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         Quarterly Report

        September 30, 2008
       First Pioneer Farm Credit, ACA


                 *   Burrville

                                                                *   Greenwich
                          *       Sangerfield                                                    *
           *                               *       Cobleskill

                                                                    Enfield   *                          *
                                                                                         *                   Middleboro

                      Middletown               *


           Bridgeton          *
        President Bill Lipinski’s Message
This quarterly report updates you on First Pioneer’s
operations and financial position as of September 30,
2008. Operating results continue to be favorable. Net
interest earnings during the first nine months of the year
are slightly higher than a year ago and slightly ahead of

Loan volume grew by $340 million compared to the same
period a year ago with credit quality remaining strong.
More and more of you are using the many financial
services which we offer (see list on facing page). Please
ask your loan officer to tell you how our services can add
value to your business. First Pioneer wants to be Your
First Choice for Financial Solutions.

The credit and financial crisis accelerated in the third
quarter causing First Pioneer to increase interest rates
0.25% effective October 1 st . The Federal Reserve
responded by dropping rates 1.00% during October. First
Pioneer held rates steady while Association funding costs
rose, then fell. First Pioneer plans to reduce interest rates
by 0.50% on December 1st.

Our business priorities continue to focus on areas that
strengthen organizational effectiveness and efficiency and
also, promote internal and external satisfaction. We will
also continue building our financial services program and
implementing enhancements to our on-line banking

Thanks for your continued patronage and support of First
Pioneer Farm Credit.


William L. Lipinski
President & CEO


The following comments address the operations and
financial position of First Pioneer Farm Credit, ACA (the
Association or First Pioneer). These comments should be
read in conjunction with the Association’s Annual Report
and the accompanying quarterly condensed financial
statements and related notes.

These accompanying financial statements have been
prepared under the oversight of the Audit Committee of the
Board of Directors.


Net Income Net income generated during the nine months
ended September 30, 2008 was $47.9 million, up $3.7
million compared to the first nine months of last year. The
increase in net income is primarily the result of higher net
interest income.

Interest Income, Expense Interest income totaled $117.0
million during the first nine months of the year, a decrease
of $24.9 million compared to the same period a year ago.
Interest expense totaled $58.4 million, a decrease of $27.2
million compared to last year. The decrease reflects the
lower interest rate environment compared to a year ago.

Net interest income of $58.6 million earned during the nine
months ended September 30, 2008 was up $2.2 million
(3.9%) from that earned during the same period a year ago.
The increase in net interest income is primarily due to loan

Provision For Loan Losses A $2.5 million provision for loan
losses was recorded during the first nine months of 2008
and 2007.

Noninterest Income, Expense Noninterest income of $20.1
million earned during the first nine months of 2008 was up
$2.8 million from that earned the same period a year ago.
The increase is primarily attributable to higher patronage
refunds from CoBank and higher financial services revenue.

Operating or noninterest expenses totaled $28.1 million during
the first nine months of 2008, up $1.4 million from the same
period last year. The increase is primarily due to higher
salary and benefits and technology service provider fees.

Net Income Before Income Taxes Net income generated
before providing for income taxes totaled $48.2 million
during the nine months ended September 30, 2008 up $3.7
million compared to a year ago.

Provision For Income Taxes A $0.3 million expense for
income taxes was recorded during the first nine months of
the year which is essentially unchanged from a year ago.


Loans held by the Association stood at $2.8 billion at September
30, 2008, up $243.0 million (9.3%) since the beginning of the
year. The increase in loans reflects new loan volume as well
as normal seasonal demand for borrowing by Association

Credit Quality The overall credit quality of the loan portfolio
remains strong. Internal reviews report loan volume classified
as acceptable (i.e., loans with no well-defined weaknesses
identified) to be 97.0% of the loan portfolio. High risk assets
(consisting of impaired loans, accruing loans past due 90 days
or more, and other property owned) totaled $14.9 million
(0.52% of loan related assets) at September 30, 2008 which is
an increase from $11.1 million at the beginning of the year.
High-risk assets stood at $10.9 million at September 30, 2007.

Allowance For Loan Losses The allowance for loan losses stood
at $26.5 million at September 30, 2008, which is an increase
of $2.4 million from the beginning of the year. The allowance
represents 0.93% of loans held by the Association and
accrued interest on loans.


