Inside First Pioneer: Isn't it prime time you borrowed from First Pioneer?

It's prime time to borrow from First Pioneer Farm Credit

updated 10.1.08

October 2008 Interest Rate Outlook

First Pioneer raised all variable rates effective October 1st by 0.25%.

This increase was due to increased volatility in our funding rates. As with the rest of the world, we are uncertain when financial markets will settle down. We have made a decision to strengthen earnings and capital with higher margins to keep First Pioneer in the best condition possible in uncertain times.

Unlike other institutions you hear about in the news, First Pioneer and the Farm Credit System is in good financial condition and we continue to be a stable source of capital to agriculture.

Fall customer meetings are coming up. Bill and his staff are prepared to discuss recent events and the impact on First Pioneer.

Outlook
We are entering very uncertain times with financial markets undergoing huge changes, $700 billion economic recovery package being debated in Congress, and a Presidential campaign in its final weeks.

Expect things to get worse before they get better,

However, things are probably not as bad as the media would lead you to believe,

First Pioneer will continue to make decisions to maintain our strong capital and earning position.

First Pioneer first priority is to be a stable source of credit and services to our customers.
We have increased margins to maintain our strong position and expect to keep these higher margins until the uncertainty in the financial markets passes.

Earnings strong in 2007 (and 2008!)
First Pioneer earned $58.5 million in 2007, enabling us to distribute $22.3 million in patronage to customers in 2008. The 60% cash portion was distributed in February. The 2008 patronage equated to a 0.95% reduction in average borrower interest rate. ARE will be redeemed in May to customers who received a patronage distribution in February 2003.

We are ahead of budget through September 2008.

Continued good financial results enable your cooperative to get excellent rates on the money that it borrows, and to pass those savings along in terms of very competitive billed interest rates. Good financial results also mean stable patronage dividends to which First Pioneer borrowers have become accustomed. Competitive rates, good patronage dividends and great customer service assure continued strong customer value.

We look forward to serving you and continuing to provide great customer value!

As always, if you have questions, please contact your local First Pioneer branch.

Just a quick look at our interest rates and you'll find they are the most competitive in the market. In fact, our average variable rate is below "prime" — which is the lowest rate offered at more than 75 percent of the nation's 30 largest banks!

The chart below illustrates our point. It compares First Pioneer’s average variable rate with the prime rate.

First Pioneer average variable rate*
Average rate	4.98%
Cost of borrower stock***	+0.04%
Effect of projected 2008 patronage on your rate	-.95%
Average effective rate	4.07%

Commercial Bank Rates**
Current National Prime rate	5.00%

Average savings at First Pioneer compared to:
Prime	.93%
Average variable rates estimated for October 1, 2008 Last updated 10.1.08 *Most commercial loans cannot borrow at Prime. Prime plus 1% is more typical

The average variable loan rate paid by our customers will be 4.98%, or an effective rate of 4.07% after stock and patronage. That's 0.93% under Prime.