Equity

9 Months Ended

Feb. 28, 2022

Stockholders' Equity Note [Abstract]

Equity

NOTE 10—EQUITY

Total equity increased $253 million to $1,653 million as of February 28, 2022, attributable primarily to our reported net income of $307 million for the nine months ended February 28, 2022, partially offset by the patronage capital retirement of $58 million authorized by the CFC Board of Directors in July 2021.

Allocation of Earnings and Retirement of Patronage Capital

In May 2021, the CFC Board of Directors authorized the allocation of $1 million of net earnings for fiscal year 2021 to the cooperative educational fund. In July 2021, the CFC Board of Directors authorized the allocation of net earnings for fiscal year 2021 as follows: $90 million to members in the form of patronage capital and $102 million to the members’ capital reserve. 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 2021, the CFC Board of Directors also authorized the retirement of allocated net earnings totaling $58 million, of which $45 million represented 50% of the patronage capital allocation for fiscal year 2021 and $13 million represented the portion of the allocation from net earnings for fiscal year 1996 that has been held for 25 years pursuant to the CFC Board of Directors policy. The authorized patronage capital retirement amount of $58 million was returned to members in cash in September 2021. The remaining portion of the amount allocated for fiscal year 2021 will be retained by CFC for 25 years under current guidelines adopted by the CFC Board of Directors in June 2009.

See “Note 11—Equity” in our 2021 Form 10-K for additional information on our policy for allocation and retirement of patronage capital.

Accumulated Other Comprehensive Income (Loss)

The following table presents, by component, changes in AOCI for the three and nine months ended February 28, 2022 and 2021 and the balance of each component as of the end of each respective period.

Table 10.1: Changes in Accumulated Other Comprehensive Income (Loss)

	Three Months Ended February 28,
	2022						2021
(Dollars in thousands)	Unrealized Gains on Derivative Hedges(1)		Unrealized Losses on Defined Benefit Plans(2)		Total		Unrealized Gains on Derivative Hedges(1)		Unrealized Losses on Defined Benefit Plans(2)		Total
Beginning balance	$	5,506	$	(1,600)	$	3,906	$	1,918	$	(3,664)	$	(1,746)
Changes in unrealized gains	—		—		—		—		—		—
Realized (gains) losses reclassified to earnings	(192)		72		(120)		(101)		188		87
Ending balance	$	5,314	$	(1,528)	$	3,786	$	1,817	$	(3,476)	$	(1,659)
	Nine Months Ended February 28,
	2022						2021
(Dollars in thousands)	Unrealized Gains on Derivative Hedges(1)		Unrealized Losses on Defined Benefit Plans(2)		Total		Unrealized Gains on Derivative Hedges(1)		Unrealized Losses on Defined Benefit Plans(2)		Total
Beginning balance	$	1,718	$	(1,743)	$	(25)	$	2,130	$	(4,040)	$	(1,910)
Changes in unrealized gains	4,028		—		4,028		—		—		—
Realized (gains) losses reclassified to earnings	(432)		215		(217)		(313)		564		251
Ending balance	$	5,314	$	(1,528)	$	3,786	$	1,817	$	(3,476)	$	(1,659)

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(1) Of the derivative gains reclassified to earnings, a portion is reclassified as a component of the derivative gains (losses) line item and the remainder is reclassified as a component of the interest expense line item on our consolidated statements of operations.

(2) Reclassified to earnings as component of the other non-interest expense line item presented on our consolidated statements of operations.

We expect to reclassify realized gains of $1 million attributable to derivative cash flow hedges from AOCI into earnings over the next 12 months.