Assets, Member’s Equity At September 30, 2008 assets totaled
just under $3.0 billion with member’s equity totaling $496.8
million. At December 31, 2007 assets totaled $2.7 billion
with member’s equity totaling $465.2 million.

The $239.2 million increase (8.8%) in assets during the first
nine months of 2008 is directly attributable to increased loan
volume. Other assets include a patronage refund receivable
from CoBank, which totaled $8.7 million at September 30,
2008, down $1.7 million from $10.4 million at December 31,
2007. The patronage refund from CoBank accrued during the
first nine months of 2008 is $1.0 million higher than that
accrued during the first nine months of last year.

Member’s equity increased $31.6 million (6.8%) during
the first nine months of 2008. The increase in member’s

equity reflects net income of $47.9 million which was offset
by an anticipated patronage refund payable ($10.3 million).
Also $5.6 million of allocated surplus was redeemed in May.
The other components of equity are other comprehensive
income, which decreased $0.6 million since the beginning
of the year and stock which increased $0.2 million since
December 31, 2007.

Member’s equity represented 16.8% of total assets at
September 30, 2008 down from 17.1% at December 31,
2007. The Association’s permanent capital continues to be
in excess of Permanent Capital Adequacy Standards
prescribed by FCA regulations. Association management
knows of no reason that the Association will not continue
to meet those standards in the foreseeable future.


Funding Source The Association’s primary source of funding
is CoBank. Funds are obtained through borrowing on a
revolving line of credit governed by a General Financing
Agreement (GFA). At September 30, 2008 the Association’s
note payable to CoBank totaled $2.5 billion, up $212.9 million
(9.5%) from December 31, 2007. The Association is in full
compliance with its financing agreement with CoBank and
has capacity under the agreement to borrow funds needed to
meet anticipated loan demand.

At December 31, 2007, liabilities included a $13.5 million
patronage distribution payable to members, which has since
been distributed in cash. An anticipated patronage distribution
payable to members of $10.3 million was accrued during the
first nine months of 2008 which will be payable to members
in cash early in 2009 provided the capital and earnings goals
for the Association are achieved.

At September 30, 2008 the Association’s total liabilities
stood at $2.5 billion, up $207.6 million (9.2%) from $2.3
billion at December 31, 2007.


CoBank, ACB (CoBank) is the Association’s primary source
of funding. As a stockholder, your investment in the Association
is materially affected by the financial condition and results of
operations of CoBank. You may obtain, at no charge, a copy of
CoBank’s annual and quarterly reports by contacting any of
our offices. A listing of Association offices together with
addresses and telephone numbers is printed on the inside back
cover of this report.

(in thousands)           (Unaudited)
                                                 September 30,       December 31,
                                                     2008               2007
Loans                                       $      2,846,143     $     2,603,096
Less allowance for loan losses                        26,550              24,195
Net loans                                          2,819,593           2,578,901

Cash                                                  13,425              14,686
Accrued interest receivable                           13,855              16,119
Investment in CoBank, ACB                             87,457              88,521
Premises and equipment, net                            9,777               7,811
Other property owned                                     755                 119
Other assets                                          21,631              21,131
       Total assets                         $      2,966,493     $     2,727,288

Note payable to CoBank, ACB                 $      2,450,459     $     2,237,566
Patronage refunds payable                             10,273              13,474
Other liabilities                                      8,959              11,043
       Total liabilities                           2,469,691           2,262,083

Capital stock and participation certificates           8,710               8,475
Allocated surplus                                     45,644              44,336
Unallocated surplus                                  444,384             413,697
Accumulated other comprehensive income                (1,936)             (1,303)
       Total members' equity                         496,802             465,205
       Total liabilities and
          members' equity                    $     2,966,493     $     2,727,288

 (in thousands)          (Unaudited)
                                                       Nine Months Ended
                                                          September 30
                                                     2008             2007
 Balance at January 1            $                     8,475     $         8,309
       Issued                                            724                 483
       Retired                                          (489)               (411)
 Balance at September 30         $                     8,710     $         8,381

