Annual Report 2014

Board of Directors 2014

Salim S CharoliaSecretary

Altaf A PraslaChairman,

Supervisory Committee

Razeeb MominTreasurer

Faheem Prasla Convenor,

Collection Committee

Shaheen MominMember,

Credit Committee

Saddiq M SunesraMember,

Credit Committee

Mustakali MominMember,

Collection Committee

Moiz N DhukaChairman,

Credit Committee

Shaukat AliPresident/CEO

Naushad Ali DhukkaChairman

Riyaz R SunesaraVice Chairman

2014 Annual Report |

DESCRIPTION PAGE #

Chairman's Report 1

Supervisory Committee's Report 2

Credit Committee's Report 2

Treasurer’s Report 3

Statement of Operations 4

Statement of Financial Position 5

Schedule of Loans 6

Allowance for Loan Losses 6

Key Indicators 7

Classification of Loans 7

CONTENTS

| 2014 Annual Report

Dear Members,

It was 33 years ago when a few visionaries from our Sidhpur Jamat came up with the brilliant idea of establishing a credit union to create economic opportunities for their fellow community members. The idea not only materialized into this magnificent institution, but it also has enabled thousands of members to improve their earning capacities.

As always, Pioneer has strived to go above and beyond in trying to meet members’ needs with a strong focus on providing quality service. We want all of our members to know that they can count on their credit union to take care of them and help them achieve their financial goals. Once again, we set ourselves apart from other financial institutions with quality member service, various growth strategies, and innovative programs. Our members earned high returns year after year. While the other credit unions gave out a minuscule 0.1% dividend on their regular saving accounts last year, Pioneer was pleased to distribute to its members a generous yield of 2.8% as well as increase the dividends paid by 23%. More and more members are opening business and MSB accounts. Despite MSB being a relatively new product for us, it has been very successful and helpful to members by saving their check cashing business that other banks were refusing to service. We appreciate the members’ cooperation in keeping their accounts compliant as required per regulations.

Last quarter, for the first time in our history, Pioneer’s assets reached $100M. However, it was short-lived as we closed our books for the year with total assets of $99M.

I am pleased to report that during a year of remarkable growth, Pioneer remained financially sound and strong Our commitment to quality and the values established by our credit union’s founding fathers is set securely on a firm foundation. At the same time, members’ loyalty and trust has always been instrumental in the success we have. I am extremely delighted to announce that we have made official moves to increase members’ borrowing capacities as we increase possible loan amounts to up to $100K per loan. Similarly, growing education costs have made us reconsider loan amounts. Students will soon be able to draw educational loans of up to $200K for a bachelor degree.

We appreciate the dedicated management team and employees who have contributed to our unwavering mission of exceptional member service throughout this busy and productive year. Together, we look forward to the continued success of our credit union.

With appreciation,

NAUSHAD ALI DHUKKAChairman

CHAIRMAN’S REPORT – 2014TO THE MEMBERS

PIONEER MUTUAL FEDERAL CREDIT UNION

1| 2014 Annual Report

2014 Annual Report | 2

The primary role of the Supervisory Committee of Pioneer Mutual Federal Credit Union (PMFCU) is to ensure that the operations of the credit union are effective in protecting credit union’s assets and member records. To fulfill this responsibility, the committee meets regularly to discuss and audit credit union’s activities. It verifies that the management maintains strong internal control and follows the NCUA rules and regulations as well as the policies and procedures established by the Board. It ensures that various financial reports are prepared and reviewed each month which depict the financial condition of the credit union.

The Board of Directors appointed Supervisory Committee Chairman from the Board and two professionals as a committee members from the general membership to carry out these responsibilities, thus the committee comprises of the following members in fiscal year 2014:

Altaf A. Prasla, ChairmanIrfan K. Ali, MemberAltaf A. Dholasaniya, Member

The committee ensures that the external audits for NCUA Annual Examination, Money Service Business (MSB), Bank Secrecy Act (BSA), Automatic Clearing House (ACH), Customer Identification Program (CIP), Office of Foreign Assets Control (OFAC), and Supervisory Committee Annual Review are performed regularly and reports are reviewed by the Board. The committee is pleased to inform that the management maintains strong internal control to protect member assets and information. It strictly follows NCUA rules and regulations, and the policies and procedures approved by the Board.

On behalf of the Supervisory Committee, I would like to express my appreciation to the staff members in assisting the audits. We thank the Board and the members for their continuous support and confidence in the committee. We look forward to continue serving you in the years ahead.

