NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/NRUC
NATIONAL RURAL UTILITIES COOPERATIVE FINANCE CORP /DC/ Segments Disclosure
| NOTE 16—BUSINESS SEGMENTS | ||
The following disclosures reflect the adoption of ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which was adopted retrospectively for our annual consolidated financial statements for the fiscal year ended May 31, 2025. The adoption of this guidance requires additional reportable segment disclosures, primarily relating to significant segment expenses and the CODM. Adoption of this guidance did not result in changes to the identification of our reportable business segments. See “Note 1—Summary of Significant Accounting Policies” for additional information related to our adoption of this new accounting standard.
Our operating segments consist of CFC and NCSC for both FY2025 and FY2024, which also represent our reportable segments. Our activities were previously conducted through three operating segments: CFC, NCSC and RTFC for FY2023. On December 1, 2023, RTFC completed the sale of its business to NCSC, as discussed under “Note 1—Summary of Significant Accounting Policies” in our 2024 Form 10-K. As we aggregated segment information for NCSC and RTFC into one reportable segment prior to the RTFC sale transaction, the sale of RTFC did not cause a change in the composition of our reportable segments. A description of each of our segments and the products and services they provide to their respective members and associates is presented below.
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 thought 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 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 15—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 the years ended May 31, 2025, 2024 and 2023, assets attributable to each segment as of May 31, 2025 and 2024 and a reconciliation of total segment amounts to our consolidated total amounts.
Table 16.1: Business Segment Information
| Year Ended May 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | CFC | NCSC | Segments Total | Reclasses and Adjustments(1) | Intersegment Eliminations(2) | Consolidated | ||||||||||||||||||||||||||||||||
| Results of operations: | ||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 1,693,507 | $ | 87,710 | $ | 1,781,217 | $ | — | $ | (77,984) | $ | 1,703,233 | ||||||||||||||||||||||||||
| Interest expense | (1,442,027) | (78,236) | (1,520,263) | — | 77,984 | (1,442,279) | ||||||||||||||||||||||||||||||||
Derivative cash settlements interest income (expense) | 99,237 | (18) | 99,219 | (99,219) | — | — | ||||||||||||||||||||||||||||||||
Interest expense(3) (4) | (1,342,790) | (78,254) | (1,421,044) | (99,219) | 77,984 | (1,442,279) | ||||||||||||||||||||||||||||||||
| Net interest income | 350,717 | 9,456 | 360,173 | (99,219) | — | 260,954 | ||||||||||||||||||||||||||||||||
Benefit for credit losses | 8,111 | 414 | 8,525 | — | (414) | 8,111 | ||||||||||||||||||||||||||||||||
Net interest income after benefit for credit losses | 358,828 | 9,870 | 368,698 | (99,219) | (414) | 269,065 | ||||||||||||||||||||||||||||||||
| Non-interest income: | ||||||||||||||||||||||||||||||||||||||
| Fee and other income | 29,162 | 3,707 | 32,869 | — | (9,272) | 23,597 | ||||||||||||||||||||||||||||||||
| Derivative gains: | ||||||||||||||||||||||||||||||||||||||
| Derivative cash settlements interest income | — | — | — | 99,219 | — | 99,219 | ||||||||||||||||||||||||||||||||
Derivative forward value losses | — | — | — | (105,070) | — | (105,070) | ||||||||||||||||||||||||||||||||
Derivative losses | — | — | — | (5,851) | — | (5,851) | ||||||||||||||||||||||||||||||||
Investment securities gains | 5,674 | — | 5,674 | — | — | 5,674 | ||||||||||||||||||||||||||||||||
| Total non-interest income | 34,836 | 3,707 | 38,543 | (5,851) | (9,272) | 23,420 | ||||||||||||||||||||||||||||||||
| Non-interest expense: | ||||||||||||||||||||||||||||||||||||||
Salaries and employee benefits(3) | (71,920) | (251) | (72,171) | — | — | (72,171) | ||||||||||||||||||||||||||||||||
Consulting(3) | (14,828) | (249) | (15,077) | — | — | (15,077) | ||||||||||||||||||||||||||||||||
Depreciation and amortization(3) | (12,615) | — | (12,615) | — | — | (12,615) | ||||||||||||||||||||||||||||||||
Other non-interest expense(5) | (50,016) | (12,090) | (62,106) | — | 9,686 | (52,420) | ||||||||||||||||||||||||||||||||
