Funding Activity The FCS raises funds for loans through the sale of debt securities, channeling funds from capital market investors to agriculture and rural communities by bringing resources from Wall Street to Main Street. Systemwide debt securities are issued as discount notes, master notes, bonds, designated bonds, or global debt securities. As required by the Farm Credit Act, the System must obtain FCA approval for all funding requests. For the 12 months ended September 30, 2001, the FCS issued $521.8 billion in debt, up significantly from the $361.6 billion issued during the same period in 2000, owing to the increase in short-term discount note issuance. Data Reporting We continued to make significant strides in data management by using new technology to become more effective, more efficient, and more transparent. This year we initiated a new Internet service that gives the public easy access to certain financial information about FCS institutions. The information currently available includes the Uniform Call Report schedules and the Uniform Performance Report. Previously, the public could obtain this information only by submitting a Freedom of Information Act request to FCA. The public now can view or download the information at no cost from the FCA Web site. FCA plans to add additional reports and data to its Web site in FY 2002. Compensation Program The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 requires that the Federal financial regulators strive to achieve comparability in their compensation and benefits programs. The FCA Compensation Program is designed to pay FCA employees at the average market rate provided for equivalent work by the other Federal financial regulators. The FCA believes that it is achieving this objective based on a yearly reevaluation of its program in the context of the compensation practices of the other Federal financial regulators and the private sector. Locality Pay Differential While the FCA has a national salary range structure, we use locality pay differentials to compensate for the higher costs of labor that are evident at our duty stations. This is consistent with the practices of the other Federal financial regulators. The pay differentials supplement base salary and may be revised in accordance with the annual review of current data and available funding. To promote comparability, as required by law, we consider the practices of the other Federal financial regulators in establishing and adjusting the rates that we pay at the various duty stations. Locality pay is a percentile add-on to base salary that is creditable for employee benefits, such as retirement and thrift savings calculations. It is based on variations in the competitive cost of labor that are encountered in the vicinity of our duty stations. The FCA has a pay-for-performance program. We adjust employee salaries annually using a merit pay matrix that provides for variable adjustments based on the employee's performance rating and salary range position. The salary range is divided into "quintiles," or fifths. We review the values in the merit matrix cells and adjust them annually based on a number of factors, including the salary program developments of the other Federal financial regulators, private sector compensation trends, available funding, and the agency's overall performance and accomplishments during the last fiscal year. Salary Ranges for FCA Employees The agency's current base salary ranges are provided in the following table: Financial Condition of the Farm Credit System Farm Credit System loan volume increased with continued high asset quality over the 12 months ended September 30, 2001. Interest rates fell throughout 2001, ensuring low interest expense. Continued high levels of government payments ensured good loan repayment rates. The result of these favorable factors high loan volume, low interest expense, and good loan repayment rates was continued strong earnings. As a cautionary note, interest rates were near 40-year lows in late 2001 and are likely to increase. Further, government payments to agricultural producers in 2001 are expected to continue at around 40 percent of net farm income. For those grain and fiber producers who benefit from these payments, continued low commodity prices, combined with a significant reduction in govemment program payments could cause debt repayment problems and a resulting upsurge in credit quality problems at System institutions. In addition, the declining general economy may present similar problems for the many farmers with off-farm income. (1) Includes rural home loans and various loans classified as "other." (2) Includes a portion of loans classified as "lease recievable" and various loans classified as "other." (3) Includes loans to rural utilities, rural water and waste facilities, and a portion of loans classified as "lease receivable." Source: Federal Farm Credit Banks Funding Corporation, Quarterly Information Statements |