time,
reasonably request, including, without limitation, with respect to the performance
and observance by the Borrower of the covenants and conditions contained in this
Agreement.
Reports or financial information required to be delivered pursuant to
clauses (b)(i), (b)(ii) and (b)(iii) of this Section 5.03 shall be deemed to have been
delivered on the date on which the Borrower posts such reports or financial
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continue to make its own credit decisions in taking or not taking any action under
this Agreement.
Section 7.08. Successor Administrative Agent. The Administrative Agent
may, upon giving 5 Domestic Business Days prior written notice to the Borrower,
and for so long as long as no Event of Default has occurred and is continuing, at
the request of the Borrower, shall, resign at any time by giving written notice
thereof to the Banks and the Borrower. Upon any such resignation, the Borrower
shall have the right, with the consent of the Required Banks, such consent not to
be unreasonably withheld, conditioned or delayed, to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Borrower, and shall have accepted such appointment, within 15
days after the retiring Administrative Agent gives notice of resignation, then the
retiring Administrative Agent may, on behalf of the Bank Parties, appoint a
successor Administrative Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $1,000,000,000. Upon the
acceptance of its appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent’s resignation hereunder as Administrative Agent, the provisions of this
Article shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent.
Section 7.09. Co-Documentation Agents, Syndication Agent and Co-Lead
Arrangers Not Liable. Nothing in this Agreement shall impose upon the Co-
Documentation Agents, the Syndication Agent, or the Co-Lead Arrangers, each in
such capacity, any duties or responsibilities whatsoever.
Section 7.010. Calculations. The Administrative Agent shall not be liable
for any calculation, apportionment or distribution of payments made by it in good
faith. If such calculation, apportionment or distribution is subsequently
determined to have been made in error, the sole recourse of any Lender to whom
payment was due but not made shall be to recover from the other Banks any
payment in excess of the amount to which they are determined to be entitled or, if
the amount due was not paid by the Borrower, to recover such amount from the
Borrower.
Section 7.011. Erroneous Payments.
(a) If the Administrative Agent notifies a Bank, Issuing Bank, or
any Person who has received funds on behalf of a Bank or Issuing Bank,
such Bank or Issuing Bank (any such Bank, Issuing Bank or other recipient,
a “Payment Recipient”) that the Administrative Agent has determined in its
sole discretion (whether or not after receipt of any notice under immediately
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succeeding clause (b)) that any funds received by such Payment Recipient
from the Administrative Agent or any of its affiliates were erroneously
transmitted to, or otherwise erroneously or mistakenly received by, such
Payment Recipient (whether or not known to such Bank, Issuing Bank or
other Payment Recipient on its behalf) (any such funds, whether received as
a payment, prepayment or repayment of principal, interest, fees, distribution
or otherwise, individually and collectively, an “Erroneous Payment”) and
demands the return of such Erroneous Payment (or a portion thereof), such
Erroneous Payment shall at all times remain the property of the
Administrative Agent and shall be segregated by the Payment Recipient and
held in trust for the benefit of the Administrative Agent, and such Bank or
Issuing Bank shall (or, with respect to any Payment Recipient who received
such funds on its behalf, shall cause such Payment Recipient to) promptly,
but in no event later than one Business Day thereafter, return to the
Administrative Agent the amount of any such Erroneous Payment (or
portion thereof) as to which such a demand was made, in same day funds (in
the currency so received), together with interest thereon in respect of each
day from and including the date such Erroneous Payment (or portion
thereof) was received by such Payment Recipient to the date such amount is
repaid to the Administrative Agent in same day funds at the greater of the
Federal Funds Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation from
time to time in effect. A notice of the Administrative Agent to any Payment
Recipient under this clause (a) shall be conclusive, absent manifest error.
(b) Without limiting immediately preceding clause (a), each Bank
and Issuing Bank hereby further agrees that if it receives a payment,
prepayment or repayment (whether received as a payment, prepayment or
repayment of principal, interest, fees, distribution or otherwise) from the
Administrative Agent (or any of its affiliates) (x) that is in a different amount
than, or on a different date from, that specified in a notice of payment,
prepayment or repayment sent by the Administrative Agent (or any of its
affiliates) with respect to such payment, prepayment or repayment, (y) that
was not preceded or accompanied by a notice of payment, prepayment or
repayment sent by the Administrative Agent (or any of its affiliates), or (z)
that such Bank or Issuing Bank, or other such recipient, otherwise becomes
aware was transmitted, or received, in error or by mistake (in whole or in
part) in each case:
(i) (A) in the case of immediately preceding clauses (x) or (y),
an error shall be presumed to have been made (absent written
confirmation from the Administrative Agent to the contrary) or (B)
an error has been made (in the case of immediately preceding clause
(z)), in each case, with respect to such payment, prepayment or
repayment; and
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(ii) such Bank or Issuing Bank shall (and shall cause any other
recipient that receives funds on its respective behalf to) promptly (and, in all
events, within one Business Day of its knowledge of such error) notify the
Administrative Agent of its receipt of such payment, prepayment or
repayment, the details thereof (in reasonable detail) and that it is so notifying
the Administrative Agent pursuant to this Section 7.11(b).
(c). Each Bank and Issuing Bank hereby authorizes the
Administrative Agent to set off, net and apply any and all amounts at any
time owing to such Bank or Issuing Bank under this Agreement, or otherwise
payable or distributable by the Administrative Agent to such Bank or
Issuing Bank from any source, against any amount due to the Administrative
Agent under immediately preceding clause (a) or under the indemnification
provisions of this Agreement.
