2007 Annual Report

2007 ANNUAL REPORT

It was a defining year for Patriot Federal Credit Union. While some financial institutions encountered problems due to subprime mortgage lending and uncertainties in the financial marketplace, PFCU continued to provide a safe, secure haven for members? funds. Your credit union adheres to prudent lending and investment policies and does not participate in subprime mortgage lending. As a result of these strategies, PFCU remains well capitalized and, once again, delivered strong financial results to its membership.

In 2007, we focused the credit union?s energies and resources on building a level of service, quality of product, and degree of caring for members that we believe will set Patriot Federal Credit union apart from other financial alternatives.

Financial Performance:

Patriot continues to grow, exceeding one third of a billion dollars in assets. Total assets reached an all time high of $385,528,158, as of December 31, 2007, representing a 6.5% increase over the previous year. Through prudent management of expenses and share and loan rates, the credit union attained a strong capital to asset position of 12.27%, by year end. In addition to PFCU?s strong capital position and required reserves maintained by the credit union, members? funds are protected by the National Credit Union Share Insurance Fund, an agency of the Federal Government.

Certified financial statements for the years ending September 30, 2006, and September 30, 2007, are included in this report on pages 6 and 7. These statements were provided by PFCU?s independent auditing firm, Orth, Chakler, Murnane and Company, CPAs.

Community Support:

PFCU continued to remain a strong presence in Franklin, Fulton, Washington Counties and the Borough of Shippensburg. In the true spirit of Building Better Lives and Communities Together, the credit union supported many charitable and worthwhile organizations throughout its community charter area.

Recognizing the sad reality that there are children in our area who need protection, PFCU donated funds to Safe Harbor in Washington County. Safe Harbor is a child advocacy center that helps bring child abusers to justice by providing a safe place for victims to tell their story.

To help in the fight to stamp out homelessness and substandard housing, PFCU contributed to Habitat for Humanity in both Franklin and Washington Counties. The credit union?s contribution was used to help build homes for local families in need.

PFCU was proud to support the local American Cancer Society?s Relay for Life event. The Relay for Life event celebrates survivorship and raises money for research. PFCU was proud to support a cause which touches so many of us in our personal and professional lives.

The American Heart Association is dedicated to finding ways of curing and preventing the number 1 killer in America; cardiovascular disease. PFCU was very pleased to participate as a sponsor in the association?s signature event, the Heart Walk. The local event promotes physical activity and heart healthy living in a family environment.

The credit union also played a part in granting the wishes of seriously ill children by contributing to the Make-A-Wish Foundation. Whether it?s a day at Disneyland, or meeting a famous celebrity, Make-A-Wish, makes it happen! PFCU was privileged to play a part in the joy of these children, through our donation.

PFCU?s contribution to the Chambersburg Meals on Wheels program helped pay for the home delivery of meals to local senior citizens who are unable to purchase or prepare their own meals

PFCU and our employees combined their efforts to contribute a total of nearly $7,000 to United Way Agencies in Franklin and Washington Counties. Our contributions flow directly into our local communities to fund programs that help children and youth succeed, and strengthen and support families. Their programs provide early education for children, parenting classes, substance abuse support, teen pregnancy support, access to health and wellness initiatives, and economic self support initiatives.

Your credit union participated in the sponsorship, planning and support of IceFest in downtown Chambersburg. A free, family-oriented winter celebration, IceFest attracts thousands of visitors young and old to the charm of historic Chambersburg. Visitors marvel at the ice sculpture masterpieces transformed by chainsaw wielding carvers from simple blocks of ice.

For the first time ever, PFCU was the major sponsor for Celebrate the Arts at Old Market Day during ChambersFest. This event drove over 10,000 people to Downtown Chambersburg, PA, and provided PFCU with the opportunity to promote the advantages of credit union membership to the community.

Our people-helping-people, altruistic efforts even reached outside our community charter area in 2007, when we contributed to the VA Tech Memorial Fund. In April, 32 individuals lost their lives, and 15 were injured when the horrific mass shooting rampage took place on the campus of the Virginia Polytech Institute and State University. PFCU?s donation was used to help the families and loved ones of the victims.

Patriot Financial Services:

Patriot Financial Services (PFS)continued to assist our membership with a variety of financial management solutions including mutual funds, estate planning, college savings plans, fixed annuities, bonds, and long-term health care insurance. Financial Advisor, Sarah Eyler, is committed to helping members find the proper solution to their unique financial situation.PFS professionals also conducted a Retirement Planning seminar and an Investment workshop entitled ?Make My Money Work For Me.?

Member Education:

Several free, educational seminars were conducted, as part of our continuing efforts to keep members informed on a variety of consumer topics. Patriot?s popular seminar entitled ?Understanding your Credit Score? helped members understand how a credit score is determined and how it affects your buying power. In addition, a ?Home Buying? seminar was held in 2007. Among other things, members learned how to determine how much house they could afford, and how to qualify to buy a home. Your credit union also provided ID Theft prevention information on the website, in the electronic newsletter and in your quarterly member newsletter, Expanding Horizons. These seminars and educational materials represent two of the advantages of membership at Patriot Federal Credit Union.

