FEDERAL AGRICULTURAL MORTGAGE CORP

Credit Risk – Loans and Guarantees.

We are exposed to both direct and indirect credit risk. We have direct credit exposure to our Agricultural Finance mortgage loans, Infrastructure Finance loans, and loans underlying off-balance sheet Farmer Mac Guaranteed Securities and LTSPCs. We have indirect credit exposure to the Agricultural Finance mortgage loans and Infrastructure Finance loans that secure AgVantage securities because, in the event of a default on an AgVantage security, we have recourse to the pledged collateral and have rights to the ongoing borrower payments of principal and interest.

Agricultural Finance - Direct Credit Exposure

Our direct credit exposure to Agricultural Finance mortgage loans as of December 31, 2025 was $14.0 billion across 48 states. We apply credit underwriting standards and methodologies to help assess exposures to loan purchases, which may include collateral valuation, financial metrics, and other appropriate borrower financial and credit information. We rely on the combined expertise of experienced internal agricultural credit underwriters and loan servicers, along with external agricultural loan servicing and collateral valuation contractors, to perform the necessary underwriting, servicing, and collateral valuation functions on Agricultural Finance mortgage loans. For Corporate AgFinance loans, which are often larger loan exposures (generally loan sizes more than $10 million) to agriculture production and agribusinesses that support agriculture production, food and fiber processing, and other supply chain production, and which may have risk profiles that differ from smaller agricultural mortgage loans, we have implemented methodologies and parameters that help assess credit risk based on the appropriate sector, borrower construct, and transaction complexity.

Corporate AgFinance loans often have a different credit risk profile than Farm & Ranch loans, therefore, we have implemented methodologies and parameters to help assess credit risk and have established specific underwriting criteria for these portfolio loans based on the sector, borrower construct, and transaction complexity. We thoroughly analyze each prospective Corporate AgFinance loan, including assessing the borrower's leverage, cash flows, liquidity, revenue and margin trends, as well as evaluating the borrower's suppliers, customers, market share, and competition. Any underlying weaknesses are assessed and analyzed in conjunction with any compensating strengths. Corporate AgFinance loans typically require ongoing monitoring of reporting requirements and financial and non-financial covenants. We rely on internal underwriters with the expertise to analyze large, complex farming operations and agribusiness loans, along with collateral valuation contractors, and legal counsel to perform the necessary diligence to assess the overall credit risk and loan structures of these transactions. We have developed business operating processes and skill sets to source, underwrite, close, and service Corporate AgFinance loans. Those processes and skill sets are different than those required for Farm & Ranch loans and, accordingly, have a higher operating expense profile than for Farm & Ranch loans.

When analyzing the credit quality of our Agricultural Finance mortgage loans, we also consider the level of internally-rated "substandard" assets, both in dollars and as a percentage of the outstanding portfolio. Assets categorized as "substandard" have a well-defined weakness or weaknesses, and there is a distinct possibility that some loss will be sustained if deficiencies are not corrected.

The following table disaggregates the Agricultural Finance mortgage loans by portfolio segment and by internally assigned risk ratings.

Table 20

Agricultural Finance mortgage loans classified as substandard increased $95.9 million to $494.2 million, or 3.5% of the portfolio, as of December 31, 2025 from $398.3 million, or 3.2% of the portfolio, as of December 31, 2024. Substandard assets are primarily concentrated within permanent planting commodity types. Credit performance within the crops and livestock commodities remains near historical averages with a divergence in sector economics causing an improvement in livestock sector performance and a slight degradation in grain and oilseed sector performance. Strong government support program payments have helped to mitigate degradation in the grain and oilseed loan portfolio performance.

The percentage of Agricultural Finance mortgage loans substandard assets within the portfolio of 3.5% as of December 31, 2025 is in line with the 15-year historical average of approximately 3.3% and is less than the highest observed substandard asset rate during that period of approximately 5.3%. If the rate of substandard assets increases from current levels on a sustained basis, our provision to the allowance for loan losses and the reserve for losses would also likely increase.