(d) In the event that an Erroneous Payment (or portion thereof) is
not recovered by the Administrative Agent for any reason, after demand
therefor by the Administrative Agent in accordance with immediately
preceding clause (a), from any Bank or Issuing Bank that has received such
Erroneous Payment (or portion thereof) (and/or from any Payment
Recipient who received such Erroneous Payment (or portion thereof) on its
respective behalf) (such unrecovered amount, an “Erroneous Payment
Return Deficiency”), upon the Administrative Agent’s notice to such Bank or
Issuing Bank at any time, (i) such Bank or Issuing Bank shall be deemed to
have assigned its Loans (but not its Commitments) in an amount equal to the
Erroneous Payment Return Deficiency (or such lesser amount as the
Administrative Agent may specify) (such assignment of the Loans (but not
Commitments), the “Erroneous Payment Deficiency Assignment”) at par
plus any accrued and unpaid interest (with the assignment fee to be waived
by the Administrative Agent in such instance), and is hereby (together with
the Borrower) deemed to execute and deliver an Assignment and Assumption
Agreement with respect to such Erroneous Payment Deficiency Assignment,
and such Bank or Issuing Bank shall deliver any Notes evidencing such
Loans to the Borrower or the Administrative Agent, (ii) the Administrative
Agent as the assignee Bank shall be deemed to acquire the Erroneous
Payment Deficiency Assignment, (iii) upon such deemed acquisition, the
Administrative Agent as the assignee Bank shall become a Bank or Issuing
Bank, as applicable, hereunder with respect to such Erroneous Payment
Deficiency Assignment and the assigning Bank or assigning Issuing Bank
shall cease to be a Bank or Issuing Bank, as applicable, hereunder with
respect to such Erroneous Payment Deficiency Assignment, excluding, for the
avoidance of doubt, its obligations under the indemnification provisions of
this Agreement and its applicable Commitments which shall survive as to
such assigning Bank or assigning Issuing Bank and (iv) the Administrative
Agent may reflect in the register its ownership interest in the Loans subject
to the Erroneous Payment Deficiency Assignment. The Administrative Agent
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may, in its discretion, sell any Loans acquired pursuant to an Erroneous
Payment Deficiency Assignment in compliance with the terms set forth in
Section 9.06 hereof and upon receipt of the proceeds of such sale, the
Erroneous Payment Return Deficiency owing by the applicable Bank or
Issuing Bank shall be reduced by the net proceeds of the sale of such Loan
(or portion thereof), and the Administrative Agent shall retain all other
rights, remedies and claims against such Bank or Issuing Bank (and/or
against any recipient that receives funds on its respective behalf). For the
avoidance of doubt, no Erroneous Payment Deficiency Assignment will
reduce the Commitments of any Bank or Issuing Bank and such
Commitments shall remain available in accordance with the terms of this
Agreement. In addition, each party hereto agrees that, except to the extent
that the Administrative Agent has sold a Loan (or portion thereof) acquired
pursuant to an Erroneous Payment Deficiency Assignment, and irrespective
of whether the Administrative Agent may be equitably subrogated, the
Administrative Agent shall be contractually subrogated to all the rights and
interests of the applicable Bank or Issuing Bank under this Agreement with
respect to each Erroneous Payment Return Deficiency.
(e) The parties hereto agree that an Erroneous Payment shall not
pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by
the Borrower, except, in each case, to the extent such Erroneous Payment is,
and solely with respect to the amount of such Erroneous Payment that is,
comprised of funds received by the Administrative Agent from the Borrower
for the purpose of making a payment or prepayment of the Obligations.
(f) To the extent permitted by Applicable Law, no Payment
Recipient shall assert any right or claim to an Erroneous Payment, and
hereby waives, and is deemed to waive, any claim, counterclaim, defense or
right of set-off or recoupment with respect to any demand, claim or
counterclaim by the Administrative Agent for the return of any Erroneous
Payment received, including without limitation waiver of any defense based
on “discharge for value” or any similar doctrine.
(g) Each party’s obligations, agreements and waivers under this
Section 7.11 shall survive the resignation or replacement of the
Administrative Agent, the termination of the Commitments and/or the
repayment, satisfaction or discharge of all obligations (or any portion
thereof) under this Agreement.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period for any Fixed Rate Borrowing:
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(a) the Administrative Agent determines that the London Interbank
Offered Rate is not available in the manner set forth in the definition of London
Interbank Offered Rate for any such Interest Period (each such Interest Period an
“Affected Interest Period”), or
(b) in the case of a Committed Borrowing, Banks having 50% or more
of the aggregate amount of the Commitments advise the Administrative Agent in
writing that the Adjusted London Interbank Offered RateBenchmark, as
determined by the Administrative Agent, will not adequately and fairly reflect the
cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, in
either the case of clause (a) or clause (b) above, the Administrative Agent shall
forthwith give notice thereof to the Borrower and the Banks, whereupon until the
Administrative Agent notifies the Borrower that the circumstances giving rise to
such suspension no longer exist, (i) the obligations of the Banks to make Euro-
Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar
Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be
converted into a Base Rate Loan on the last day of the then current Interest Period
applicable thereto. Unless the Borrower notifies the Administrative Agent at least
two Domestic Business Days before the date of any Fixed Rate Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, (i) if such Fixed Rate Borrowing is a Euro-Dollar
Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and
(ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the
Money Market LIBOR Loans comprising such Borrowing shall bear interest for
each day from and including the first day to but excluding the last day of the
Interest Period applicable thereto at the Base Rate for such day.
Section 8.02. Illegality. If a Change in Law shall make it unlawful or impossible
for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-
Dollar Loans and such Bank shall so notify the Administrative Agent, the Administrative
Agent shall forthwith give notice thereof to the other Banks and the Borrower,
whereupon until such Bank notifies the Borrower and the Administrative Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of such Bank
to make Euro-Dollar Loans or to convert outstanding Loans into Euro-Dollar Loans or
continue outstanding Loans as Euro-Dollar Loans, shall be suspended. Before giving any
notice to the Administrative Agent pursuant to this Section, such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need for giving
such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to
such Bank. The Borrower hereby agrees to pay the reasonable costs and expenses
incurred by such Bank in connection with any such designation. If such Bank shall
determine that it may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall
immediately prepay in full the then-outstanding principal amount of each such Euro-
Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each
such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal
amount
101
Attn: Capital Markets Relations
Phone: (703) 467-7402467-1628
Fax: (703) 467-5178
Email: BankingRelations@nrucfc.coop
with a copy to:
National Rural Utilities Cooperative Finance Corporation
20701 Cooperative Way
Dulles, Virginia 20166
Attn: General Counsel
Phone: (703) 467-7404467-1872
Fax: (703) 467-5651
Email: Roberta.Aronson@nrucfc.coop
(x) in the case of the Administrative Agent:
JPMorgan Chase Bank, N.A.
500 Stanton Christiana Road, Ops 2NCC5, Floor 031
Newark, DE 19713
Attn: Ido Yehuda
Fax: 302-634-1911Chris Bickert
E-mail: christopher.bickert@chase.com
Telephone: 302-634-1417484-889-2178
with a copy to:
JPMorgan Chase Bank, N.A.
383 Madison Ave, 24th Floor
New York, NY 10079
Attn: Bridget KillackeyNancy R. Barwig
Fax: 212-270-3308
E-mail: nancy.r.barwig@jpmorgan.com
Telephone: 212-270-3308972-324-1721
(y) in the case of any Bank, at its address, email address or telecopier number set
forth in its Administrative Questionnaire or (z) in the case of any other party, such
other address, email address or telecopier number as such party may hereafter
specify for the purpose by notice to the Administrative Agent and the Borrower.
