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Harvard University Employees Credit Union annual report 2011


Huecu 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.


2011 highlights Charlestown Branch Opening In July, the Credit Union opened the doors to our new branch in the Charlestown Navy Yard. This branch, the fourth for HUECU, is located in Building 149, considered the “Hub” for MGH/Partners Employees who work in this area. This convenient location will also provide better access to other Credit Union affiliates including Massachusetts General Institute of Health Professionals, Massachusetts Eye and Ear Infirmary employees at the Schrafft’s Building, and employees of the new CNY Spaulding Rehabilitation Hospital. 30,000 Member Milestone In August, HUECU reached a significant milestone when the number of Members eclipsed 30,000 for the first time. The Credit Union has seen consistent growth over the past several years as more and more people discover the benefits of banking with a not-for-profit community institution. This growth has been accelerated recently in the wake of new fees adopted by large institutions and grass-roots efforts like “Bank Transfer Day.” Harvard Square Branch Renovation In October, the Credit Union began a major renovation project at the main branch in Harvard Square. The project aimed to improve security and service while also creating a more comfortable and visually pleasing environment. Now, when you enter our Harvard Square Branch, you will find an inviting open space with a complimentary coffee bar, internet café, and plush waiting area. You will be greeted at our First Impression desk and shown to the appropriate work station. The teller line has been replaced with state-of-the art dialogue pods, contributing to an open feel while also providing members with greater privacy as they speak with tellers. Financial Literacy Program for Students Though the Credit Union has had a long-standing commitment to Member Education, this was the first year that the University incorporated the Credit Union’s Financial Literacy Programs into their undergraduate “J-Term” curriculum. The Personal Money Management Program was created by the Credit Union in collaboration with current and former students from Harvard College and Harvard Business School. The program, which was endorsed by several members of the Harvard faculty, is designed to educate students on practical life skills including: consumer credit, credit scoring, financial budgeting, taxes, insurance, and investing. Continued Mortgage Growth This past year, HUECU helped hundreds of Members purchase and refinance their homes, bringing in over $72 Million in Mortgages, one of the highest marks in the Credit Union’s history. Members are taking advantage of record low mortgage rates and the personal guidance and advice they receive from our expert Mortgage staff. Another stat we’re even more proud of is that we have still never foreclosed on any of our Members loans.


George whitE letter from the chairman of the board

This past year, the Harvard University Employees Credit Union reached a significant membership milestone. In August, for the first time, the number of HUECU members exceeded 30,000. This achievement is a testament to the remarkable value the Credit Union provides and the strength of our community. The ongoing economic recession continued to reshape the financial services industry in 2011. New legislation and increased regulation imposed on financial institutions caused a flurry of changes in the personal banking landscape. The Durbin Amendment in particular had an immediate impact on large national banks’ ability to collect fees on certain types of transactions. The unintended result was the introduction of new consumer fees and the near elimination of popular services such as free checking. The cumulative adverse effect of these changes has led to public outrage and a growing anti-bank movement. One obvious manifestation of this was the highly publicized “Bank Transfer Day,� when a social media campaign urged citizens to move their money from big banks to community institutions and credit unions. Though it is unclear exactly how much of an impact these grassroots efforts have had, one thing is certain. People have been closing their big-bank relationships in record numbers in favor of local institutions which they deem more trustworthy. Our Credit Union is in a unique position to benefit from these industry changes for the simple reason that we have never relied on fees for a signficant portion of our income. As a not-for-profit community institution we have always charged lower and fewer fees than large corporate banks. New regulations have a minimal effect on our bottom line and


People h ave b een c l osi ng t he i r b i g - b a n k r elations h i p s i n rec ord n u m b e r s i n fav o r of local i nst i t u t i ons w hi c h t he y d e e m more trust w o r t h y.”

we are able to continue to offer low-cost consumer-friendly services. Though these shifts in the industry help to raise the profile of the Credit Union, the real story of our success lies with our people. The Credit Union’s strong leadership has stayed committed to the institution’s core values of responsibility, honesty and integrity. Likewise, our dedicated staff consistently delivers on the promise of high quality personal service and sincere, sound advice. I must also thank our Board members, who generously volunteer their time and talent to support the Credit Union mission. I am exceptionally proud of the work that the the Credit Union does and it is my great pleasure to serve such an extraordinary organization.

George White Chairman

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Eugene j. foley l e t t e r f r o m t h e p r e s i d e n t & CEO

While the nationwide economic recession persisted in 2011 showing few signs of recovery, I am pleased to report that our Credit Union experienced another year of steady growth in assets, profitability, and liquidity. Deposits grew at double digit rates as our members continued to view HUECU as a safe haven for their funds. The Credit Union further benefited from rising anti-bank sentiment over increased fees which drove many consumers to find refuge in not-for-profit institutions.