Our 90-day delinquency measure includes loans 90 days or more past due, as well as loans in foreclosure and non-performing loans where the borrower is in bankruptcy. As of December 31, 2025, 90-day delinquencies on Agricultural Finance mortgage loans with direct credit exposure were $132.6 million, 0.94% of the portfolio, up slightly from $108.9 million, or 0.88% of the portfolio as of December 31, 2024. The top ten borrower exposures over 90 days delinquent represent approximately half of the 90-day delinquencies as of December 31, 2025. We believe that we remain adequately collateralized on our delinquent loans.

Our 90-day delin quency rate of 0.94% as of December 31, 2025 was above our historical average of approximately 0.72%, which is based on the average 90-day delinquency rate as a percentage of the Agricultural Finance mortgage loan portfolio over the last 15 years. We continue to monitor delinquency rates for trends that may result from more than expected cyclical trends such as changes in the general economy or unforeseen events like adverse weather or regulatory changes in water management.

The following table presents historical information about our contractural 90-day delinquencies in the Agricultural Finance mortgage loan portfolio compared to the unpaid principal balance of all Agricultural Finance mortgage loans to which we have direct credit exposure:

Table 21

For Farm & Ranch loans, we consider a loan's original LTV ratio as one of many factors in evaluating loss severity. LTV depends on the market value of a property, as determined in accordance with our collateral valuation standards. As of December 31, 2025 and 2024, the average unpaid principal balances for Farm & Ranch loans outstanding and to which we have direct credit exposure was $836,000 and $817,000, respectively. We calculate the "original LTV" ratio of a loan by dividing the original loan principal balance by the original appraised property value. This calculation does not reflect any amortization of the original loan balance or any adjustment to the original appraised value to provide a current market value. The original LTV ratio of any cross-collateralized loans is calculated on a combined basis rather than on a loan-by-loan basis. The weighted-average original LTV ratio for Farm & Ranch mortgage loans purchased during 2025 was 51%, compared to 49% for loans purchased during 2024. The weighted-average original LTV ratio for exposure related to on- and off-balance sheet Farm & Ranch mortgage loans was 52% as of both December 31, 2025 and 2024. The weighted-average original LTV ratio for 90-day delinquencies for Farm & Ranch loans was 54% and 53% as of December 31, 2025 and 2024, respectively.

Analysis of portfolio performance indicates that commodity type is the primary determinant of our exposure to loss on a given loan. Although some credit losses are inherent to the business of agricultural lending, we believe that losses associated with the current agricultural credit cycle will be moderated by the strength and diversity of our Agricultural Finance portfolio, which we believe is adequately collateralized. The following tables present concentrations of Agricultural Finance mortgage loans by commodity type within geographic region and cumulative credit losses by origination year and commodity type:

Table 22

(1)Geographic regions: Northwest (AK, ID, MT, OR, WA, WY); Southwest (AZ, CA, CO, HI, NM, NV, UT); Mid-North (IA, IL, IN, MI, MN, NE, ND, SD, WI); Mid-South (AR, KS, LA, MO, OK, TX); Northeast (CT, DE, KY, MA, MD, ME, NH, NJ, NY, OH, PA, RI, VA, VT, WV); Southeast (AL, FL, GA, MS, NC, SC, TN).

Table 23

For more information about the credit quality of our Agricultural Finance mortgage loans and the associated allowance for losses please refer to Note 7—Loans to the consolidated financial statements. Activity affecting the allowance for loan losses is discussed in MD&A—Results of Operations—Provision for and Release of Allowance for Loan Losses.

