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Business Segments
 6 Months Ended
Nov. 30, 2021
Segment Reporting [Abstract]  
Business Segments
NOTE 14—BUSINESS SEGMENTS

Our activities are conducted through three operating segments, which are based on each of the legal entities included in our consolidated financial statements: CFC, NCSC and RTFC. We report segment information for CFC separately; however, we aggregate segment information for NCSC and RTFC into one reportable segment because neither entity meets the quantitative materiality threshold for separate reporting under the accounting guidance governing segment reporting.

Basis of Presentation

We present the results of our business segments on the basis in which management internally evaluates operating performance to establish short- and long-term performance goals, develop budgets and forecasts, identify potential trends, allocate resources and make compensation decisions. During the current quarter, we changed the presentation of our segment results to align more closely to the presentation of financial information reviewed regularly by our Chief Executive Officer, the chief operating decision maker, to assess performance and inform the decision-making process in managing our business operations. This presentation change excludes derivative forward value derivative gains and losses from the results of operations results for each segment and includes net periodic derivative cash settlement expense amounts as a component of interest expense, which represents the only difference between the accounting and reporting for our business segment results of operations and our consolidated total results of operations. We recast the presentation of our business segment results for the prior fiscal year period to align with the current period presentation.
Business Segment Reporting Methodology

The results of our business segments are intended to present the separate results for each of the legal entities included in our consolidated financial statements. As discussed in “Note 13—Variable Interest Entities,” all of NCSC’s and RTFC’s funding is either provided by CFC or guaranteed by CFC, the terms and conditions of which are stipulated in a loan and security agreement and a guarantee agreement between CFC and each legal entity. Pursuant to the guarantee agreement, CFC unconditionally guarantees full indemnification to NCSC and RTFC for any credit losses. In addition, CFC manages the business operations of NCSC and RTFC under a management agreement that automatically renews on an annual basis unless the agreement is terminated by either party.

We report loans and interest and fees earned on loans based on the legal entity that holds the loans. CFC borrows from various sources to fund the operations of CFC, NCSC and RTFC, the cost of which is reflected in CFC’s interest expense. NCSC and RTFC each borrow from CFC to fund loans to their members, the cost of which is reported as interest expense by each legal entity. CFC charges NCSC and RTFC a management fee, which CFC reports as a component of fee and other income. NCSC and RTFC report the management fee charged by CFC as a component of non-interest expense. CFC and NCSC use derivatives, primarily interest rate swaps, to manage interest rate risk. Because we generally do not elect to apply hedge accounting to our interest rate swaps, changes in the fair value of our interest rate swaps are recorded in earnings in our consolidated total results of operations. However, management excludes the impact of derivative forward value gains and losses and includes the net periodic derivative cash settlement interest expense amounts as a component of interest expense in reporting our segment results of operations.