Each such notice, request, direction, consent, approval or other communication
shall be effective (i) if given by facsimile transmission or other electronic
submission, when such facsimile transmission or other electronic submission is
transmitted to the facsimile number or email address specified in this Section and
receipt is confirmed or (ii) if given by any other means, when delivered or
received at the address specified in this Section; provided that (A) notices to the
Administrative Agent under Article 2 or Article 8 shall also be confirmed by
105
(b) of this Section. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process in
any other manner permitted by law.
Section 9.09. Counterparts; Integration. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as
delivery of a manually executed counterpart of this Agreement. The words
“execution,” “signed,” “signature,” and words of similar import in this
Agreement shall be deemed to include electronic or digital signatures or the
keeping of records in electronic form, each of which shall be of the same
effect, validity and enforceability as manually executed signatures or a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for under applicable law, including the Electronic Signatures in
Global and National Commerce Act of 2000, the Electronic Signatures and
Records Act of 1999, or any other similar state Laws based on the Uniform
Electronic Transactions Act. This Agreement constitutes the entire agreement
and understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. Notwithstanding the foregoing, if the Administrative Agent or any
Lender reasonably requests a manually executed counterpart, the Company
shall deliver such manually executed counterpart.
Section 9.010. Several Obligations. The obligations of the Bank Parties
hereunder are several. Neither the failure of any Bank Party to carry out its
obligations hereunder nor of this Agreement to be duly authorized, executed and
delivery by any Bank Party shall relieve any other Bank Party of its obligations
hereunder (or affect the rights hereunder of such other Bank). No Bank Party
shall be responsible for the obligations of, or any action taken or omitted by, any
other Bank Party hereunder.
Section 9.011. Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or obligations, or
of such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
Section 9.012. Confid
entiality. The Administrative Agent and each Bank Party represent that
they will maintain the confidentiality of any written or oral information provided
by or on behalf of the Borrower or any of its Consolidated
112
Default or other breach, violation, default or noncompliance with the provisions
of the Credit Documentation that might otherwise be caused by or be attributable
to, the “ICC Transactions” as such term is defined in Schedule 9.15 hereto, and
(b) the ICC Transactions, the “ICC Assets,” the “ICC Related Companies” (as
such terms are respectively defined in Schedule 9.15 hereto), and the assets,
liabilities and operations of the ICC Related Companies (including without
limitation any circumstances, events, occurrences, actions or omissions relating
to, of or by any of the ICC Related Companies), are hereby excluded from, and
shall not be taken into account in applying, interpreting or determining
compliance with, the provisions of the Credit Documentation (including without
limitation, the definitions, representations, warranties, covenants, agreements,
conditions and events of default set forth in the Credit Documentation) and may
be excluded from any certifications, notices, reports or statements delivered or to
be delivered pursuant to the Credit Documentation. Without limiting the
generality of the foregoing, the defined terms “ERISA Group,” “Joint Venture,”
“Member” and “Subsidiary,” among others, as used in the Credit Documentation
shall not include the ICC Related Companies. Notwithstanding the preceding
provisions of this Section 9.15, any new investments in the ICC Related
Companies by purchase of equity and/or debt securities, funding (through capital
contributions and/or newly originated loans) of working capital or capital
expenditure needs of the ICC Related Companies, payment by RTFC (as such
term is defined in Schedule 9.15 hereto) or the Borrower of claims of other
creditors of the ICC Related Companies, and/or provision of any new guarantees,
letters of credit and/or other new credit support or credit enhancement of the debt
or other obligations of the ICC Related Companies, in the case of each of the
foregoing, made or provided by the Borrower and/or RTFC at any time from
December 9, 2008 shall not exceed in the aggregate (but without double-counting
any such new investments) $275,000,000 without the consent of the Required
Banks. To the extent that the Credit Documentation provides that any of the ICC
Transactions may be implemented if certain advance notice thereof is given, all
such conditions or requirements of advance notice shall be deemed to have been
complied with and all such notices shall be deemed to have been duly and timely
given in accordance with the terms of the Credit Documentation.
Section 9.016. Acknowledgement and Consent to Bail-In of Affected
Financial Institutions. Notwithstanding anything to the contrary in this
Agreement or any other agreement, arrangement or understanding among any
such parties, each party hereto acknowledges that any liability of any
EEAAffected Financial Institution arising under this Agreement may be subject
to the Write-Down and Conversion Powers of an EEAa Resolution Authority and
agrees and consents to, and acknowledges and agrees to be bound by:
(a) the application of any Write-Down and Conversion Powers by an
EEAthe applicable Resolution Authority to any such liabilities arising
hereunder which may be payable to it by any party hereto that is an
EEAAffected Financial Institution; and
114
(b) the effects of any Bail-In Action on any such liability, including, if
applicable (i) a reduction in full or in part or cancellation of any such
liability, (ii) a conversion of all, or a portion of, such liability into shares
or other instruments of ownership in such EEAAffected Financial
Institution, its parent entity, or a bridge institution that may be issued to it
or otherwise conferred on it, and that such shares or other instruments of
ownership will be accepted by it in lieu of any rights with respect to any
such liability under this Agreement or any other Loan
Documentagreement, arrangement or understanding among any such
parties or (iii) the variation of the terms of such liability in connection
with the exercise of the Write-Down and Conversion Powers of any
EEAthe applicable Resolution Authority.
[remainder of page intentionally left blank]
115
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and year
first above written.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE
CORPORATION
By: /s/ J. Andrew DonLing Wang
Name: J. Andrew DonLing Wang
Title: Senior Vice President and Chief
Financial Officer
Signature Page to 20232025 Facility
MUFG BANK, LTD. (F/K/A THE BANK
OF TOKYO-MITSUBISHI UFJ,
LTD.)BANK, LTD., as a Bank
By: /s/ Robert MacFarlaneMichael
Agrimis
Name: RobertMac FarlaneMichael
Agrimis
Title: Director
Signature Page to 20232025 Facility
ROYAL BANK OF CANADA
By: /s/ Rahul D. ShahMark Condon
Name: Rahul D. ShahMark Condon
Title: Authorized Signatory
Signature Page to 20232025 Facility
SUNTRUSTTRUIST BANK, as a Lender
By: /s/ Shannon JuhanJustin Lien
Name: Shannon JuhanJustin Lien
Title: Director
Signature Page to 20232025 Facility
NATIONAL COOPERATIVE SERVICES
CORPORATION, as a Bank
By: /s/ J. Andrew DonLing Wang
Name: J. Andrew DonLing Wang
Title: Senior Vice President and
Chief Financial Officer
Signature Page to 20232025 Facility
AGENT SCHEDULE
Institution
JPMorgan Chase Bank, N.A.
Mizuho Bank, Ltd.
MUFG Bank, Ltd. (f/k/aThe Bank of
Tokyo-Mitsubishi UFJ, Ltd.)
