Business Segments

12 Months Ended

May 31, 2026

Segment Reporting [Abstract]

BUSINESS SEGMENTS

NOTE 16—BUSINESS SEGMENTS

Our operating segments consist of CFC and NCSC which also represent our reportable segments. CFC’s principal purpose is to provide its members with financing to supplement the loan programs of RUS. CFC makes loans to its rural electric members so they can acquire, construct and operate electric distribution systems, electric power supply systems and related facilities. CFC also provides its members and associates with credit enhancements in the form of letters of credit and guarantees of debt obligations. NCSC’s principal purpose is to provide financing to its members and associates. NCSC makes loans to electric cooperatives and their subsidiaries that provide non-electric services in the energy and telecommunication industries as well as to entities that provide substantial benefit to CFC members, including eligible solar energy providers and investor-owned utilities. NCSC also provides its members and associates with equipment financing for leased assets, institutional debt placement services through its wholly owned subsidiary Cooperative Securities and credit enhancements in the form of letters of credit.

Basis of Presentation

We present the results of our business segments on the basis in which management internally evaluates operating performance to establish short- and long-term performance goals, develop budgets and forecasts, identify potential trends, allocate resources and make compensation decisions. This presentation is aligned with how results are reviewed internally by our Chief Executive Officer (“CEO”), which we determined to be our chief operating decision maker (“CODM”). The primary measure used regularly by our CODM to evaluate segment financial performance and allocate resources accordingly between segments is the net income adjusted to exclude derivative forward value gains (losses), which represent the effects of fair value fluctuations in our interest rate swaps. The CODM reviews and analyzes on a monthly basis the budget-to-actual variances for the adjusted net income and its components, to inform his decisions regarding the business segment allocation of capital and resources, in order to ensure alignment with our performance goals. The CODM also looks at changes in our total loans outstanding to assess the performance of the segments.

Business Segment Reporting Methodology

The results of our business segments are intended to present the separate results for each of the reportable segments included in our consolidated financial statements. As discussed in “Note 15—Variable Interest Entities,” all of NCSC’s funding is either provided by CFC or guaranteed by CFC, the terms and conditions of which are stipulated in a loan and security agreement and a guarantee agreement between CFC and NCSC. Pursuant to the guarantee agreement, CFC unconditionally guarantees full indemnification to NCSC for any credit losses. In addition, CFC manages the business operations of NCSC under a management agreement that automatically renews on an annual basis unless the agreement is terminated by either party.

We report loans, and interest and fees earned on loans, based on the entity that holds the loans. CFC borrows from various sources to fund the operations of CFC and NCSC, the cost of which is reflected in CFC’s interest expense. NCSC borrows from CFC to fund loans to its members, the cost of which is reported as interest expense by NCSC. CFC charges NCSC a management fee, which CFC reports as a component of fee and other income. NCSC reports the management fee charged by CFC as a component of non-interest expense. CFC and NCSC use derivatives, primarily interest rate swaps, to manage interest rate risk. Because we generally do not elect to apply hedge accounting to our interest rate swaps, changes in the fair value of our interest rate swaps are recorded in earnings in our consolidated total results of operations. However, management excludes the impact of derivative forward value gains (losses) and includes the net periodic derivative cash settlement interest income or expense amounts as a component of interest expense in reporting our segment results of operations, which represents the only difference between the accounting and reporting for our business segment results of operations and our consolidated total results of operations.

Segment Results and Reconciliation

The following tables display segment results of operations for the years ended May 31, 2026, 2025 and 2024, assets attributable to each segment as of May 31, 2026 and 2025 and a reconciliation of total segment amounts to our consolidated total amounts.

