NOTE 10—EQUITY

Total equity decreased by $146 million to $1,158 million as of November 30, 2019. The decrease was primarily attributable to our reported net loss of $82 million for the six months ended November 30, 2019 and the patronage capital retirement of $63 million in September 2019.

In July 2019, the CFC Board of Directors authorized the allocation of the fiscal year 2019 net earnings as follows: $97 million to members in the form of patronage, $71 million to the members’ capital reserve and $1 million to the cooperative educational fund. The amount of patronage capital allocated each year by CFC’s Board of Directors is based on adjusted net income, which excludes the impact of derivative forward value gains (losses). See “MD&A—Non-GAAP Financial Measures” for information on adjusted net income.

In July 2019, the CFC Board of Directors authorized the retirement of allocated net earnings totaling $63 million, consisting of $48 million, which represented 50% of the patronage capital allocation for fiscal year 2019, and $15 million, which represented the portion of the allocation from fiscal year 1994 net earnings that has been held for 25 years pursuant to the CFC Board of Directors policy. This amount was returned to members in cash in September 2019. The remaining portion of the amount allocated for fiscal year 2019 will be retained by CFC for 25 years under current guidelines adopted by the CFC Board of Directors in June 2009.

The CFC Board of Directors is required to make annual allocations of adjusted net income, if any. CFC has made annual retirements of allocated net earnings in 39 of the last 40 fiscal years; however, future retirements of allocated amounts are determined based on CFC’s financial condition. The CFC Board of Directors has the authority to change the current practice for allocating and retiring net earnings at any time, subject to applicable laws. See “Item 1. Business—Allocation and Retirement of Patronage Capital” of our 2019 Form 10-K for additional information.

Accumulated Other Comprehensive Income (Loss)

The following tables summarize, by component, the activity in AOCI as of and for the three and six months ended November 30, 2019 and 2018.



	Three Months Ended November 30, 2019
(Dollars in thousands)	Unrealized Gains (Losses) Equity Securities		Unrealized Gains Derivatives			Unrealized Gains (Losses) Cash Flow Hedges		Unrealized Losses Defined Benefit Plan			Total
Beginning balance	$	—	$	2,459		$	—	$	(2,573	)	$	(114	)
(Gains) losses reclassified into earnings	—		(114		)	—		146			32
Ending balance	$	—	$	2,345		$	—	$	(2,427	)	$	(82	)



	Three Months Ended November 30, 2018
(Dollars in thousands)	Unrealized Gains (Losses) Equity Securities		Unrealized Gains Derivatives			Unrealized Gains (Losses) Cash Flow Hedges			Unrealized Losses Defined Benefit Plan			Total
Beginning balance	$	—	$	2,920		$	(1,035	)	$	(2,099	)	$	(214	)
Unrealized gains	—		—			1,035			—			1,035
(Gains) losses reclassified into earnings	—		(120		)	—			131			11
Other comprehensive income (loss)	—		(120		)	1,035			131			1,046
Ending balance	$	—	$	2,800		$	—		$	(1,968	)	$	832



	Six Months Ended November 30, 2019
(Dollars in thousands)	Unrealized Gains (Losses) Equity Securities		Unrealized Gains Derivatives⁽¹⁾			Unrealized Gains (Losses) Cash Flow Hedges		Unrealized Losses Defined Benefit Plan⁽²⁾			Total
Beginning balance	$	—	$	2,571		$	—	$	(2,718	)	$	(147	)
(Gains) losses reclassified into earnings	—		(226		)	—		291			65
Ending balance	$	—	$	2,345		$	—	$	(2,427	)	$	(82	)



	Six Months Ended November 30, 2018
(Dollars in thousands)	Unrealized Gains (Losses) Equity Securities			Unrealized Gains Derivatives⁽¹⁾			Unrealized Gains (Losses) Cash Flow Hedges			Unrealized Losses Defined Benefit Plan⁽²⁾			Total
Beginning balance	$	8,794		$	3,039		$	(1,059	)	$	(2,230	)	$	8,544
Cumulative effect of changes from adoption of new accounting standard	(8,794		)	—			—			—			(8,794		)
Unrealized gains	—			—			1,059			—			1,059
(Gains) losses reclassified into earnings	—			(239		)	—			262			23
Other comprehensive income (loss)	—			(239		)	1,059			262			1,082
Ending balance	$	—		$	2,800		$	—		$	(1,968	)	$	832

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⁽¹⁾Amounts are reclassified into income in the derivative forward value gains (losses) component of the derivative gains (losses) line item of our condensed consolidated statements of operations.

⁽²⁾Amounts are reclassified into income in the other general and administrative expenses line item of our condensed consolidated statements of operations.

We expect to reclassify less than $1 million of amounts in AOCI related to unrealized derivative gains into earnings over the next 12 months.