 Balance at January 1                                 44,336              42,259
       Issued                                          6,849               4,138
       Retired                                        (5,541)             (6,587)
 Balance at Septmeber 30                     $        45,644     $        39,810

 Balance at January 1              (1,303)                                 (2,094)
       Net change in valuation       (633)                                    621
 Balance at September 30       $   (1,936)                       $         (1,473)

 Balance at January 1                        $       413,697     $       377,509
 Adjustment for change in measurement
  date of pension valuation - FAS 158                    (67)                  0
 Net income                                           47,876              29,932
 Patronage distributions accrued:
        Cash                                         (10,273)             (6,205)
        Allocated Surplus                             (6,849)             (4,138)
 Balance at September 30                     $       444,384     $       397,098

See accompanying notes to condensed financial statements.

(in thousands)               (Unaudited)
                                                    Three Months Ended
                                                          Sept 30,
                                                   2008            2007
Loans                                          $    37,759          48,982
Other                                                  191             125
      Total interest income                         37,950          49,107

Note payable to CoBank, ACB                         18,289          28,405
      Total interest expense                        18,289          28,405

Net interest income                                 19,661          20,702
Provision for loan losses                            2,500           2,500
Net interest income after
 provision for loan losses                           17,161         18,202

Patronage income                                      3,108          2,565
Financial services fee income                         2,681          1,989
Loan Fees                                               322            279
Compensation on participation loans                     469            247
Other income                                             18             98
       Total noninterest income                       6,598          5,178

Salaries and employee benefits                        5,235          4,998
Occupancy and equipment                                 458            486
Insurance fund premium                                  792            907
Fees paid to technology service provider                981            899
Other operating expenses                              1,562          1,677
       Total noninterest expenses                     9,028          8,967

Income before income taxes                          14,731          14,413
Provision for income taxes                              94             125
       Net income                              $    14,637          14,288

See accompanying notes to condensed financial statements.

      Nine Months Ended
           Sept 30,
    2008             2007

$   116,405          141,460
        607              482
    117,012          141,942

     58,392           85,552
     58,392           85,552

     58,620           56,390
      2,500            2,500

     56,120           53,890

      8,861            7,767
      9,086            7,762
      1,131              952
        981              639
         75              197
     20,134           17,317

     16,030           15,313
      1,295            1,354
      2,790            2,629
      2,911            2,658
      5,067            4,712
     28,093           26,666

     48,161           44,541
        285              321
$    47,876           44,220

      (Unaudited) ($ in thousands except as noted)

First Pioneer Farm Credit, ACA (the Association or ACA)
and its subsidiaries are part of the Farm Credit System. A
description of the organization and operations of the
Association, the significant accounting policies followed,
and the financial condition and results of operations as of
and for the year ended December 31, 2007, are contained
in the 2007 Annual Report to Shareholders. These unaudited
second quarter 2008 financial statements should be read in
conjunction with the 2007 Annual Report to Shareholders.

In December 2007, the Financial Accounting Standards
Board issued Statements of Financial Accounting Standards
No. 141R, “Business Combinations” SFAS No. 141R
requires business combinations to be accounted for under
the acquisition method of accounting (previously called the
purchase method). The acquisition method requires (a)
identifying the acquirer, (b) determining the acquisition
date, (c) recognizing and measuring the identifiable assets
acquired, the liabilities assumed and any noncontrolling
interest in the acquiree, at their acquisition date fair values,
and (d) recognizing and measuring goodwill or a gain from
a bargain purchase. SFAS No. 141R should be applied
prospectively to business combinations for which the
acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December
15, 2008. Early application is prohibited. The Association
is still evaluating the provisions of the Standard but believe
that its adoption will significantly impact its accounting
for acquisitions that occur in 2009 and beyond.

In March 2008, the FASB issued SFAS No. 161,
“Disclosures about Derivative Instruments and Hedging
Activities,” which amends and expands the disclosure
requirements for derivative instruments and for hedging
activities previously required by SFAS No. 133. It states
that an entity with derivative instruments shall disclose
information to enable users of the financial statements to

      a. How and why an entity uses derivative
      b. How derivative instruments and related
          hedged items are accounted for under this
          Statement and related interpretations

       c. How derivative instruments and related
          hedged items affect an entity’s financial
          position, financial performance, and cash

This Statement is effective for financial statements issued
for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. This
Statement encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. The
Association is currently evaluating the impact of adoption
on its financial statement disclosures.

