Members' Subordinated Certificates

12 Months Ended

May 31, 2026


NOTE 9—MEMBERS’ SUBORDINATED CERTIFICATES

Membership Subordinated Certificates

Prior to June 2009, CFC members were required to purchase membership subordinated certificates as a condition of membership. Such certificates are interest-bearing, unsecured, subordinated debt. Membership certificates typically have an original maturity of 100 years and pay interest at 5% semiannually. No requirement to purchase membership certificates has existed for NCSC.

Loan and Guarantee Subordinated Certificates

Members obtaining long-term loans, certain line of credit loans or guarantees may be required to purchase additional loan or guarantee subordinated certificates with each such loan or guarantee based on the borrower’s debt-to-equity ratio with CFC. These certificates are unsecured, subordinated debt and may be interest bearing or non-interest bearing.

Under our current policy, most borrowers requesting standard loans are not required to buy subordinated certificates or guarantee subordinated certificates as a condition of a loan or guarantee. Borrowers meeting certain criteria, including but not limited to, high leverage ratios, or borrowers requesting large facilities, may be required to purchase loan or guarantee subordinated certificates or member capital securities (described below) as a condition of the loan. Loan subordinated certificates have the same maturity as the related long-term loan. Some certificates may amortize annually based on the outstanding loan balance.

The interest rates payable on guarantee subordinated certificates purchased in conjunction with our guarantee program vary in accordance with applicable CFC policy. Guarantee subordinated certificates have the same maturity as the related guarantee.

Member Capital Securities

CFC offers member capital securities to its voting members. Member capital securities are interest-bearing, unsecured obligations of CFC, which are subordinate to all existing and future senior and subordinated indebtedness of CFC held by nonmembers of CFC, but rank proportionally to our member subordinated certificates. Member capital securities mature 30 years from the date of issuance and are callable at par at our option five years from the date of issuance and anytime thereafter. The interest rate for new member capital securities issuance is set at the time of issuance. These securities represent voluntary investments in CFC by the members. Member capital securities issued prior to FY2023 have a call option of 10 years from the date of issuance and anytime thereafter. The following table displays members’ subordinated certificates and the weighted-average interest rates as of May 31, 2026 and 2025.

Table 9.1: Members’ Subordinated Certificates Outstanding and Weighted-Average Interest Rates


	May 31,
	2026				2025
(Dollars in thousands)	Amounts Outstanding		Weighted- Average Interest Rate		Amounts Outstanding		Weighted- Average Interest Rate
Membership subordinated certificates:
Certificates maturing 2030 through 2119	$	627,254			$	628,617
Subscribed and unissued(1)	18				20
Total membership subordinated certificates	627,272		4.96	%	628,637		4.96	%
Loan and guarantee subordinated certificates:
Interest-bearing loan subordinated certificates maturing through 2045	141,626				192,779
Non-interest-bearing loan subordinated certificates maturing through 2047	85,405				90,378

Total loan subordinated certificates	227,031		2.69		283,157		2.74
Interest-bearing guarantee subordinated certificates maturing through 2044	26,640		5.95		26,757		5.93


Total loan and guarantee subordinated certificates	253,671		3.03		309,914		3.02
Member capital securities:
Securities maturing through 2056	247,297		5.01		246,163		5.01
Total members’ subordinated certificates	$	1,128,240	4.54		$	1,184,714	4.46

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(1)The subscribed and unissued subordinated certificates represent subordinated certificates that members are required to purchase. Upon collection of full payment of the subordinated certificate amount, the certificate will be reclassified from subscribed and unissued to outstanding.

The weighted-average maturity for all membership subordinated certificates outstanding was 51 and 52 years as of May 31, 2026 and 2025, respectively. The following table presents the amount of members’ subordinated certificates maturing in each of the five fiscal years subsequent to May 31, 2026 and thereafter.

Table 9.2: Members’ Subordinated Certificate Maturities and Weighted-Average Interest Rates


(Dollars in thousands)	Amount Maturing(1)		Weighted-Average Interest Rate
2027	$	3,484	3.40	%
2028	4,502		3.54
2029	6,265		2.49
2030	4,384		3.71
2031	64,558		3.31
Thereafter	1,045,029		4.64
Total	$	1,128,222	4.54

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(1)Excludes $0.02 million in subscribed and unissued member subordinated certificates for which a payment has been received, but no certificate has been issued. Amortizing member loan subordinated certificates totaling $114 million are amortizing annually based on the unpaid principal balance of the related loan. Amortization payments on these certificates totaled $7 million in FY2026 and represented 6% of amortizing loan subordinated certificates outstanding.