National Rural Utilities Cooper

Good afternoon, and welcome to the National Rural Utilities Cooperative Finance Corporation Fiscal Year 2024 Third Quarter Investor Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Hee-Sun Choi, Vice President, Capital Market Relations.

Thank you, Operator. Welcome to our Investor Conference Call for our third 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 results during the three months and nine months ended February 29, 2024. Today's presentation slides and financial reports filed with the SEC 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 make during today's call as of April 17, 2024, are subject to risks and uncertainties. Factors that may cause actual results to differ materially from expectations are described on slide two of today's presentation. as well as in our annual and quarterly course 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 1025 with the SEC on April 12, 2024, 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 any questions over the phone or submit your questions online. With that, I will turn this call over to Andrew.

Thank you, Heesun. Good morning and thank you for joining our call today to review our business and operating results during the nine months ended February 29, 2024, which is our third fiscal quarter of 2024. I'm moving to slide five to discuss highlights during the quarter. We experienced another strong quarter marked by robust loan growth. We strategically manage the growth by effectively utilizing our various funding sources resulting in superior financial metrics and maintaining a high quality loan portfolio. Our loans to members continue to grow and reach $34.4 billion, reflecting an increase of approximately $1.9 billion or 6% during the nine months ended February 29, 2024. We had no charge-offs during the fiscal year, and our loan portfolio remained pristine with only 25 basis points of loans classified as non-performing at the quarter end. We also successfully maintained a strong financial position. Our adjusted tier was 1.25 times during the nine months ended February 29, 2024, well above our goal of 1.1 times. We remain committed to growing our members' equities to support the loan growth. Our members' equities stood at $2.3 billion at February 29, 2024. 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, investments, committed bank lines, committed loan facilities under the Guaranteed Underwriter Program, revolving note purchase agreement with PharmaMac, and access to repo facilities. We remain committed to maintaining strong investment-grade ratings from Fitch, Moody's, and S&P. Our short-term and long-term credit ratings and outlook are unchanged. During the quarter, S&P and Moody's affirmed all of CFC's 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 increased by $1.9 billion. $34.4 billion at February 29, 2024, compared to $32.5 billion at May 31, 2023. Specifically, during the third quarter, we recorded an addition of $858 million in our loans to members, which accounts for nearly 46% of the fiscal year-to-date loan growth. 92%, or $1.7 billion, of the net loan increase was driven by increases in loans to our distribution of power supply borrowers. At February 29, 2024, our loans to distribution members totaled $26.9 billion, and our loans to power supply members totaled $5.7 billion, accounting for 94% of total loans to members. As we mentioned on a prior quarterly call, the sale of RTSC's business to NCSC was finalized and effective on December 1, 2023. Consequently, beginning this quarter, we will refer to the RTSC loans as NCSC telecom loans and the electric loans previously under NCSC portfolio as NCSC electric loans. During the nine months ended February 29, 2024, we experienced increases in loans outstanding across all member classes. Our distribution loan portfolio increased by $1.4 billion, and our power supply loan portfolio increased by $294 million. We also experienced increases in NCSC telecom loans of $61 million, CSC statewide and associate loans of $58 million, and NCSC electric loans of $28 million during the nine months ended February 29, 2024. In terms of the loan type, long-term loans increased by $1.5 billion to $30.9 billion, and line of credit loans increased by $407 million to $3.5 billion at February 29, 2024, compared to the levels of May 31, 2023. During the nine-month period, we made long-term loan advances for a total of $2.7 billion. Approximately $2.5 billion or 95% of those advances were for capital expenditure purposes, the remaining balance being for other purposes, primarily business acquisitions. Additionally, of the $2.7 billion total long-term loans advanced, $2.5 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-term loans advanced during the same period from our prior fiscal year. Our members continue to show a preference for slightly shorter fixed rate term loans given the prevailing higher interest rate environment. Our loan growth is partially driven by increased loans outstanding for broadband projects. 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 February 29, 2024, CFC's total outstanding loans associated with these broadband projects was approximately $2.9 billion, an increase of $512 million compared to the May 31, 2023 level of $2.4 billion. We typically fund our members' broadband projects through their electric balance sheet rather than extending loans to a separate broadband subsidiary. With that, I will now Turn the corner over to Ling, who will review our financial results in greater Teutel. Thank you.