Segment Results and Reconciliation

The following tables display segment results of operations for the three and six months ended November 30, 2021 and 2020, assets attributable to each segment as of November 30, 2021 and November 30, 2020 and a reconciliation of total segment amounts to our consolidated total amounts.
Table 14.1: Business Segment Information
 Three Months Ended November 30, 2021
(Dollars in thousands)CFCNCSC and RTFCSegments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Results of operations:   
Interest income$281,131 $10,973 $292,104 $— $(8,952)$283,152 
Interest expense(173,596)(8,952)(182,548)— 8,952 (173,596)
Derivative cash settlements interest expense(25,533)(419)(25,952)25,952 — — 
Interest expense(199,129)(9,371)(208,500)25,952 8,952 (173,596)
Net interest income82,002 1,602 83,604 25,952 — 109,556 
Benefit for credit losses3,400 3,063 6,463 — (3,063)3,400 
Net interest income after benefit for credit losses85,402 4,665 90,067 25,952 (3,063)112,956 
Non-interest income:
Fee and other income 6,093 (1,812)4,281 — 550 4,831 
Derivative gains:
Derivative cash settlements interest expense— — — (25,952)— (25,952)
Derivative forward value gains — — — 72,038 — 72,038 
Derivative gains — — — 46,086 — 46,086 
Investment securities losses(4,344)— (4,344)— — (4,344)
Total non-interest income1,749 (1,812)(63)46,086 550 46,573 
Non-interest expense:
General and administrative expenses(22,716)(1,975)(24,691)— 1,596 (23,095)
Losses on early extinguishment of debt(118)— (118)— — (118)
Other non-interest expense(313)(917)(1,230)— 917 (313)
Total non-interest expense(23,147)(2,892)(26,039)— 2,513 (23,526)
Income (loss) before income taxes64,004 (39)63,965 72,038 — 136,003 
Income tax provision— (274)(274)— — (274)
Net income (loss)$64,004 $(313)$63,691 $72,038 $— $135,729 
 Three Months Ended November 30, 2020
(Dollars in thousands)CFCNCSC and RTFCSegments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Results of operations:   
Interest income$274,473 $11,008 $285,481 $— $(8,982)$276,499 
Interest expense(174,422)(8,982)(183,404)— 8,982 (174,422)
Derivative cash settlements interest expense(29,370)(430)(29,800)29,800 — — 
Interest expense(203,792)(9,412)(213,204)29,800 8,982 (174,422)
Net interest income70,681 1,596 72,277 29,800 — 102,077 
Benefit (provision) for credit losses(1,638)41 (1,597)— (41)(1,638)
Net interest income after benefit (provision) for credit losses69,043 1,637 70,680 29,800 (41)100,439 
Non-interest income:
Fee and other income 7,513 686 8,199 — (1,867)6,332 
Derivative gains:
Derivative cash settlements interest expense— — — (29,800)— (29,800)
Derivative forward value gains — — — 111,087 — 111,087 
Derivative gains — — — 81,287 — 81,287 
Investment securities losses(1,361)— (1,361)— — (1,361)
Total non-interest income6,152 686 6,838 81,287 (1,867)86,258 
Non-interest expense:
General and administrative expenses(23,750)(1,978)(25,728)— 1,592 (24,136)
Losses on early extinguishment of debt(1,455)— (1,455)— — (1,455)
Other non-interest expense(323)(316)(639)— 316 (323)
Total non-interest expense(25,528)(2,294)(27,822)— 1,908 (25,914)
Income before income taxes49,667 29 49,696 111,087 — 160,783 
Income tax provision— (262)(262)— — (262)
Net income (loss)$49,667 $(233)$49,434 $111,087 $— $160,521 
 Six Months Ended November 30, 2021
(Dollars in thousands)CFCNCSC and RTFCSegments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Results of operations:   
Interest income$562,438 $21,426 $583,864 $— $(17,444)$566,420 
Interest expense(348,373)(17,444)(365,817)— 17,444 (348,373)
Derivative cash settlements interest expense(52,678)(837)(53,515)53,515 — — 
Interest expense(401,051)(18,281)(419,332)53,515 17,444 (348,373)
Net interest income161,387 3,145 164,532 53,515 — 218,047 
Benefit (provision) for credit losses(603)2,857 2,254 — (2,857)(603)
Net interest income after benefit (provision) for credit losses160,784 6,002 166,786 53,515 (2,857)217,444 
Non-interest income:
Fee and other income 11,416 (928)10,488 — (1,716)8,772 
Derivative losses:
Derivative cash settlements interest expense— — — (53,515)— (53,515)
