2010 HUECU Annual Report

Harvard University Employees Credit Union Annual Report 2010

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 In accordance with our organizational vision, HUECU continued to promote our core values through our 2010 initiatives.

Supporting Environmental Sustainability Sustainable Products: We continued our commitment to green initiatives, offering two new eco-friendly products loan products: • The MassSave HEAT Loan, offered in partnership with MassSave, provides members with a 0% loan for installation of energy efficient home improvements.

• The Personal Sustainability Loan (PSL) offers low-rate financing for energy-saving purchases such as Energy-Star appliances and alternative transportation. eStatement Challenge: We challenged our members to reduce waste by switching to eStatements. For every additional member enrolled the Credit Union pledged to plant a tree through American Forests. The result was a 12% increase in eStatement usage and over 1,000 trees planted.

Helping the Community Haiti Earthquake Relief: In partnership with Harvard University Administration we established the Harvard University Employees Emergency Relief Fund to provide emergency financial relief to Harvard employees affected by the January, 2010 earthquake in Haiti.

Toys for Tots: Collected over 200 toys so children of families in need would have gifts for the holidays.

Christmas in the City: Teamed up with Phillips Brooks House to provide holiday gifts to children in homeless shelters.

WGBH Pledge Drive: Employees volunteered their time to work the annual pledge drive, helping raise over $30,000 for public access television.

CU Community Hope Initiative: Raised money for the Massachusetts Coalition for the Homeless by collecting in-branch donations bins and participating in the annual Hebert Candy Bar sale.

Children’s Book Drive: Participated in Annual Massachusetts Credit Union Children’s Book Drive, collecting hundreds of books for children in area shelters.

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

Promoting Financial Literacy Home Buying Seminars: Presented numerous free seminars providing critical advice for first-time homebuyers.

Student Workshops: Conducted a workshop series for undergraduate college students covering basic financial skills such as personal budgeting and maintaining healthy credit.

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Letter from the Chairman of the Board Chairmain of the Board George White

While the financial markets began stabilizing in 2010, general economic conditions showed little improvement with unchanged unemployment numbers and housing prices in a continued slump. The residual affect of the credit crisis that hit two years ago is still most apparent in the general decline in consumer confidence and a corresponding drop in spending. These conditions created a significant decline in consumer loans for all financial institutions, including our Credit Union throughout the year; most especially as car buying hit all time lows.

Consumer lending was also greatly impacted when Congress passed new regulations this year written to simplify and facilitate greater transparency of credit card disclosures. The C.A.R.D. Act mandated new rules for card issuers that lengthened required notification for changes in rates and terms, eliminated arbitrary price increases and severely curtailed an issuer's ability to levy punitive fees. Enactment of this consumer friendly legislation caused credit card companies to radically change their offering rates and terms and took almost a third of total revenue out of the system by curtailing issuers’ ability to charge excessive fees.

These economic and regulatory changes that influenced consumer spending and lending in 2010 served to level the playing field between commercial providers and not-for-profit institutions like our Credit Union. In response to lower pricing and greater transparency, commercial lenders scrambled to limit the numbers of products "Our Credit Union left its low and create new fees. Our Credit Union in contrast left its low fee structure unchanged and expanded its product offering to fee structure unchanged and provide our members with the greatest flexibility and value possible. expanded its product offering Just as it was during the last great depression that the credit union movement to provide our members with in this country took hold and grew, it is no surprise that adverse conditions in the current economy are contributing to the greatest flexibility and more and more members relying upon their Credit Union during these difficult value possible." and changing times. Perhaps over its 100 year history in the U.S., the credit union difference has never been more crucial than it is today. Our mission and promise is to leverage our cooperative structure to fill the financial gaps left by commercial providers in the everyday lives of our members. We were created and still exist as a trusted partner and benefit for our members. I am especially proud to be a part of this difference and want to thank our members, board and staff for your contribution to our important work together.

George White Chairman

Letter Letter from the from President the President

CEO

President & CEO Eugene J. Foley

I am pleased to report that in fulfillment of our five year plan, the Credit Union reached the milestone of holding $350 million in assets in 2010. This objective was achieved through consistent double digit annual asset growth over the past half decade. More importantly, our Credit Union has been able to grow its membership by over the twice the national average rate each year, without having changed its charter or having acquired other institutions.