PNC Bank, National Association
The Bank of Nova Scotia
Royal Bank of Canada
Title
Administrative Agent
Syndication Agent
Co-Documentation Agent
Co-Documentation Agent
Co-Documentation Agent
Co-Documentation Agent
Agent Schedule
EXISTING COMMITMENT SCHEDULE
Institution
Bank
JPMorgan Chase Bank, N.A.
Mizuho Bank (USA)
Royal Bank of Canada
The Bank of Nova Scotia
MUFG Bank, Ltd. (f/k/a The Bank of
Tokyo-Mitsubishi UFJ, Ltd.)
KeyBank National Association
PNC Bank, National Association
US Bank National Association
SunTrustTruist Bank
Regions Bank
Apple Bank for Savings
Total:
Commitment Prior
to the FourthFifth
Amendment
Effective
Loans
Outstanding on
the FourthFifth
Amendment
Effective Date
$180,000,000.0015
0,000,000.00
$187,500,000.0015
0,000,000.00
$187,500,000.0015
0,000,000.00
$187,500,000.0015
0,000,000.00
187,500,000.0015
0,000,000.00
$180,000,000.00
$150,000,000.00
$125,000,000.00
$125,000,000.00
$75,000,000.00
$7,500,000.005,000
,000.00
$1592,500,000.001 ,
410,00,000.00
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Existing Commitment Schedule
COMMITMENT SCHEDULE
Commitment Schedule
Bank
JPMorgan Chase Bank, N.A.
Mizuho Bank, Ltd.
Royal Bank of Canada
The Bank of Nova Scotia
MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.)
KeyBank National Association
PNC Bank, National Association
US Bank National Association
SunTrustTruist Ban
MUFG Bank, Ltd.
Regions Bank
Apple Bank for Savings
Total:
Commitment
$150,000,000.0
0
$150,000,000.0
0
$150,000,000.0
0
$150,000,000.0
0
$150,000,000.0
0
$180,000,000.0
0
$150,000,000.0
0
$125,000,000.0
0
$125,000,000.0
0
$100,000,000.0
0
$75,000,000.00
$5,000,000.00
$1,410,000,000.
001,35
5,000,000.00
Commitment Schedule
EXISTING LETTERS OF CREDIT
L/C# TFTX-374881 - Deseret Generation & Transmission Cooperative
Beneficiary: Rockwood Casualty Insurance Company
Amount:$1,000,0002,000,000
Effective Date: October 16, 2012
Expiration Date: : November 28, 2018December 31, 2021
L/C# SLCLSTL11173 - Allamakee-Clayton Electric Cooperative, Inc.
Beneficiary: Universal Service Administrative Company
Amount: $436,0801,017,520
Effective Date: March 18, 2016
Expiration Date: March 18, 20182022
Existing Letters of Credit
PRICING SCHEDULE
The “Euro-Dollar Margin”, the “Base Rate Margin” and the
“Facility Fee Rate” for the Borrower at any date are the respective percentages set
forth below in the applicable row and column based upon the Status of the Borrower
that exists on such date.
Status
Euro-Dollar
Margin
Base Rate
Margin
Facility Fee
Rate
Level I
Level II
Level III
Level IV
Level V
0.6900%
0.8000%
0.9000%
1.0000%
0%
0%
0%
0%
0.0600%
0.0750%
0.1000%
0.1250%
1.1000%
0.1000%
0.1500%
For purposes of this Pricing Schedule, the following terms have the
following meanings, subject to the concluding paragraph of this Pricing Schedule:
“Fitch” means Fitch Ratings, Inc.
“Level I Status” exists at any date if, at such date, the Borrower’s
Unsecured Long-Term Debt is rated AA- or higher by S&P or, Aa3 or higher by
Moody’s or AA- or higher by Fitch.
“Level II Status” exists at any date if, at such date, (i) the Borrower’s
Unsecured Long-Term Debt is rated A+ or higher by S&P or, A1 or higher by
Moody’s or A+ or higher by Fitch, and (ii) Level I Status does not exist.
“Level III Status” exists at any date if, at such date, (i) the
Borrower’s Unsecured Long-Term Debt is rated A or higher by S&P or, A2 or higher
by Moody’s or A or higher by Fitch, and (ii) Level II Status does not exist.
“Level IV Status” exists at any date if, at such date, (i) the
Borrower’s Unsecured Long-Term Debt is rated A- or higher by S&P or, A3 or
higher by Moody’s or A- or higher by Fitch, and (ii) Level III Status does not exist.
“Level V Status” exists at any date if, at such date, neither Level I
Status, Level II Status, Level III Status or Level IV Status exists.
“Moody’s” means Moody’s Investors Services, Inc.
“Rating Agencies” means each of S&P and, Moody’s and Fitch.
“S&P” means S&P Global Ratings, a business unit of Standard &
Poor’s Financial Services LLC, or any successor thereto.
“Status” refers to the determination of which of Level I Status, Level
II Status, Level III Status, Level IV Status or Level V Status exists at any date.
Pricing Schedule
The credit ratings to be utilized for purposes of this Pricing
Schedule are those assigned to the senior unsecured long-term debt securities of
the Borrower without
third-party credit enhancement (the “Borrower’s
Unsecured Long-Term Debt”), and any ratings assigned to any other debt
security of the Borrower shall be disregarded; provided that if at any date there is
no such rating assigned by a particular Rating Agency, such Rating Agency’s
rating of the Borrower’s Unsecured Long-Term Debt shall be deemed to be one
notch below such Rating Agency’s rating of the senior secured debt of the
Borrower at such date. In the event that the twothree assigned ratings differ, then
the(i) if two of the ratings are higher than the third rating, the higher rating
assigned to the Borrower’s Unsecured Long-Term Debt (after giving effect to the
proviso in the first sentence of this paragraph) shall be used, (ii) if two of the
ratings assigned differ by only one rating (e.g., A+/A2 results in Level II
Status). In the event the two assigned ratings differ by more than oneare
lower than the third rating, the lower rating below the highestassigned to the
Borrower’s Unsecured Long-Term Debt (after giving effect to the proviso in
the first sentence of this paragraph) shall be used or (iii) if all three ratings
are different, the intermediate rating shall be used (e.g., A+/A3 results in Level
III Status).
Pricing Schedule
EXHIBIT A
New York, New York [DATE]
For value received, National Rural Utilities Cooperative Finance
Corporation, a not-for-profit cooperative association incorporated under the laws
of the District of Columbia (the “Borrower”), promises to pay to the order of [·]
(the “Bank”), for the account of its Applicable Lending Office, the principal sum
of [$ ]($ ),] or, if less, the aggregate unpaid principal amount
of each Loan and L/C Borrowing made by the Bank to the Borrower pursuant to
the Revolving Credit Agreement referred to below on the Maturity Date with
respect to such Loan or L/C Borrowing. The Borrower promises to pay interest on
the unpaid principal amount of each such Loan and L/C Borrowing on the dates
and at the rate or rates provided for in the Revolving Credit Agreement. All such
payments of principal and interest shall be made in lawful money of the United
States in Federal or other immediately available funds at the office of JPMorgan
Chase Bank, N.A., 1111 Fannin St., 10th Floor, Houston, TX 77002, Attn: Leslie
Hill.
