2009 HUECU Annual Report

Harvard University Employees Credit Union

ANNUAL

REPORT

2009

What can we do for you?

Our vision

Harvard University Employees Credit Union aspires to be a trusted partner in our members’ 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.

Values Report

putting

VALUES

IN ACTION

In accordance with our organizational vision, HUECU continued to promote our core values through our 2009 initiatives.

Financial Literacy Empowering members by providing the knowledge and resources they need to achieve financial success.

Financial Workshops: Conducted over 30 financial workshops on a variety of topics including:

- Buying Your First Home

- Creating a Budget Blueprint

- IRA and Retirement Strategies featuring Jonathan Pond

- Developing and maintaining healthy credit Live Web-Chats: Conducted several live online chats via the Harvard University Employee intranet where

the Credit Union’s CEO answered questions and addressed financial concerns of Harvard employees.

Housing Issues Supporting organizations that provide assistance to homeless and impoverished Massachusetts residents.

Toys for Tots: Collected over 250 toys for children of families in need.

Christmas in the City: Teamed up with Phillips Brooks House to provide gifts to children in

homeless shelters.

CU Community Hope Initiative: Raised money for the Massachusetts Coalition for the homeless

through in-branch donation bins and the annual Hebert Candy Bar sale.

Book Drive: Participated in 9th Annual Massachusetts Credit Union Children’s Book Drive, collecting

hundreds of books and for children in area shelters.

Green Initiatives Promoting eco-consciousness and sustainable business practices among our staff, members, and affiliates.

Enhanced Recycling: Introduced single-stream recycling in our Administrative Offices

Electronic Communication: Implemented a new email communication tool to reach out to

members in a more sustainable way

Digital Manuals: Developed an Online Product Manual System to allow all policies, procedures,

and product information to be updated in real time and eliminate the need for paper-intensive

printed manuals.

Eco-Friendly Supplies: Replaced many internal supplies with more sustainable substitutes.

Community Involvement Strengthening our relationship with our sponsor organizations through volunteer efforts and financial support.

MGH Fund: Made a $100,000 donation to the MGH Fund, which provides unrestricted support for

key areas of the MGH mission, including patient care, research, and education.

WGBH: Credit Union employees volunteered to answer phones at the WGBH annual pledge drive for the

14th consecutive year.

Harvard Athletics: Renewed our annual commitment as a corporate sponsor of Harvard University Athletics.

3

Message from the Chairman of the Board

George

WHITE

" Throughout the challenges of the past few years, I have been exceptionally proud of how our Credit Union has performed."

In June of this past year, the Harvard University Credit Union celebrated the 70th anniversary of our inception. 2009 also marked the 100 years since the first credit union was established in the U.S. Though both of these milestones are a testament to the continued strength of the credit union movement, they come during a period of extraordinary transformation in the financial services industry.

The ongoing economic recession in the United States has been called the nation’s worst financial crisis since the Great Depression. Consumer spending has plummeted and the unemployment rates remain high. Costly government bailouts seem to have staved off a disaster of 1930's era proportions, but economic recovery will be a laborious process.

Though many institutions have struggled to survive in this trying climate, our Credit Union has flourished. 2009 marked our second consecutive year of double-digit asset growth. HUECU’s continued success emphatically demonstrates the power of our cooperative structure. This simple and effective model, along with our diligent fiscal responsibility, have helped protect the Credit Union from the dangers that have caused over 100 bank failures in the past year. Members continue to choose the Credit Union as a safe haven for their deposits and we in turn continue to extend credit to people under served by other institutions.

The credit union industry as a whole, however, has not been immune to economic hardship. Fallout from the sub-prime mortgage crisis has severely weakened many credit unions, especially in western states, as their home foreclosures reach record levels. Making matters worse, the Corporate Credit Union system, which has traditionally provided deposit and investment services to the nation’s natural person credit unions, lost billions in mortgage-backed securities. To prevent a complete collapse, the National Credit Union Association, called upon all credit unions to provide emergency funding. These stabilization payments, based on a percentage of each institution’s assets, caused a substantial reduction in HUECU’s 2009 net income. We are anticipating a similar result from additional payments required in 2010.

