National Rural Utilities Cooper

Good afternoon, and welcome to the National Rural Utilities Cooperative Finance Corporation Fiscal Year 2024 First Quarter Investor Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. He Sun Choi, Vice President of Capital Market Relations. Please go ahead, ma'am.

Thank you, Operator. Welcome to our Investor Conference Call for the first quarter of Fiscal Year 2024. Joining with me today are Andrew Dan, our Chief Executive Officer, and Ling Wang, our Chief Financial Officer. Andrew and Ling will discuss office financial and operating reserves during the three months ended August 31, 2023. Today's presentation slides and financial reports filed with the FCC are available on our website www.nrucfc.coop under investor relations. This call is being recorded and a replay and call transcript will be made available under investor relations. Our presentation today will include four looking statements and certain non-GAAP financial measures. Please review the disclosures on slide two and slide three of the presentation regarding these statements and measures. I would like to remind you that any forward-looking statements that we may make during today's call as of October 16, 2023, are subject to risks and uncertainties. Factors that may cause actual results differ materially from expectations are described on slide two of today's presentation, as well as in our annual and quarterly reports filed with the SEC. Information about any non-GAAP financial measures referenced today during the presentation, including reconciliations to GAAP measures, can also be found in our Form 10-Q filed with the SEC on October 12, 2023, as well as in the appendix of the presentation slides. At the end of the presentation, we will open the call and Andrew and Ling will take your questions. You can ask questions over the phone or submit your questions online. With that, I will now turn this call over to Andrew.

Thank you, Yisan. Good afternoon. Thank you for joining our call today to review the financial operating results during the three months ended August 31, 2023, which is our first fiscal quarter of 2024. I'm moving to slide five to discuss CFC's financial highlights during the quarter. Our financial position remains strong as we generated solid financial results during our first fiscal quarter. Our loans to members continue to increase and we recorded a level of $33.1 billion which represents an increase of $565 million, or 2%, during the three months ended August 31, 2023. During the quarter, our adjusted tier was 1.23 times, which is well above our goal of 1.1 times. Our members' equity has surpassed $2.2 billion at August 31, 2023, as we've been increasing member equity through retained earnings accumulation. Our liquidity position remains strong 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 Farmer MacNote Purchase Agreement, and repo facilities. We are 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. In September 2023, Fitch affirmed all CFSK credit ratings with a stable outlook. Now I'm turning to slide six to discuss our loan portfolio. As I mentioned, our loans to members was at a level of $33.1 billion in August 31, 2023, compared to $32.5 billion at May 31, 2023, reflecting a $565 million increase. Ninety-one percent, or $515 million, of the net loan increase was driven by increases in loan store distribution and power supply borrowers. At August 31, 2023, our loans to distribution members totaled $25.8 billion, and our loans to power supply members totaled $5.6 billion, accounting for 95% of total loans to members. Looking at the increases by business segment, our distribution loan portfolio increased by $381 million, and our power supply loan portfolio increased by $134 million. We also experienced increases in RTSC loans of $51 million and CFC statewide associate loans of $32 million, and a decrease in NCSC loans of $33 million during the quarter. In terms of the loan type, long-term loans increased by $326 million to $29.7 billion, and line of credit loans increased by $239 million to $3.4 billion at August 31, 2023. The $239 million increase in line of credit loans was primarily attributed to funding for our members' higher operating costs and working capital needs, as well as bridge loan financing for our U.S. borrowers. During the quarter, we made long-term loan advances for a total of $711 million. Approximately $616 million, or 87% of those advances, were for capital expenditure purposes, with the remaining balance being for other purposes, primarily asset acquisitions. Additionally, of the $711 million total long-term loan advance during the quarter, $659 million were fixed-rate loan advances with a weighted average fixed-rate term of 14 years. In comparison, of the $815 million total long-term loans advanced during the same prior year fiscal quarter, $747 million were fixed-rate loan advances with a weighted average fixed-rate term of 21 years. Some of our members have shown a preference for slightly shorter fixed-rate term loans during the quarter given the prevailing higher interest rate environment. We estimate that there are over 200 electric cooperatives engaged in rural broadband projects at various stages of development. Generally speaking, these projects are financed through a mix of grants and debt funding. At August 31, 2023, CFC's total outstanding loans associated with these broadband projects was approximately $2.6 billion, an increase of $203 million compared to the May 31, 2023 level of $2.4 billion. With that, I would now like to turn this call over to Ling, who will review our financial results in more detail. Thank you.