PENN STATE FEDERAL

Annual ReportAnnual ReportDear Members,

We are very excited to be celebrating 61 years of success! It is with great pleasure that we present to you the Penn State Federal Credit Union 2019 Annual Report. In 1959, a group of faculty from the College of Agriculture started Penn State Federal Credit Union as a very small financial cooperative totally run by volunteers. Penn State Federal has evolved to a full service $191 million-dollar financial institution with three locations and 49 employees. Today, as yesterday, our mission and commitment remain the same - members helping members everyday in the ordinary and extraordinary moments of their lives.

FINANCIAL SNAPSHOT Penn State Federal ended the year with $184.7 million in assets, a decrease of $483.1 thousand over 2018. The total deposit growth declined 1.89 % compared to a growth of 2.27 % in 2018; loan growth was down 4.49 % compared to a growth of 11.23 % in 2018. Gross income was $7.8 million and gross operating expense was $ 5.7 million. Gross expense was less than budgeted due to a re-examination of expenses and the prevailing low market interest rates. Dividend expenses for the year were lower than budget. A total of $2.1 million was added to undivided earnings. At year end, the average asset net worth ratio was 10.67 %. The Credit Union remains financially strong with a total asset net worth ratio of 10.33 % and total capital of $19 million.

FINANCIAL EDUCATION 2019 presented opportunities for Penn State Federal representatives to provide financial education to our members. Checking Account Basics were presented to math students at State College Area High School. In addition, a Credit Union employee is a member of the Diversified Occupations Advisory Committee at SCASD. Teen Financial Education Classes were offered online to our Teen Club members. Visits were made to our Company Partners, where a representative was available to provide information about financial products and services. A series of Retirement Planning seminars were offered by our Morgan Stanley Certified Financial Planner.

SOCIAL RESPONSIBILITY Penn State and community visibility continued to be a focus in 2019. Penn State Federal’s trellis at The Penn State Arboretum provides visibility of our support to the University. In addition to THON and the Penn State Federal Trustee Scholarship though PSU, the Credit Union participated in the Grad Fair at the Penn State Bookstore. The Credit Union awarded five scholarships to high school graduating seniors to help reduce the financial burden of pursuing a postsecondary education. The Credit Union also tabled at several of our Select Employer Groups (SEGs). The Credit Union sponsored the Children’s Sidewalk Sale at the Central Pennsylvania Festival of the Arts. Penn State Federal participated in a variety of community events: The Y Feeds Kids Weekend Backpack Food Program through the YMCA of Centre County, the Jared Box Project, the Broadband Project for the Centre County Federation of Public Libraries, Summer Reading Program at Schlow Library, Fourth Fest Firecracker 4K race, State College and Bellefonte Little Leagues, local travel softball teams, First Night, Toys for Tots, the Food Bank, and various other nonprofit events.

FIELD OF MEMBERSHIP Penn State Federal was originally chartered as a credit union for faculty and staff at all of Penn State’s campuses. In the 1990’s students were added to the field of membership. In addition, small employee and association groups (SEGs) have requested and been approved to be added to our field of membership.

CONTINUITY & TRANSITION The Board of Directors and Management Team continued to work well together which created an environment conducive to personal and organizational growth. The Strategic Plan and Business Goals were updated for 2018-2020.

COMMITMENT Penn State Federal’s Board, Management Team and Staff are moving forward to achieve our vision that Penn State Federal Credit Union will be the preferred financial institution for the Penn State Community. Our continued successes are attributed to you, our members, staff and volunteers. We give a very special “thank you” to our membership for your support of Penn State Federal over the years and we look forward to our continued future together.

Penn State Federal, that’s my Credit Union!

Cheryl Barr, CEOBob White, Chairman of the Board 20201919

Board of DirectorsBob White, ChairJane Agnelly, Vice ChairJean Songer, SecretaryTheresa Cummins, TreasurerLynn DuBois, DirectorGail Hurley, DirectorSusan Morse, DirectorJudy Mudgett, DirectorKimlyn Patishnock, Director

Management TManagement TeameamCheryl Barr****, CEOMarnie Derabasse**, Senior Lending Vice PresidentSteve Komir***, ControllerDan Lestz****, CIO/CSOLori McTavish***, Senior Marketing Vice PresidentDonna Trapp***, Senior Human Resources Vice President

SuperSupervisorvisory Committeey Committee To the members of the Penn State Federal Credit Union:

The Penn State Federal Credit Union Supervisory Committee is comprised of members of the Credit Union who voluntarily serve its members in ensuring the Institution is financially and operationally sound. Following the mandate set forth in the Federal Credit Union Act and in compliance with the provisions set forth in the National Credit Union Administration’s (NCUA) rules and regulations, the Supervisory Committee of the Penn State Federal Credit Union engaged Doeren Mayhew, Certified Public Accountants to perform the annual financial statement audit. Doeren Mayhew issued its opinion that the credit union’s financial statements for the year ended December 31, 2019, are presented fairly in all material respects. Importantly, Penn State Federal Credit Union had no weaknesses in its controls over financial reporting. In other words, you can be assured that the Board of Directors, Supervisory Committee and management team are fulfilling their fiduciary responsibilities for sound fiscal stewardship.

