Company: AGM-PH
Filing Date: 2025-04-16
Form Type: DEF 14A
Source: 0000845877-25-000143
Chunk: 52

Company: FEDERAL AGRICULTURAL MORTGAGE CORP
Filing Date: 2025-04-16
Form: DEF 14A
Chunk 52
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 measure that reflects the economics of the net spread between all the assets owned by Farmer Mac and all related funding, including any associated derivatives, some of which may not be included in GAAP net interest income. Net effective spread differs from GAAP net interest income by excluding certain items from net interest income related to consolidated trusts and fair value changes of financial derivatives and including certain other items related to financial derivatives that net interest income does not contain. In summary, the differences between the two measures are:

• Farmer Mac excludes from net effective spread the interest income and interest expense associated with consolidated trusts and the average balance of the loans underlying these trusts to reflect management's view that the net interest income Farmer Mac earns on the related Farmer Mac Guaranteed Securities owned by third parties is effectively a guarantee fee. Accordingly, the excluded interest income and interest expense associated with consolidated trusts is reclassified to guarantee and commitment fees in determining Farmer Mac's core earnings.

• Farmer Mac also excludes from net effective spread the fair value changes of financial derivatives and the corresponding assets or liabilities designated in fair value hedge accounting relationships because they are not expected to have an economic effect on Farmer Mac's financial performance, as we expect to hold the financial derivatives and corresponding hedged items to maturity.

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| EXECUTIVE COMPENSATION GOVERNANCE |

• Net effective spread includes the accrual of income and expense related to the contractual amounts due on financial derivatives that are not designated in hedge accounting relationships ("undesignated financial derivatives"). For undesignated financial derivatives, Farmer Mac records the income or expense related to the accrual of the contractual amounts due in "Gains on financial derivatives" on the consolidated statements of operations, but the accrual of the contractual amounts due for undesignated financial derivatives are included in Farmer Mac's calculation of net effective spread.

• Net effective spread includes the net effects of terminations or net settlements on financial derivatives. The inclusion of these items in net effective spread reflects our view of the complete net spread between an asset and all of its related funding, including any associated derivatives, whether or not they are designated in a hedge accounting relationship.

The Compensation Committee measures achievement against each of these performance measures as of year-end. Each performance measure is weighted as determined by the Compensation Committee, and the Compensation Committee establishes thresholds within each performance measure to determine the actual levels of attainment necessary for payout. Although it is always a challenge to narrow down to a few measures, the Compensation Committee chose these measures because they most closely represent the business goals established by the Board and management and balance the