Throughout the challenges of the past few years, I have been exceptionally proud of how our Credit Union has performed. Our strong leadership, dedicated staff, and loyal members epitomize what is meant by “The Credit Union Difference.” I am confident that in 2010 HUECU will continue on a course of stable growth, financial soundness, and a sustained commitment to putting members first in all that we do.

George White Chairman of the Board

4

Message from the President & CEO

eugene

FOLEY

" At a time when consumers often feel that the large commercial providers have failed them, the Credit Union has emerged as a national industry leader."

Despite a struggling U.S. economy and continuing trouble for the nation’s largest financial institutions, I am pleased to report that our Credit Union experienced extraordinary growth again in 2009 and is now one of the fastest growing U.S. credit unions.

Deposits grew by nearly thirty percent as members have come to view the Credit Union as a safe haven for their funds. With fully insured deposits, a very strong capital position and an aversion to excessive risk, our Credit Union is positioned to leverage and honor the trust our members have placed in us.

We have also seen double digit loan growth as members take advantage of historically low mortgage rates. With a declining housing market and the subsequent collapse of the credit markets, the advantage of Credit Union membership became even greater, while most commercial providers were unable or unwilling to lend.

The Credit Union offered student loans for the first time in 2009, when the national capital markets imploded and left students without a resource for educational funding. Initially, our private student program is geared toward the Harvard graduate students, with the hope that in the future we will extend this program to any students in our membership.

The most compelling evidence of our ability for long lasting, sustainable growth is the deepening relationships with current members. We now enjoy some of the highest levels for services and balances per member in the industry.

In addition, we saw a six percent increase in total membership last year, nearly three times the national average.

At a time when consumers often feel that the large commercial providers have failed them, the Credit Union has emerged as a national industry leader. While our ongoing commitment to innovation and service has been instrumental in our success, it is our core mission of “people helping people� that provides our strong foundation.

I would like to recognize and applaud our volunteer Board, our hard working staff and most especially our dedicated members for this shining example of help and cooperation in these difficult times. My hope is that you feel truly good about your relationship with the Credit Union, and that we are making a positive difference in your life.

Eugene J. Foley President & CEO

5

JOHN H. LICHTEN

Treasurer's Report

" The Credit Union continues to enjoy sustained growth. It is a well capitalized, safe and sound financial institution where members can feel confident in saving and borrowing.

In 2009, the Credit Union continued to grow in assets and liquidity despite the ongoing economic recession. Growth in membership, loans and deposits were well above projections in the business plan, and year-end assets were up by more than 22% at $325 million.

5 Year Loan GrAPH

5 Year Deposit Graph $275

$250

$250

$225

$225

MILLIONS

MILLIONS

$300

$200

$200 $175

$175

$150

$150

$125

$125

$100

$100 2005

2006

2007

2008

2009

Deposits grew by 28% in 2009 continuing the trend of consistent growth.

2005

2006

2007

2008

2009

Full liquidity enabled the Credit Union to meet the credit needs especially in mortgage lending.

As reflected in the audited financial statements, the Credit Union continues to enjoy sustained growth. It is a well capitalized, safe and sound financial institution where members can feel confident in saving and borrowing.

The Board, Management and Staff are to be commended for their contributions to our financial strength.

John H. Lichten Treasurer

6

Audit Committee Report

audit

committee

The Audit Committee is comprised of five Directors dedicated to ensuring that the Credit Union’s actions are held at the highest standards of integrity and value. Throughout 2009, this team met monthly to review compliance programs and examine the financial records of the Credit Union.