Infrastructure Finance - Direct Credit Exposure

Our direct credit exposure to Infrastructure Finance loans held and loans underlying LTSPCs as of December 31, 2025 was $7.9 billion across 45 states. Our Charter does not specify minimum underwriting criteria for eligible Infrastructure Finance loans. To manage our credit risk, to mitigate the risk of loss from borrower defaults, and to provide guidance for the management, administration, and conduct of underwriting to participants in the Infrastructure Finance line of business, we have adopted credit underwriting standards that vary by loan product and by loan type. These standards are based on industry practices for similar Power & Utilities, Broadband Infrastructure, or Renewable Energy loans and are designed to assess the risk we assume on the loan and creditworthiness of the borrower. Underwriting standards for loans within each segment of the Infrastructure Finance line of business are detailed below:

Broadband Infrastructure loans tend to be larger operations focused on providing communication and data services to rural areas, including fiber, cable/broadband, tower, wireless, local exchange carrier, and data centers. Due to the larger loan sizes and different credit risk profiles, we thoroughly analyze each prospective Broadband Infrastructure loan, including assessing the borrower's leverage, cash flows, liquidity, revenue, and margin trends, as well as evaluating the borrower's capital expenditures, customer/subscriber growth, market share, and competition. Any underlying weaknesses are assessed and analyzed in conjunction with any compensating strengths. These loans also typically require ongoing monitoring of reporting requirements and financial and non-financial covenants. We rely on the experience of internal underwriters with the expertise to analyze the loans and engage legal counsel to perform the necessary diligence to assess the overall credit risk and loan structures of these transactions.

We have developed business operating processes and skill sets to source, underwrite and close Broadband Infrastructure and Renewable Energy loans. Those processes and skill sets are different than those required for Power & Utility loans and, accordingly, have a higher operating expense profile than for Power & Utility loans.

We do not directly service loans held in our portfolio for the Infrastructure Finance line of business. Typically, these loans are serviced by the lender or other organization which has experience in servicing loans to borrowers in these segments.

As of December 31, 2025, there were no delinquencies in our Infrastructure Finance line of business. Substandard assets within the Infrastructure Finance portfolio increased to $75.5 million as of December 31, 2025 compared to $42.5 million as of December 31, 2024, however, the amount of substandard assets as a percentage of the total outstanding balance has remained relatively flat.

The following table disaggregates the Infrastructure Finance loans by portfolio segment and by internally assigned risk ratings.

Table 24

For more information about the credit quality of our Infrastructure Finance line of business and the associated allowance for losses please refer to Notes 7—Loans to the consolidated financial statements.

Other Considerations Regarding Credit Risk Related to Loans and Guarantees

The credit exposure on USDA Securities, including those underlying Farmer Mac Guaranteed USDA Securities, is guaranteed by the full faith and credit of the United States. Therefore, we believe there is little or no credit risk exposure to the USDA Securities in the Agricultural Finance line of business. As of December 31, 2025, we had not experienced any credit losses on any USDA Securities or Farmer Mac Guaranteed USDA Securities and do not expect to incur any such losses in the future. Because we do not expect credit losses on this portfolio, we do not provide an allowance for losses on the USDA portfolio. The lender on each USDA-guaranteed loan is required by regulation to retain the unguaranteed portion of the loan, to service the entire underlying guaranteed loan, and to remain mortgagee and/or secured party of record, as applicable. The USDA-guaranteed portion and the unguaranteed portion of the loan are to be secured by the same collateral with equal lien priority. The USDA-guaranteed portion of a loan cannot be paid later than, or in any way be subordinated to, the related unguaranteed portion.

We require many lenders to make representations and warranties about the conformity of Agricultural Finance mortgage loans to our standards, the accuracy of provided loan data, and other requirements related to the loans. Sellers who make these representations and warranties are responsible for breaches of those representations and warranties. In the event of a breach of a representation or warranty material to our decision to purchase a loan or that directly or indirectly causes a default or potential loss on a loan sold or transferred to us by the seller, we can require a seller to cure, replace, or repurchase the loan. During the previous three years ended December 31, 2025, there have been no breaches of representations and warranties by sellers requiring a seller to cure, replace, or repurchase a loan. For more information about Farmer Mac's loan eligibility requirements, see "Business—Farmer Mac's Lines of Business—Agricultural Finance—Loan Eligibility."

