Upon adoption of CECL on June 1, 2020, we recorded an increase in our allowance for credit losses for our loan portfolio of $4 million. The impact on the reserve for expected credit losses for our off-balance sheet credit exposures related to unadvanced loan commitments and financial guarantees was not material. Additional information on our adoption of CECL is provided in “Note 1—Summary of Significant Accounting Policies.”

The following tables summarize, by member class, changes in the allowance for credit losses for our loan portfolio and present the allowance components for the years ended May 31, 2021, 2020 and 2019. The changes in the allowance and the allowance components prior to our adoption of CECL on June 1, 2020 are based on the incurred loss model. The allowance components, which consist of a collective allowance and an asset-specific allowance, are based on the evaluation method used to measure our loans for credit losses. Loans that share similar risk characteristics are evaluated on a collective basis in measuring credit losses, while loans that do not share similar risk characteristics with other loans in our portfolio are evaluated on an individual basis.


	Year Ended May 31, 2021
(Dollars in thousands)	Distribution		Power Supply		Statewide and Associate		CFC Total		NCSC		RTFC		Total
Balance as of May 31, 2020	$	8,002	$	38,027	$	1,409	$	47,438	$	806	$	4,881	$	53,125
Cumulative-effect adjustment from adoption of CECL accounting standard	3,586		2,034		25		5,645		(15)		(1,730)		3,900
Balance as of June 1, 2020	11,588		40,061		1,434		53,083		791		3,151		57,025
Provision (benefit) for credit losses	1,838		24,585		(43)		26,380		583		1,544		28,507


Balance as of May 31, 2021	$	13,426	$	64,646	$	1,391	$	79,463	$	1,374	$	4,695	$	85,532


	Year Ended May 31, 2020
(Dollars in thousands)	Distribution		Power Supply		Statewide and Associate		CFC Total		NCSC		RTFC		Total
Balance as of May 31, 2019	$	7,483	$	4,253	$	1,384	$	13,120	$	2,007	$	2,408	$	17,535
Provision (benefit) for credit losses	519		33,774		25		34,318		(1,201)		2,473		35,590



Balance as of May 31, 2020	$	8,002	$	38,027	$	1,409	$	47,438	$	806	$	4,881	$	53,125


	Year Ended May 31, 2019
(Dollars in thousands)	Distribution		Power Supply		Statewide and Associate		CFC Total		NCSC		RTFC		Total
Balance as of May 31, 2018	$	7,611	$	4,588	$	101	$	12,300	$	2,082	$	4,419	$	18,801
Provision (benefit) for credit losses	(128)		(335)		1,283		820		(75)		(2,011)		(1,266)


Balance as of May 31, 2019	$	7,483	$	4,253	$	1,384	$	13,120	$	2,007	$	2,408	$	17,535


	May 31, 2021
(Dollars in thousands)	Distribution			Power Supply			Statewide and Associate			CFC Total			NCSC			RTFC			Total
Allowance components:
Collective allowance	$	13,426		$	25,104		$	1,391		$	39,921		$	1,374		$	1,147		$	42,442
Asset-specific allowance(1)	—			39,542			—			39,542			—			3,548			43,090
Total allowance for credit losses	$	13,426		$	64,646		$	1,391		$	79,463		$	1,374		$	4,695		$	85,532

Loans outstanding:(2)
Collectively evaluated loans	$	22,022,044		$	4,926,000		$	106,121		$	27,054,165		$	706,868		$	406,606		$	28,167,639
Individually evaluated loans(1)	5,379			228,312			—			233,691			—			13,777			247,468
Total loans outstanding	$	22,027,423		$	5,154,312		$	106,121		$	27,287,856		$	706,868		$	420,383		$	28,415,107



Allowance ratios:
Collective allowance coverage ratio(3)	0.06		%	0.51		%	1.31		%	0.15		%	0.19		%	0.28		%	0.15		%
Asset-specific allowance coverage ratio(4)	—			17.32			—			16.92			—			25.75			17.41
Total allowance coverage ratio(5)	0.06			1.25			1.31			0.29			0.19			1.12			0.30