Expenses related to Directors in 2009 totaled thirty-six thousand, three hundred, and sixteen dollars. Expenses related to the Credit Committee totaled one thousand, six hundred, and thirty-six dollars. Expenses related to the Audit Committee totaled one hundred and seventy-six dollars. All Director expenses and reimbursements were made in compliance with the regulations stated by 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, Guillermo Banchiere Edward Emde Christian Schumann Eileen Sullivan Edward Feldman, Chairman

7

Statements of Financial Condition FOR THE YEARS ENDED December 31, 2009 and 2008 assets Cash and cash equivalents Investments

Available-for-sale

Held-to-maturity

Other Loans to members, net Accrued interest receivable Property and equipment, net National Credit Union Share Insurance Fund deposit Other assets

2009

2008

$56,633,062

$35,980,663

18,513,396 5,046,441 15,334,499 223,341,965 896,425 2,158,803 2,486,086 558,922

0 5,099,642 23,284,200 196,137,887 780,991 2,456,588 1,900,781 380,564

$324,969,599

$266,021,316

LIABILITIES AND members’ EQUITY Liabilities

Members’ shares $280,170,895 $219,025,557

Borrowed funds 14,667,218 17,539,660

Accrued expenses and other liabilities 1,300,589 1,473,893

Total liabilities 296,138,702 238,039,110 Commitments and contingent liabilities

0

0

Members’ Equity

Retained earnings, substantially restricted

Accumulated other comprehensive income

28,773,003 57,894

27,982,206 0

Total members’ equity

28,830,897

27,982,206

$324,969,599

$266,021,316

Total liabilities and members’ equity

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

Statements of Income INTEREST INCOME

Interest on loans to members Interest on investments and cash equivalents

INTEREST EXPENSE Dividends on members’ shares Interest of borrowed funds

NET INTEREST INCOME PROVISION FOR LOAN LOSSES

2008

$12,170,373 827,427

$11,625,116 1,384,187

12,997,800

13,009,303

3,675,011 690,316

4,002,794 609,107

4,365,327

4,611,901

8,632,473

8,397,402

612,079

707,872

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

8,020,394

7,689,530

NON-INTEREST INCOME Service charges and other fees Recapitalization gain on National Credit Union Share Insurance Fund deposit Credit card interchange income Loan servicing fee income

1,374,311 1,404,110 368,568 1,149,493

1,173,724 0 336,364 304,900

4,296,482

1,814,988

12,316,876

9,504,518

4,841,244 3,856,521 1,404,110 372,913 1,051,291

4,397,932 3,192,871 0 0 941,755

GENERAL AND ADMINISTRATIVE EXPENSES Salaries and benefits Operations National Credit Union Share Insurance Fund deposit impairment National Credit Union Share Insurance Fund premium assessment, net Occupancy

NET INCOME

8

2009

11,526,079

8,532,558

$790,797

$971,960

Statements of Members' Equity FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 Retained Earnings

Balance, December 31, 2007 Net Income Net change in unrealized gains (losses) on available-for-sale investments

Regular Reserve

Unappropriated

$3,811,094 0 0

$23,199,152 971,960 0

Accumulated Other Total Comprehensive Income (Loss) $27,010,246 971,960 0

0 0 0

Balance, December 31, 2008 3,811,094 24,171,112 27,982,206 0 Net Income 0 790,797 790,797 0 Net change in unrealized gains (losses) 0 0 0 57,894 on available-for-sale investments

Balance, December 31, 2009 $3,811,094 $24,961,909 $28,773,003 $ 57,894

Statements of Cash Flows FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operating activities:

Amortization (accretion) of investments, net

Impairment loss on National Credit Union Share Insurance Fund deposit

Recapitalization gain on National Credit Union Share Insurance Fund deposit

Provision for loan losses

Depreciation and amortization

Net changes in operating assets and liabilities: Accrued interest receivable Other assets Accrued expenses and other liabilities

2009 $790,797 80,831 1,404,110 (1,404,110) 612,079 443,072

2008 $971,960 (33,453) 0 0 707,872 382,857

(115,434) (178,358) (173,304)

128,550 (30,244) 266,380

1,459,683

2,393,922

INVESTING ACTIVITIES

Purchases of available-for-sale investments (18,483,132)

Purchases of held-to-maturity investments 0

Proceeds from maturities of held-to-maturity investments 0

Net change in other investments 7,949,701

Net change in loans to members (27,816,157))

Increase in the National Credit Union Share Insurance Fund deposit (585,305)

Purchases of property and equipment (145,287)

Net cash used in investing activities (39,080,180)

