Greetings Fellow Pioneer Bank Shareholders, Customers and Employees!

We hope that you all have endured this hot summer that we just experienced. It has been awhile since we last communicated with you on our progress, and we felt that after having completed our third quarter of operations for 2011 that the timing was good for an update. We are pleased to report that we continue to prosper and grow. As of September 30, 2011, total assets were $124 million which represents a 23% increase during 2011. In addition, total gross loans were $87 million, total deposits were $106 million and net income for the first nine months of 2011 was $496,000. For this year, we are on pace to double our 2010 profits of $368,000 and expect profits for 2011 to be approximately $736,000.

Our growth continues and we are happy to report that we have recently received all necessary regulatory approvals to convert our San Marcos loan production office into a full-service branch. Plans are underway for that to occur this month. In addition, we have under contract a bank site and are currently in the building design phase with plans to commence construction in the first quarter of 2012.

We have also been busy building our San Marcos Advisory Board and have named Wayne Becak as Chairman of the Advisory Board. Wayne is a long-time banker in San Marcos having most recently worked with Broadway Bank. We are all thrilled to have him join us and he and our San Marcos team are doing an excellent job expanding Pioneer Bank into San Marcos and recruiting other local leaders to join our Advisory Board. We have one outstanding invitation and once that is confirmed, we look forward to formally announcing the members of our San Marcos Advisory Board. We think you will be impressed with the caliber of our new supporters in San Marcos.

In September of this year, our Board approved expansion plans to Austin, Texas. This has been in the planning stages for some time, and after several unsuccessful attempts to acquire an Austin bank, we have determined that the timing is good for us to expand organically. We have already identified several possible sites and we hope to be in business in Austin in 2012, first in a temporary location and then in a permanent location by early 2013. As always, we will also continue to look for banks we can acquire to further enhance the value of your investment.

To support our continued success and growth, we will be announcing a capital raise in the near future. We continue to field calls from existing and potential shareholders about the availability of additional stock and believe that the market is strong to raise the capital that we will need to successfully build our bank locations in Austin and San Marcos. You should receive details of the capital raise by the end of the year.

The prospects for Pioneer Bank and community banking continue to be bright. We would not enjoy the success we have if it were not for the strong support we have received from each of you. I hope you are as proud as we are about what Pioneer Bank has become in just four years since our inception.

Thank you again for your continued support of Pioneer Bank and best wishes to everyone!

All the best,

Jeffrey A. Wilkinson
President and CEO

Whit Hanks
Chairman