We service a sizable portion of our Agricultural Finance mortgage loan and USDA Securities portfolios, as well as a smaller portfolio of eligible agricultural mortgage loans that are held by an unrelated third party. We also continue to contract with other institutions to undertake most of the servicing responsibilities for the remaining portion of our Agricultural Finance mortgage loans in accordance with our specified servicing requirements or accepted servicing standards established by the servicing institution. When the originating lender does not retain servicing for Farm & Ranch loans, they often retain "field servicing" in which they maintain certain responsibilities related to direct borrower contact. Field servicers may enter into contracts with our servicers that specify their field servicing responsibilities. We do not directly service loans held in our portfolio for the Infrastructure Finance line of business. Typically, these loans are serviced by the lender or other approved servicers in accordance with contractual requirements and in consideration for servicing fees.

In the event of a breach of the terms of its servicing agreement with Farmer Mac, such as failing to forward payments received or releasing collateral without our consent, or insolvency or bankruptcy, the servicer is responsible for any corresponding damages. In most cases, we have the right to terminate the servicing relationship for a particular loan or the entire portfolio serviced by the servicer. We may also proceed against the servicer in arbitration or exercise any remedies available to us under law. In September 2024, we notified a field servicer of a breach of its servicing duties and the termination of the servicing relationship for two large borrower relationships effective October 1, 2024. In April 2025, we terminated the entire seller/servicer relationship with that field servicer and assumed field servicing duties on all loans we acquired from that entity. We did not incur any credit losses as a result of this breach and these actions against this single field servicer were the only formal remedies taken against any servicers during the previous three years ended December 31, 2025.

Credit Risk – Counterparty Risk. We are exposed to credit risk arising from our business relationships with other institutions, which include:

•issuers of AgVantage securities;

•approved lenders and servicers; and

•interest rate swap counterparties.

We approve AgVantage counterparties and manage institutional credit risk related to those AgVantage counterparties by requiring them to meet our standards for creditworthiness for the particular counterparty type and transaction. All AgVantage securities must be secured by Eligible Loans or eligible securities in an amount at least equal to the outstanding principal amount of the issuer's AgVantage securities. The required collateralization level is established when the AgVantage facility is entered into with the counterparty and does not change during the life of the AgVantage securities issued under the facility without our consent. Loans pledged under AgVantage securities are serviced by the issuers of the securities (or their affiliated servicing institutions) in accordance with these institutions' servicing procedures. We review these servicing procedures before purchasing AgVantage securities from the issuer. In AgVantage transactions, the issuer is typically required to remove from the pool of pledged collateral loans that become and remain (within specified parameters) delinquent in the payment of principal or interest and to substitute Eligible Loans that are current in payment or pay down the AgVantage securities to maintain the minimum required collateralization level.

For AgVantage securities secured by loans eligible for our Agricultural Finance line of business, we require the general obligation to be over-collateralized, either by Eligible Loans or any of the following: cash; securities issued by the U.S. Treasury or guaranteed by an agency or instrumentality of the United States, other highly-rated securities; or other approved instruments. We require collateralized loans to meet the minimum standards set forth in the Charter for Agricultural Finance mortgage loans with a maximum limit of $75.0 million in cumulative loan exposure to any one borrower or related borrowers on pledged collateral.

AgVantage securities in our Infrastructure Finance line of business areissued by lenders organized as cooperatives and secured by pools of Power & Utilities loans. We requirethe issuing counterparty to have an investment grade credit rating from a NRSRO or to demonstrate comparable creditwort hiness. Although we have only indirect credit exposure on the Power & Utilities loans pledged to secure AgVantage securities, we apply the same underwriting standards as those used for direct credit exposure to Power & Utilities borrowers. Our Charter does not prescribe a maximum loan size or a total borrower exposure for an eligible Power & Utilities loan, but our current limit for AgVantage transactions is $75.0 million for cumulative loan exposure to any one borrower or related borrowers.

