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Business Segments
 9 Months Ended
Feb. 28, 2022
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 nine months ended February 28, 2022 and 2021, assets attributable to each segment as of February 28, 2022 and February 28, 2021 and a reconciliation of total segment amounts to our consolidated total amounts.
Table 14.1: Business Segment Information
 Three Months Ended February 28, 2022
(Dollars in thousands)CFCNCSC and RTFCSegments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Results of operations:   
Interest income$283,162 $10,817 $293,979 $— $(8,773)$285,206 
Interest expense(173,654)(8,773)(182,427)— 8,773 (173,654)
Derivative cash settlements interest expense(25,802)(410)(26,212)26,212 — — 
Interest expense(199,456)(9,183)(208,639)26,212 8,773 (173,654)
Net interest income83,706 1,634 85,340 26,212 — 111,552 
Benefit for credit losses12,749 2 12,751 — (2)12,749 
Net interest income after benefit for credit losses96,455 1,636 98,091 26,212 (2)124,301 
Non-interest income:
Fee and other income 5,590 685 6,275 — (2,005)4,270 
Derivative gains:
Derivative cash settlements interest expense— — — (26,212)— (26,212)
Derivative forward value gains — — — 195,492 — 195,492 
Derivative gains — — — 169,280 — 169,280 
Investment securities losses(11,621)— (11,621)— — (11,621)
Total non-interest income(6,031)685 (5,346)169,280 (2,005)161,929 
Non-interest expense:
General and administrative expenses(22,690)(1,984)(24,674)— 1,595 (23,079)
Losses on early extinguishment of debt(578)— (578)— — (578)
Other non-interest expense(265)(412)(677)— 412 (265)
Total non-interest expense(23,533)(2,396)(25,929)— 2,007 (23,922)
Income (loss) before income taxes66,891 (75)66,816 195,492 — 262,308 
Income tax provision— (343)(343)— — (343)
Net income (loss)$66,891 $(418)$66,473 $195,492 $— $261,965 
 Three Months Ended February 28, 2021
(Dollars in thousands)CFCNCSC and RTFCSegments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Results of operations:   
Interest income$276,153 $10,901 $287,054 $— $(8,882)$278,172 
Interest expense(173,039)(8,883)(181,922)— 8,882 (173,040)
Derivative cash settlements interest expense(29,307)(428)(29,735)29,735 — — 
Interest expense(202,346)(9,311)(211,657)29,735 8,882 (173,040)
Net interest income73,807 1,590 75,397 29,735 — 105,132 
Provision for credit losses(33,023)(3,588)(36,611)— 3,588 (33,023)
Net interest income after provision for credit losses40,784 (1,998)38,786 29,735 3,588 72,109 
Non-interest income:
Fee and other income 5,059 4,308 9,367 — (5,548)3,819 
Derivative gains:
Derivative cash settlements interest expense— — — (29,735)— (29,735)
Derivative forward value gains — — — 359,931 — 359,931 
Derivative gains — — — 330,196 — 330,196 
Investment securities losses(2,807)— (2,807)— — (2,807)
Total non-interest income2,252 4,308 6,560 330,196 (5,548)331,208 
Non-interest expense:
General and administrative expenses(23,174)(1,909)(25,083)— 1,521 (23,562)
Other non-interest expense(301)(439)(740)— 439 (301)
Total non-interest expense(23,475)(2,348)(25,823)— 1,960 (23,863)
Income (loss) before income taxes19,561 (38)19,523 359,931 — 379,454 
Income tax provision— (507)(507)— — (507)
Net income (loss)$19,561 $(545)$19,016 $359,931 $— $378,947 
 Nine Months Ended February 28, 2022
(Dollars in thousands)CFCNCSC and RTFCSegments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Results of operations:   
Interest income$845,600 $32,243 $877,843 $— $(26,217)$851,626 
Interest expense(522,027)(26,217)(548,244)— 26,217 (522,027)
Derivative cash settlements interest expense(78,480)(1,247)(79,727)79,727 — — 
Interest expense(600,507)(27,464)(627,971)79,727 26,217 (522,027)
Net interest income245,093 4,779 249,872 79,727 — 329,599 
