v3.26.3
Allowance for Credit Losses
 3 Months Ended
Aug. 31, 2026
Credit Loss [Abstract]  
ALLOWANCE FOR CREDIT LOSSES
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. 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.

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
Q1 FY2027
(Dollars in thousands)CFC Distribution
CFC
Power Supply
CFC Statewide & Associate
CFC
 Total
NCSC Electric
NCSC Telecom
NCSC TotalTotal
Balance as of May 31, 2026$16,625 $6,661 $970 $24,256 $4,108 $1,583 $5,691 $29,947 
Provision for credit losses312 1,306 15 1,633 1,728 514 2,242 3,875 
Balance as of August 31, 2026$16,937 $7,967 $985 $25,889 $5,836 $2,097 $7,933 $33,822 

Q1 FY2026
(Dollars in thousands)CFC Distribution
CFC
Power Supply
CFC Statewide & Associate
CFC
 Total
NCSC ElectricNCSC TelecomNCSC TotalTotal
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
1,002 95 (12)1,085 472 30 502 1,587 
Balance as of August 31, 2025$19,475 $15,551 $1,088 $36,114 $4,290 $1,798 $6,088 $42,202 
The following tables present, by legal entity and member class, the components of our allowance for credit losses as of August 31, 2026 and May 31, 2026.
Table 5.2: Allowance for Credit Losses Components

August 31, 2026
(Dollars in thousands)CFC DistributionCFC Power SupplyCFC Statewide & Associate
CFC
Total
NCSC Electric
NCSC Telecom
NCSC TotalTotal
Allowance components:
Collective allowance$16,937$7,924$985$25,846$5,836$2,097$7,933$33,779
Asset-specific allowance—43—43———43
Total allowance for credit losses$16,937$7,967$985$25,889$5,836$2,097$7,933$33,822
Loans outstanding:(1)
Collectively evaluated loans$30,224,580$6,123,758$263,700$36,612,038$1,111,967$585,651$1,697,618$38,309,656
Individually evaluated loans3,0025,000—8,002———8,002
Total loans outstanding$30,227,582$6,128,758$263,700$36,620,040$1,111,967$585,651$1,697,618$38,317,658
Allowance coverage ratios:
Collective allowance coverage ratio(2)
0.06 %0.13 %0.37 %0.07 %0.52 %0.36 %0.47 %0.09 %
Asset-specific allowance coverage ratio(3)
— 0.86 — 0.54 — — — 0.54 
Total allowance coverage ratio(4)
0.06 0.13 0.37 0.07 0.52 0.36 0.47 0.09 

May 31, 2026
(Dollars in thousands)CFC Distribution
CFC
Power Supply
CFC Statewide & Associate
CFC
Total
NCSC ElectricNCSC TelecomNCSC TotalTotal
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 loans3,3717,500—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 
____________________________
(1)Represents the unpaid principal amount of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $20 million and $19 million as of August 31, 2026 and May 31, 2026, 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 increased to $34 million and 0.09%, respectively, as of August 31, 2026, compared with $30 million and 0.08%, respectively, as of May 31, 2026. The $4 million increase in the allowance for credit losses was attributable to an increase in the collective allowance, driven primarily by longer weighted-average remaining maturity of our loan portfolio and higher credit risk associated with certain borrowers, partially offset by an improvement in the overall credit quality and risk profile of the loan portfolio.

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 August 31, 2026 and May 31, 2026.