In the event of a default on an AgVantage security, we have recourse to the pledged collateral and rights to the ongoing borrower payments of principal and interest. As a result, we have indirect credit exposure to the Agricultural Finance mortgage loans and Infrastructure loans that secure AgVantage securities. For AgVantage counterparties that are institutional real estate investors or financial funds and other similar entities, we also typically require that the counterparty (1) maintain a higher collateralization level, through either a higher overcollateralization percentage or lower LTV ratio thresholds and (2) comply with specified financial covenants for the life of the related AgVantage security to avoid default. As of December 31, 2025, we have had no credit losses on AgVantage securities over the life of the program.

The following table provides information about the issuers of AgVantage securities and the required collateralization levels for those transactions as of December 31, 2025 and 2024:

Table 25

(1)Consists of AgVantage securities issued by 9 different issuers as of both December 31, 2025 and December 31, 2024.

We manage institutional credit risk related to lenders and servicers by requiring those institutions to meet our standards for creditworthiness. We monitor the financial condition of those institutions by evaluating financial statements and credit rating agency reports. For more information about lender eligibility requirements, see Business—Farmer Mac's Lines of Business—Agricultural Finance—Lenders.

We manage institutional credit risk related to interest rate swap counterparties through collateralization provisions contained in each of our swap agreements that vary based on the market value of our swap portfolio with each counterparty. For cleared swap transactions and non-cleared swap transactions entered into after March 1, 2017, we and our interest rate swap counterparties are required to fully collateralize their derivatives positions without any minimum threshold. We enter into interest rate swaps with multiple counterparties to reduce counterparty credit exposure concentration. Our use of cleared derivatives has increased over time which reduces our exposure to individual counterparties with the central clearinghouse acting to settle the change in value of contracts on a daily basis. Credit risk related to interest rate swap contracts is discussed in MD&A—Risk Management—Interest Rate Risk and Note 5—Financial Derivatives to the consolidated financial statements.

Credit Risk – Other Investments. The management of the credit risk inherent in these investments is governed by our internal policies as well as the Liquidity and Investment Regulations. In addition to establishing a portfolio of highly liquid investments as an available source of cash, the goals of our investment policies are designed to minimize exposure to financial market volatility, preserve capital, and support access to the debt markets.

The Liquidity and Investment Regulations and our internal policies require that investments held in our investment portfolio meet the following creditworthiness standards: (1) at a minimum, at least one obligor of the investment must have a very strong capacity to meet financial commitments for the life of the investment, even under severely adverse or stressful conditions, and generally present a very low risk of default; (2) if the obligor whose capacity to meet financial commitments is being relied upon to meet the standard set forth in subparagraph (1) is located outside of the United States, the investment must also be fully guaranteed by a U.S. government agency; and (3) the investment must exhibit low credit risk and other risk characteristics consistent with the purpose or purposes for which it is held.

The Liquidity and Investment Regulations and our internal policies also establish concentration limits, which are intended to limit exposure to any single entity, issuer, or obligor. While the Liquidity and Investment Regulations limit our total credit exposure to any single entity, issuer, or obligor of securities to 10% of our regulatory capital ($174.5 million as of December 31, 2025), our current policy limit is 5% of our regulatory capital ($87.3 million as of December 31, 2025). These exposure limits do not apply to obligations of U.S. government agencies or GSEs, although our current policy restricts investing more than 100% of regulatory capital in the senior non-convertible debt securities of any one GSE.

Although the Liquidity and Investments Regulations do not establish limits on the maximum amount, expressed as a percentage of our investment portfolio, that can be invested in each eligible asset class, our internal policies set forth asset class limits as part of our overall risk management framework.