Effective January 1, 2008, the Association adopted SFAS
No. 157, “Fair Value Measurements.” This Statement
defines fair value, establishes a framework for measuring
fair value and expands disclosures about fair value
measurements. It describes three levels of inputs that may
be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets
or liabilities that the reporting entity has the ability to access
at the measurement date. Level 1 assets and liabilities
include derivative contracts that are traded in an active
exchange market, as well as assets held in trust funds related
to deferred compensation and our supplemental retirement
plan. The trust funds include investments that are actively
traded and have quoted net asset values that are observable
in the marketplace.

Level 2 - Observable inputs other than quoted prices
included within Level 1 that are observable for the asset or
liability either directly or indirectly. Level 2 inputs include
the following: (a) quoted prices for similar assets or
liabilities in active markets; (b) quoted prices for identical
or similar assets or liabilities in markets that are not active
so that they are traded less frequently than exchange-traded
instruments, the prices are not current or principal market
information is not released publicly; (c) inputs other than
quoted prices that are observable such as interest rates and
yield curves, prepayment speeds, credit risks and default
rates and (d) inputs derived principally from or corroborated
by observable market data by correlation or other means.

Level 3 - Unobservable inputs that are supported by little
or no market activity and that are significant to the fair
value of the assets or liabilities. These unobservable inputs
reflect the reporting entity’s own assumptions about
assumptions that market participants would use in pricing
the asset or liability. Level 3 assets and liabilities include
financial instruments whose value is determined using
pricing models, discounted cash flow methodologies, or
similar techniques, as well as instruments for which the
determination of fair value requires significant management
judgment or estimation.

The adoption of the Standard did not have an impact on the
Association’s financial position, results of operations or cash

The accompanying financial statements contain all
adjustments necessary for a fair presentation of the interim
financial condition and results of operations and conform
with generally accepted accounting principles and prevailing
practices within the banking industry. The results for the
six months ended June 30, 2008 are not necessarily
indicative of the results to be expected for the year ended
December 31, 2008.

An analysis of the allowance for loan losses for the three-
month periods ended September 30, 2008 and September
30, 2007 follows:
                                       Three Months Ended September 30 ,
                                                 (in thousands)
                                      2008                         2007
Balance at July 1            $              24,142           $           20,701
Provision for loan losses                    2,500                        2,500
Charge -offs                                  (93)                            0
Recoveries                                       1                            0
Balance at September 30      $              26,550           $           23,201

The following table presents information concerning
nonaccrual loans:
                                 September 30, 2008           September 30, 2007
                                   (in thousands)               (in thousands)
Nonaccrual loans with
  related allowance              $              1,035         $               495
Nonaccrual loans with no
 related allowance                             12,598                      10,132
Total nonaccrual loans           $             13,633         $            10,627

Allowance on nonaccrual
 Loans                           $                146         $               133

The following table summarizes nonaccrual loan
information for the nine months ended September 30,
(in thousands)                        2008                          2007

Average nonaccrual loans         $           11,574       $                14,810
Interest income recognized
  on nonaccrual loans            $             644        $                 1,663

In accordance with the Farm Credit Act, and the ACA’s
Capitalization Bylaws and Capitalization Plan, each
Association borrower, as a condition of borrowing, is
required at the time the loan is made, to invest in Class B
Stock for agricultural loans, or Class B Participation
Certificates for country home and farm related business

loans. Association Bylaws require that borrowers acquire,
as a condition to borrowing, at least the lesser of $1,000 or
2% of the amount of the loan, and not more than 10% of
the amount of the loan.

Pursuant to the Association Capitalization Plan, the
Association Board has determined that Class B stock and
Class B participation certificates shall be issued as follows:

     For all loans (except where indicated below) Class B
     stock and Class B participation certificates shall be
     issued equal to $1,000 per customer as a condition of
     borrowing from this Association. For purposes of
     borrower stock, a customer is defined as the primary
     borrower on a loan. The intent of this policy is for
     each primary customer to have $1,000 of stock,
     regardless of the number of loans or balance on those
     loans to that customer. Stock shall be purchased at
     the beginning of a customer’s relationship and will
     not be retired until all loans to that customer are paid
     in full and there are no funds available for advances.

