Equity

12 Months Ended

May 31, 2026

Stockholders' Equity Note [Abstract]

EQUITY

NOTE 11—EQUITY

Total equity increased by $209 million to $3,312 million as of May 31, 2026, compared with $3,103 million as of May 31, 2025. The increase was attributable primarily to our reported net income of $263 million for FY2026, partially offset by a decrease in equity of $53 million from the CFC Board of Directors’ authorized patronage capital retirements during the period, as discussed below.

Table 11.1: Equity

	May 31,
(Dollars in thousands)	2026		2025
Membership fees and educational fund:
Membership fees	$	969	$	966
Educational fund	2,800		2,658
Total membership fees and educational fund	3,769		3,624
Patronage capital allocated	966,253		948,526
Members’ capital reserve	1,804,161		1,631,609
Unallocated net income:
Prior fiscal year-end cumulative derivative forward value gains(1)	501,663		606,215
Current fiscal year derivative forward value gains (losses)(1)	17,756		(104,552)
Current fiscal year-end cumulative derivative forward value gains(1)	519,419		501,663
Other unallocated net loss	(709)		(709)
Unallocated net income	518,710		500,954
CFC retained equity	3,292,893		3,084,713
Accumulated other comprehensive loss	(2,369)		(2,236)
Total CFC equity	3,290,524		3,082,477
Noncontrolling interests	21,612		20,989
Total equity	$	3,312,136	$	3,103,466

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(1) Represents derivative forward value gains (losses) for CFC only, as total CFC equity does not include the noncontrolling interests of the consolidated variable interest entities. The cumulative amounts also include CFC historical foreign currency translation adjustments recorded in net income. See “Note 16—Business Segments” for the statements of operations for CFC.

Allocation of Net Earnings and Retirement of Patronage Capital—CFC

District of Columbia cooperative law requires cooperatives to allocate net earnings to patrons, to a general reserve in an amount sufficient to maintain a balance of at least 50% of paid-in capital and to a cooperative educational fund, as well as permits additional allocations to board-approved reserves. District of Columbia cooperative law also requires that a cooperative’s net earnings be allocated to all patrons in proportion to their individual patronage, and each patron’s allocation be distributed to the patron unless the patron agrees that the cooperative may retain its share as additional capital.

Annually, the CFC Board of Directors allocates its net earnings to its patrons in the form of patronage capital, to a cooperative educational fund, to a general reserve, if necessary, and to board-approved reserves. An allocation to the general reserve is made, if necessary, to maintain the balance of the general reserve at 50% of the membership fees collected. The general reserve is included in the patronage capital allocated component of CFC’s retained equity. CFC’s bylaws require the allocation to the cooperative educational fund to be at least 0.25% of its net earnings. Funds from the cooperative

educational fund are disbursed annually to statewide cooperative organizations to fund the teaching of cooperative principles and for other cooperative education programs.

Currently, CFC has one additional board-approved reserve, the members’ capital reserve. The CFC Board of Directors determines the amount of net earnings that is allocated to the members’ capital reserve, if any. The members’ capital reserve represents net earnings that CFC holds to increase equity retention. The net earnings held in the members’ capital reserve have not been specifically allocated to members, but may be allocated to individual members in the future as patronage capital if authorized by the CFC Board of Directors.

All remaining net earnings are allocated to CFC’s members in the form of patronage capital. The amount of net earnings allocated to each member is based on the member’s patronage of CFC’s lending programs during the year. No interest is earned by members on allocated patronage capital. There is no effect on CFC’s total equity as a result of allocating net earnings to members in the form of patronage capital or to board-approved reserves. The CFC Board of Directors has voted annually to retire a portion of the patronage capital allocation. Upon retirement, patronage capital is paid out in cash to the members to whom it was allocated. CFC’s total equity is reduced by the amount of patronage capital retired to its members and by amounts disbursed from board-approved reserves. CFC’s net earnings for determining allocations are based on CFC’s non-GAAP adjusted net income, which excludes the impact of derivative forward value gains (losses).

The current policy of the CFC Board of Directors is to retire 50% of the prior year’s allocated patronage capital and hold the remaining 50% for 25 years. The retirement amount and timing is subject to annual approval by the CFC Board of Directors.