Interest Rate Risk. We are subject to interest rate risk on all interest-earning assets on our balance sheet due to timing differences in the cash flows related to maturity, paydown, or repricing of the assets and debt together with financial derivatives. Cash flow mismatches due to changing interest rates can reduce our earnings if assets prepay sooner than expected and the resulting cash flows must be reinvested in lower-yielding investments when our funding costs cannot be correspondingly reduced. Alternatively, we could realize a decline in income if assets repay more slowly than originally forecasted and the associated maturing debt must be replaced by debt issuances at higher interest rates. Changes in interest rates may also affect the returns generated on assets funded with equity capital, as equity proceeds are deployed alongside debt funding to support interest-earning assets and liquidity.

Interest Rate Risk Management

The goal of our interest rate risk management is to manage the balance sheet in a manner that generates stable earnings and value across a variety of interest rate environments. Recognizing that interest rate sensitivities may change with the passage of time and as interest rates change, we regularly assess this exposure and, if necessary, adjust our portfolio of interest-earning assets, debt, and financial derivatives.

We seek to maintain exposure to interest rate risk within appropriate limits, as approved by our board of directors. Our management-level Asset and Liability Committee ("ALCO") provides oversight, establishes guidelines, and approves strategies to maintain interest rate risk within the board-established limits.

Equity capital is positioned to support asset growth, regulatory capital requirements, and liquidity and is allocated in a manner that complements our overall funding and interest rate risk management strategy. We consider the deployment of equity proceeds when assessing balance sheet duration, earnings sensitivity, and value across interest rate environment.

Our primary strategy for managing interest rate risk is to fund asset purchases with debt that together with financial derivatives have similar duration and convexity characteristics and help mitigate impacts from interest rate changes across the yield curve. As part of this strategy, we seek to issue debt securities across a variety of maturities that, together with financial derivatives, closely align the forecasted debt and financial derivative cash flows with forecasted asset cash flows.

We issue discount notes and both callable and non-callable medium-term notes across a spectrum of maturities to execute our debt issuance strategy. A portion of our callable debt is issued to mitigate prepayment risk associated with certain interest-earning assets held on balance sheet. In general, as interest rates decline, asset prepayments typically increase, and we may be able to economically extinguish certain callable debt issuances. We also enter into financial derivatives, primarily interest rate swaps, to better match the durations of our assets and liabilities, thereby reducing overall sensitivity to changing interest rates.

We incorporate behavioral models when projecting and valuing cash flows related to our interest-earning assets, taking into consideration the associated prepayment provisions and the default probabilities. We periodically evaluate the effectiveness of these models compared to actual prepayment experience because borrowers' behavior may change over time depending on the interest rate environment. We adjust and refine our models as necessary to improve the precision of future prepayment forecasts.

Interest rate changes may affect the timing of prepayments which may, in turn, impact duration and asset value. Declining interest rates generally result in increased prepayments, which shortens asset duration while rising interest rates generally result in lower prepayments, thereby extending asset duration.

We are subject to interest rate risk on loans and securities we have committed to acquire but not yet purchased (other than delinquent loans purchased through LTSPCs or loans designated for securitization under a forward purchase agreement). When we commit to purchase these assets, we are exposed to interest rate risk between the time we commit to purchase the loan and the time we issue debt to fund the loan purchase. We manage interest rate risk exposure related to these loans by entering into exchange-traded futures contracts involving U.S. Treasury securities and other financial derivatives. Similarly, when we commit to sell certain assets, the associated interest rate exposure is primarily managed with exchange-traded futures contracts involving U.S. Treasury securities and other financial derivatives.

Interest Rate Risk Metrics

We regularly evaluate and conduct interest rate shock simulations on our portfolio of financial assets, debt, and financial derivatives and examine a variety of metrics to quantify and manage our exposure to interest rate risk. These metrics include sensitivity to interest rate movements on the market value of equity ("MVE") and forecasted NES as well as a duration gap analysis.