Table 16.1: Business Segment Information

	Year Ended May 31, 2026
(Dollars in thousands)	CFC		NCSC		Segments Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated
Results of operations:
Interest income	$	1,785,859	$	93,162	$	1,879,021	$	—	$	(82,361)	$	1,796,660
Interest expense	(1,494,526)		(82,729)		(1,577,255)		—		82,361		(1,494,894)
Derivative cash settlements interest income (expense)	64,178		(225)		63,953		(63,953)		—		—
Interest expense(3) (4)	(1,430,348)		(82,954)		(1,513,302)		(63,953)		82,361		(1,494,894)
Net interest income	355,511		10,208		365,719		(63,953)		—		301,766
Benefit (provision) for credit losses	10,362		(105)		10,257		—		105		10,362
Net interest income after benefit (provision) for credit losses	365,873		10,103		375,976		(63,953)		105		312,128
Non-interest income:
Fee and other income	34,814		6,323		41,137		—		(12,418)		28,719
Derivative gains:
Derivative cash settlements interest income	—		—		—		63,953		—		63,953
Derivative forward value gains	—		—		—		18,213		—		18,213
Derivative gains	—		—		—		82,166		—		82,166
Investment securities gains	1,128		—		1,128		—		—		1,128
Total non-interest income	35,942		6,323		42,265		82,166		(12,418)		112,013
Non-interest expense:
Salaries and employee benefits(3)	(79,813)		(270)		(80,083)		—		—		(80,083)
Depreciation and amortization(3)	(13,966)		—		(13,966)		—		—		(13,966)
Other non-interest expense(5)	(63,680)		(15,655)		(79,335)		—		12,313		(67,022)
Total non-interest expense	(157,459)		(15,925)		(173,384)		—		12,313		(161,071)
Income before income taxes	244,356		501		244,857		18,213		—		263,070
Income tax provision	—		(334)		(334)		—		—		(334)
Net income(6)	$	244,356	$	167	$	244,523	$	18,213	$	—	$	262,736
	May 31, 2026
	CFC		NCSC		Segments Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated Total
Assets:
Total loans outstanding	$	38,389,050	$	1,656,398	$	40,045,448	$	—	$	(1,642,033)	$	38,403,415
Deferred loan origination costs	18,713		—		18,713		—		—		18,713
Loans to members	38,407,763		1,656,398		40,064,161		—		(1,642,033)		38,422,128
Less: Allowance for credit losses	(29,947)		(5,691)		(35,638)		—		5,691		(29,947)
Loans to members, net	38,377,816		1,650,707		40,028,523		—		(1,636,342)		38,392,181
Other assets	1,296,147		34,981		1,331,128		—		(18,962)		1,312,166
Total assets	$	39,673,963	$	1,685,688	$	41,359,651	$	—	$	(1,655,304)	$	39,704,347

	Year Ended May 31, 2025
(Dollars in thousands)	CFC		NCSC		Segments Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated Total
Results of operations:
Interest income	$	1,693,507	$	87,710	$	1,781,217	$	—	$	(77,984)	$	1,703,233
Interest expense	(1,442,027)		(78,236)		(1,520,263)		—		77,984		(1,442,279)
Derivative cash settlements interest income (expense)	99,237		(18)		99,219		(99,219)		—		—
Interest expense(3) (4)	(1,342,790)		(78,254)		(1,421,044)		(99,219)		77,984		(1,442,279)
Net interest income	350,717		9,456		360,173		(99,219)		—		260,954
Benefit for credit losses	8,111		414		8,525		—		(414)		8,111
Net interest income after benefit for credit losses	358,828		9,870		368,698		(99,219)		(414)		269,065
Non-interest income:
Fee and other income	29,162		3,707		32,869		—		(9,272)		23,597
Derivative gains (losses):
Derivative cash settlements interest income	—		—		—		99,219		—		99,219
Derivative forward value losses	—		—		—		(105,070)		—		(105,070)
Derivative losses	—		—		—		(5,851)		—		(5,851)
Investment securities gains	5,674		—		5,674		—		—		5,674
Total non-interest income	34,836		3,707		38,543		(5,851)		(9,272)		23,420
Non-interest expense:
Salaries and employee benefits(3)	(71,920)		(251)		(72,171)		—		—		(72,171)
Depreciation and amortization(3)	(12,615)		—		(12,615)		—		—		(12,615)
Other non-interest expense(5)	(64,844)		(12,339)		(77,183)		—		9,686		(67,497)
Total non-interest expense	(149,379)		(12,590)		(161,969)		—		9,686		(152,283)
Income before income taxes	244,285		987		245,272		(105,070)		—		140,202
Income tax provision	—		(188)		(188)		—		—		(188)
Net income(6)	$	244,285	$	799	$	245,084	$	(105,070)	$	—	$	140,014
	May 31, 2025
	CFC		NCSC		Segments Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated Total
Assets:
Total loans outstanding	$	37,049,692	$	1,654,228	$	38,703,920	$	—	$	(1,640,372)	$	37,063,548
Deferred loan origination costs	16,430		—		16,430		—		—		16,430
Loans to members	37,066,122		1,654,228		38,720,350		—		(1,640,372)		37,079,978
Less: Allowance for credit losses	(40,615)		(5,586)		(46,201)		—		5,586		(40,615)
Loans to members, net	37,025,507		1,648,642		38,674,149		—		(1,634,786)		37,039,363
Other assets	1,269,575		34,068		1,303,643		—		(17,957)		1,285,686
Total assets	$	38,295,082	$	1,682,710	$	39,977,792	$	—	$	(1,652,743)	$	38,325,049

