v3.26.3
Business Segments
 3 Months Ended
Aug. 31, 2026
Segment Reporting [Abstract]  
BUSINESS SEGMENTS
NOTE 14—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 13—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 Q1 FY2027 and Q1 FY2026, assets attributable to each segment as of August 31, 2026 and August 31, 2025 and a reconciliation of total segment amounts to our consolidated total amounts.
Table 14.1: Business Segment Information
Q1 FY2027
(Dollars in thousands)CFCNCSC Segments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Results of operations:
Interest income$451,601 $22,307 $473,908 $— $(19,452)$454,456 
Interest expense(378,395)(19,543)(397,938)— 19,452 (378,486)
Derivative cash settlements interest income (expense)
14,099 (69)14,030 (14,030)— — 
Interest expense(3) (4)
(364,296)(19,612)(383,908)(14,030)19,452 (378,486)
Net interest income87,305 2,695 90,000 (14,030)— 75,970 
Provision for credit losses(3,875)(2,242)(6,117)— 2,242 (3,875)
Net interest income after provision for credit losses83,430 453 83,883 (14,030)2,242 72,095 
Non-interest income:
Fee and other income 8,638 4,152 12,790 — (4,916)7,874 
Derivative gains:
Derivative cash settlements interest income— — — 14,030 — 14,030 
Derivative forward value gains— — — 82,586 — 82,586 
Derivative gains— — — 96,616 — 96,616 
Investment securities gains
1,639 — 1,639 — — 1,639 
Total non-interest income10,277 4,152 14,429 96,616 (4,916)106,129 
Non-interest expense:
Salaries and employee benefits(3)
(20,161)(60)(20,221)— — (20,221)
Depreciation and amortization(3)
(3,748)— (3,748)— — (3,748)
Other non-interest expense(5)
(17,165)(3,656)(20,821)— 2,674 (18,147)
Total non-interest expense(41,074)(3,716)(44,790)— 2,674 (42,116)
Income before income taxes
52,633 889 53,522 82,586 — 136,108 
Income tax provision— (682)(682)— — (682)
Net income(6)
$52,633 $207 $52,840 $82,586 $— $135,426 
August 31, 2026
CFCNCSC Segments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Assets:
Total loans outstanding$38,303,948 $1,697,618 $40,001,566 $— $(1,683,908)$38,317,658 
Deferred loan origination costs19,660 — 19,660 — — 19,660 
Loans to members38,323,608 1,697,618 40,021,226 — (1,683,908)38,337,318 
Less: Allowance for credit losses(33,822)(7,933)(41,755)— 7,933 (33,822)
Loans to members, net38,289,786 1,689,685 39,979,471 — (1,675,975)38,303,496 
Other assets1,249,536 31,336 1,280,872 — (15,542)1,265,330 
Total assets$39,539,322 $1,721,021 $41,260,343 $— $(1,691,517)$39,568,826 
Q1 FY2026
(Dollars in thousands)CFC
NCSC
Segments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Results of operations:
Interest income$444,745 $22,951 $467,696 $— $(20,250)$447,446 
Interest expense(376,377)(20,342)(396,719)— 20,250 (376,469)
Derivative cash settlements interest income (expense)20,294 (27)20,267 (20,267)— — 
Interest expense(3) (4)
(356,083)(20,369)(376,452)(20,267)20,250 (376,469)
Net interest income88,662 2,582 91,244 (20,267)— 70,977 
Provision for credit losses(1,587)(502)(2,089)— 502 (1,587)
Net interest income after provision for credit losses87,075 2,080 89,155 (20,267)502 69,390 
Non-interest income (loss):
Fee and other income8,445 2,091 10,536 — (3,461)7,075 
Derivative gains (losses):
Derivative cash settlements interest income
— — — 20,267 — 20,267 
Derivative forward value losses
— — — (52,471)— (52,471)
Derivative losses
— — — (32,204)— (32,204)
Investment securities gains
1,445 — 1,445 — — 1,445 
Total non-interest income (loss)
9,890 2,091 11,981 (32,204)(3,461)(23,684)
Non-interest expense:
Salaries and employee benefits(3)
(19,906)(70)(19,976)— — (19,976)
Depreciation and amortization(3)
(3,394)— (3,394)— — (3,394)
Other non-interest expense(5)
(16,623)(4,010)(20,633)— 2,959 (17,674)
Total non-interest expense(39,923)(4,080)(44,003)— 2,959 (41,044)
Income before income taxes57,042 91 57,133 (52,471)— 4,662 
Income tax benefit— 20 20 — — 20 
Net income(6)
$57,042 $111 $57,153 $(52,471)$— $4,682 
August 31, 2025
CFC
NCSC
Segments Total
Reclasses and Adjustments(1)
Intersegment Eliminations(2)
Consolidated Total
Assets:
Total loans outstanding$37,538,412 $1,674,517 $39,212,929 $— $(1,660,221)$37,552,708 
Deferred loan origination costs16,893 — 16,893 — — 16,893 
Loans to members37,555,305 1,674,517 39,229,822 — (1,660,221)37,569,601 
Less: Allowance for credit losses(42,202)(6,088)(48,290)— 6,088 (42,202)
Loans to members, net37,513,103 1,668,429 39,181,532 — (1,654,133)37,527,399 
Other assets1,305,157 32,256 1,337,413 — (16,094)1,321,319 
Total assets$38,818,260 $1,700,685 $40,518,945 $— $(1,670,227)$38,848,718 
____________________________
(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.