All Loans and L/C Borrowings made by the Bank, the respective types
and maturities thereof and all repayments of the principal thereof shall be
recorded by the Bank and, prior to any transfer hereof, appropriate notations to
evidence the foregoing information with respect to each such Loan then
outstanding may be endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Revolving Credit
Agreement.
This note is one of the Notes referred to in that certain Amended and Restated
Revolving Credit Agreement, dated as of November 19, 2015, among the
Borrower, the Banks listed on the signature pages thereof, JPMorgan Chase Bank,
N.A., as Administrative Agent and Initial Issuing Bank, Mizuho Bank (USA), as
Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank of Nova
Scotia and Royal Bank of Canada as Co-Documentation Agents (as the same may
be amended, supplemented or otherwise modified, from time to time, in each
case, pursuant to the terms and conditions thereof, the “Revolving Credit
Agreement”). Terms defined in the Revolving Credit Agreement are used herein
with the same meanings. Reference is made to the Revolving Credit Agreement
for provisions for the prepayment hereof and the acceleration of the maturity
hereof. This Note shall be governed by and construed in accordance with the laws
of the State of New York.
A-1
FORM OF MONEY MARKET QUOTE REQUEST
EXHIBIT C
[Date]
To: JPMorgan Chase Bank, N.A. (the “Administrative Agent”)
From: National Rural Utilities Cooperative Finance Corporation (the
“Borrower”)
Re: Amended and Restated Revolving Credit Agreement, dated as of
November 19, 2015, among the Borrower, the Banks listed on the
signature pages thereof, JPMorgan Chase Bank, N.A., as Administrative
Agent and Initial Issuing Bank, Mizuho Bank (USA), as Syndication
Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi
UFJ, Ltd.), PNC Bank, National Association, The Bank of Nova Scotia
and Royal Bank of Canada, as Co-Documentation Agents (as amended,
supplemented, or otherwise modified from time to time, in each case
, pursuant to the terms and conditions thereof, the “Revolving Credit
Agreement”)
We hereby give notice pursuant to Section 2.03 of the Revolving Credit
Agreement that we request Money Market Quotes for the following proposed
Money Market Borrowing(s):
Date of Borrowing:
Principal Amount1 Interest Period2
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Terms used herein have the meanings assigned to them in the Revolving
Credit Agreement.
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE
CORPORATION
By:
Name:
1Amount must be $10,000,000 or a larger multiple of $1,000,000.
2Any number of whole months (but not less than one month) (LIBOR Auction) or not less
than 30 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period.
C-1
FORM OF INVITATION FOR MONEY MARKET QUOTES
EXHIBIT D
[Date]
To:
[Name of Bank]
Re:
Invitation for Money Market Quotes to the National Rural Utilities
Cooperative Finance Corporation (the “Borrower”)
Pursuant to Section 2.03 of the Amended and Restated Revolving Credit
Agreement, dated as of November 19, 2015, among the Borrower, the Banks
listed on the signature pages thereof, JPMorgan Chase Bank, N.A., as
Administrative Agent and Initial Issuing Bank, Mizuho Bank (USA),
asSyndication Agent, and MUFG Bank, Ltd.(f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank of Nova
Scotia and Royal Bank of Canada, as Co-Documentation Agents (as amended,
supplemented or otherwise modified from time to time, in each case, pursuant to
the terms and conditions thereof, the “Revolving Credit Agreement”):
Date of Borrowing: __________________
Principal Amount
Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than 9:30 A.M. (New York
City time) on [date].
JPMORGAN CHASE BANK, N.A.
By:
Name:
Title: Authorized Officer
D-1
[provided, that the aggregate principal amount of Money Market Loans for which
the above offers may be accepted shall not exceed $ ___________.]**
We understand and agree that the offer[s] set forth above [is][are] subject
to the satisfaction of the applicable conditions set forth in the Amended and
Restated Revolving Credit Agreement, dated as of November 19, 2015, among
the Borrower, the Banks listed on the signature pages thereof, JPMorgan Chase
Bank, N.A., as Administrative Agent and Initial Issuing Bank, Mizuho Bank
(USA), as Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of
Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank of
Nova Scotia and Royal Bank of Canada, as Co-Documentation Agents, as
amended, supplemented or otherwise modified from time to time, in each case,
pursuant to the terms and conditions thereof.
Very truly yours,
[NAME OF BANK]
By:
Name:
Title: Authorized Officer
Dated:
E-2
EXHIBIT F
OPINION OF GENERAL COUNSEL OF THE BORROWER
November 26June 7, 20192021
To the Administrative Agent and each of the Banks party to the Revolving Credit
Agreement referred to below c/o JPMorgan Chase Bank, N.A. 1111 Fannin
Street, 10th Floor Houston, TX 77002
Ladies and Gentlemen:
Reference is hereby made to (i) that certain Amended and Restated Revolving
Credit Agreement dated as of November 19, 2015 (as amended by the
Amendments (defined below), the “Extended Agreement”), by and among the
Borrower, the Banks listed on the signature pages thereof, JPMorgan Chase Bank,
N.A., as Administrative Agent and Initial Issuing Bank, Mizuho Bank (USA), as
successor Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), The Bank of Nova Scotia, and Royal Bank of Canada, as
Co-Documentation Agents, (ii) that certain Amendment No. 1 dated as of
November 18, 2016 ( “Amendment No. 1”), by and among the Borrower, the
Banks listed on the signature pages thereof, JPMorgan Chase Bank, N.A., as
Administrative Agent and Initial Issuing Bank, Mizuho Bank (USA), as
Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), The Bank of Nova Scotia, and Royal Bank of Canada, as
Co-Documentation Agents, (iii) that certain Amendment No. 2 dated as of
November 20, 2017 (“Amendment No. 2”), by and among the Borrower, the
Banks listed on the signature pages thereof, Mizuho Bank, Ltd., as Administrative
Agent and Initial Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication
Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.),
The Bank of Nova Scotia, and Royal Bank of Canada, as Co-Documentation
Agents, (iv) that certain Amendment No. 3 dated as of November 1828, 20162018
(“Amendment No. 3”), by and among the Borrower, the Banks listed on the
signature pages thereof, Mizuho Bank, Ltd., as Administrative Agent and Initial
Issuing Bank, JPMorgan Chase Bank, N.A., as Syndication Agent, and MUFG
Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.),, PNC Bank,
National Association, The Bank of Nova Scotia, and Royal Bank of Canada,
as Co-Documentation Agents; (v) that certain Amendment No. 4 dated as of
November 26, 2019 (“Amendment No. 4”) by and among the Borrower, the
Banks listed on the signature pages thereof, JPMorgan Chase Bank, N.A., as
Administrative Agent and Initial Issuing Bank, Mizuho Bank, Ltd., as
Syndication Agent, and PNC Bank, National Association, The Bank of Nova
Scotia, and Royal Bank of Canada, as Co-Documentation Agents and (vvi) that
certain Amendment No. 45 dated as of November 26June 7, 20192021
(“Amendment No. 45”, and together with
F-1
Amendment No. 1, Amendment No. 2 and, Amendment No. 3 and Amendment
No. 4, the “Amendments”), by and among the Borrower, the Banks listed on the
signature pages thereof, JPMorgan Chase Bank, N.A., as Administrative Agent
and Initial Issuing Bank, Mizuho Bank, Ltd., as Syndication Agent, and MUFG
Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC Bank,
National Association, The Bank of Nova Scotia, and Royal Bank of Canada, as
Co-Documentation Agents. I, Roberta B. Aronson, General Counsel of the
National Rural Utilities Cooperative Finance Corporation (the “Borrower”), am
delivering this opinion at the request of the Borrower pursuant to Section 7(b) of
Amendment No. 45. Terms defined in the Extended Agreement are used herein as
therein defined.