Altaf A. Prasla, Chairman, Supervisory Committee

The credit committee plays an important role in maintaining the regulatory requirements as per policies and procedures of the NCUA for the loan portfolio. The Committee is elected by the Board of Directors and consists of five members. The Committee meets atleast twice a week to review and approve the loan applications. We are proud to inform that our credit union offers the best competitive interest rates across our league while maintaining a safe and secure capital base.

In the year 2014, the loan portfolio has gained a considerable growth. The Committee received 697 loan applications, of which 690 loans totaling $23,968,946 were approved. Overall loan portfolio stood at $55,384,637 in the year 2014 as compared to $52,508,348 in the year 2013 with an increase of 5.48%.

During the last 3 years, our credit union has loaned out loans as follows: Year 2012: $23.00 M, Year 2013: $26.46 M and Year 2014: 23.97 M.

The increase in the loan portfolio reveals our continued ability to meet financial needs of our members. Special promotions were offered to the members to gain benefits on availing the lower and competitive interest rates on various loan products. We will continue to aim meeting the financial needs of our members by offering new loan product and services.

On behalf of the Credit Committee, I would like to convey my gratitude to the Board of Directors and the Staff members for their cooperation and continued support as well as to all our members, without you it would have not been possible to achieve our objectives and goals. We look forward to continue serving you better by introducing more products in the years ahead.

Moiz DhukaChairman, Credit Committee

SUPERVISORY COMMITTEE’S REPORT

CREDIT COMMITTEE’S REPORT

| 2014 Annual Report 3

The year 2014 was a financially strong year for Pioneer Mutual Federal Credit Union (PMFCU). In 2014, we had the highest ever operating income of $5.4 million, an increase of over 20 percent from 2013 due to higher loans and service income. Net income for the year was also higher than prior year at $1.3 million.

PMFCU has a financially sound balance sheet compared to our peers. As of December 31, 2014, our assets were $98.5 million, an increase of 21 percent from December 31, 2013 primarily due to increase in cash and cash equivalent, investments and loans outstanding. As of December 31, 2014, loans outstanding were 5 percent higher than December 31, 2014 at $55.1 million. Our net worth at

December 31, 2013 was $17.4 million, an increase of $1.3 million from December 31, 2013. In addition, members’ deposit grew significantly from $64.6 million as of December 31, 2012 to $80.6 million as of December 31, 2013, an increase of 25 percent.

During 2014, we also distributed $1.5 million to our members as dividends, an increase of 25 percent from 2013. Our dividends continue to be significantly above the state and national averages. The average dividends paid on Share Savings and IRA accounts were 2.75 percent and 3.75 percent. We also paid 0.5 percent dividend on Share Draft (Checking) accounts.

The following table presents key financial ratios for the last five years for PMFCU and 2014 peer averages:

The following charts present key financial information for the last two years:

The year 2014 was a financial success for PMFCU and we will continue to strengthen financially. In the year 2015, we plan to expand our loan portfolio, increase our assets and net worth, and grow our income.

Razeeb MominTreasurer

TREASURER’S REPORT

 

(in %) 2010 2011 2012 2013 2014 Peer Avg.

26.8 25.2 23.9 19.9 17.7 11.5

0.2 0.2 1.0 0.2 0.8 1.2

(0.2) 0.0 0.1 0.2 (0.0) 0.5

2.3 2.1 1.6 1.3 1.4 0.5

7.1 6.9 6.5 6.2 6.0 4.7

1.9 2.0 1.8 1.7 1.7 0.4

2.5 2.7 2.9 3.0 2.8 3.7

4.9 4.6 4.7 4.5 4.4 4.4

35.6 38.9 44.5 48.8 47.1 79.0

2.3 2.5 2.7 2.2 1.3 2.9

112.7 107.7 99.9 81.3 68.7 62.1

82.1 79.7 75.4 64.7 56.2 54.4Total Loans/Total Assets

Net Worth/Total Assets

Delinquent Loans/Total Loans

Net Charge-Offs/Average Loans

Return on Average Assets

Gross Income/Average Assets

Cost of Funds/Average Assets

Operating Expenses/Average Assets

Net Margin/Average Assets

Operating Expenses/Gross Income

Net Operating Expense/Average Assets

Total Loans/Total Shares

- 20 40 60 80

100 120

Assets Loans Net Worth

Mill

ions

$

2013

2014

- 1 2 3 4 5 6

Operating Income Net Income Dividends

Mill

ions

$

2013

2014

2014 Annual Report | 4

STATEMENT OF OPERATIONS

Operating Income:

Income from loans 3,909,720$ 72% 3,818,863$ 86%

Income from investments 104,976 2% 62,372 1%

Service and other income 1,400,127 26% 602,247 13%

Total Operating Income 5,414,823 100% 4,483,482 100%

Operating Expenses:

