Interest Income and Interest Expense

12 Months Ended

May 31, 2023

Banking and Thrift, Interest [Abstract]

INTEREST INCOME AND INTEREST EXPENSE

NOTE 2—INTEREST INCOME AND INTEREST EXPENSE

The following table displays the components of interest income, by interest-earning asset type, and interest expense, by debt product type, presented on our consolidated statements of operations for fiscal years 2023, 2022 and 2021.

Table 2.1: Interest Income and Interest Expense

	Year Ended May 31,
(Dollars in thousands)	2023		2022		2021
Interest income:
Loans(1)	$	1,330,144	$	1,125,292	$	1,101,505
Investment securities	21,585		15,951		15,096
Total interest income	1,351,729		1,141,243		1,116,601
Interest expense:(2)(3)
Short-term borrowings(4)	165,961		18,265		14,730
Long-term debt (5)	763,700		581,748		581,292
Subordinated debt	106,847		105,521		106,041
Total interest expense	1,036,508		705,534		702,063
Net interest income	$	315,221	$	435,709	$	414,538

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(1)Includes loan conversion fees, which are generally deferred and recognized in interest income over the period to maturity using the effective interest method, late payment fees, commitment fees and net amortization of deferred loan fees and loan origination costs.

(2)Includes amortization of debt discounts and debt issuance costs, which are generally deferred and recognized as interest expense over the period to maturity using the effective interest method. Issuance costs related to dealer commercial paper, however, are recognized in interest expense immediately as incurred.

(3)Includes fees related to funding arrangements, such as up-front fees paid to banks participating in our committed bank revolving line of credit agreements. Based on the nature of the fees, the amount is either recognized immediately as incurred or deferred and recognized in interest expense ratably over the term of the arrangement.

(4)Short-term borrowings consist of interest expense paid for commercial paper, select notes, daily liquidity fund notes and secured borrowings under repurchase agreements.

(5)Long-term debt consists of interest expense paid for both long-term and short-term medium-term notes and Farmer Mac notes payable, and other long-term debt.

Deferred income reported on our consolidated balance sheets of $39 million and $44 million as of May 31, 2023 and 2022, respectively, consists primarily of deferred loan conversion fees that totaled $30 million and $37 million as of each respective date.