MVE represents our estimate of the present value of all future cash flows from our current portfolio of on- and off-balance sheet assets, liabilities, and financial derivatives, discounted at current interest rates and appropriate spreads. However, MVE is not indicative of our market value as a going concern as these market values are theoretical and do not reflect future business activities. The MVE sensitivity analysis measures the degree to which the market values of our assets, liabilities, and financial derivatives are estimated to change for a given change in interest rates.

Our NES simulation represents the difference between projected income over the next twelve months from the current portfolio of interest-earning assets and interest expense produced by the related funding, including associated financial derivatives. The NES simulation may be impacted by changes in market interest rates resulting from timing differences between maturities and re-pricing characteristics of funded assets and debt together with the associated financial derivatives. The direction and magnitude of any such effect depends on the direction and magnitude of the change in interest rates across the yield curve as well as the composition of our portfolio. The NES simulation represents an estimate of NES that our current portfolio is expected to produce over a twelve-month horizon. As a result, the NES simulation sensitivity statistics provide a short-term view of our NES sensitivity to interest rate shocks.

Duration is a measure of a financial instrument's fair value sensitivity to changes in interest rates. Duration gap is calculated using the net estimated durations of our interest-earning assets, debt, and financial derivatives. Duration gap quantifies the extent to which estimated fair value sensitivities are matched for interest-earning assets, debt and financial derivatives. Duration gap provides a relatively concise measure of the interest rate risk inherent in our outstanding portfolio.

A positive duration gap denotes that the duration of our interest-earning assets is greater than the duration of our debt and financial derivatives. A positive duration gap indicates that with small changes in interest rate movements the fair value change of our interest-earning assets is more sensitive than the fair value change of our debt and financial derivatives. Conversely, a negative duration gap indicates that with small changes in interest rate movements the fair value change of our interest-earning assets are less sensitive than the fair value change of our debt and financial derivatives. A duration gap of zero indicates that with small changes in interest rate movements the fair value change of our interest-earning assets is effectively offset by the fair value change of our debt and financial derivatives.

Each of the interest rate risk metrics is quantified using asset/liability models and derived based on our best estimates of factors such as implied forward interest rates across the yield curve, interest rate volatility, and timing of asset prepayments and callable debt redemptions. Accordingly, these metrics are estimates rather than precise measurements. Actual results may differ to the extent there are material changes to our financial asset portfolio or changes in funding or hedging strategies undertaken to mitigate unfavorable sensitivities to interest rate changes.

The following schedule summarizes our MVE and NES sensitivity analysis as of December 31, 2025 and 2024 to an immediate and instantaneous uniform or "parallel" shift in the yield curve:

Table 26

As of December 31, 2025, we reported a positive effective duration gap of 3.7 months, reflecting no material change from the effective duration gap reported as of December 31, 2024. Since the end of 2024, the yield curve has steepened, with the yields on the 2‑year and 10‑year U.S. Treasury Notes falling by approximately 77 and 40 basis points, respectively. The change in interest rates resulted in correspondingly similar changes in the duration profiles of our funded assets, liabilities, and financial derivatives.

Financial Derivatives Transactions

The economic effects of financial derivatives are included in our MVE, NES, and duration gap analyses. We typically enter into the following types of financial derivative transactions principally to protect against risk from the effects of market price or interest rate movements on the value of interest-earning assets, future cash flows, and debt issuance, and not for trading or speculative purposes:

•"pay-fixed" interest rate swaps, in which we pay fixed rates of interest to, and receive floating rates of interest from, counterparties;

•"receive-fixed" interest rate swaps, in which we receive fixed rates of interest from, and pay floating rates of interest to, counterparties;

•"basis swaps," in which we pay floating rates of interest based on one index to, and receive floating rates of interest based on a different index from, counterparties; and

•exchange-traded futures contracts involving U.S. Treasury securities.