	Year Ended May 31, 2024
(Dollars in thousands)	CFC		NCSC		Segments Total		Reclasses and Adjustments(1)		Intersegment Eliminations(2)		Consolidated Total
Results of operations:
Interest income	$	1,584,071	$	82,104	$	1,666,175	$	—	$	(72,824)	$	1,593,351
Interest expense	(1,339,003)		(72,909)		(1,411,912)		—		72,824		(1,339,088)
Derivative cash settlements interest income	127,017		149		127,166		(127,166)		—		—
Interest expense(3) (4)	(1,211,986)		(72,760)		(1,284,746)		(127,166)		72,824		(1,339,088)
Net interest income	372,085		9,344		381,429		(127,166)		—		254,263
Benefit (provision) for credit losses	5,516		(2,330)		3,186		—		2,330		5,516
Net interest income after benefit (provision) for credit losses	377,601		7,014		384,615		(127,166)		2,330		259,779
Non-interest income:
Fee and other income	27,857		7,448		35,305		—		(12,513)		22,792
Derivative gains:
Derivative cash settlements interest income	—		—		—		127,166		—		127,166
Derivative forward value gains	—		—		—		264,871		—		264,871
Derivative gains	—		—		—		392,037		—		392,037
Investment securities gains	10,772		—		10,772		—		—		10,772
Total non-interest income	38,629		7,448		46,077		392,037		(12,513)		425,601
Non-interest expense:
Salaries and employee benefits(3)	(66,382)		(1,019)		(67,401)		—		—		(67,401)
Depreciation and amortization(3)	(10,469)		—		(10,469)		—		—		(10,469)
Other non-interest expense(5)	(49,622)		(12,251)		(61,873)		—		10,183		(51,690)
Total non-interest expense	(126,473)		(13,270)		(139,743)		—		10,183		(129,560)
Income before income taxes	289,757		1,192		290,949		264,871		—		555,820
Income tax provision	—		(1,504)		(1,504)		—		—		(1,504)
Net income (loss)(6)	$	289,757	$	(312)	$	289,445	$	264,871	$	—	$	554,316

____________________________

(1)Consists of (i) the reclassification of net periodic derivative settlement interest income (expense) amounts, which we report as a component of interest expense for business segment reporting purposes but is included in derivatives gains (losses) in our consolidated total results and (ii) derivative forward value gains (losses), which we exclude from our business segment results but is included in derivatives gains (losses) in our consolidated total results.

(2)Consists of intercompany borrowings payable by NCSC to CFC and the interest related to those borrowings, management fees paid by NCSC to CFC and other intercompany amounts, all of which are eliminated in consolidation.

(3)The significant expense categories and amounts align with the segment level information that is regularly provided to the CODM.

(4)Interest expense presented at the segment level is adjusted to include the effects of derivative cash settlement interest income or expense as provided to the CODM.

(5)Other non-interest expense for each segment includes consulting, information technology, member relations, board, and other general and administrative expenses. For the NCSC segment, the other non-interest expense also includes the management fee expense paid to CFC pursuant to the management agreement. Certain reclassifications have been made to the presentation of information in prior periods to conform to the current-period presentation.

(6) Net income (loss) presented at the segment level is adjusted to exclude derivative forward value gains (losses) and is the primary measure used regularly by our CODM to evaluate segment financial performance and allocate resources between segments.