Annual Report
ANNUAL REPORT TO THE MEMBERS OF PIONEER FEDERAL SAVINGS AND LOAN ASSOCIATION
March 19, 2024
Pioneer Federal Mission Statement: Pioneer Federal Savings and Loan Association is dedicated to providing quality services and products to its customers all the while remaining financially strong and adding value to the quality of life to the communities it serves. Pioneer Federal is known for commitment to our communities and our desire to help our communities grow and prosper. We are Montana’s only mutual thrift institution our commitment is to you- our customers- and the communities we serve. As a mutual, our customers are our owners, our success is measured by your success, we do not face the dilemma that commercial banks do of trying to balance shareholders’ demand for returns with serving customers’ interests. Mutual banking is community banking at its finest, where we know our customers because you are our neighbors.
The calendar year 2023 brought upon the economy a rapid increase in interest rates as the Fed increased the Fed Funds, a short-term rate in which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight rate meeting after meeting. The Fed raised rates over 16 months from March 2022 through July 2023, from 0% Q1 2022 to 5.50% Q3 2023. The Fed fund rates do not have direct correlation with the mortgage rates but certainly are a big factor. Rising mortgage rates, hitting 8% in October 2023 for a 30-year fixed rate loan, weakened the housing market. Locally, the increase in interest rates, combined with high prices, have made homes less affordable for consumers, real estate surrounding our two communities had a slowdown during 2023 as will be evident when you see our loan production numbers.
2023 saw Pioneer Federal Savings and Loan basically maintain a flat level of growth:
12.31.22- Assets: $103,385,000 Deposits: $85,450,000 Loans: $81,553,000
12.31.23- Assets: $112,669,000 Deposits: $86,207,000 Loans: $82,207,000
The “core” Non-Maturing Deposits- Savings, Money Market, Checking and Business Checking accounts stayed at a somewhat flat level from 2022 to 2023. The bulk of Pioneer’s deposits continue to be the non-Maturing deposits comprising $55,704,000 of the $86,207,000 on deposit; Certificates of Deposit make up $22,033,000 and IRAs $8,331,000. The rapidly rising interest rates on deposits showed up in 2023 as depositors at Pioneer Federal Savings and Loan earned almost $1,000,000 in interest in 2023. At year end 2023 we had 5,568 deposit accounts across our variety of deposit products.
The Association new loans two-year comparison:
| Association Loan Comparisons | 2023 | 2022 |
|---|---|---|
| Assoc New Loans Total | 113 Loans | 108 Loans |
| New Loans Total Volume | $15,590,000.00 | $20,470,000.00 |
| Average Loan Size | $138,000.00 | $189,520.00 |
| Dillon Total Loans | 62 Loans | 66 Loans |
| Dillon Total Loan Volume | $11,513,000.00 | $12,860,000.00 |
| Dillon Average Loan Size | $185,700.00 | $194,850.00 |
| Deer Lodge Total Loans | 51 Loans | 42 Loans |
| Deer Lodge Total Loan Volume | $4,070,000.00 | $7,608,500.00 |
| Deer Lodge Average Loan Size | $79,800.00 | $181,200.00 |
The 2023 new loans included:
60 Residential Real Estate Loans
17 HELOCs
46 Consumer Loans
2 Non-Residential RE Loans
5 Commercial Loans
Pioneer Federal Savings and Loan Association’s capital position remains one of the strongest in MT. Our capital level of $17,905,000 is 16.52% of assets and far exceeds the requirements of federal guidelines as of December 31, 2023. The Association’s strong capital levels will allow us to handle ongoing market uncertainties- specifically rising interest rates.
The Association’s cost of funds at year end was 1.72%. Our number is higher than some of our competitors, as a mutual your Association continues to try to reward customers with very competitive deposit rates appropriate with the time, we try to remain on the higher end of scale regarding the interest paid to our depositors. The cost of funds throughout 2024 will continue to be a real challenge as consumers look to capture optimum interest rates on deposits as well as keeping consumer deposit accounts will be very challenging.
Asset quality continues to remain high with very few loan delinquencies and an investment portfolio consisting of highly rated investments. At year-end 2023, the Association had no Other Real Estate Owned (OREO) or foreclosed property on our books.
Pioneer Federal has been involved in quality loan participations with other MT financial institutions. These participations make up approximately 5.6% of our total loan balances and allow the Association to diversify our loan portfolio. Management continues to monitor the loan portfolio for weaknesses and the Association maintains a healthy provision for loan losses for any potential exposure we might have with respect to economic downturns or problem loans.
Pioneer Federal Savings and Loan Association and the Pioneer Federal Community Foundation, Inc. continue to financially support worthy projects and organizations located primarily in Powell and Beaverhead counties. In addition to supporting many local area events and organizations, during 2023 we continued to fund previous financial commitments made supporting UM-Western, hospitals in both communities, and the Beaverhead County 4H Building project. In the past 10 years alone, Pioneer Federal Savings and Loan and its Foundation have made cash contributions of well over $1,000,000 to our local communities.
Personnel worked closely with bank regulators and independent auditors. The FDIC led the first full scope exam, after the conversion to MT State Charter in December 2021, in spring 2022. The State of MT Banking Division conducted the State’s first full scope exam in the fall of 2023 in which the Association received a favorable report. The FDIC conducted Compliance and Community Reinvestment Act (CRA) exams during the same time frame in 2023 and the Association had an excellent review in Compliance, one minor error to correct, and received an OUTSTANDING rating in CRA.
The Deer Lodge location moved in January 2024 to the brand-new state of the art building located at 202 N Main Street and we will actively be looking to sell the old Milwaukee Avenue building. The Association is proud to be making this massive investment in the Deer Lodge community with the wonderful addition right on Main Street.
The Dillon office again successfully hosted its annual community shred day. This continues to be very successful and is expected to continue.
Pioneer Federal must remain true to the local communities in which we serve as well as work hard to retain and look to grow support of our local customer base. The way people bank and interact financially is changing daily, we are committed to continuing to invest in our employees and technology to try to meet our customers’ financial needs and expectations. We need to look at expanding our footprint into neighboring communities to allow us the opportunity for more growth. As a community financial institution, we are faced daily with operational, regulatory, economic risks that will define how we can operate as a community oriented, mutual thrift, so we must be flexible and adapt to changes for sustainability.
To our many customers, I would like to personally thank you for your relationship and your trust in Pioneer Federal- you are truly our most valued asset.
I would like to express sincere appreciation to our staff, the officers and our Board of Directors for their continued effort and support on behalf of the Association. Please let me know any questions you may have about Pioneer Federal Savings and Loan Association.
Phillip K Willett
President/CEO
March 19, 2024