I have examined originals or copies, certified or otherwise identified to my
satisfaction, of such documents, corporate records, certificates of public officials
and other instruments and have conducted such other investigations of fact and
law as I have deemed necessary or advisable for purposes of this opinion. This
opinion is limited to the laws of the District of Columbia.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a cooperative association duly incorporated,
validly existing and in good standing under the laws of the District of Columbia
and has the corporate power and authority and all material governmental licenses,
authorizations, consents and approvals required to own its property and assets and
to transact the business in which it is engaged. The Borrower is duly qualified or
licensed as a foreign corporation in good standing in every jurisdiction in which
the nature of the business in which it is engaged makes such qualification or
licensing necessary, except in those jurisdictions in which the failure to be so
qualified or licensed would not (after qualification, assuming that the Borrower
could so qualify without the payment of any fee or penalty and retain its rights as
they existed prior to such qualification all to an extent so that any fees or
penalties required to be so paid or any rights not so retained would not,
individually or in the aggregate, have a material adverse effect on the business or
financial position of the Borrower), individually or in the aggregate, have a
material adverse effect upon the business or financial position of the Borrower.
2. The Borrower has the corporate power and authority to execute,
deliver and carry out the terms and provisions of the Extended Agreement and
each of the Notes dated the date hereof (the “Subject Notes”). The Extended
Agreement and the Subject Notes have been duly and validly authorized,
executed and delivered by the Borrower.1
1 The opinion with respect to the enforceability of the Amended and Restated
Revolving Credit Agreement under New York law shall be provided by Borrower’s New York
counsel, Norton Rose Fulbright USFoley & Lardner LLP, subject to customary
assumptions, qualifications and limitations.
_______________________
F-2
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of , 20 among [ASSIGNOR] (the
“Assignor”), [ASSIGNEE] (the “Assignee”), NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION (the “Borrower”) and
JPMORGAN CHASE BANK, N.A., as Administrative Agent (the “Agent”).
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
“Agreement”) relates to the Amended and Restated Revolving Credit Agreement,
dated as of November 19, 2015 (as amended, supplemented or otherwise modified
from time to time, in each case pursuant to the terms and conditions thereof, (the
“Credit Agreement”), among the Borrower, the Banks listed on the signature
pages thereof, JPMorgan Chase Bank, N.A., as Administrative Agent and Initial
Issuing Bank (the “Agent”), and Mizuho Bank (USA), as Syndication Agent, and
MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.), PNC
Bank, National Association, The Bank of Nova Scotia and Royal Bank of Canada,
as Co-Documentation Agents.
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans and/or make or participate in L/C Obligations to the
Borrower in an aggregate principal amount at any time outstanding not to exceed
$ ;
WHEREAS, Committed Loans and L/C Obligations made to the Borrower
by the Assignor under the Credit Agreement in the aggregate principal amount of
$ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $ (the “Assigned Amount”),
together with a corresponding portion of its outstanding Committed Loans and/or
L/C Obligations, and the Assignee proposes to accept assignment of such rights
and assume the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
G-1
EXHIBIT H-1
[FORM OF]
U.S. TAX CERTIFICATE
(For Non-U.S. Bank Parties That Are Not Partnerships For U.S. Federal
Income Tax Purposes)
Reference is hereby made to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among the
Borrower, the Banks listed on the signature pages thereof, JPMorgan Chase Bank,
N.A., as Administrative Agent and Initial Issuing Bank, Mizuho Bank (USA), as
Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank of Nova
Scotia and Royal Bank of Canada, as Co-Documentation Agents.
Pursuant to the provisions of Section 2.16 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner of
the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which
it is providing this certificate, (ii) it is not a bank within the meaning of Section
881(c)(3)(A) of the Code, (iii) it is not a member of Borrower, it does not exercise
voting power over Borrower and is not a ten percent shareholder of the Borrower
within the meaning of Section 871(h)(3)(B) of the Code, (iv) it is not a controlled
foreign corporation related to the Borrower as described in Section 881(c)(3)(C)
of the Code and (v) the interest payments in question are not effectively connected
with the undersigned’s conduct of a U.S. trade or business.
The undersigned has furnished the Administrative Agent and the
Borrower with a certificate of its non-U.S. person status on IRS Form W-8BEN.
By executing this certificate, the undersigned agrees that (1) if the information
provided on this certificate changes, the undersigned shall promptly so inform the
Borrower and the Administrative Agent and (2) the undersigned shall have at all
times furnished the Borrower and the Administrative Agent with a properly
completed and currently effective certificate in either the calendar year in which
each payment is to be made to the undersigned, or in either of the two calendar
years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF BANK PARTY]
By:
Name:
Title:
H-1-1
EXHIBIT H-2
[FORM OF]
U.S. TAX CERTIFICATE
(For Non-U.S. Bank Parties That Are Partnerships For U.S. Federal Income
Tax Purposes)
Reference is hereby made to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among the
Borrower, the Banks listed on the signature pages thereof, JPMorgan Chase Bank,
N.A., as Administrative Agent and Initial Issuing Bank, Mizuho Bank (USA), as
Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank of Nova
Scotia and Royal Bank of Canada, as Co-Documentation Agents.
