Annual Report 2007

REPORT to the MEMBERSHIP

We are growing our future together at Patriot Federal Credit Union. That's because Patriot is a not-for-profit financial cooperative, democratically controlled by, and for the sole benefit of, its member-owners. When you became a member of Patriot, you also became an owner, equal to every other member-owner. This is an important difference in the relationship you have with Patriot, and other relationships you might have with other financial providers.

Your credit union exists to help member-owners like you achieve life goals through financial services at fair and reasonable rates. In contrast, one of the key principles of a for-profit financial provider is the generation of profits and dividends for its investor-shareholders. At Patriot, all members are also owners, so all reap benefits from the credit union's success.

When members save and invest with Patriot, they are also providing funds for their neighbors to buy the home of their dreams or remodel their home for the new baby being born into our community. They are helping the high school senior who lives down the street with a student loan for their tuition. They are funding their co-worker's auto loan to get back and forth to work each day; or they are helping a struggling family get back on their feet.

A credit union is more than a depository in which to place funds, it is a tradition of people helping people build better lives and communities. Indeed, each member is helping to make a difference in the lives of fellow members and our communities. This report highlights our collective efforts and results for 2006.

FINANCIAL PERFORMANCE

Patriot experienced superior financial results in 2006. Total assets grew 10.4% to $362 million. On the loan side, outstanding balances grew by an incredibly strong 15.6 % to $237 million. Even with such strong growth, Patriot's capital, or "reserves safety net," remained exceptionally strong at 12.85% of assets.

This remarkable financial performance positioned Patriot to return additional earnings to member-owners with a bonus dividend and interest rebate at the end of the first quarter in 2007. On March 31, 2007, all members received a bonus dividend equal to 5% of their total dividends earned on all their share accounts during the first quarter; and, in addition, members with qualifying loans received interest rebates equal to 10% of the interest they had paid from January 1, 2007, through March 31, 2007.

This was possible because members strongly supported their credit union with both deposit and loan business in 2006. The bottom line is that the more business you do with your credit union, the more successful Patriot will be; and, credit union success equals better rates, products and services, and potentially more bonus dividends and interest rebates for the member-owners!

PFCU EXPANSION

As part of our continuing efforts to maximize the benefits of membership in Patriot, we routinely assess changing member demographics and the evolving market dynamics relating to Patriot's community charter area; and, in our most recent studies, we have found opportunities to provide better member service as well as potential for future growth. As a result, we have embarked on the expansion and renovation of Patriot's corporate center and main branch office located at 800 Wayne Avenue, in Chambersburg, Pennsylvania.

Our studies have also revealed a substantial overlap of service between the Wayne Avenue and Federal Street branches, while at the same time, a significant void in service to members east of Chambersburg. Consequently, the Wayne Avenue expansion is being re-designed to serve more members; a new branch will be built east of Chambersburg; and, the Federal Street branch will be replaced with a free-standing ATM.

Property has been acquired, and the new branch will be built at 1524 Lincoln Way East, Chambersburg, PA, near the Chambersburg Lowe's and Wal-Mart. We are targeting a 2008 opening.

Other branch and ATM locations within Patriot's community charter area are also being considered; and, announcements will be made as plans are developed.

These expansion strategies will help our credit union effectively and efficiently meet the needs of our evolving membership.

NEW OR ENHANCED PRODUCTS AND SERVICES

In addition to growing your financial strength through excellent savings and loan rates, and enhancing convenience through branch expansions and renovations, your credit union also introduced new products and services that provide more convenience and value.

• E-Lerts -These electronic alerts automatically email important financial notifications to e-BRANCH users. E-Lerts are available for: NSF notification, overdraft protection occurrence, a deposit posted, account balance under minimum amount, VISA debit card purchase was made, minimum loan payment due, loan balance over limit, rate change and available loan balance.

• E-MORTGAGE - Recognizing that members' mortgage needs do not always follow traditional business hours, e-MORTGAGEs were added to our online service offerings. Whether looking to buy, build or refinance, members can conveniently apply for mortgages online via e-MORTGAGE. To access e-MORTGAGE, simply log onto Patriot's homepage at www.patriotfcu.org, then click on the e-MORTGAGE logo.

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. During 2006, Financial Advisor, Sarah Eyler, helped hundreds of members find proper solutions to their unique financial situations. PFS professionals also conducted a retirement planning seminar and an investment alternatives workshop entitled "Make My Money Work For Me."

MEMBER EDUCATION

Three additional seminars were conducted in 2006, as part of Patriot's continuing efforts to educate its members on a variety of consumer topics. Our popular home buying seminar was repeated twice in 2006. Among other things, members learned how to determine how much house they could afford and how to qualify to buy a home. The popular seminar, "Understanding Your Credit Score" seminar was also offered. Members learned what the term "credit score" actually means, and how a credit score affects their buying power. We also conducted two seminars regarding ID Theft prevention. These seminars were offered at no cost as another benefit of member-ownership in Patriot Federal Credit Union.

COMMUNITY SUPPORT

In the spirit of the credit union philosophy of People-Helping-People®, the credit union supported many charitable and worthwhile organizations throughout its community charter area.

Realizing that even small communities like ours are affected by homelessness and poverty housing, PFCU donated funds to Franklin County Habitat for Humanity in order to support its goal of providing decent shelter for lower income families who would not otherwise be able to afford homes.

PFCU was a sponsor for the American Cancer Society's Relay for Life event. Funds raised through Relay for Life offer something for everyone affected by this deadly disease from the newly diagnosed, to caregivers and friends, to long term survivors. It is an opportunity to celebrate with survivors, and support those who are facing cancer. Too many of us are touched by this deadly disease and the credit union is honored to support the cancer society's mission to eradicate cancer.

Not wanting to overlook the smallest and most vulnerable members of our community, PFCU proudly sponsored the March of Dimes Pre-maturity Campaign. A total of 25 employees and their family members participated in the walk to raise funds for research to find the cause of premature birth, educate women about risk reduction strategies and the signs and symptoms of premature labor, and expand access to health care coverage to improve maternity care and infant health.

The Make-A-Wish Foundation grants the wishes of children with life threatening medical conditions. Whether they want to experience an exciting day at Disney Land, or be a real police officer, Make-A-Wish makes it happen! PFCU is privileged to play a part in their joy through our donations.
PFCU donated funds to the Chambersburg Meals on Wheels program. Homebound residents of Chambersburg and Fayetteville who are over the age of 60, and unable to prepare a meal, receive a fresh, hot, noontime meal delivered to their homes Monday through Friday.
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.

PFCU and its employees combined their efforts to contribute a total of nearly $7,500 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. Programs that provide early education for children, parenting classes, substance abuse support, teen pregnancy support, access to health and wellness initiatives, and economic self support initiatives.

The credit union played a significant role in the historic preservation of downtown Chambersburg by pledging $25,000 to the Capitol Theatre Foundation. Significant renovations have already been completed on the Capitol Theatre, but much remains to be done both inside and out to preserve this home to the performing arts in Franklin County.

GROWING OUR FUTURE TOGETHER

A credit union is much more than programs or bricks and mortar. It is really the members, staff, and volunteers, who, altogether, make it the instrument through which we are "Growing Our Future Together." Each and every person was an important part of the success we achieved in the past year. We are deeply grateful to everyone for your continuing support. Thank you!