Gary R' Bradley Executive Vice President

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Gary R. BradleyExecutive Vice President
The Dairy Industry From a First Pioneer
Perspective
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Overview

• Who we are
• Northeast dairy industry at a glance
• Winning management styles
• Our strategy to serve the market
• Financial solutions for success
• Thoughts going forward

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First Pioneers 15 Branch Offices
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First, Who Is Pioneer?

• 275 staff members
• 9,000 customers
• 2.1 billion in loans
• Small average size loan
• 9.4 million financial services
• Truly a relationship

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Diverse Loan Portfolio as of 12/31/05
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Loan Growth Continues
Billion
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Financial Services Growth
Million
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Our Dairy Industry

• Controlled by Federal milk marketing order
• With large population base blend price driven by
  fluid milk sales
• 22 of US population in NE
• Environmental compliance is getting greater
  attention
• Increasing volatility in the market
• 2005 Ave. net earnings/ cow of 339
• Estimated 06 price of 13.63 is about 1.85
  lower than 2005

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Our Dairy Industry (continued)

• Predominately in New York State (3 nationally in
  milk production)
• 6,700 dairy farms in NY
• No typical farm
• 77 have less than 100 cows
• 170 have 500 cows
• 4,000 cows is the biggest
• Tie stall/ freestall/ rotational grazers
• Organic/ BST free/ conventional

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Our Dairy Industry (continued)

• Each year we benchmark 230 dairy farms
• Published by May
• Resource for staff, industry, and producers
• Has taught us there is no one winning management
  style to be in the top 25 profit group but five!

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Winning Management Styles

• Great with cows- ave. production 26,433
• Labor efficient- milk sold/ worker gt1.5mm pounds
• Better milk price- 17.04/ cwt ( 86 cents)
• Tight with a buck- 11.98 cost/ cwt.
• Balanced- good all-around managers

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First Pioneers Strategy to Win in our Market

• Small bank customer service backed by large
  bank efficiency
• Efficiency drives low rates
• We can hold the largest dairy loans
• On-farm services enabled by technology
  investment
• www.FirstPioneer.com
• From Cradle to Grave financial services
• Your First Choice for Financial Solutions

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Small Bank Service

• Fundamental belief best decisions are made close
  to the member
• DOA levels managed so 85 of decisions _at_ branch
• Requires trained staff with the right tools
• Balance of tried and true underwriting
  guidelines and up to the minute information
• No Surprise lending, Bending the curve
• The sound loan concept
• Valuation modeling

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Dairy Underwriting

• Guidelines we look at
• Breakeven milk price- should be less than five
  year lowest period (13.75) for sustainability
• Internal Herd Growth (IHG) should be positive
• BCDT lt 10 years to allow for reinvestment
• Positive liquidity
• Debt/ cow?
• Collateral/ valuation benchmarking

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From Cradle to Grave and beyond Getting started!

• Young,Beginning,Small farmer discounts on rates
  and fees to get started
• Farm Start program
• Consulting for entity formation and transfers
• Appraising the farm you wish to purchase
• GeNext training new management

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From Cradle to Grave and beyond the end

• Estate Plans
• Business Valuations
• Appraising the estate
• Filing of the estate tax return

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In Between Financial Solutions for Success

• Preparing your tax return- last year we did over
  5,000!
• Tools to reduce taxable income
• Year-end tax planning
• Leasing
• Record keeping solutions
• Mail-in records
• On- Farm records
• Basic to high end
• Red Wing software

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In Between Financial Solutions for Success

• Risk Management Solutions
• Crop Insurance- 8mm crop loss in two days in
  one county due to flooding June 06
• Credit Life Insurance
• LLC Entity Formation

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In Between Financial Solutions for Success

• Large Dairy Farm Benchmark Program
• gt 400 cow size operations
• Benchmarking against yourself and top 20 group
• Regional Group meetings
• Topics such as Dairy Viability Scoring, Analyzing
  your near cash position
• One on one follow-up visit

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In Between Financial Solutions for Success

• Business Consulting
• 13 Business Consultants on staff
• Entity, labor management, profitability,
  marketing
• Dairy Profit Analyzer
• High end monthly/ quarterly analysis of a dairy
  business

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The Future?

• It is predicted the number of producers in NY
  will decline by 9 by 2010
• The industry will get even more bi-modal
• Complexion will become even more diverse
  satellite farms with common management, organic
  production up
• Greater influences nationally and globally
• We need to strive to know the industry- traveled
  to Tulare, Idaho, Indiana in past six months

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The Future How to Serve?

• Smaller operations will fit more a consumer
  model
• Country Living Program- loan originators
• Farm Equity lines
• Internet access, approval in minutes

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The Future How to Serve?

• Larger operations will have more options and
  demand more services
• Need to find new ways to assist in their success
• New products/ features to meet those needs-
  Director of Smart- knowledge transfer
• Increasing pressure on cost and service- they
  will be more and more attractive to the
  competition
• Partnering with industry to bring value
• Looking to revamp our credit delivery process

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In Conclusion

• In continues to be a great industry to serve NY
  3rd
• With population concentration there will be need
  for dairy products in the NE- strong blend price
• Increasing milk price volatility, environmental
  issues, and cost pressures will create the need
  for producers to find new ways to remain viable
• We need to make sure we have the stability and
  foresight to serve the industry- we can not
  afford to be a fair weather friend
• Our core value is to offer financial solutions in
  a relationship management approach

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In Conclusion

• I appreciate the opportunity to speak to you
  today
• Hopefully you have enjoyed hearing a lenders
  perspective of the dairy industry
• feel free to contact me _at_ Gary.Bradley_at_Firstpione
  er.com or
• 1-607-749-7177
• THANKS!

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