In addition to the external audit, Penn State Federal’s Chief Internal Auditor performed regulatorily required audits, evaluated internal controls and performed additional audit testing as deemed necessary. All reviews were noted to be satisfactory.

The National Credit Union Administration, the Credit Union’s federal regulator, conducted an examination during 2019 and had no material findings. Penn State Federal Credit Union was approved in 2019 for an extended exam cycle due to being a well-managed, low risk Federal Credit Union. All Credit Union deposit accounts are insured to $250,000 and IRA accounts are insured to $250,000 by the NCUA.

The Supervisory Committee commends the Board of Directors and staff of the Credit Union for their adherence to established principles of fiscal responsibility. Their dedication and expertise have provided a strong foundation that will enable your Credit Union to have continued growth and financial stability.

In closing, as Chairperson of the Supervisory Committee, I would like to express my gratitude to the Board of Directors of the Credit Union and their Staff for the expedient manner in which they carried out the Governor’s mandates regarding COVID–19 safeguards. While at the same time ensuring that the banking needs of our members are being met during this difficult time in our history.

Respectfully submitted,Roy James Orr Jr.Chairperson, Supervisory Committee4/29/2020

Committee MembersCommittee Members

Ro y James Orr, Jr., ChairJudy MudgettSue SmithRick Tabor, Chief Internal Auditor

Liabilities & Equity 2019 2018Liabilities

Accounts Payable $476,596 $219,458

All Other Liabilities $301,981 $181,840

Total Accounts Payable/Other Liabilities

$778,551 $401,298

Share Savings $86,271,648 $86,527,357

Share Club $205,523 $195,505

Money Market $16,197,109 $16,708,537

Share Draft $50,079,192 $51,396,410

Share IRA $6,919,624 $7,252,367

Term Share Certificates $5,236,478 $6,014,113

Net Shares/CDs $164,909,575 $168,094,289

TOTAL LIABILITIES $165,688,126 $168,495,587

Equity

Regular/Statutory Reserves $1,932,167 $1,932,167

Undivided Earnings $17,156,419 $15,023,708

Other Comprehensive Income

$(70,500) $(262,148)

TOTAL EQUITY $19,018,086 $16,693,727

TOTAL LIABILITIES AND EQUITY

$184,706,212 $185,189,314

Income & Expense 2019 2018Operating Income

Loan Interest Income $4,279,047 $4,129,090

Investments Income $1,787,661 $1,467,863

Other Operation Income $1,735,236 $1,784,978

Gross Income $7,801,944 $7,381,932

Operating Expense

Salaries $2,379,527 $2,254,263

Benefits $762,513 $725,238

Travel & Conference $22,167 $21,963

Association Dues-League $17,901 $15,412

Office Occupancy $478,820 $454,148

Office Operation $790,975 $768,009

Education & Promotion $88,044 $88,016

Loan Expense $176,393 $207,920

Professional/Outside Services

$537,638 $527,055

Provision for Loan Loss $333,924 $197,353

Members Insurance $4,833 $4,588

Federal Supervision & Exam $49,895 $47,565

Interest on Borrowed Money $135 $99

Misc. Operation $68,379 $70,496

Gross Expense $5,711,145 $5,382,125

Net Operating Incomebefore Dividends

$2,090,798 $1,999,807

Non-operating Gain (Loss)on Investments $12,325 $0

Other Non-Operating Inc/(Exp)

$750 $0

Dividends Paid $95,186 $60,182

N. I. (LOSS) BEF NCUSIF $2,008,687 $1,939,625

NCUSIF STABILIZATION EXPENSE

$0 $0

NET INCOME (LOSS) $2,008,687 $1,939,625

2019 United Way Day of Caring 2019 Central PA Arts Festival Children’s Day

2019 Park Forest Preschool Holiday Gift Boxes

Financials

Assets 2019 2018Loans

Loans to Members $74,721,633 $78,587,052

Loan Participations $871,742 $1,229,715

VISA Loans $5,054,612 $5,013,210

Mortgages $4,930,885 $4,649,117

Student Loans $925,129 $1,083,228

Total Loans to Members $86,504,002 $90,562,321

VISA Cash Advances $1,200 $10,500

Allowance for Loan Loss $(430,544) $(357,710)