This robust organic growth is evidence that more and more members of our community have come to trust and rely upon the Credit Union difference at a time when large commercial providers seem to have forgotten them. Our true value lies in our structure; we are a "In the midst of a local, not-for-profit cooperative, run by members for members. We measure success not in quarterly declining national earnings reports to stock holders, but by returning as much value as possible back to our members. One economy our Credit indication of our success can clearly be seen in the extraordinary growth we have been enjoying year Union has grown to over year.

In the midst of a declining national economy our fill the void left by Credit Union has also grown to fill the void left by other financial service providers. When the private other financial student loan market imploded two years ago, we developed the expertise to meet this need. By the service providers." end of 2010, private student loans total almost $25 million, representing over 7% of assets. In order to accommodate our business growth, the Credit Union also under took physical expansion by securing an additional 7,000 square feet of office space in 2010. I am especially proud to report that even in this time of rising national unemployment, the Credit Union was able to created new jobs and add more employees to our staff.

Even in today’s market turmoil, our Credit Union is profitable, fully insured and very well capitalized with money to lend. This stability has enabled us to concentrate on enhancing efficiency, convenience and member services. We continue to increase member access and value by developing products at the lowest pricing possible with features and functionality that are state of the art. From the teller line to the Board room, we are listening to our members' needs and responding to deliver the best products and service possible. While continuous improvement is difficult to sustain, it is what drives us and we hope what you have come to expect in the Credit Union difference.

Eugene J. Foley Preisdent & CEO 5

Audit Committee Report Guillermo Banchiere • William Murphy Ed Emde • Edward Feldman • Eileen Sullivan, Chair

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 2010, this team met monthly to review compliance programs and examine the financial records of the Credit Union.

Expenses related to Directors in 2010 totaled fifty thousand, seven hundred and sixty nine dollars. Expenses related to the Credit Committee totaled one thousand, five hundred and thirty eight dollars. Expenses related to the Audit Committee totaled forty four dollars. All Director expenses and reimbursements were made in compliance with the regulations 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 William Murphy Edward Feldman Eileen Sullivan, Chair

$

Treasurer’s Report Values Report Treasurer John H. Lichten In accordance with our organizational vision, HUECU continued to

$350

$300

$300

$250

$250

MILLIONS

MILLIONS

In 2010, the Credit Union continued to grow in assets despite the ongoing economic recession. Positive growth in membership, loans and deposits were all realized and year-end assets were up by more than 7% at $350 million.

$200 $150 $100

$200 $150 $100 $50

$50

2006

2007

2008

2009

2010

5-Year Deposit Graph Deposits grew by 9% in 2010 continuing the trend of consistent growth.

2006

2007

2008

2009

2010

5-Year Loan Graph Loans grew by nearly 13% led by mortgages and student loans

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

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Statements of Financial Condition ASSETS

2010

2009

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

46,773,082

56,633,062

35,756,252 0 7,301,623 252,082,496 1,667,300 2,379,727 2,821,966 989,038

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

Total Assets

349,771,484

324,969,599

305,208,221 12,635,510 1,800,252

280,170,895 14,667,218 1,300,589

319,643,983

296,138,702

0

0

30,015,012 112,489

28,773,003 57,894

LIABILITIES AND MEMBERS’ EQUITY Liabilities Members’ shares Borrowed funds Accrued expenses and other liabilities Total liabilities Commitments and contingent liabilities Members’ Equity Retained earnings, substantially restricted Accumulated other comprehensive income Total members’ equity Total liabilities and members’ equity

30,127,501

28,830,897

349,771,484

324,969,599

Statements of Income INTEREST INCOME Interest on loans to members Interest on investments and cash equivalents