Pursuant to the provisions of Section 2.16 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as
well as any Note(s) evidencing such Loan(s)) in respect of which it is providing
this certificate, (ii) its direct or indirect partners/members are the sole beneficial
owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), with
respect to the extension of credit pursuant to this Credit Agreement, neither the
undersigned nor any of its direct or indirect partners/members is a bank extending
credit pursuant to a loan agreement entered into in the ordinary course of its trade
or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a member of Borrower, exercise voting
power over Borrower or otherwise is a ten percent shareholder of the Borrower
within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its partners/
members is a controlled foreign corporation related to the Borrower as described
in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in question are
not effectively connected with the undersigned’s or its direct or indirect partners/
members’ conduct of a U.S. trade or business.
The undersigned has furnished the Administrative Agent and the
Borrower with IRS Form W-8IMY accompanied by an IRS Form W-8BEN from
each of its partners/members claiming the portfolio interest exemption. By
executing this certificate, the undersigned agrees that (1) if the information
provided on this certificate changes, the undersigned shall promptly so inform the
Borrower and the Administrative Agent and (2) the undersigned shall have at all
times furnished the Borrower and the Administrative Agent with a properly
completed and currently effective certificate in either the calendar year in which
each payment is to be made to the undersigned, or in either of the two calendar
years preceding such payments.
H-2-1
EXHIBIT H-3
[FORM OF]
U.S. TAX CERTIFICATE
(For Non-U.S. Participants That Are Not Partnerships For U.S. Federal
Income Tax Purposes)
Reference is hereby made to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among the
Borrower, the Banks listed on the signature pages thereof, JPMorgan Chase Bank,
N.A., as Administrative Agent and Initial Issuing Bank, Mizuho Bank (USA), as
Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank of Nova
Scotia and Royal Bank of Canada, as Co-Documentation Agents.
Pursuant to the provisions of Section 2.16 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner of
the participation in respect of which it is providing this certificate, (ii) it is not a
bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten
percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B)
of the Code, (iv) it is not a controlled foreign corporation related to the Borrower
as described in Section 881(c)(3)(C) of the Code, and (v) the interest payments in
question are not effectively connected with the undersigned’s conduct of a U.S.
trade or business.
The undersigned has furnished its participating Bank with a certificate of
its non-U.S. person status on IRS Form W-8BEN. By executing this certificate,
the undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Bank in writing and (2)
the undersigned shall have at all times furnished such Bank with a properly
completed and currently effective certificate in either the calendar year in which
each payment is to be made to the undersigned, or in either of the two calendar
years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT]
By:
Name:
Title:
Date: _________, 20[ ]
H-3-1
EXHIBIT H-4
[FORM OF]
U.S. TAX CERTIFICATE
(For Non-U.S. Participants That Are Partnerships For U.S. Federal Income
Tax Purposes)
Reference is hereby made to the Amended and Restated Revolving Credit
Agreement dated as of November 19, 2015 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among the
Borrower, the Banks listed on the signature pages thereof, JPMorgan Chase Bank,
N.A., as Administrative Agent and Initial Issuing Bank, Mizuho Bank (USA), as
Syndication Agent, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-
Mitsubishi UFJ, Ltd.), PNC Bank, National Association, The Bank of Nova
Scotia and Royal Bank of Canada, as Co-Documentation Agents.
Pursuant to the provisions of Section 2.16 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the participation
in respect of which it is providing this certificate, (ii) its partners/members are the
sole beneficial owners of such participation, (iii) with respect such participation,
neither the undersigned nor any of its partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its
partners/members is a ten percent shareholder of the Borrower within the
meaning of Section 871(h)(3)(B) of the Code, (v) none of its partners/members is
a controlled foreign corporation related to the Borrower as described in Section
881(c)(3)(C) of the Code, and (vi) the interest payments in question are not
effectively connected with the undersigned’s or its partners/members’ conduct of
a U.S. trade or business.
The undersigned has furnished its participating Bank with IRS Form
W-8IMY accompanied by an IRS Form W-8BEN from each of its partners/
members claiming the portfolio interest exemption. By executing this certificate,
the undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Bank and the
undersigned shall have at all times furnished such Bank with a properly
completed and currently effective certificate in either the calendar year in which
each payment is to be made to the undersigned, or in either of the two calendar
years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT]
By:
H-4-1
THIRD AMENDED AND RESTATED
FIRST SUPPLEMENTAL NOTE PURCHASE AGREEMENT
THIRD AMENDED AND RESTATED FIRST SUPPLEMENTAL
NOTE PURCHASE AGREEMENT, dated as of May 20, 2021 (this “Supplemental Note
Purchase Agreement”), among Farmer Mac Mortgage Securities Corporation (the
“Purchaser”), a wholly owned
subsidiary of FEDERAL AGRICULTURAL
MORTGAGE CORPORATION, a federally-chartered instrumentality of the United
States and an institution of the Farm Credit System (“Farmer Mac” or the “Guarantor”);
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORPORATION, a
cooperative association existing under the laws of the District of Columbia (“National
Rural”); and Farmer Mac, as Guarantor.
RECITALS
WHEREAS National Rural, the Purchaser and the Guarantor have
heretofore executed and delivered the Amended and Restated Master Note Purchase
Agreement dated as of March 24, 2011, among National Rural, the Purchaser and the
Guarantor (the “Master Agreement”);
WHEREAS, pursuant to the Master Agreement, National Rural, the
Purchaser and the Guarantor entered into the First Supplemental Note Purchase
Agreement dated as of March 24, 2011, the Amended and Restated First Supplemental
Note Purchase Agreement dated as of January 8, 2015, and the Second Amended and
Restated First Supplemental Note Purchase Agreement dated as of February 26, 2018
(collectively, the “Amended Supplement”), providing for the terms of a series of Notes
issued by National Rural and purchased by the Purchaser; and
WHEREAS, the parties wish to amend and restate the Amended
Supplement, as provided herein.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, Farmer Mac, the Purchaser and National Rural agree as follows:
definition shall have the meanings assigned to them in the Master Agreement.
1.
Capitalized Terms. Capitalized terms used herein without
2.
Title of Series. The Pricing Agreement for any Notes and
each such Note issued hereunder on or after the date hereof may identify the name (if any
name is designated) of such series of Notes. Failure to make a notation of the name of a
series within any Pricing Agreement or on the applicable Note shall not affect the validity
and effect of such Note.
3.
Purchase of Notes. The parties agree that the Purchaser may
purchase Notes, at 100% of their principal amount and on terms and conditions
acceptable to each of Purchaser and National Rural, from time to time during the Draw
Period, as requested by National Rural by written notice by electronic mail to Farmer
Mac at such email address as designated by Farmer Mac to National Rural by written
notice by electronic mail from time to time, or such other address as may be provided in
writing (each, a “Notice of Borrowing”), in an aggregate principal amount, for all Notes
issued prior to the date hereof or to be issued under this Supplemental Note Purchase
Agreement at any one time, not in excess of the Maximum Purchase Amount, subject to
the conditions set forth in the Master Agreement.
