We are required to maintain an allowance based on a current estimate of credit losses that are expected to occur over the remaining term of the loans in our portfolio. Our allowance for credit losses consists of a collective allowance and an asset-specific allowance. The collective allowance is established for loans in our portfolio that share similar risk characteristics and are therefore evaluated on a collective, or pool, basis in measuring expected credit losses. The asset-specific allowance is established for loans in our portfolio that do not share similar risk characteristics with other loans in our portfolio and are therefore evaluated on an individual basis in measuring expected credit losses.

The following tables summarize, by legal entity and member class, changes in the allowance for credit losses for our loan portfolio and present the allowance components for the periods presented.


	Q3 FY2026
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Balance as of November 30, 2025	$	20,102	$	15,593	$	1,113	$	36,808	$	4,576	$	2,039	$	6,615	$	43,423


Provision (benefit) for credit losses	274		(8,272)		(44)		(8,042)		626		11		637		(7,405)
Charge-offs	—		(306)		—		(306)		—		—		—		(306)

Balance as of February 28, 2026	$	20,376	$	7,015	$	1,069	$	28,460	$	5,202	$	2,050	$	7,252	$	35,712


	Q3 FY2025
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Balance as of November 30, 2024	$	18,049	$	24,785	$	1,198	$	44,032	$	4,091	$	2,426	$	6,517	$	50,549


Provision (benefit) for credit losses	1,452		(7,790)		(31)		(6,369)		290		(14)		276		(6,093)


Balance as of February 28, 2025	$	19,501	$	16,995	$	1,167	$	37,663	$	4,381	$	2,412	$	6,793	$	44,456


	YTD FY2026
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Balance as of May 31, 2025	$	18,473	$	15,456	$	1,100	$	35,029	$	3,818	$	1,768	$	5,586	$	40,615



Provision (benefit) for credit losses	1,903		(8,135)		(31)		(6,263)		1,384		282		1,666		(4,597)
Charge-offs	—		(306)		—		(306)		—		—		—		(306)

Balance as of February 28, 2026	$	20,376	$	7,015	$	1,069	$	28,460	$	5,202	$	2,050	$	7,252	$	35,712


	YTD FY2025
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Balance as of May 31, 2024	$	15,954	$	25,583	$	1,189	$	42,726	$	3,937	$	2,063	$	6,000	$	48,726


Provision (benefit) for credit losses	3,547		(8,588)		(22)		(5,063)		444		349		793		(4,270)


Balance as of February 28, 2025	$	19,501	$	16,995	$	1,167	$	37,663	$	4,381	$	2,412	$	6,793	$	44,456

The following tables present, by legal entity and member class, the components of our allowance for credit losses as of February 28, 2026 and May 31, 2025.


	February 28, 2026
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Allowance components:
Collective allowance	$	20,376	$	6,818	$	1,069	$	28,263	$	5,202	$	2,050	$	7,252	$	35,515
Asset-specific allowance	—		197		—		197		—		—		—		197
Total allowance for credit losses	$	20,376	$	7,015	$	1,069	$	28,460	$	5,202	$	2,050	$	7,252	$	35,712

Loans outstanding:(1)
Collectively evaluated loans	$	30,383,915	$	6,275,950	$	273,177	$	36,933,042	$	1,163,391	$	618,988	$	1,782,379	$	38,715,421
Individually evaluated loans	3,371		12,887		—		16,258		—		—		—		16,258
Total loans outstanding	$	30,387,286	$	6,288,837	$	273,177	$	36,949,300	$	1,163,391	$	618,988	$	1,782,379	$	38,731,679


Allowance coverage ratios:
Collective allowance coverage ratio(2)	0.07	%	0.11	%	0.39	%	0.08	%	0.45	%	0.33	%	0.41	%	0.09	%
Asset-specific allowance coverage ratio(3)	—		1.53		—		1.21		—		—		—		1.21
Total allowance coverage ratio(4)	0.07		0.11		0.39		0.08		0.45		0.33		0.41		0.09


	May 31, 2025
(Dollars in thousands)	CFC Distribution		CFC Power Supply		CFC Statewide & Associate		CFC Total		NCSC Electric		NCSC Telecom		NCSC Total		Total
Allowance components:
Collective allowance	$	18,473	$	6,200	$	1,100	$	25,773	$	3,818	$	1,722	$	5,540	$	31,313
Asset-specific allowance	—		9,256		—		9,256		—		46		46		9,302
Total allowance for credit losses	$	18,473	$	15,456	$	1,100	$	35,029	$	3,818	$	1,768	$	5,586	$	40,615

Loans outstanding:(1)
Collectively evaluated loans	$	29,258,741	$	5,869,401	$	251,325	$	35,379,467	$	1,078,763	$	573,008	$	1,651,771	$	37,031,238
Individually evaluated loans	3,754		26,099		—		29,853		—		2,457		2,457		32,310
Total loans outstanding	$	29,262,495	$	5,895,500	$	251,325	$	35,409,320	$	1,078,763	$	575,465	$	1,654,228	$	37,063,548


Allowance coverage ratios:
Collective allowance coverage ratio(2)	0.06	%	0.11	%	0.44	%	0.07	%	0.35	%	0.30	%	0.34	%	0.08	%
Asset-specific allowance coverage ratio(3)	—		35.46		—		31.01		—		1.87		1.87		28.79
Total allowance coverage ratio(4)	0.06		0.26		0.44		0.10		0.35		0.31		0.34		0.11

(1)Represents the unpaid principal amount of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $18 million and $16 million as of February 28, 2026 and May 31, 2025, respectively.

Our allowance for credit losses and allowance coverage ratio were $36 million and 0.09%, respectively, as of February 28, 2026, compared with $41 million and 0.11%, respectively, as of May 31, 2025. The $5 million decrease in the allowance for credit losses was attributable to a $9 million decrease in the asset-specific allowance, partially offset by a $4 million increase in the collective allowance. The decrease in the asset-specific allowance was primarily due to higher-than-expected payments received on a nonperforming and nonaccrual CFC power supply loan during YTD FY2026. The increase in the collective allowance was primarily due to growth of our loan portfolio.

In addition to the allowance for credit losses for our loan portfolio, we maintain an allowance for credit losses for unadvanced loan commitments, which we refer to as our reserve for credit losses because this amount is reported as a component of other liabilities on our consolidated balance sheets. We measure the reserve for credit losses for unadvanced loan commitments based on expected credit losses over the contractual period of our exposure to credit risk arising from our obligation to extend credit, unless that obligation is unconditionally cancellable by us. The reserve for credit losses related to our off-balance sheet exposure for unadvanced loan commitments was less than $1 million as of both February 28, 2026 and May 31, 2025.