| Business Segments |
| | 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 |
|
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