2010

2009

13,632,147 599,684

12,170,373 827,427

14,231,831

12,997,800

3,234,776 488,995

3,675,011 690,316

3,723,771

4,365,327

INTEREST EXPENSE Dividends on members’ shares Interest on borrowed funds

NET INTEREST INCOME

10,508,060

8,632,473

PROVISION FOR LOAN LOSSES

1,008,847

612,079

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

9,499,213

8,020,394

1,581,856

1,374,311

0 470,506 1,329,330 29,013

1,404,110 368,568 1,149,493 0

3,410,705

4,296,482

12,909,918

12,316,876

5,480,883 4,042,058 0 729,921 1,415,047

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

11,667,909

11,526,079

1,242,009

790,797

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

TOTAL INCOME BEFORE EXPENSES GENERAL AND ADMINISTRATIVE EXPENSES Salaries and benefits Operations Nat’l Credit Union Share Insurance Fund deposit impairment Nat’l Credit Union Share Insurance Fund assessments, net Occupancy

NET INCOME

Statements of Members’ Equity Regular Reserve

Balance, December 31, 2008 Net Income Net change in unrealized gains (losses) on available-for-sale investments

3,811,094

Balance, December 31, 2009 Net Income Net change in unrealized gains (losses) on available-for-sale investments

3,811,094

Balance, December 31, 2010

3,811,094

Unappropriated

24,171,112 790,797

Accumulated Other Comprehensive Income (Loss)

Total

27,982,206 790,797

0 0 57,894

24,961,909 1,242,009

28,773,003 1,242,009

0 0 54,595

26,203,918

30,015,012

112,489

Statements of Cash Flows OPERATING ACTIVITIES

2010

2009

1,242,009

790,797

493,314 (29,013)

80,831 0

0

1,404,110

0 1,008,847 462,931

(1,404,110) 612,079 443,072

(770,875) (430,116) 499,663

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

2,476,760

1,459,683

Purchases of available-for-sale investments Proceeds from maturities of available-for-sale investments Proceeds from sales of available-for-sale investments Proceeds from maturities of held-to-maturity investments Net change in other investments Net change in loans to members Increase in the Nat'l Credit Union Share Insurance Fund deposit Purchases of property and equipment

(30,739,891) 4,029,013 9,104,756 5,000,000 8,032,876 (29,749,377) (335,880) (683,855)

(18,483,132) 0 0 0 7,949,701 (27,816,157) (585,305) (145,287)

Net cash used in investing activities

(35,342,358)

(39,080,180)

Repayment of borrowed funds Net change in members' shares

(2,031,708) 25,037,326

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

Net cash provided by financing activities

23,005,618

58,272,896

(Decrease) increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year

(9,859,980) 56,633,062

20,652,399 35,980,663

Cash and cash equivalents at the end of the year

46,773,082

56,633,062

3,704,225

4,281,505

Net Income Adjustments to reconcile net income to net cash provided by operating activities: · Amortization (accretion) of investments, net · Gain on sale of available-for-sale investments · 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 Net cash provided by operating activities INVESTING ACTIVITIES

FINANCING ACTIVITIES

SUPPLEMENTAL CASH FLOW INFORMATION Dividends paid on members' shares and interest paid on borrowed funds

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Officers & Board of Directors

Officers

Eugene J. Foley President & CEO

Craig Leonard Executive VP, CFO

Board

Cheryl Gorman Executive VP, Retail Services

Peter Buchanan VP, Lending

John Degnan VP, Operations

Tom Montilli VP, Marketing

Guillermo Banchiere Since 2007

Karen DeBerio Since 2003

Joseph DeCristoforo Clerk, Since 1995

Edward Doctoroff Since 1979

Edward Emde Since 1993

Edward Feldman Since 1984

John Lichten Treasurer Since 1992

Thomas Lucey Since 2006

Jeremiah Murphy Since 2003

William Murphy Since 2010

Chris Schumann Since 2006

Eileen Sullivan Since 2008

Mary Straub Since 2004

Marie Trottier Vice Chair Since 1991

George White Chairman Since 1999

Our Sponsors 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) Radcliffe Institute for Advanced Study

Joslin Diabetes Center Judge Baker Children’s Center Lesley University

American Repertory Theater

McLean Hospital

Beth Israel Deaconess Medical Center

Massachusetts Eye and Ear Infirmary

Boston Shriners Hospital

Massachusetts General Hospital/ Partners Health Care System

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

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

Harvard Management Company

Hospital Veterans Administration

Harvard Pilgrim Health Care

Boston Healthcare System

Harvard–Smithsonian Center for Astrophysics

WGBH Boston

Harvard Vanguard Medical Associates

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www.huecu.org | 617.495.4460

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