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 4.11.08

March 2008 Interest Rate Outlook

The Federal Reserve Open Market Committee reduced rates by 200 BP in January and March, including a rate change outside of their normal meeting schedule. Prime rate followed “suit” dropping from 7.25% to 5.25%. First Pioneer reduced all variable rates accordingly, 1.25% effective February 1st and 0.75% on April 1st.

The Federal Reserve next meets on April 30th. They are expected to continue to reduce rates at that meeting, but we think their big moves have already been made. Financial markets are anticipating a 25-50 bp reduction.

Rates should stabilize out at lower levels during the second half of 2008, averaging significantly lower than in 2007 .

First Pioneer expects to continue to follow Federal Reserve and Prime changes.
If the Fed drops rates on April 30th, we will reduce our variable rates on May first. We typically change customer rates on the first of the month following a Federal Reserve rate change. We will continue to follow this pattern in the future as well, matching any Federal Reserve rate change with a First Pioneer rate change..

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.

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	5.25%

Average savings at First Pioneer compared to:
Prime	1.18%
Average variable rates estimated for April 1, 2008 Last updated 4.11.08 *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 1.18% under Prime.