Employee compensation 849,514 16% 687,023 15%

Employee benefits 76,071 1% 97,776 2%

Payroll Taxes 65,619 1% 54,355 1%

Office operations 707,489 13% 534,052 12%

Office occupancy 129,645 2% 124,818 3%

Licenses & taxes 78,000 1% 75,329 2%

Depreciation expense 159,323 3% 148,262 3%

Provision for loan losses 91,237 2% 141,649 3%

Educational & promotional 151,035 3% 118,483 3%

Loan servicing 62,838 1% 69,405 2%

Professional & outside services 47,857 1% 51,356 1%

Member insurances 61,907 1% 45,012 1%

Charitable contributions 61,500 1% 26,926 1%

Other expenses 101,599 2% 155,903 3%

Total operating expenses 2,643,635 49% 2,330,349 52%

Income from operations 2,771,188 51% 2,153,133 48%

Dividends paid to members 1,486,466 27% 1,205,178 27%

Net income 1,284,722$ 24% 947,955$ 21%

For the years ended December 31,2014 2013

| 2014 Annual Report 5

STATEMENT OF FINANCIAL POSITION

ASSETS

Cash and cash equivalents 21,098,441$ 21% 14,923,898$ 18%

Investments 16,949,448 17% 8,539,448 11%

Loans

Personal loans 41,510,905 42% 41,041,733 51%

Members business loans 284,969 0% 587,707 1%

Real estate loans 12,115,641 12% 9,224,823 11%

Master card loans 1,473,122 1% 1,654,084 2%

Allowance for loan losses (280,813) 0% (183,779) 0%

Loans, net 55,103,824 56% 52,324,568 64%

Receivables 29,519 0% 85,484 0%

Accrued income 232,284 0% 207,825 0%

N.C.U.S.I.F. deposit 747,551 1% 562,653 1%

Property, equipment and leasehold improvements, net 2,784,244 3% 2,870,135 4%

Prepaid expenses and other assets 1,581,119 2% 1,684,397 2%

Total assets 98,526,431$ 100% 81,198,408$ 100%

LIABILITIES

Account and draft payables 469,573$ 0% 432,166$ 1%

MEMBERS' DEPOSITS

Members' shares 36,856,748 38% 32,382,031 40%

Share drafts 26,656,432 27% 18,133,677 22%

I.R.A. shares 12,128,380 12% 11,011,485 14%

Other savings 1,881,627 2% 1,647,594 2%

Certificate deposits 3,112,044 3% 1,454,549 2%

Total members' deposits 80,635,231 82% 64,629,336 80%

RESERVES AND UNDIVIDED EARNINGS

Regular reserves 1,250,847 1% 1,250,847 2%

Undivided earnings 16,170,781 17% 14,886,059 18%

Total reserves and undivided earnings 17,421,628 18% 16,136,906 20%

Total liabilities and equity 98,526,431$ 100% 81,198,408$ 100%

As of December 31,2014 2013

2014 Annual Report | 6

ALLOWANCE FOR LOAN LOSSES

SCHEDULE OF LOANS

Name of Loan Amount of Loan Rate (APR)* Max Term (Years)

Secured Loan (Savings/Share Draft) Limited by Members' Savings From 4.50% ** 6Advantage Loan Up to $25,000 7.99% 6Preferred Unsecured Loan $25,001 to $35,000 7.99% 6Jumbo Loan $35,001 to $49,900 7.99% 6Xpress50 Loan Upto $49,900 7.99% 6Premium Loan Upto $100,000 6.99% 7Prime Loan Upto $100,000 7.99% 7Auto Loan – New Up to $50,000 1.79% to 2.49% 6Auto Loan – Used Up to $50,000 2.99% 5Auto Loan – New $50,001 to $150,000 2.79% to 3.49% 6Auto Loan – Used $50,001 to $150,000 3.99% 5Business Security Loan Up to $15,000 4.99% 3Education Loan Up to $200,000 4.99% 10Equipment Loan Up to $50,000 7.99% 5Special Equipment Loan Up to $35,000 4.99% 3

5.99% 5Personal Line of Credit Up to $49,900 7.99% 3Member's Business Loan Up to $150,000 Prime +2.00% or 6.99 %*** 7

Fixed 9.99% 7Commercial Real Estate Loan Up to $1,500,000 Fixed & Variable **** 20

4.49% for 5 yrs then Prime+1% or Floor 205.25% for 10 yrs then Prime+1% or Floor 20Fixed 8.99% 20Variable 4.49% or Prime+1% 20

