Allowance for Credit Losses

12 Months Ended

May 31, 2026

Loans and Leases Receivable Disclosure [Abstract]


NOTE 5—ALLOWANCE FOR CREDIT LOSSES

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. Additional information on our current CECL allowance methodology is provided in “Note 1—Summary of Significant Accounting Policies.”

Allowance for Credit Losses—Loan Portfolio

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.

Table 5.1: Changes in Allowance for Credit Losses


	Year Ended May 31, 2026
(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	(1,848)		(8,489)		(130)		(10,467)		290		(185)		105		(10,362)
Charge-offs	—		(306)		—		(306)		—		—		—		(306)

Balance as of May 31, 2026	$	16,625	$	6,661	$	970	$	24,256	$	4,108	$	1,583	$	5,691	$	29,947


	Year Ended May 31, 2025
(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	2,519		(10,127)		(89)		(7,697)		(119)		(295)		(414)		(8,111)



Balance as of May 31, 2025	$	18,473	$	15,456	$	1,100	$	35,029	$	3,818	$	1,768	$	5,586	$	40,615


	Year Ended May 31, 2024
(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, 2023	$	14,924	$	33,306	$	1,194	$	49,424	$	2,464	$	1,206	$	3,670	$	53,094


Provision (benefit) for credit losses	1,030		(8,871)		(5)		(7,846)		1,473		857		2,330		(5,516)

Recoveries	—		1,148		—		1,148		—		—		—		1,148
Balance as of May 31, 2024	$	15,954	$	25,583	$	1,189	$	42,726	$	3,937	$	2,063	$	6,000	$	48,726

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

Table 5.2: Allowance for Credit Losses Components


	May 31, 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	$	16,625		$	6,558		$	970		$	24,153		$	4,108		$	1,583		$	5,691		$	29,844
Asset-specific allowance	—			103			—			103			—			—			—			103
Total allowance for credit losses	$	16,625		$	6,661		$	970		$	24,256		$	4,108		$	1,583		$	5,691		$	29,947

Loans outstanding:(1)
Collectively evaluated loans	$	30,081,853		$	6,395,896		$	258,397		$	36,736,146		$	1,073,794		$	582,604		$	1,656,398		$	38,392,544
Individually evaluated loans	3,371			7,500			—			10,871			—			—			—			10,871
Total loans outstanding	$	30,085,224		$	6,403,396		$	258,397		$	36,747,017		$	1,073,794		$	582,604		$	1,656,398		$	38,403,415



Allowance coverage ratios:
Collective allowance coverage ratio(2)	0.06		%	0.10		%	0.38		%	0.07		%	0.38		%	0.27		%	0.34		%	0.08		%
Asset-specific allowance coverage ratio(3)	—			1.37			—			0.95			—			—			—			0.95
Total allowance coverage ratio(4)	0.06			0.10			0.38			0.07			0.38			0.27			0.34			0.08


	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

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(1)Represents the unpaid principal amount of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $19 million and $16 million as of May 31, 2026 and 2025, respectively.

(2)Calculated based on the collective allowance component at period-end divided by collectively evaluated loans outstanding at period-end.

(3)Calculated based on the asset-specific allowance component at period-end divided by individually evaluated loans outstanding at period-end.

(4)Calculated based on the total allowance for credit losses at period-end divided by total loans outstanding at period-end.

Our allowance for credit losses and allowance coverage ratio decreased to $30 million and 0.08%, respectively, as of May 31, 2026, from $41 million and 0.11%, respectively, as of May 31, 2025. The $11 million decrease in the allowance for credit losses was attributable to a $9 million reduction in the asset-specific allowance, driven by higher-than-expected payments received on a nonaccrual CFC power supply loan during FY2026, and an approximately $2 million decrease in the collective allowance, driven primarily by improved borrower credit quality and a refinement in our borrower risk rating methodology during FY2026, as discussed above in “Note 4—Loans.”

Reserve for Credit Losses—Unadvanced Loan Commitments

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 May 31, 2026 and 2025.