Net Loans Outstanding $86,074,658 $90,215,111

Loans Held For Sale $296,900 $0

ATM Accounts Receivable $42,199 $62,629

Cash $1,793,911 $2,094,070

Investments

US Govt Obligations $28,292,725 $29,182,740

MidAtlantic Corporate CU $12,031,306 $14,269,572

PSFCU CD Portfolio $48,892,000 $42,159,000

Visa Inc Stock - AFS $200,030 $141,063

Net Investments $89,416,062 $85,752,375

Other Assets

Prepaid Accruals $378,757 $305,821

Land & Buildings $4,727,592 $4,777,031

Accrued Income $320,218 $306,998

NCUSIF Deposit $1,640,915 $1,651,595

CUSO-CU24 $0 $8,684

CUSO $15,000 $15,000

Net Other Assets $7,082,482 $7,065,129

TOTAL ASSETS $184,706,212 $185,189,314

AdministrationCindy Greendoner****Marjorie Groff*Theresa Irvin**Rick Tabor

Back Office ServicesShannon Ballenger***Tom Dicus***Melanie StimerPaige Wolford

Business ServicesLori BelkoMichele Steinbugl Conklin*Kent CorlAmy Ieraci**

Information SystemsSam Bacza-NelsonJustin Maddox**Steve Northamer**Chris Snyder**Nate Socoski*

Lending Services Gene Eichenlaub**Michela HallTina Hepfer**Katie Lyons*Chelsea MooreDarla Owlett***Linda Pelton*Shannon KellermanPaul Stodart****Beth WalkerDoug Welch**

MarketingGail Jones****

Member ServicesChristine Boone****Jeff Drapcho**Ashleigh EganTatiana FavorsAngela GatesJamie Gilham*Alyson GrossAnnette HestresTina HibbertTina Hyduke**Carol KuhlenKylie RutherfordJulie Sealy*Patty Supko**

Lori BelkoVice President of Business Lending- Temporary Housing Foundation Board Member- Central PA 4th Fest Committee Member- Central PA Festival of the Arts Volunteer- Risk Management Association Board Member

Michele Steinbugl Conklin,Chief Credit Officer- Central PA RMA Chapter Board President and Education Committee Chair- Chair of the State College YMCA Managing Board- YMCA of Centre County Board Vice Chair- YMCA of Centre County Annual Giving Campaign Co-Chair- YMCA of Centre County Fiscal Planning Committee- Central PA 4th Fest Committee Member- Western Pennsylvania SBA Lenders Advisory Board Member- Volunteer for various non-profits’ special event days through Centre County - Various 5K Walk/Run Volunteer- RSVP Pen Pal

Marnie Derabasse, Senior Lending Vice President- Centre County United Way Board Member - Centre County United Way Finance Committee

Tom Dicus,Operations Coordinator- Central Blair County Relay for Life Participant

Jamie GilhamTeller Service Representative- United Way Day of Caring Volunteer

Tina HepferLoan Service Representative- The Y Feeds Kids Weekend Backpack Food Program Volunteer

Tina Hyduke, Member Service Representative- Pennsylvania Historical Association Treasurer

Gail Jones,Marketing & Business Relationship Coordinator- Orchard Creek Homeowner’s Association Vice President- American Red Cross Blood Donor- The Y Feeds Kids Weekend Backpack Food Program Volunteer- SCASD - Diversified Occupations Committee Member- United Way Day of Caring Volunteer

Dan LestzCIO/CSO- Central PA 4th Fest Volunteer- First Night Volunteer

Justin Maddox,Systems Analyst- The Y Feeds Kids Weekend Backpack Food Program Volunteer- United Way Day of Caring Voluntee- Bellefonte Faith VBS- Bellefonte Faith Serving Seniors- Centre County Habitat for Humanity

Lori McTavish,Senior Marketing Vice President- Youth Softball Volunteer- Centre Elite Gymnastics Volunteer- United Way Day of Caring Volunteer

Donna Trapp, Senior Human Resources Vice President- AAUW Annual Used Book Sale Chair- United Way Day of Caring Volunteer- Community Cafe Volunteer

* Denotes at least 5 years of service** Denotes at least 10 years of service*** Denotes at least 15 years of service****Denotes at least 20 years of service

2019 United Way Day of Caring

2019 Jared Boxes

Thanks to the Penn State Federal Team Members who are committed to helping in our community!