Benefit for credit losses12,146 2,859 15,005 — (2,859)12,146 
Net interest income after benefit for credit losses257,239 7,638 264,877 79,727 (2,859)341,745 
Non-interest income:
Fee and other income 17,006 (243)16,763 — (3,721)13,042 
Derivative gains:
Derivative cash settlements interest expense— — — (79,727)— (79,727)
Derivative forward value gains— — — 122,930 — 122,930 
Derivative gains— — — 43,203 — 43,203 
Investment securities losses(18,190)— (18,190)— — (18,190)
Total non-interest income(1,184)(243)(1,427)43,203 (3,721)38,055 
Non-interest expense:
General and administrative expenses(69,060)(6,110)(75,170)— 4,786 (70,384)
Losses on early extinguishment of debt(696)— (696)— — (696)
Other non-interest expense(834)(1,794)(2,628)— 1,794 (834)
Total non-interest expense(70,590)(7,904)(78,494)— 6,580 (71,914)
Income (loss) before income taxes185,465 (509)184,956 122,930 — 307,886 
Income tax provision— (524)(524)— — (524)
Net income (loss)$185,465 $(1,033)$184,432 $122,930 $— $307,362 
February 28, 2022
CFCNCSC and RTFCSegments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Assets:    
Total loans outstanding$29,487,207 $1,187,887 $30,675,094 $— $(1,166,731)$29,508,363 
Deferred loan origination costs12,018 — 12,018 — — 12,018 
Loans to members29,499,225 1,187,887 30,687,112 — (1,166,731)29,520,381 
Less: Allowance for credit losses(73,386)(3,210)(76,596)— 3,210 (73,386)
Loans to members, net29,425,839 1,184,677 30,610,516 — (1,163,521)29,446,995 
Other assets1,027,433 96,117 1,123,550 — (87,023)1,036,527 
Total assets$30,453,272 $1,280,794 $31,734,066 $— $(1,250,544)$30,483,522 
 Nine Months Ended February 28, 2021
(Dollars in thousands)CFCNCSC and RTFCSegments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Results of operations:
Interest income$828,222 $32,917 $861,139 $— $(26,884)$834,255 
Interest expense(527,437)(26,885)(554,322)— 26,884 (527,438)
Derivative cash settlements interest expense(85,240)(1,267)(86,507)86,507 — — 
Interest expense(612,677)(28,152)(640,829)86,507 26,884 (527,438)
Net interest income215,545 4,765 220,310 86,507 — 306,817 
Provision for credit losses(34,987)(2,481)(37,468)— 2,481 (34,987)
Net interest income after provision for credit losses180,558 2,284 182,842 86,507 2,481 271,830 
Non-interest income:
Fee and other income17,347 4,478 21,825 — (8,158)13,667 
Derivative gains:
Derivative cash settlements interest expense— — — (86,507)— (86,507)
Derivative forward value gains— — — 558,266 — 558,266 
Derivative gains — — — 471,759 — 471,759 
Investment securities gains491 — 491 — — 491 
Total non-interest income17,838 4,478 22,316 471,759 (8,158)485,917 
Non-interest expense:
General and administrative expenses(69,124)(5,944)(75,068)— 4,707 (70,361)
Losses on early extinguishment of debt(1,455)— (1,455)— — (1,455)
Other non-interest expense(956)(970)(1,926)— 970 (956)
Total non-interest expense(71,535)(6,914)(78,449)— 5,677 (72,772)
Income (loss) before income taxes126,861 (152)126,709 558,266 — 684,975 
Income tax provision— (920)(920)— — (920)
Net income (loss)$126,861 $(1,072)$125,789 $558,266 $— $684,055 
February 28, 2021
CFCNCSC and RTFCSegment Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Assets:    
Total loans outstanding$28,294,236 $1,152,844 $29,447,080 $— $(1,131,409)$28,315,671 
Deferred loan origination costs11,810 — 11,810 — — 11,810 
Loans to members28,306,046 1,152,844 29,458,890 — (1,131,409)28,327,481 
Less: Allowance for credit losses(92,012)(8,168)(100,180)— 8,168 (92,012)
Loans to members, net28,214,034 1,144,676 29,358,710 — (1,123,241)28,235,469 
Other assets1,169,521 108,022 1,277,543 — (98,024)1,179,519 
Total assets$29,383,555 $1,252,698 $30,636,253 $— $(1,221,265)$29,414,988 
____________________________
(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.