Scholarships:

In keeping with its theme of Building Better Lives and Communities, PFCU assisted the Chambersburg Chamber of Commerce and the Washington County Chamber of Commerce with their Leadership Development Scholarships. The goal of these scholarships is to develop first rate community leaders. PFCU also awarded a $2,500 scholarship award to Holly Browell, a graduating senior and credit union member. This memorial scholarship was established in honor of Richard E. Baumunk, a past board member and original founder of the credit union.

New or Enhanced Products, Services and Benefits:

Your credit union is positioned to assist you with the financial fitness you want and need throughout your lifetime. In 2007, PFCU introduced several new or enhanced products and services designed to provide increased value and convenience.

• Bonus Distribution ? We are very proud of the value we returned to YOU, our members. Your credit union distributed $1,100,000 to Patriot Federal Credit union members in 2007. These dollars were based on share account balances held at the credit union and qualifying loan interest payments made by members in 2007. Loan dividend rebates are particularly satisfying since providing loans to assist our members with their lifestyle needs is such an important aspect of what Patriot Federal Credit Union does as a lending institution. As a not-for-profit financial cooperative of ?People-Helping-People,? it is the credit union?s resolve that members benefit from its success. As a result of its continued growth and members? utilization of our products and services, Patriot shared its success with members in the form of bonus dividend distributions. This action is a shining example of how a member-owned, not-for-profit financial cooperative, like Patriot Federal Credit Union, works for its members and not an elite group of stockholders.
• E-SMART Deposit ? Patriot enhanced its member service by providing e-BRANCH users the capability to make online deposits to their accounts, while gaining immediate access to those funds. This new member service is fast, easy, convenient and is offered at no charge to our members.
• Expanded Member Service Hours ? The Contact Center and 800 Wayne Avenue Drive-Thru hours of operation were expanded to 8:00 AM ? 6:00 PM on Monday ? Wednesday; 8:00 AM - 7:00 PM on Thursday and Friday; and 8:00 AM-12:00 PM on Saturday. This action provides increased member service support and added value to our members.
• Safety Net ? This service was added in an ongoing effort to protect members? confidential account information online. Safety Net works behind the scenes 24-hours a day, 7-days a week to help protect your account against phishing scams and other consumer fraud activity. Members enrolled in e-BRANCH are asked to select and provide three answers to three security questions. The questions you select may be subsequently triggered by any unusual or uncharacteristic account activity.

• Certificate and Money Market Tiering ? Your credit union added great rate tiers to these deposit products to increase your earning flexibility. Your dividend rate is determined by your balance, so the more you save, the more you earn! When you take a planned approach to investing and choose the right products for your financial situation, you boost your chances of receiving what you want out of your investment program.
• SMART ATMs - In July 2007, when PFCU opened its new, expanded drive up facility at Wayne Avenue, two new SMART ATMs were introduced. The technology of these state-of-the-art ATMs takes ATM convenience and safety to a higher level than ever before. Members receive instant acknowledgement of their cash and check deposits, and are given faster availability to their funds. Checks are fed into the machine, without an envelope, where they are imaged and printed on the member?s receipt. Up to 100 unfolded bills can be deposited, with cash facing in any direction. The ATM reads each bill, giving a breakdown on members? receipts for each denomination.

PFCU Expansion:

Patriot Federal Credit Union is transforming itself. We have expanded our capabilities and boosted our productivity, and in the process have situated the organization to assist current and potential members in the community.

• Construction of a 26,000 square foot addition and renovation of PFCU?s main branch office, located at 800 Wayne Avenue, in Chambersburg, PA is scheduled for completion in the summer of 2008. This expansion project is providing your credit union with twice as much space to serve an expanding membership.

• Patriot installed an ATM machine at Kaplan College in Hagerstown, Maryland. This expanded service is assisting students and teachers in Washington County. Your credit union currently offers members access to 14 Patriot ATM?s in Franklin County, Fulton County and Washington County.

• To meet the new account, depository and lending needs of our existing and potential members in Washington County, Patriot opened a temporary, full service branch office in the North Pointe Centre, in Hagerstown, MD. To accommodate future growth, PFCU is planning to build a more spacious facility, as early as 2009, in the North Pointe complex, next to Spichers Appliances.

• Coming this summer ? Watch for a free standing SMART ATM near the Southgate Shopping Center in Chambersburg.

Let?s Grow Our Future Together:

With market conditions shifting constantly, we are excited by the opportunities such changes present. We are committed to scanning the business environment for best practices; looking for ways we can enhance the organization; and, most importantly, pursuing every opportunity to continue delivering the greatest value to you, our members.

You can rest assured your money is safe, sound and secure at PFCU. While we ?Grow Our Future Together,? we will continue to honor the financial trust you have placed in us. As we look forward to another successful year, we will remain steadfast in our efforts to continue Building Better Lives and Communities Together.