2013 HUECU Annual Report
Harvard University Employees Credit Union is proud to present our 2013 Annual Report.
20 1 3 HARVARD UNIVERSITY EMPLOYEES CREDIT UNION T H E F U T U R E I S N O W. ANNUAL REPORT OUR VISION Harvard University Employees Credit Union aspires to be a trusted partner in our membersâ€™ financial lives. We add value to membership by offering the best possible price, the highest quality personal service, and sincere, sound advice. The Credit Union seeks to be known as a community leader and to deepen its long standing commitment to housing issues, green initiatives, financial literacy and access to credit for low and moderate income borrowers. The Credit Union works toward transformational growth and change without relinquishing the core values we hold today. We are a not-for-profit cooperative which exists solely for the best interest of our members. We value integrity and responsibility in all of our actions. We strive to enhance our communities and create solutions for social, environmental and economic issues. HIGHLIGHTS OF 2013 MEMBERSHIP NET NEW MEMBERS IN 2013 GEOGRAPHY HUECU members reside in all 50 states. Top states outside of MA include CA & NY. 7,266 4 4 % % 75 % 40,825 HUECU membership grew by 21.7% in 2013, bolstered by the conversion of members from the Harvard Alumni Card acquisition. TOTAL MEMBERS AT YEAR END 2013 16 countries HUECU NOW SERVES MEMBERS IN EFFICIENCY $1.7 million NEW FULL TIME JOBS ADDED IN 2013 56% in interest-free Mass Save loans were disbursed to help members make their homes more energy efďŹ cient. of HUECU members received their statements electronically in 2013, saving over 800,000 pieces of paper. OPPORTUNITY 6 3 9 EMPLOYEES RECEIVED PROMOTIONS IN 2013 HUECU ANNUAL REPORT | 2013 COMMUNITY Focus on Financial Literacy HUECU continues to enhance the financial lives of people within the communities we serve through numerous educational programs. 78 free financial workshops were offered in 2013, covering subjects including first-time home buying, managing credit, personal budgeting, college financing and more. COOPERATIVE SPIRIT In 2013, HUECU employees & members generously supported the local community. 437 Toys were donated for Toys for Tots. 753 400 Books were donated for Childrenâ€™s Book Month in April. HOPE Candy bars were sold to assist the Massachusetts Coalition for the Homeless. CONVENIENCE Enhanced Mobile Services HUECUâ€™s mobile app received a significant upgrade in 2013. The new features enable members to pay bills, transfer funds and deposit checks using their smartphones. 5,000+ 94 SHARED BRANCHING LOCATIONS NATIONWIDE LOCATIONS IN MASSACHUSETTS Nation-Wide Branch Access With the introduction of Shared Branching, members can conduct transactions at thousands of participating credit union locations just as they would at an HUECU branch. FOR THE RECORD... $184,435.71 of coins were counted in our Harvard Square Coin Counter. Debit Cards in an Instant Our Harvard Square & MGH branches added the ability to instantly issue debit cards on the spot, giving new members quicker access to their Credit Union accounts. 8,500 Approximately HUECU pens were acquired by our members. 4 REPORT FROM THE CHAIRMAN & CEO STATE OF THE INDUSTRY Despite the persistently slow pace of economic recovery, the credit union industry had another strong year in 2013. U.S. credit unions’ total assets grew by $40 billion to end the year at just over $1.06 trillion. Membership growth was also impressive, reaching a new high of 96.3 million members, up 2.4 million from the previous year. The number of U.S. credit unions continued its four-decade decline, shrinking by nearly 4% in 2013. The current rate environment continues to be a challenge for profitability, as net interest margins remain on a downward trend. Moving forward, credit unions will need to accept lower returns in the short-term to avoid long-term interest rate risk. as members continued to take advantage of historically low mortgage rates. We also saw healthy growth in our new Harvard Alumni Credit Card portfolio and in our graduate student loan program, now in its fourth year. Membership growth in 2013 surpassed any year on record. The addition of over 4,000 members converted from the Harvard Alumni Card program acquisition, combined with an organic growth rate of 7.5%, resulted in net membership growth of more than 21%. ENHANCING SERVICE DELIVERY HUECU strives to constantly enhance our product offerings and service delivery to meet the changing needs of our members. In 2013, we furthered our commitment to mobile access with the addition of several services. The introduction of new Apple and Android apps significantly improved member experience in the mobile channel. Functionality was expanded to include Mobile Bill Pay and Mobile Check Deposit, enabling members to pay bills and deposit paper checks anytime, anywhere, using their smartphones. Our Credit Union’s exponential growth over the past several years has resulted in a more geographically dispersed membership, with 25% of members now residing outside of Massachusetts. We have enhanced our ability to serve these