Derivative forward value losses — — — (72,562)— (72,562)
Derivative losses — — — (126,077)— (126,077)
Investment securities losses(6,569)— (6,569)— — (6,569)
Total non-interest income4,847 (928)3,919 (126,077)(1,716)(123,874)
Non-interest expense:
General and administrative expenses(46,370)(4,126)(50,496)— 3,191 (47,305)
Losses on early extinguishment of debt(118)— (118)— — (118)
Other non-interest expense(569)(1,382)(1,951)— 1,382 (569)
Total non-interest expense(47,057)(5,508)(52,565)— 4,573 (47,992)
Income (loss) before income taxes118,574 (434)118,140 (72,562)— 45,578 
Income tax provision— (181)(181)— — (181)
Net income (loss)$118,574 $(615)$117,959 $(72,562)$— $45,397 
November 30, 2021
CFCNCSC and RTFCSegments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Assets:    
Total loans outstanding$28,911,891 $1,152,940 $30,064,831 $— $(1,130,017)$28,934,814 
Deferred loan origination costs12,056 — 12,056 — — 12,056 
Loans to members28,923,947 1,152,940 30,076,887 — (1,130,017)28,946,870 
Less: Allowance for credit losses(86,135)(3,212)(89,347)— 3,212 (86,135)
Loans to members, net28,837,812 1,149,728 29,987,540 — (1,126,805)28,860,735 
Other assets1,144,912 99,144 1,244,056 — (89,212)1,154,844 
Total assets$29,982,724 $1,248,872 $31,231,596 $— $(1,216,017)$30,015,579 
 Six Months Ended November 30, 2020
(Dollars in thousands)CFCNCSC and RTFCSegments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Results of operations:
Interest income$552,069 $22,016 $574,085 $— $(18,002)$556,083 
Interest expense(354,398)(18,002)(372,400)— 18,002 (354,398)
Derivative cash settlements interest expense(55,933)(839)(56,772)56,772 — — 
Interest expense(410,331)(18,841)(429,172)56,772 18,002 (354,398)
Net interest income141,738 3,175 144,913 56,772 — 201,685 
Benefit (provision) for credit losses(1,964)1,107 (857)— (1,107)(1,964)
Net interest income after benefit (provision) for credit losses139,774 4,282 144,056 56,772 (1,107)199,721 
Non-interest income:
Fee and other income12,288 170 12,458 — (2,610)9,848 
Derivative gains:
Derivative cash settlements interest expense— — — (56,772)— (56,772)
Derivative forward value gains— — — 198,335 — 198,335 
Derivative gains — — — 141,563 — 141,563 
Investment securities gains3,298 — 3,298 — — 3,298 
Total non-interest income15,586 170 15,756 141,563 (2,610)154,709 
Non-interest expense:
General and administrative expenses(45,950)(4,035)(49,985)— 3,186 (46,799)
Losses on early extinguishment of debt(1,455)— (1,455)— — (1,455)
Other non-interest expense(655)(531)(1,186)— 531 (655)
Total non-interest expense(48,060)(4,566)(52,626)— 3,717 (48,909)
Income (loss) before income taxes107,300 (114)107,186 198,335 — 305,521 
Income tax provision— (413)(413)— — (413)
Net income (loss)$107,300 $(527)$106,773 $198,335 $— $305,108 
November 30, 2020
CFCNCSC and RTFCSegment Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Assets:    
Total loans outstanding$27,027,010 $1,136,379 $28,163,389 $— $(1,112,226)$27,051,163 
Deferred loan origination costs11,806 — 11,806 — — 11,806 
Loans to members27,038,816 1,136,379 28,175,195 — (1,112,226)27,062,969 
Less: Allowance for credit losses(58,989)(4,580)(63,569)— 4,580 (58,989)
Loans to members, net26,979,827 1,131,799 28,111,626 — (1,107,646)27,003,980 
Other assets1,161,963 107,272 1,269,235 — (97,113)1,172,122 
Total assets$28,141,790 $1,239,071 $29,380,861 $— $(1,204,759)$28,176,102 
____________________________
(1)Consists of (i) the reclassification of net periodic derivative settlement interest expense amounts, which we report as a component of interest expense for business segment reporting purposes but is included in derivatives gains (losses) in our consolidated total results and (ii) derivative forward value gains and losses, which we exclude from our business segment results but is included in derivatives gains (losses) in our consolidated total results.
(2)Consists of intercompany borrowings payable by NCSC and RTFC to CFC and the interest related to those borrowings, management fees paid by NCSC and RTFC to CFC and other intercompany amounts, all of which are eliminated in consolidation.