As of December 31, 2025, we had $25.5 billion combined notional amount of interest rate swaps, with terms ranging from less than one year to approximately thirty years, of which $11.3 billion were pay-fixed interest rate swaps, $13.8 billion were receive-fixed interest rate swaps, and $0.4 billion were basis swaps.

We enter into interest rate swaps to more closely match the cash flow and duration characteristics of our interest-earning assets with those of our debt. For example, we enter into pay-fixed interest rate swaps and issue floating rate debt to effectively create fixed rate funding that approximately matches the duration of the corresponding fixed rate assets being funded. We evaluate the overall cost of using interest rate swaps in conjunction with debt issuance as a funding alternative to duration-matched debt and enters into interest rate swaps to manage interest rate risks across the balance sheet.

Certain financial derivatives are designated as fair value hedges of fixed rate assets classified as AFS or liabilities to protect against fair value changes in the assets or liabilities related to a benchmark interest rate (e.g. SOFR). Also, certain financial derivatives are designated as cash flow hedges to mitigate the volatility of future interest rate payments on floating rate debt. All of our interest rate swap transactions are conducted under standard collateralized agreements that limit our potential credit exposure to any counterparty. As of both December 31, 2025 and 2024, we had no uncollateralized net exposures based on the mark-to-market value of the portfolio of interest rate swaps.

Re-funding and repricing risk

We are subject to re-funding and repricing risk on any floating rate assets that are not funded to contractual maturity. Re-funding and repricing risk arises from potential changes in funding costs resulting from a funding strategy whereby we issue floating rate debt across a variety of maturities to fund floating rate or synthetically floating rate assets that, on average, may have longer maturities. Changes in our funding costs relative to the asset's benchmark market index rate can cause changes to NII when debt matures and is reissued at then-current interest rates to continue funding those assets.

We are subject to re-funding and repricing risk on certain fixed rate assets due to pay-fixed, receive-floating interest rate swaps, effectively converting these assets to floating rate which then require floating rate funding.

We can meet floating rate funding needs in several ways, including:

•issuing fixed rate discount notes with maturities that match the reset period of the assets;

•issuing floating rate medium-term notes with maturities and reset frequencies that match the assets being funded;

•issuing non-maturity matched, floating rate medium-term notes with reset frequencies that match the assets being funded; or

•issuing non-maturity matched, fixed rate discount notes or medium-term notes swapped to floating rate to match the interest rate reset dates of the assets.

To meet certain floating rate funding needs, we frequently issue shorter-term floating-rate medium-term notes or fixed rate medium-term notes paired with a received-fixed interest rate swap because these funding alternatives generally provide a lower cost of funding while generating an effective interest rate match. As funding for these floating rate assets matures, we seek to refinance the debt associated with these assets in a similar fashion to achieve an appropriate interest rate match in the context of our overall debt issuance and liquidity management strategies. However, if the funding cost of our discount notes or medium-term notes increased relative to the benchmark market index of the associated assets during the time between when these floating rate assets were first funded and when we refinanced the associated debt, we would be exposed to a commensurate reduction of NES. Conversely, if the funding cost on our discount notes or medium-term notes decreased relative to the benchmark market index during that time, we would benefit from a commensurate increase to NES.

Our debt issuance strategy targets balancing liquidity risk and re-funding and repricing risk while maintaining an appropriate liability management profile that is consistent with our risk tolerance. We regularly adjust our funding strategies to mitigate the effects of interest rate variability and seek to maintain an effective mixture of funding structures in the context of our overall liability and liquidity management strategies.

As of December 31, 2025, we held $8.5 billion of floating rate assets in our lines of business and our investment portfolio that reset based on floating rate market indices, such as SOFR. As of December 31, 2025, we had $11.3 billion of pay-fixed interest rate swaps outstanding.