members by joining the Co-op Shared Branch network, enabling members to conduct transactions at thousands of participating credit union locations nationwide just as they would at an HUECU branch. OUR MISSION Enhance our members’ lives by providing trustworthy products that are easy to understand, easy to use and best suited to meet their financial needs. OUR CONTINUED SUCCESS We are thrilled to report that in 2013, the Harvard University Employees Credit Union’s growth in assets, membership, and earnings all exceeded the national average. The Credit Union experienced nearly 7% growth in loans 5 HUECU ANNUAL REPORT | 2013 ENGAGEMENT MANAGING GROWTH The economic climate of recent years has made managing growth problematic for many institutions. We are proud to say that throughout this difficult period, the Credit Union has achieved strong, stable growth in our asset base, capital position, and earnings. Moving forward, we will continue to proactively manage these three factors to maintain an effective balance and ensure the Credit Union’s short- and long-term success and sustainability. PEOPLE HELPING PEOPLE The Credit Union’s enduring success through the economic challenges of recent years is a testament to the strength and character of our community. We would like to recognize and applaud our volunteer Board, dedicated staff, and most especially our loyal members for their ongoing support of the Credit Union. The cooperative spirit is alive and well at HUECU. We look forward to continuing our tradition of success and making a positive difference in our members’ lives for many years to come. While other institutions rely on automated systems to provide customer service, HUECU makes it easy to speak to a live person. 3,499 : 34 : 27 HOURS MINS SECS In 2013, our call center reps spent on average 3.5 minutes per member call. TALKTIME 55,209 CALLS ANSWERED 14,291 George White Chairman of the Board Eugene J. Foley President & CEO OUTBOUND CALLS EMAILS ANSWERED 9,298 6 BY THE NUMBERS HOME LOANS The furious pace of refinancing that fueled our mortgage business in 2012 slowed down in the second half of 2013 due to rising interest rates. FIRST MORTGAGE ORIGINATION MILLIONS 2011 2012 2013 $70.4 $134.1 $85.9 51 MORTGAGES TO FIRST TIME HOME BUYERS IN 2013 STUDENT LOANS Though production was strong, this yearâ€™s growth in our student loan portfolio was comparatively modest as many loans went into repayment. DISTRIBUTION BY SCHOOL 10% 7% 10% 59% STUDENT LOAN ORIGINATION MILLIONS 14% 2011 2012 2013 $15.9 $17.1 $17.3 Harvard Business School Harvard Law School Harvard School of Public Health Harvard Kennedy School Other Harvard Graduate Schools 7 HUECU ANNUAL REPORT | 2013 CREDIT CARDS The acquisition of the Harvard Alumni Card in 2012 more than doubled our card portfolio. In 2013, we continue to see healthy growth in card balances. MEMBERS USED THEIR CREDIT CARDS FOR OVER $16.5 MILLION IN PURCHASES THIS YEAR. CREDIT CARD BALANCES MILLIONS 2011 2012 2013 $12.3 $25.3 $26.7 19% 7% RETAIL STORES 8% CLOTHING STORES AIRLINES ESERVICES HUECU is committed to constantly enhancing our electronic delivery options to improve member service, increase efficiency and reduce our environmental impact. ONLINE BANKING USERS THOUSANDS 2011 2012 2013 12.9 14.9 16.7 146,271 BILLS WERE PAID WITH ONLINE BILL PAY 4,536 MEMBERS ENROLLED IN MOBILE BANKING CHECKING We’ve experienced steady growth in checking balances as members take advantage of the many perks available with our new Crimson Checking accounts. CHECKING BALANCES MILLIONS 2011 2012 2013 $47.4 $57.4 $71.9 8 $195,651 ATM SURCHARGE FEES WERE REFUNDED TO MEMBERS REPORT FROM THE TREASURER The Credit Union continued to perform strongly, posting solid earnings, despite an economic climate that remained challenging. Assets increased by 7%, with a year-end total of $443 million. Positive growth was realized in all areas of the Credit Union; membership, loans, and deposits. Loan quality remained high within all loan product segments. As reďŹ‚ected in the unaudited financial statements, the Credit Union continues to be a well-capitalized, financially strong institution DEPOSITS OVER 5 YEARS where members can feel confident saving and borrowing. The Board, Management and Staff are to be commended for their contributions to our success. John T. Lichten Treasurer LOANS OVER 5 YEARS $300 $400 $300 MILLIONS MILLIONS 2009 2010 2011 2012 2013 $200 $200 $100 $100 $0 $0 2009 2010 2011 2012 2013 DEPOSIT DISTRIBUTION CLUBS LOAN DISTRIBUTION <1% IRAs 5% AUTO LOANS 4% OTHER 5% 2ND MORTGAGES 4% CREDIT CARDS 9% SHARES 30% CERTIFICATES 17% CHECKING 19% STUDENT LOANS 19% MONEY MARKET 29% 1ST MORTGAGES 59% 9 HUECU ANNUAL REPORT | 2013 STATEMENT OF CONDITION ( S E L E C T E D D ATA I N M I L L I O N S ) ASSETS Cash and cash equivalents Investments Loans to Members, net Property and equipment, net National Credit Union Share Insurance Fund deposit Other Assets Total Assets LIABILITIES AND MEMBERS’ EQUITY Liabilities Members’ Shares Borrowed funds Accrued expenses and other liabilities Total liabilities Members’ Equity Retained earnings, substantially restricted Accumulated