| Total non-interest expense | (149,379) | (12,590) | (161,969) | — | 9,686 | (152,283) | ||||||||||||||||||||||||||||||||
Income before income taxes | 244,285 | 987 | 245,272 | (105,070) | — | 140,202 | ||||||||||||||||||||||||||||||||
| Income tax provision | — | (188) | (188) | — | — | (188) | ||||||||||||||||||||||||||||||||
Net income(6) | $ | 244,285 | $ | 799 | $ | 245,084 | $ | (105,070) | $ | — | $ | 140,014 | ||||||||||||||||||||||||||
| May 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| CFC | NCSC | Segments Total | Reclasses and Adjustments(1) | Intersegment Eliminations(2) | Consolidated Total | |||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||
| Total loans outstanding | $ | 37,049,692 | $ | 1,654,228 | $ | 38,703,920 | $ | — | $ | (1,640,372) | $ | 37,063,548 | ||||||||||||||||||||||||||
| Deferred loan origination costs | 16,430 | — | 16,430 | — | — | 16,430 | ||||||||||||||||||||||||||||||||
| Loans to members | 37,066,122 | 1,654,228 | 38,720,350 | — | (1,640,372) | 37,079,978 | ||||||||||||||||||||||||||||||||
| Less: Allowance for credit losses | (40,615) | (5,586) | (46,201) | — | 5,586 | (40,615) | ||||||||||||||||||||||||||||||||
| Loans to members, net | 37,025,507 | 1,648,642 | 38,674,149 | — | (1,634,786) | 37,039,363 | ||||||||||||||||||||||||||||||||
| Other assets | 1,269,575 | 34,068 | 1,303,643 | — | (17,957) | 1,285,686 | ||||||||||||||||||||||||||||||||
| Total assets | $ | 38,295,082 | $ | 1,682,710 | $ | 39,977,792 | $ | — | $ | (1,652,743) | $ | 38,325,049 | ||||||||||||||||||||||||||
| Year Ended May 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | CFC | NCSC | Segments Total | Reclasses and Adjustments(1) | Intersegment Eliminations(2) | Consolidated Total | ||||||||||||||||||||||||||||||||
| Results of operations: | ||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 1,584,071 | $ | 82,104 | $ | 1,666,175 | $ | — | $ | (72,824) | $ | 1,593,351 | ||||||||||||||||||||||||||
| Interest expense | (1,339,003) | (72,909) | (1,411,912) | — | 72,824 | (1,339,088) | ||||||||||||||||||||||||||||||||
Derivative cash settlements interest income | 127,017 | 149 | 127,166 | (127,166) | — | — | ||||||||||||||||||||||||||||||||
Interest expense(3) (4) | (1,211,986) | (72,760) | (1,284,746) | (127,166) | 72,824 | (1,339,088) | ||||||||||||||||||||||||||||||||
| Net interest income | 372,085 | 9,344 | 381,429 | (127,166) | — | 254,263 | ||||||||||||||||||||||||||||||||
Benefit (provision) for credit losses | 5,516 | (2,330) | 3,186 | — | 2,330 | 5,516 | ||||||||||||||||||||||||||||||||
Net interest income after benefit (provision) for credit losses | 377,601 | 7,014 | 384,615 | (127,166) | 2,330 | 259,779 | ||||||||||||||||||||||||||||||||
| Non-interest income: | ||||||||||||||||||||||||||||||||||||||
| Fee and other income | 27,857 | 7,448 | 35,305 | — | (12,513) | 22,792 | ||||||||||||||||||||||||||||||||
| Derivative gains: | ||||||||||||||||||||||||||||||||||||||
Derivative cash settlements interest income | — | — | — | 127,166 | — | 127,166 | ||||||||||||||||||||||||||||||||
| Derivative forward value gains | — | — | — | 264,871 | — | 264,871 | ||||||||||||||||||||||||||||||||
| Derivative gains | — | — | — | 392,037 | — | 392,037 | ||||||||||||||||||||||||||||||||
Investment securities gains | 10,772 | — | 10,772 | — | — | 10,772 | ||||||||||||||||||||||||||||||||
| Total non-interest income | 38,629 | 7,448 | 46,077 | 392,037 | (12,513) | 425,601 | ||||||||||||||||||||||||||||||||
| Non-interest expense: | ||||||||||||||||||||||||||||||||||||||
Salaries and employee benefits(3) | (66,382) | (1,019) | (67,401) | — | — | (67,401) | ||||||||||||||||||||||||||||||||
Consulting(3) | (9,668) | (168) | (9,836) | — | — | (9,836) | ||||||||||||||||||||||||||||||||
Depreciation and amortization(3) | (10,469) | — | (10,469) | — | — | (10,469) | ||||||||||||||||||||||||||||||||
Other non-interest expense(5) | (39,954) | (12,083) | (52,037) | — | 10,183 | (41,854) | ||||||||||||||||||||||||||||||||
| Total non-interest expense | (126,473) | (13,270) | (139,743) | — | 10,183 | (129,560) | ||||||||||||||||||||||||||||||||
Income before income taxes | 289,757 | 1,192 | 290,949 | 264,871 | — | 555,820 | ||||||||||||||||||||||||||||||||
| Income tax provision | — | (1,504) | (1,504) | — | — | (1,504) | ||||||||||||||||||||||||||||||||
Net income (loss)(6) | $ | 289,757 | $ | (312) | $ | 289,445 | $ | 264,871 | $ | — | $ | 554,316 | ||||||||||||||||||||||||||