	May 31, 2020
(Dollars in thousands)	Distribution			Power Supply			Statewide and Associate			CFC Total			NCSC			RTFC			Total
Allowance components:
Collective allowance	$	8,002		$	4,173		$	1,409		$	13,584		$	806		$	3,902		$	18,292
Asset-specific allowance	—			33,854			—			33,854			—			979			34,833
Total allowance for credit losses	$	8,002		$	38,027		$	1,409		$	47,438		$	806		$	4,881		$	53,125

Loans outstanding:(2)
Collectively evaluated loans	$	20,763,897		$	4,563,798		$	106,498		$	25,434,193		$	697,862		$	380,243		$	26,512,298
Individually evaluated loans	5,756			167,708			—			173,464			—			5,092			178,556
Total loans outstanding	$	20,769,653		$	4,731,506		$	106,498		$	25,607,657		$	697,862		$	385,335		$	26,690,854



Allowance coverage ratios:
Collective allowance coverage ratio(3)	0.04		%	0.09		%	1.32		%	0.05		%	0.12		%	1.03		%	0.07		%
Asset-specific allowance coverage ratio(4)	—			20.19			—			19.52			—			19.23			19.51
Total allowance coverage ratio(5)	0.04			0.80			1.32			0.19			0.12			1.27			0.20

(2)Represents the unpaid principal amount of loans as of the end of each period. Excludes unamortized deferred loan origination costs of $12 million and $11 million as of May 31, 2021 and 2020, respectively.

The allowance for credit losses increased $32 million to $86 million as of May 31, 2021, and the allowance coverage ratio increased to 0.30%. Of the $32 million increase in the allowance, $24 million was attributable to the collective allowance and $8 million was attributable to the asset-specific allowance.

The increase in the collective allowance of $24 million was primarily driven by the risk-rating downgrade of Rayburn Country Electric Cooperative, Inc. (“Rayburn”), a CFC Texas-based power supply borrower with loans outstanding of $379 million as of May 31, 2021, from a pass rating to a criticized rating in fiscal year 2021 coupled with a decrease we made in the recovery rate assumption for power supply loans during fiscal year 2021 and the addition to the collective allowance of $4 million upon our adoption of CECL on June 1, 2020.

The increase in the asset-specific allowance of $8 million was primarily driven by the risk-rating downgrade of Brazos, a CFC Texas-based power supply borrower, in fiscal year 2021 and the classification of Brazos’ loans outstanding, which totaled $85 million as of May 31, 2021, as nonperforming due to the bankruptcy filing by Brazos as discussed above in “Note 4—Loans.”

Prior to our adoption of CECL on June 1, 2020, we assessed loan impairment on a collective basis unless we considered a loan to be impaired. We assessed loan impairment on an individual basis when, based on current information, it was probable that we would not receive all principal and interest amounts due in accordance with the contractual terms of the original loan agreement. In connection with our adoption of CECL, we no longer provide information on impaired loans. The following table provides information on loans previously classified as individually impaired under the incurred loss model for determining the allowance for credit losses.


	May 31, 2020
(Dollars in thousands)	Recorded Investment		Related Allowance		With Specific Allowance		With No Specific Allowance
Individually impaired loans:
CFC	$	173,464	$	33,854	$	167,708	$	5,756
RTFC	5,092		979		5,092		—
Total	$	178,556	$	34,833	$	172,800	$	5,756


	Year Ended May 31,				Year Ended May 31,
	2020		2019		2020		2019
(Dollars in thousands)	Average Recorded Investment				Interest Income Recognized
CFC	$	11,834	$	6,322	$	568	$	553

RTFC	5,361		5,861		268		293
Total impaired loans	$	17,195	$	12,183	$	836	$	846

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. Upon adoption of CECL on June 1, 2020, we began measuring 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 May 31, 2021 and 2020.