National Rural Utilities Cooper

Good afternoon, and welcome to the National Rural Utilities Cooperative Finance Corporation Fiscal Year 2024 Second Quarter Investor Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Heesan Choi, Vice President, Capital Markets Relations. Please go ahead.

Thank you, Operator. Welcome to our Investor Conference Call for our second 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 our financial and operating reserves during the three months and six months ended November 30, 2023. Today's presentation slides and financial reports filed with the SEC are available on our website, www.nrucfc.coop.gov. 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 January 23, 2024 are subject to risk and uncertainties. Factors that may cause actual results to differ materially from expectations are described on slide 2 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 during the presentation, including reconciliations to GAAP measures, can also be found in our Form 10-Q file with the SEC on January 12, 2024, as well as in the appendix of the presentation slides. At the end of the presentation, we will open up 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 turn this call over to Andrew.

Thank you, Heesun. Good afternoon. Thank you for joining our call today to review the financial and operating results during the six months ended November 30, 2023, which is our second fiscal quarter of our 2024 fiscal year. I'm moving to slide five to discuss CERN operating and financial highlights for the second quarter and the first six months of our fiscal year 2024. Our financial position remains strong as we generated solid results during our first two fiscal quarters. Our loans to members continue to grow and reach $33.6 billion, representing an increase of approximately $1 billion, or 3%, during the six months ended November 30, 2023. Our loan portfolio remains pristine, with no charge-offs during the fiscal year and having only 0.25% of loans classified as non-performing at the end of the reporting period. Our adjusted tier was 1.23 times during the six months ended November 30, 2023, well above our goal of 1.1 times. We remain committed to grow our members' equity to support loan growth. Our members' equity stood at $2.3 billion in November 30, 2023. Our liquidity position remains sound 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, time deposits, investments, committed bank lines, committed loan facilities under the Guaranteed Underwriter Program, revolving note purchase agreement with PharmaMac, and access to repo facilities. We continue to be committed to maintaining strong investment-grade credit ratings from Fitch, Moody's, and S&P. our short-term and long-term credit ratings at Outlook remain unchanged. Recently, in December 2023, S&P affirmed all of CFC's credit ratings with stable Outlook. Now I'm turning to slide six to review highlights of our loan portfolio. As I mentioned, our loans to members reached $33.6 billion at November 30, 2023, compared to $32.5 billion at May 31, 2023, reflecting a $565 million increase during the first fiscal quarter and a $457 million increase during the second fiscal quarter for a total increase of approximately $1 billion. Eighty-nine percent, or $906 million, of the net loan increase was driven by increases in loans to our distribution and power supply borrowers. In November 30, 2023, our loans to distribution members totaled $26 billion, and our loans to power supply members total $5.7 billion, accounting for 94% of total loans to members. Looking at the increases by member class, our loan distribution portfolio increased by $605 million, and our power supply loan portfolio increased by $301 million. We also experienced increases in RTFC loads of $58 million and CFC statewide and associate loans of $68 million and a decrease in NCSC loads of $10 million during six months ended November 30, 2023. In terms of loan type, long-term loans increased by $853 million to $30.3 billion and line of credit loans increased by $169 million to $3.3 billion at November 30, 2023 compared to the levels at our fiscal year end of May 31, 2023. During six months, we made long-term loan advances in a total amount of $1.6 billion. Approximately $1.5 billion, or 94% of those advances, were for capital expenditure purposes, with the remaining balance being for other purposes, primarily business acquisitions. Additionally, of the $1.6 billion total long-term loans advanced, $1.5 billion were fixed-rate loan advances with a weighted average fixed-rate term of 12 years. In comparison, the fixed rate term was 18 years for long-dated loans advanced during the same period from our prior fiscal year. Some of our members have shown a preference for slightly shorter fixed rate term loans 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 November 30, 2023, CFC's total outstanding loans associated with these broadband loans was approximately $2.7 billion, an increase of $369 million compared to the May 31, 2023 level of $2.4 billion. With that, I would like to now turn the call over to Ling, who will review our financial results in greater detail. Thank you.