Residential Real Estate Loan 1st Lien up to $417,000 (for rate contact to CU) 302nd Lien up to $50,000 (for rate contact to CU) 15

Jumbo Mortgage Loan 1st Lien up to $900,000 (for rate contact to CU) 30Home Equity Loan 1st Lien up to $400,000 Rate starting from 4.950% 15

2nd Lien up to $200,000 Rates starting from 4.950% 15Home Mortgage Refinance Loan 3.00% 7

3.25% 103.50% 15

* Rates are subject to credit score and other requirements ** Share Saving dividend + 2% with floor of 4.50%

*** Prime + 1.00% or 6.99% Whichever is Higher

2010 2011 2012 2013 2014

Beginning Balance 33,058$ 40,112$ 44,974$ 119,592$ 183,779$

Charge-offs (14,931) (91,768) (91,042) (159,233) (56,185)

Recoveries 93,968 73,504 32,697 81,771 61,982

Provision for loan losses (71,983) 23,126 132,963 141,649 91,237

Ending Balance 40,112$ 44,974$ 119,592$ 183,779$ 280,813$

| 2014 Annual Report 7

KEY INDICATORS

2010 2011 2012 2013 2014

Total assets 48,876,959$ 56,458,167$ 63,460,661$ 81,198,408$ 98,526,431$

Total deposits 35,582,182 41,753,236 47,901,161 64,629,336 80,635,231

Net worth 13,093,549 14,211,826 15,188,951 16,136,906 17,421,628

Loans, gross 40,111,740 44,974,116 47,836,988 52,508,347 55,384,637

Loans issued 22,623,353 22,800,650 23,004,630 26,465,284 23,968,946

Net Income 1,077,411 1,118,277 977,126 947,955 1,284,722

Dividends paid 905,441$ 1,064,357$ 1,048,435$ 1,205,178$ 1,486,466$

Total members 5,538 5,843 6,248 6,812 7,286

Loans borrowers 1,613 1,805 1,905 1,981 1,999

Master card holders 947 1,047 1,263 1,438 1,638

Share saving dividend 2.6% 2.9% 2.7% 2.5% 2.8%

Staff members 14 16 16 22 25

Key Indications

Type of Loans Amount # Amount # Amount # Amount #Unsecured 21,832,601$ 981 11,127,963$ 301 (10,776,707)$ 321 22,183,858$ 961

Secured 2,889,397 105 2,085,104 82 (2,104,702) 69 2,869,799 118

Equipment 182,197 15 - - (75,541) 4 106,656 11

Automobiles 10,744,389 645 4,944,612 188 (5,242,042) 188 10,446,958 645

Education 1,998,919 90 822,540 78 (367,154) 60 2,454,305 108

Business Security - - 7,400 1 (85) 1 7,315 1

Line of Credit 3,394,230 96 1,557,700 32 (1,509,917) 27 3,442,013 101

Business 587,707 10 - - (302,738) 3 284,969 7

Commercial Real Estate 4,437,284 11 2,585,000 4 (358,873) - 6,663,411 15

Residential Real Estate 4,787,539 28 838,627 4 (173,935) - 5,452,231 32

Total Loans 50,854,263$ 1,981 23,968,946$ 690 (20,911,694)$ 673 53,911,515$ 1,999

December 31, 2013 Issuance Repayments December 31, 2014

CLASSIFICATION OF LOANS

Nooruddin MominAccounting Manager

Swati PatelOperations Manager

Faiza AliBusiness & Mortgage

Loan Officer

Afroja DhukaCredit Analyst

Anjum K MacknojiaAccounting Officer

Asma AliCollection Assistant

Naeema K. AliOperations Officer

Austin Branch

Alvin A MominMember Service

Representative - Austin Branch

Zahra AliAssistant Loan Officer

Saifali MarediaTeller - Austin Branch

Mahera MominMember ServiceRepresentative

Office Staff

Urooj FaisalCompliance Officer

Shabira MominTeller Supervisor

Sajjad AliTeller &

Back Office Assistant

Maroof AliTeller &

Back Office Assistant

MehreenMember ServiceRepresentative

Shermeen AliTeller

Shama MaknojiaTeller

Shahzain AliTeller &

Back Office Assistant

Rashmeen MominAdministrative Assistant

Nabiya MarediaTeller

Austin Branch

1521 Lake Pointe Parkway, Sugar Land, Texas 77478Phone: 281-566-8000 Fax: 281-566-8001

www.pioneeronline.org

8801 Research Blvd, Suite 105, Austin, TX 78758Phone: (512) 467-PMCU (7628) Fax: (512) 467-PFAX (7329)

OFFICE LOCATION SUGAR LAND

OFFICE LOCATION AUSTIN