0 (5,104,260) 11,000,000 (7,400,900) (20,939,220) (165,157) (1,285,065)

Net cash provided by operating activities

(23,894,602)

FINANCING ACTIVITIES Proceeds from borrowed funds Repayment of borrowed funds Net change in members’ shares

0 (2,872,442) 61,145,338

10,000,000 (1,558,553) 29,796,159

Net cash provided by financing activities

58,272,896

38,237,606

INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

20,652,399 35,980,663

16,736,926 19,243,737

CASH AND CASH EQUIVALENTS AT END OF YEAR

56,633,062

35,980,663

SUPPLEMENTAL CASH FLOW INformaTION Dividends paid on members’ shares and interest paid on borrowed funds

$4,281,505

$4,575,282

9

Board of Directors Officers

3

2

5

6

Board

4

2

3

1

6

7

8

5

10

11 12

9

14

10

Eugene J. Foley: President and CEO

2

Craig Leonard: Executive VP & Chief Financial Officer

3

John Degnan: Vice President, Operations

4

Peter Buchanan: Vice President, Lending

5

Cheryl Gorman: Senior VP, Retail Services

6

Tom Montilli Vice President, Marketing

1

Guillermo Banchiere since 2007

2

Karen DeBerio since 2003

3

Joseph DeCristoforo: Clerk since 1995

4

Edward Doctoroff since 1979

5

Edward Emde since 1993

6

Edward Feldman since 1984

7

Elizabeth Hess since 2004

8

John Lichten: Treasurer since 1992

9

Thomas Lucey since 2006

4

1

13

1

15

10

Jeremiah Murphy since 2003

11

Chris Schumann since 2006

12

Eileen Sullivan Since 2008

13

Mary Straub since 2004

14

Maria Trottier: Vice Chair since 1991

15

George White: Chairman since 1999

THANK

YOU

Our Sponsor Organizations

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. Membership at the Credit Union is available exclusively to the following groups:

Harvard University (Students, Alumni, Faculty and Staff)

Harvard Vanguard Medical Associates

Radcliffe Institute for Advanced Study

Joslin Diabetes Center

American Repertory Theater

Judge Baker Children’s Center

Beth Israel Deaconess Medical Center

Lesley University

Boston Shriners Hospital

McLean Hospital

Brigham and Women’s Hospital

Massachusetts Eye and Ear Infirmary

Cambridge Hospital/Cambridge Health Alliance

Massachusetts General Hospital/Partners Health Care

Children’s Hospital

System

Dana Farber Cancer Institute

MGH Institute of Health Professions

Daycares operating on Harvard property

Massachusetts Mental Health Center

Dumbarton Oaks Research Library

Medical Academic and Scientific Community Organization

Episcopal Divinity School

Mount Auburn Hospital

Harvard Business School Publishing

The Center for Blood Research

Harvard/M.I.T. Cooperative Society

The Schepens Eye Research Institute

Harvard Management Company

Spaulding Rehabilitation Hospital

Harvard Pilgrim Health Care

Veterans Administration Boston Healthcare System

Harvard – Smithsonian Center for Astrophysics

WGBH Boston

Main Office - Cambridge 16 Dunster Street Cambridge, MA 02138 Mon.-Wed., Fri., 8:30 a.m. - 4:30 p.m.

Thur., 8:30 a.m. - 6:00 p.m.

Sat., 8:30 a.m. - 12:00 p.m.

Phone: (617) 495-4460 Fax: (617) 495-0444

Massachusetts General Hospital Bulfinch Building 55 Fruit Street Boston, MA 02114 Mon. - Fri., 9:00 a.m. - 4:00 p.m.

Thur, 8:00 a.m. - 4:00 p.m.

Phone: (617) 726-1630 Fax: (617) 726-7409

Longwood Medical Area Kresge Building 677 Huntington Avenue Boston, MA 02115 Mon. - Fri., 9:00 a.m. - 4:00 p.m.

Phone: (617) 432-2265 Fax: (617) 432-2854

think green.

please recycle this document.

Federally Insured by NCUA

www.huecu.org | 617.495.4460