NOTE 15—BUSINESS SEGMENTS

Our consolidated financial statements include the financial results of CFC, NCSC and RTFC and certain entities created and controlled by CFC to hold foreclosed assets. Separate financial statements are produced for CFC, NCSC and RTFC and are the primary reports that management reviews in evaluating performance. The separate financial statements for CFC represent the consolidation of the financial results for CFC and the entities controlled by CFC. For more detail on the requirement to consolidate the financial results of NCSC and RTFC see “Note 1—Summary of Significant Accounting Policies.”

The consolidated CFC financial statements include three operating segments: CFC, NCSC and RTFC. The NCSC and RTFC operating segments are not required to be separately reported as the financial results of NCSC and RTFC do not meet the quantitative thresholds outlined by the accounting standards for segment reporting as of May 31, 2019. As a result, we have elected to aggregate the NCSC and RTFC financial results into a combined “Other” segment. CFC is the primary source of funding to NCSC. CFC is the sole source of funding to RTFC. Pursuant to a guarantee agreement, CFC has agreed to indemnify NCSC and RTFC for loan losses. The loan loss allowance at NCSC and RTFC is offset by a guarantee receivable from CFC.

The following tables display segment results for the years ended May 31, 2019, 2018 and 2017, and assets attributable to each segment as of May 31, 2019 and 2018.



	Year Ended May 31, 2019
(Dollars in thousands)	CFC			Other			Elimination			Consolidated
Statement of operations:
Interest income	$	1,126,869		$	51,741		$	(42,940	)	$	1,135,670
Interest expense	(835,491		)	(43,658		)	42,940			(836,209		)
Net interest income	291,378			8,083			—			299,461
Benefit for loan losses	1,266			—			—			1,266
Net interest income after benefit for loan losses	292,644			8,083			—			300,727
Non-interest income (loss):
Fee and other income	20,515			2,655			(7,815		)	15,355
Derivative losses:
Derivative cash settlements expense	(42,618		)	(993		)	—			(43,611		)
Derivative forward value losses	(318,135		)	(1,595		)	—			(319,730		)
Derivative losses	(360,753		)	(2,588		)	—			(363,341		)
Unrealized losses on equity securities	(1,799		)	—			—			(1,799		)
Total non-interest income (loss)	(342,037		)	67			(7,815		)	(349,785		)
Non-interest expense:
General and administrative expenses	(91,063		)	(8,477		)	6,374			(93,166		)
Losses on early extinguishment of debt	(7,100		)	—			—			(7,100		)
Other non-interest expense	(1,675		)	(1,441		)	1,441			(1,675		)
Total non-interest expense	(99,838		)	(9,918		)	7,815			(101,941		)
Loss before income taxes	(149,231		)	(1,768		)	—			(150,999		)
Income tax expense	—			(211		)	—			(211		)
Net loss	$	(149,231	)	$	(1,979	)	$	—		$	(151,210	)

	May 31, 2019
	CFC			Other			Elimination			Consolidated
Assets:
Total loans outstanding	$	25,877,305		$	1,087,988		$	(1,059,629	)	$	25,905,664
Deferred loan origination costs	11,240			—			—			11,240
Less: Allowance for loan losses	(17,535		)	—			—			(17,535		)
Loans to members, net	25,871,010			1,087,988			(1,059,629		)	25,899,369
Other assets	1,214,045			104,890			(93,932		)	1,225,003
Total assets	$	27,085,055		$	1,192,878		$	(1,153,561	)	$	27,124,372



	Year Ended May 31, 2018
(Dollars in thousands)	CFC			Other			Elimination			Consolidated
Statement of operations:
Interest income	$	1,067,016		$	49,182		$	(38,841	)	$	1,077,357
Interest expense	(791,836		)	(39,740		)	38,841			(792,735		)
Net interest income	275,180			9,442			—			284,622
Benefit for loan losses	18,575			—			—			18,575
Net interest income after benefit for loan losses	293,755			9,442			—			303,197
Non-interest income:
Fee and other income	17,369			1,372			(1,163		)	17,578
Derivative gains (losses):
Derivative cash settlements expense	(71,906		)	(2,375		)	—			(74,281		)
Derivative forward value gains	301,694			4,308			—			306,002
Derivative gains	229,788			1,933			—			231,721
Total non-interest income	247,157			3,305			(1,163		)	249,299
Non-interest expense:
General and administrative expenses	(83,783		)	(7,101		)	—			(90,884		)
Other non-interest expense	(1,943		)	(1,163		)	1,163			(1,943		)
Total non-interest expense	(85,726		)	(8,264		)	1,163			(92,827		)
Income before income taxes	455,186			4,483			—			459,669
Income tax expense	—			(2,305		)	—			(2,305		)
Net income	$	455,186		$	2,178		$	—		$	457,364

	May 31, 2018
	CFC			Other			Elimination			Consolidated
Assets:
Total loans outstanding	$	25,134,384		$	1,149,575		$	(1,116,465	)	$	25,167,494
Deferred loan origination costs	11,114			—			—			11,114
Less: Allowance for loan losses	(18,801		)	—			—			(18,801		)
Loans to members, net	25,126,697			1,149,575			(1,116,465		)	25,159,807
Other assets	1,520,118			106,455			(96,176		)	1,530,397
Total assets	$	26,646,815		$	1,256,030		$	(1,212,641	)	$	26,690,204



	Year Ended May 31, 2017
(Dollars in thousands)	CFC			Other			Elimination			Consolidated
Statement of operations:
Interest income	$	1,026,302		$	43,502		$	(33,170	)	$	1,036,634
Interest expense	(740,695		)	(34,250		)	33,207			(741,738		)
Net interest income	285,607			9,252			37			294,896
Provision for loan losses	(5,978		)	—			—			(5,978		)
Net interest income after provision for loan losses	279,629			9,252			37			288,918
Non-interest income:
Fee and other income	18,858			3,528			(2,673		)	19,713
Derivative gains (losses):
Derivative cash settlements expense	(81,489		)	(2,989		)	—			(84,478		)
Derivative forward value gains	175,379			4,002			—			179,381
Derivative gains	93,890			1,013			—			94,903
Results of operations from foreclosed assets	(1,749		)	—			—			(1,749		)
Total non-interest income	110,999			4,541			(2,673		)	112,867
Non-interest expense:
General and administrative expenses	(78,965		)	(7,261		)	—			(86,226		)
Gains on early extinguishment of debt	192			—			—			192
Other non-interest expense	(1,949		)	(2,635		)	2,636			(1,948		)
Total non-interest expense	(80,722		)	(9,896		)	2,636			(87,982		)
Income before income taxes	309,906			3,897			—			313,803
Income tax expense	—			(1,704		)	—			(1,704		)
Net income	$	309,906		$	2,193		$	—		$	312,099