National Rural Utilities Cooper

Good morning and welcome to the National Rural Utilities Cooperative Finance Corporation Fiscal Year 2023 Third Quarter Investor Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Heesun Choi, Vice President, Capital Market Relations. You may begin.

Good morning. I'm Heesun Choi, Vice President of Capital Market Relations and National Rural Utilities Cooperative Finance Corporation. Thanks for joining us in our fiscal year 2023 third quarter investor conference call. On today's call, Andrew Dan, our chief executive officer, and Ling Wang, our chief financial officer, will discuss our financial and operating performance during the three months as well as nine months ended February 28, 2023. Before we begin our discussion, I want to remind you that some information provided and comments made during today's call will contain forward-looking statements within the Securities Act of 1933 as amended and the Exchange Act of 1934 as amended. Forward-looking statements which are based on certain assumptions and describe our future plans, strategies, and expectations are generally identified by our 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 are forward-looking statements. Although we believe that 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. Factors that could cause future results vary from our forward-looking statements about our current expectations are included in our annual and quarterly reports filed with the U.S. Securities and Exchange Commission. All the forward-looking statements are made as of today, April 18, 2023, and we undertake no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances, and changes in our expectations after the statements are made. Today's discussion will also include certain non-GAAP measures. Please refer to our Form 10-Q filed on April 12, 2023 with the SEC and also post it on our website for discussion of why we believe our adjusted measures provide useful information in analyzing CFC's financial performance and the reconciliation to the most comparable gap measures. We will open the call for Q&As at the end of the presentation. You can ask questions via phone. or submit your questions online if you are participating in this event via web case. We invite you to join the Q&A session to ask questions you may have. Today's presentation slides and financial reports filed with the SEC are available in our investor relations page on our website at www.nrucfc.coop. A replay and court transcript will be also made available in our investor relations page after this event. With that, I will turn this call over to Andrew.

Thank you, Issa. Good morning. This is Andrew Don, Chief Executive Officer of CFC. Thank you for joining us today. I'm pleased to review our business results and operating performance for our third fiscal quarter of 2023, which was the three-month period ended on February 28, 2023. We've continued to generate solid financial results during the third fiscal quarter and for the nine months of our 2023 fiscal year. We had another strong quarter with very robust loan growth to fund our members capital needs. In particular, our loans to members increased by 2.3 billion or 8% during the nine month period and totaled 32.4 billion as at February 28, 2023. I will discuss our loan growth in more detail in a moment. Our financial position remains strong as we generated solid financial metrics during the third quarter and for the current year-to-date period. During the nine months ended February 28, 2023, our adjusted tier was 1.26 times, which was well above our goal of 1.1 times, and our members' equity surpassed 2.1 billion at the end of the third fiscal quarter. Our members' equity has grown by 55% to 2.1 billion from a level of 1.4 billion at May 31, 2017, as we are committed to grow our members' equity through retained earnings accumulation. Our liquidity position remains healthy as we maintain diverse, well-established funding sources to minimize the risk of being dependent on any single source or market. Our diverse liquidity sources consist of cash, investments, committed bank lines, the Guaranteed Underwriter Program, the Pharma MAC Note Purchase Agreement, and repo facilities. We continue to be committed to maintaining strong investment credit ratings from Fitch, Moody's, and S&P. We have long-term senior secured ratings of A+, A1, A-, and long-term unsecured credit ratings of A, A2, A-, all with a stable outlook. During the current fiscal quarter, all three rating agencies affirmed CFC's credit ratings and a stable outlook. As I mentioned, we recorded a $2.3 billion increase in net loan growth during the current fiscal year to date. The $2.3 billion increase in loans to members during the nine months ended February 28, 2023 reflected net increases in long-term and line of credit loans of $1.2 billion and $1.1 billion, respectively. The $1.1 billion increase in line of credit loans was primarily attributable to three factors, the first being increased funding for higher operating expenses and material costs incurred by our members, the second factor being more bridge loans to long-term financing from the Rural Utility Service, for those members still utilizing RUS financing, with a third factor being increased construction financing for broadband infrastructure projects. As of February 28, 2023, our loans to distribution members totaled $25 billion and our loans to power supply members totaled $5.3 billion. During the current fiscal year, we experienced increases in all of our business segments, Specifically, our distribution loan portfolio increased by $1.6 billion, and our power supply loan portfolio increased by $417 million. We also experienced increases in CSC statewide and associate loans, NCSC and RTSC loans of $29 million, $278 million, and $14 million, respectively. Loans to our distribution and power supply members accounted for 95% of total loans to members as of February 28, 2023. During the current year-to-date period, we made long-term loan advances totaling $2.5 billion. Approximately $2.3 billion, or 94% of those advances, were for capital expenditure purposes, with the balance being for the refinancing of other lenders' debt or other corporate purposes. For the same prior year-to-date period, we made long-term loan advances for a total of $2.4 billion, of which $1.9 billion, or 79%, were for capital expenditure purposes, and $481 million, or 20%, were for members' operating expenses. primarily due to increased power costs and natural gas price volatility during the winter 2021 winter storm URI weather event. A total of $605 million of long-term loans were made for financing our electric distribution cooperative infrastructure investments in broadband projects during the current nine-month year-to-date period. As of February 28, 2023, our outstanding loans to our CSC distribution members for their broadband projects increased to approximately $2.1 billion, which is a net $480 million, or 29% increase, compared to the May 31, 2022 level of $1.6 billion. I would now like to turn the call over to Ling, who will review our financial results in more detail. Thank you.