Interest Income and Interest Expense

3 Months Ended

Aug. 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 the three months ended August 31, 2023 and 2022.

Table 2.1: Interest Income and Interest Expense

	Three Months Ended August 31,
(Dollars in thousands)	2023		2022
Interest income:
Loans(1)	$	375,568	$	302,680
Investment securities	5,388		4,298
Total interest income	380,956		306,978
Interest expense:(2)(3)
Short-term borrowings	58,394		24,209
Long-term debt	223,976		158,881
Subordinated debt	33,911		26,378
Total interest expense	316,281		209,468
Net interest income	$	64,675	$	97,510

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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.

Deferred income reported on our consolidated balance sheets of $37 million and $39 million as of August 31, 2023 and May 31, 2023, respectively, consists primarily of deferred loan conversion fees that totaled $29 million and $30 million as of each respective date.