     Exceptions to this policy are:
      At the time of conversion (June 2005), certain
       customers with less than $1,000 of stock will be
       “grandfathered” at the stock level at conversion.
       Grandfathered customer stock will be frozen at
       converted levels until all loans are repaid, at which
       time the stock will be retired, or increased to $1,000
       at the time of a future advance or credit action.
      Certain small borrowers (customers with total
       commitment less than $10,000 initially) will be
       issued at 10% of the initial commitment, consistent
       with By-Law limitations.
      Certain interests in loans sold to other financial
      Loans to be sold into the secondary market

All stock and participation certificates are retired at the
discretion of the ACA Board of Directors after considering
the ACA’s capitalization plan as well as regulatory and other

The Association’s permanent capital, core surplus and total
surplus ratios at September 30, 2008 were 14.66%, 13.56%
and 14.35% respectively.

In December 2007, the Board of Directors approved a
patronage resolution. This resolution will allow the
Association to pay a patronage refund on 2008 income
provided the capital goals and earnings for the Association
are achieved. The patronage program is described more
fully in the 2007 Annual Report to Shareholders.
There were no significant changes in the composition or
valuation of tax assets/liabilities during the first nine months
of 2008.


SFAS No. 157 defines fair value as the exchange price that
would be received for an asset or paid to transfer a liability
in the principal or most advantageous market for the asset
or liability. See Note 1 – Organization and Significant
Accounting Policies for additional information.

Assets and liabilities measured at fair value on a recurring
basis at September 30, 2008 are summarized below:
                        Fair Value Measurement Using
                        Level 1     Level 2    Level 3   Total Fair Value
 Interest Rate Swaps    $     -    $    893    $     -   $      893
 Assets Held in Trust     1,190            -         -   $    1,190
  Total assets          $ 1,190    $    893    $     -   $    2,083

 Interest Rate Swaps    $     -    $    943    $     -   $      943
  Total liabilities     $     -    $    943    $     -   $      943

Valuation Techniques
SFAS No. 157 establishes a fair value hierarchy, which
requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when
measuring fair value. The following represent a brief
summary of the valuation techniques used for the
Association’s assets and liabilities:

Investment Securities
Where quoted prices are available in an active market,
available-for-sale securities would be classified as Level
1. If quoted prices are not available in an active market,
the fair value of securities are estimated using pricing
models, quoted prices for similar securities received from
pricing services or discounted cash flows. Generally, these
securities would be classified as Level 2. This would
include certain mortgage-backed and asset-backed
securities. Where there is limited activity or less
transparency around inputs to the valuation, the securities
are classified as Level 3. Securities classified within Level
3 include certain mortgage-backed securities, including
those issued by Farmer Mac and residual interests in

Exchange-traded derivatives valued using quoted prices are
classified within Level 1 of the valuation hierarchy.
However, few classes of derivative contracts are listed on
an exchange; thus, the majority of the Association’s

derivative positions are valued using internally developed
models that use as their basis readily observable market
parameters and are classified within Level 2 of the valuation
hierarchy. Such derivatives include basic interest rate swaps
and options and credit default swaps. Derivatives that are
valued based upon models with significant unobservable
market parameters and that are normally traded less actively
or have trade activity that is one way are classified within
Level 3 of the valuation hierarchy.


The consolidated financial statements of First Pioneer Farm
Credit, ACA (the Association) are prepared by management,
who are responsible for their integrity and objectivity,
including amounts that must necessarily be based on
judgments and estimates. The consolidated financial
statements, in our opinion, fairly present the financial
position of the Association.

The undersigned certify that we have reviewed the
September 30, 2008 Quarterly Report to Stockholders and
it has been prepared in accordance with all applicable
statutory or regulatory requirements and that the information
contained herein is true, accurate, and complete to the best
of our knowledge and belief.

William J. Lipinski
President & CEO

J. Scott Markham
Chairman of the Board

Paul S. Bajgier
Senior Vice President & Treasurer

James D. Miller
Senior Vice President of Finance

Dated: November 10, 2008


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