other comprehensive income Total members’ equity Total liabilities and members’ equity 2013 43.1 78.3 310.6 2.5 3.8 4.4 442.7 2012 34.7 79.7 291.1 2.8 3.5 3.2 415.0 400.4 0.0 5.4 405.8 37.2 -0.3 36.9 442.7 372.1 1.4 5.9 379.4 34.6 1.0 35.6 415.0 STATEMENT OF INCOME ( S E L E C T E D D ATA I N M I L L I O N S ) INTEREST INCOME Interest Income from Loans and Investments Interest Expense Provision for Loan Losses Net Interest Income after Provision for Loan Losses Other Income Operating Expenses NET INCOME 2013 16.2 -1.5 -0.9 13.8 3.7 -14.9 2.6 2012 15.2 -2.2 -1.1 11.9 4.5 -13.8 2.6 10 REPORT FROM THE AUDIT COMMITTEE The Audit Committee is composed of five Directors dedicated to ensuring that the Credit Union’s actions are held to the highest standards of integrity and value. We are assisted in our efforts by outside firms that provide audit support of the Credit Union’s finances, internal controls, and regulatory compliance. Throughout 2013, the Committee met regularly to review audit and compliance reports and to discuss operational topics of interest. In 2013, the Credit Union’s existing contract with our external auditing firm ended. The Audit Committee, with support from the Credit Union CFO, initiated a competitive process to evaluate potential providers. Proposals were received from four firms and extensive interviews were conducted with each of them. As a result, the Audit Committee selected Wolf & Company, P.C. to perform the audit of our financial statements. Internal audits and compliance training continued to receive significant attention during 2013. We were assisted in these areas by two outside firms, Healy & Healy and FIS. Healy & Healy performed periodic internal audits to test Credit Union procedures and controls in areas such as branch operations, wire transfers, deposit operations, mortgages, and student loans. Having carefully reviewed the findings and management’s responses, the Audit Committee will actively work with management to strengthen processes and risk management systems. FIS performed trainings for Credit Union staff on a range of compliance topics such as the Bank Secrecy Act and Red Flags, and also conducted loan file reviews. Reimbursements to Board Directors in 2013 totaled $19,982. The majority of these costs were related to attending the annual Massachusetts Credit Union League convention. No reimbursable expenses were attributed to the Credit and Audit Committees. All Director expenses and reimbursements were made in compliance with the regulations of the National Credit Union Administration and the Massachusetts Division of Banks. The Committee wishes to thank the Credit Union Management for their cooperation, support and assistance throughout the year. Respectfully submitted, Cheryl Hutt Committee Chair COMMITTEE MEMBERS Guillermo Banchiere Mark Edington Edward Emde Edward Feldman 11 HUECU ANNUAL REPORT | 2013 OFFICERS Eugene J. Foley President & CEO Craig Leonard Executive VP, CFO Cheryl Gorman Executive VP, Retail Services Peter Buchanan VP, Lending John Degnan VP, Operations Tom Montilli VP, Marketing BOARD OF DIRECTORS Guillermo Banchiere Since 2007 Dennis Campbell Since 2013 Karen DeBerio Since 2003 Edward Doctoroff Since 1979 Mark Edington Since 2013 Edward Emde Since 1993 Edward Feldman Since 1984 Cheryl Hutt Since 2013 Stephen King Since 2011 John Lichten Treasurer Since 1992 Thomas Lucey Since 2006 Bill Murphy Since 2010 Jeremiah Murphy Vice Chair Since 2003 Mary Straub Clerk Since 2004 George White Chairman Since 1999 12 THANK YOU The Harvard University Employees Credit Union is proud to offer our services to the employees, students and alumni of Harvard University, Harvard teaching hospitals and affiliated organizations. We would like to thank all of our sponsor organizations for their continued support and participation in the Credit Union. OUR SPONSORS Harvard University (Students, Alumni, Faculty and Staff) Radcliffe Institute for Advanced Study American Repertory Theater Beth Israel Deaconess Medical Center Boston Shriners Hospital Brigham and Women’s Hospital Cambridge Hospital/ Cambridge Health Alliance Children’s Hospital Dana Farber Cancer Institute Dumbarton Oaks Research Library Harvard Business School Publishing Harvard/M.I.T. Cooperative Society Harvard Management Company Harvard Pilgrim Health Care Harvard–Smithsonian Center for Astrophysics Harvard Vanguard Medical Associates Joslin Diabetes Center Judge Baker Children’s Center Lesley University McLean Hospital Massachusetts Eye and Ear Infirmary Massachusetts General Hospital/ Partners Health Care System MGH Institute of Health Professions Massachusetts Mental Health Center Medical Academic and Scientific Community Organization Mount Auburn Hospital The Center for Blood Research The Schepens Eye Research Institute Spaulding Rehabilitation Hospital Veterans Administration Boston Healthcare System WGBH Boston HARVARD SQUARE 16 Dunster Street Cambridge, MA 02138 MASSACHUSETTS GENERAL HOSPITAL 55 Fruit Street Boston, MA 02114 LONGWOOD MEDICAL AREA 677 Huntington Avenue Boston, MA 02115 CHARLESTOWN NAVY YARD 149 13th Street Charlestown, MA 02129 HUECU.ORG