| May 31, 2024 | ||||||||||||||||||||||||||||||||||||||
| CFC | NCSC | Segments Total | Reclasses and Adjustments(1) | Intersegment Eliminations(2) | Consolidated Total | |||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||
| Total loans outstanding | $ | 34,516,488 | $ | 1,544,477 | $ | 36,060,965 | $ | — | $ | (1,532,781) | $ | 34,528,184 | ||||||||||||||||||||||||||
| Deferred loan origination costs | 14,101 | — | 14,101 | — | — | 14,101 | ||||||||||||||||||||||||||||||||
| Loans to members | 34,530,589 | 1,544,477 | 36,075,066 | — | (1,532,781) | 34,542,285 | ||||||||||||||||||||||||||||||||
| Less: Allowance for credit losses | (48,726) | (6,000) | (54,726) | — | 6,000 | (48,726) | ||||||||||||||||||||||||||||||||
| Loans to members, net | 34,481,863 | 1,538,477 | 36,020,340 | — | (1,526,781) | 34,493,559 | ||||||||||||||||||||||||||||||||
| Other assets | 1,671,555 | 28,389 | 1,699,944 | — | (15,689) | 1,684,255 | ||||||||||||||||||||||||||||||||
| Total assets | $ | 36,153,418 | $ | 1,566,866 | $ | 37,720,284 | $ | — | $ | (1,542,470) | $ | 36,177,814 | ||||||||||||||||||||||||||
| Year Ended May 31, 2023 | ||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | CFC | NCSC | Segments Total | Reclasses and Adjustments(1) | Intersegment Eliminations(2) | Consolidated Total | ||||||||||||||||||||||||||||||||
| Results of operations: | ||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 1,343,215 | $ | 61,716 | $ | 1,404,931 | $ | — | $ | (53,202) | $ | 1,351,729 | ||||||||||||||||||||||||||
| Interest expense | (1,036,499) | (53,211) | (1,089,710) | — | 53,202 | (1,036,508) | ||||||||||||||||||||||||||||||||
Derivative cash settlements interest income (expense) | 34,021 | (444) | 33,577 | (33,577) | — | — | ||||||||||||||||||||||||||||||||
Interest expense(3) (4) | (1,002,478) | (53,655) | (1,056,133) | (33,577) | 53,202 | (1,036,508) | ||||||||||||||||||||||||||||||||
| Net interest income | 340,737 | 8,061 | 348,798 | (33,577) | — | 315,221 | ||||||||||||||||||||||||||||||||
Provision for credit losses | (603) | (935) | (1,538) | — | 935 | (603) | ||||||||||||||||||||||||||||||||
Net interest income after provision for credit losses | 340,134 | 7,126 | 347,260 | (33,577) | 935 | 314,618 | ||||||||||||||||||||||||||||||||
| Non-interest income: | ||||||||||||||||||||||||||||||||||||||
| Fee and other income | 24,880 | 3,922 | 28,802 | — | (10,668) | 18,134 | ||||||||||||||||||||||||||||||||
| Derivative gains: | ||||||||||||||||||||||||||||||||||||||
Derivative cash settlements interest income | — | — | — | 33,577 | — | 33,577 | ||||||||||||||||||||||||||||||||
| Derivative forward value gains | — | — | — | 252,267 | — | 252,267 | ||||||||||||||||||||||||||||||||
| Derivative gains | — | — | — | 285,844 | — | 285,844 | ||||||||||||||||||||||||||||||||
Investment securities losses | (4,974) | — | (4,974) | — | — | (4,974) | ||||||||||||||||||||||||||||||||
Total non-interest income (expense) | 19,906 | 3,922 | 23,828 | 285,844 | (10,668) | 299,004 | ||||||||||||||||||||||||||||||||
| Non-interest expense: | ||||||||||||||||||||||||||||||||||||||
Salaries and employee benefits(3) | (58,164) | (847) | (59,011) | — | — | (59,011) | ||||||||||||||||||||||||||||||||
Consulting(3) | (8,201) | (218) | (8,419) | — | — | (8,419) | ||||||||||||||||||||||||||||||||
Depreciation and amortization(3) | (5,717) | — | (5,717) | — | — | (5,717) | ||||||||||||||||||||||||||||||||
Other non-interest expense(5) | (36,728) | (11,093) | (47,821) | — | 9,733 | (38,088) | ||||||||||||||||||||||||||||||||
| Total non-interest expense | (108,810) | (12,158) | (120,968) | — | 9,733 | (111,235) | ||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | 251,230 | (1,110) | 250,120 | 252,267 | — | 502,387 | ||||||||||||||||||||||||||||||||
| Income tax provision | — | (800) | (800) | — | — | (800) | ||||||||||||||||||||||||||||||||
Net income (loss)(6) | $ | 251,230 | $ | (1,910) | $ | 249,320 | $ | 252,267 | $ | — | $ | 501,587 | ||||||||||||||||||||||||||
____________________________
(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 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.
(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.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 5, 2025 | Showing above |
| 2024 | Aug 1, 2024 | |
| 2017 | Aug 1, 2017 | |
| 2016 | Aug 25, 2016 | |
About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.