CFC Reports $86.1 Million Net Income in Q3 FY 2025, Driven by Derivatives Gains

National Rural Utilities Cooperative Finance Corporation (CFC) reported significant financial results for the third quarter of fiscal year 2025, ending February 28, 2025. The company achieved a net income of $86.1 million, a substantial increase from $31.2 million in the same quarter of the previous year. This growth was primarily driven by a shift from losses to gains in the derivatives portfolio, which contributed $59 million, alongside a $2 million increase in net interest income due to a 4% rise in average interest-earning assets. However, year-to-date net income showed a decline to $66.6 million from $407.5 million, largely due to a $327 million shift from gains to losses in the derivatives portfolio compared to the previous year.

CFC's total assets increased by 4% to $37.8 billion, primarily due to a 6% rise in loans to members, which reached $36.5 billion. The loan portfolio's composition remained stable, with 79% of loans to distribution borrowers and 16% to power supply borrowers. The company reported no charge-offs during the year, maintaining strong credit quality, with only one loan classified as nonperforming, totaling $42 million. The allowance for credit losses decreased to $44.5 million, reflecting a reduction in the asset-specific allowance for a nonperforming loan.

In terms of operational developments, CFC's debt-to-equity ratio rose to 11.31 from 10.86, attributed to increased borrowing to fund loan growth. The adjusted debt-to-equity ratio also increased slightly to 7.37. The company issued $3.9 billion in long-term debt during the year, including $2.4 billion in unsecured medium-term notes, to support its lending activities. CFC's liquidity position remained strong, with available liquidity totaling $7.7 billion, exceeding its scheduled debt obligations of $7.3 billion over the next 12 months.

Looking ahead, CFC anticipates continued growth in its loan portfolio, projecting net long-term loan growth of approximately $1.5 billion over the next year. The company expects an increase in reported net interest income and net interest yield, although adjusted net income and adjusted TIER may decrease due to rising interest expenses. CFC's management remains focused on maintaining its investment-grade credit ratings, which were affirmed by major rating agencies, and is committed to providing cost-based financial products to its rural electric cooperative members.