For purposes hereof, “Draw Period” means the period from the date hereof through June
30, 2026; provided, however, on June 30th of each year beginning June 30, 2025, the
Draw Period shall be deemed automatically extended for one (1) additional year without
further action, unless at least sixty (60) days prior to any such anniversary date, Farmer
Mac or the Purchaser provides National Rural with written notice that the Draw Period
will not be extended beyond the then-remaining term.
Further for purposes hereof, “Maximum Purchase Amount” means $5.5 billion.
National Rural may borrow, repay (subject to the terms of the applicable Notes being
repaid) and reborrow funds at any time or from time to time during the Draw Period.
Each borrowing under this Supplemental Note Purchase Agreement (or, in the case of
Notes issued prior to the date hereof, the applicable Original Note Purchase Agreement
and/or Amended Supplement) shall be made in accordance with the Note applicable
thereto.
Each advance under this Supplemental Note Purchase Agreement shall be disbursed in
such increments as agreed upon by the parties in the applicable Pricing Agreement.
4.
Amendment and Restatement. This Supplemental Note Purchase
Agreement amends and restates in its entirety all of the terms, conditions and provisions
of the Amended Supplement.
5.
GOVERNING LAW. EXCEPT AS SET FORTH IN SECTION 9.01
OF THE MASTER AGREEMENT, THIS Supplemental Note Purchase AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
FEDERAL LAW. TO THE EXTENT FEDERAL LAW INCORPORATES STATE
LAW, THAT STATE LAW SHALL BE THE LAWS OF THE DISTRICT OF
COLUMBIA APPLICABLE TO CONTRACTS MADE AND PERFORMED
THEREIN.
6.
Counterparts; Electronic Signature.
This Supplemental Note
Purchase Agreement may be executed in two or more counterparts, each of which shall
be an original, but all of which together shall constitute one and the same instrument. The
word “execution” and words of like import in this Supplemental Note Purchase
Agreement shall be deemed to include electronic signatures or electronic records, each of
which shall be of the same legal effect, validity or enforceability as a manually executed
signature or the use of a paper-based recordkeeping system, as the case may be, to the
extent and as provided for in any applicable law, including the Federal Electronic
Signatures in Global and National Commerce Act or any other similar state laws based on
the Uniform Electronic Transactions Act.
2
Third Amended and Restated First Supplemental Note Purchase Agreement
7.
Inconsistency. In the event of any inconsistency between the terms
of this Supplemental Note Purchase Agreement and the Master Agreement, the terms
of this Supplemental Note Purchase Agreement shall apply.
IN WITNESS WHEREOF, each party hereto has caused this Supplemental
Note Purchase Agreement to be executed by an authorized officer as of the day and
year first above written.
FARMER MAC MORTGAGE SECURITIES
CORPORATION
/s/ ZACHARY CARPENTER
By:
Name: Zachary Carpenter
Title:
Executive Vice President - Chief
Business Officer
FEDERAL AGRICULTURAL MORTGAGE
CORPORATION
/s/ ZACHARY CARPENTER
By:
Name: Zachary Carpenter
Title:
Executive Vice President - Chief
Business Officer
NATIONAL RURAL UTILITIES
COOPERATIVE FINANCE CORPORATION
/s/ LING WANG
By:
Name: Ling Wang
Title:
Senior Vice President and
Chief Financial Officer
[Remainder of page intentionally left blank]
Third Amended and Restated First Supplemental Note Purchase Agreement
3
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
The Board of Directors
National Rural Utilities Cooperative Finance Corporation:
We consent to the incorporation by reference in the registration statements (No. 333-230569 and No. 333-249702) on Form
S-3 of National Rural Utilities Cooperative Finance Corporation of our report dated July 30, 2021, with respect to the
consolidated balance sheets of National Rural Utilities Cooperative Finance Corporation as of May 31, 2021 and 2020, the
related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of
the years in the three-year period ended May 31, 2021, and the related notes, which report appears in the May 31, 2021
Annual Report on Form 10-K of National Rural Utilities Cooperative Finance Corporation.
/s/ KPMG LLP
McLean, Virginia
July 30, 2021
National Rural Utilities Cooperative Finance Corporation
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
Exhibit 31.1
I, J. Andrew Don, certify that:
1.
I have reviewed this report on Form 10-K of National Rural Utilities Cooperative Finance Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors:
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: July 30, 2021
By:
/s/ J. ANDREW DON
J. Andrew Don
Chief Executive Officer
A signed original of this written statement required by Section 302 has been provided to National Rural Utilities Cooperative Finance
Corporation and will be retained by National Rural Utilities Cooperative Finance Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
National Rural Utilities Cooperative Finance Corporation
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
Exhibit 31.2
I, Yu Ling Wang, certify that:
1.
I have reviewed this report on Form 10-K of National Rural Utilities Cooperative Finance Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s board of directors:
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: July 30, 2021
By:
/s/ YU LING WANG
Yu Ling Wang
Chief Financial Officer
A signed original of this written statement required by Section 302 has been provided to National Rural Utilities Cooperative Finance
Corporation and will be retained by National Rural Utilities Cooperative Finance Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
National Rural Utilities Cooperative Finance Corporation
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
Exhibit 32.1
Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), I, the
Chief Executive Officer of National Rural Utilities Cooperative Finance Corporation (“CFC”), hereby certify to the best of
my knowledge as follows:
1.
2.
CFC’s Annual Report on Form 10-K for the fiscal year ended May 31, 2021 filed with the Securities and Exchange
Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of CFC.
Date: July 30, 2021
By:
/s/ J. ANDREW DON
J. Andrew Don
Chief Executive Officer
A signed original of this written statement required by Section 906 has been provided to National Rural Utilities Cooperative Finance
Corporation and will be retained by National Rural Utilities Cooperative Finance Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.
National Rural Utilities Cooperative Finance Corporation
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
Exhibit 32.2
Pursuant to the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Sections 1350(a) and (b)), I, the
Chief Financial Officer of National Rural Utilities Cooperative Finance Corporation (“CFC”), hereby certify to the best of
my knowledge as follows:
1.
2.
CFC’s Annual Report on Form 10-K for the fiscal year ended May 31, 2021 filed with the Securities and Exchange
Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of CFC.
Date: July 30, 2021
By:
/s/ YU LING WANG
Yu Ling Wang
Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to National Rural Utilities Cooperative Finance
Corporation and will be retained by National Rural Utilities Cooperative Finance Corporation and furnished to the Securities and
Exchange Commission or its staff upon request.