In May 2026, the CFC Board of Directors authorized the allocation of $1 million of net earnings for FY2026 to the cooperative educational fund. In July 2026, the CFC Board of Directors authorized the allocation of net earnings for FY2026 as follows: $72 million to members in the form of patronage capital and $172 million to the members’ capital reserve. See “Item 7. MD&A—Non-GAAP Financial Measures” for information on adjusted net income.

In July 2026, the CFC Board of Directors also authorized the retirement of allocated net earnings totaling $62 million, of which $36 million represented 50% of the patronage capital allocation for FY2026 and $26 million represented the portion of the allocation from net earnings for fiscal year 2001 that had been held for 25 years pursuant to the CFC Board of Directors’ policy. We expect to return the authorized patronage capital retirement amount of $62 million to members in cash in the second quarter of fiscal year 2027. The remaining portion of the patronage capital allocation for FY2026 will be retained by CFC for 25 years pursuant to the guidelines adopted by the CFC Board of Directors in June 2009.

In May 2025, the CFC Board of Directors authorized the allocation of $1 million of net earnings for FY2025 to the cooperative educational fund. In July 2025, the CFC Board of Directors authorized the allocation of net earnings for FY2025 as follows: $67 million to members in the form of patronage capital and $176 million to the members’ capital reserve. In July 2025, the CFC Board of Directors also authorized the retirement of allocated net earnings totaling $53 million, of which $34 million represented 50% of the patronage capital allocation for FY2025 and $19 million represented the portion of the allocation from net earnings for fiscal year 2000 that had been held for 25 years pursuant to the CFC Board of Directors’ policy. The authorized patronage capital retirement amount of $53 million was returned to members in cash in September 2025. The remaining portion of the amount allocated for FY2025 will be retained by CFC for 25 years under current guidelines adopted by the CFC Board of Directors in June 2009.

Future allocations and retirements of net earnings may be made annually as determined by the CFC Board of Directors with due regard for its financial condition. The CFC Board of Directors has the authority to change the current practice for allocating and retiring net earnings at any time, subject to applicable laws and regulations.

CFC’s total equity includes noncontrolling interests, which consists of 100% of the equity of NCSC, as the members of NCSC own or control 100% of the interests in NCSC. NCSC also allocates annual net earnings, subject to approval by its board of directors. The allocation of net earnings by NCSC to board-approved reserves does not affect noncontrolling interests; however, the cash disbursements from board-approved reserves results in a reduction to noncontrolling interests.

Allocation of Net Earnings—NCSC

NCSC’s bylaws require that it allocate at least 0.25% of its net earnings to a cooperative educational fund and an amount to the general reserve required to maintain the general reserve balance at 50% of membership fees collected. Funds from the cooperative educational fund are disbursed annually to fund the teaching of cooperative principles and for other cooperative education programs.

Accumulated Other Comprehensive Income (Loss)

The following table presents, by component, changes in AOCI for the years ended May 31, 2026 and 2025 and the balance of each component as of the end of each respective period.

Table 11.2: Changes in Accumulated Other Comprehensive Income (Loss)

	Year Ended May 31,
	2026							2025
(Dollars in thousands)		Unrealized Gains on Derivative Hedges(1)		Unrealized Losses on Defined Benefit Plans(2)		Total		Unrealized Gains on Derivative Hedges(1)		Unrealized Losses on Defined Benefit Plans(2)		Total
Beginning balance		$	2,935	$	(5,171)	$	(2,236)	$	3,287	$	(4,703)	$	(1,416)
Changes in unrealized gains (losses)		—		(139)		(139)		803		(850)		(47)
Realized (gains) losses reclassified to earnings		(470)		476		6		(1,155)		382		(773)
Ending balance		$	2,465	$	(4,834)	$	(2,369)	$	2,935	$	(5,171)	$	(2,236)

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(1)Derivative gains reclassified to earnings for FY2026 were included in the interest expense line item in our consolidated statements of operations. For FY2025, a portion of the derivative gains reclassified to earnings was included as a component of the derivative gains (losses) line item and the remainder was reclassified to the interest expense line item in our consolidated statements of operations.

(2)Reclassified to earnings as a component of the other non-interest expense line item presented in our consolidated statements of operations.

We expect to reclassify realized net gains of less than $1 million attributable to derivative cash flow hedges from AOCI into earnings over the next 12 months.