Ou r ph i lo sop h y h a s always f o c u sed o n people over p ro fi t s

Record low mortgage rates helped to sustain historically high volumes in our home loan business. Another factor was the continued success of our graduate student loan program, now in its third year.

and we co nt i nu e t o

The prosperity the Credit Union has experienced in recent pu t ou r m em b ers’ b est years has allowed us to make key investments in our future interes ts fi rst i n a l l growth. In 2011 we opened our fourth branch, located in d ecis ions w e m a ke. ” the Charlestown Navy Yard. The new facility will allow us to better serve our growing field of membership working in the area. Other significant investments were made in improving critical Credit Union infrastructure. In the first quarter, we successfully completed a complex conversion of our online banking and bill payment platform


that leverages state-of-the art technology to deliver a more streamlined and secure online experience. Later in the year, our main branch in Harvard Square underwent a major renovation to improve service levels, privacy, and security. Despite the many ambitious projects completed in 2011, the Credit Union remained true to our mission of promoting financial literacy within the community. This year we achieved a significant breakthrough in these efforts with the introduction of the Personal Money Management Program. This comprehensive classroom experience was designed to provide Harvard undergraduate students with basic financial skills crucial to their life after graduation. The program received the endorsement of several Harvard faculty members, and was subsequently included in the University’s “J-Term” curriculum. At a time when people are looking for new ways to save and conserve, profit-driven banks are aggressively increasing fees. Now, the Credit Union’s value proposition is more important than ever. We are committed to providing simple, honest value to our members and remaining a trusted partner in their financial lives. Our philosophy has always focused on people over profits and we continue to put our members’ best interests first in all decisions we make. On behalf of our Board and staff, I would like to thank you for being a member and for your continued support of the Credit Union.

Eugene J. Foley Preisdent & CEO

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Audit Committee Report William Murphy, Chair • Guillermo Banchiere Ed Emde • Edward Feldman • Stephen King

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 2011, this team met monthly to review compliance programs and examine the financial records of the Credit Union. Expenses related to Directors in 2011 totaled $60,026. Expenses related to the Credit Committee totaled $1,194. Expenses related to the Audit Committee totaled $73. 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, William Murphy, Chair Guillermo Banchiere Ed Emde Edward Feldman Stephen King


John H. Lichten treasurer

treasurer’s report

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In 2011, the U.S. economy continued to struggle and interest rates remained at historic lows. Despite the tough economic conditions, the Credit Union maintained healthy profitability and steady asset growth. Year-end assets were up by more than 10% at $385 million. Positive growth was realized in membership and deposits. Though loan growth was flat in 2011, our loan quality remains pristine.

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2009

2010

2011

5-Year Deposit Graph Deposits grew by 11% in 2011 continuing the trend of consistent growth.

2007

2008

2009

2010

2011

5-Year Loan Graph Loans were flat during 2011 as increases in student loans were largely offset by decreases within mortgages.

As reflected in the audited financial statements, the Credit Union continues to be a well-capitalized, financially strong institution where members can feel confident saving and borrowing. The Board, Management and Staff are to be commended for their contributions to our success. John H. Lichten Treasurer


Statements of Financial Condition ASSETS

2011

2010

58,202,755

46,773,082

57,288,818 0 9,860,071 250,577,138 1,720,457 2,800,139 3,099,716 1,128,260

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

384,677,354

349,771,484

Liabilities Members’ shares Borrowed funds Accrued expenses and other liabilities

338,453,833 10,612,790 2,767,623

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

351,834,246

319,643,983

0

0

32,055,065 788,043

30,015,012 112,489

32,843,108 384,677,354

30,127,501 349,771,484

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 Total Assets LIABILITIES AND MEMBERS’ EQUITY

Total liabilities

Commitments and contingent liabilities Members’ Equity Retained earnings, substantially restricted Accumulated other comprehensive income Total members’ equity Total liabilities and members’ equity

Statements of income interest income Interest on loans to members Interest on investments and cash equivalents

2011

2010

13,954,928 876,859

13,632,147 599,684

2,450,865 406,240

3,234,776 488,995

2,857,105

3,723,771

11,974,682

10,508,060

864,443

1,008,847

11,110,239

9,499,213

1,900,192 458,255 1,111,067 51,764

1,581,856 470,506 1,329,330 29,013

3,521,278

3,410,705

14,631,517

12,909,918

5,921,853 4,440,422 774,929 1,454,260

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

12,591,464

11,667,909

2,040,053

1,242,009

INTEREST EXPENSE Dividends on members’ shares Interest on borrowed funds

NET INTEREST INCOME PROVISION FOR LOAN LOSSES NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES NON-INTEREST INCOME Service charges and other fees 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 assessments, net Occupancy

NET INCOME


Statements of Members’ Equity Regular Reserve Balance, December 31, 2009 Net Income Net change in unrealized gains (losses) on available-for-sale investments

3,811,094

Balance, December 31, 2010 Net Income Net change in unrealized gains (losses) on available-for-sale investments

3,811,094

Balance, December 31, 2011

3,811,094

Unappropriated

Total

24,961,909 1,242,009

28,773,003 1,242,009

Accumulted Other Comprehensive Income (Loss) 57,894 0 54,595

26,203,918 2,040,053

30,015,012 2,040,053

112,489 0 675,554

8,243,971

32,055,065

788,043

Statements of Cash Flows 2011

2010

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

2,040,053

1,242,009

607,888 (51,764)

493,314 (29,013)

864,443 474,772

1,008,847 462,931

(6,872) (185,507) 967,371

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

Net cash provided by operating activities

4,710,384

2,476,760

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 National Credit Union Share Insurance Fund deposit Purchases of property and equipment

(44,328,908) 22,308,965 606,807 (2,558,448) 640,915 (277,750) (895,184)

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

Net cash used in investing activities

(24,503,603)

(35,342,358)

Repayment of borrowed funds Net change in members’ shares

(2,022,720) 33,245,612

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

Net cash provided by financing activities

31,222,892

23,005,618

Increase (decrease) in cash and cash equivalents

11,429,673

(9,859,980)

Cash and cash equivalents at the beginning of the year

46,773,082

56,633,062

Cash and cash equivalents at the end of the year

58,202,755

46,773,082

2,450,865

3,704,225

Operating Activities

Investing Activities

Financing Activities

Supplemental cash flow information Dividends paid on members’ shares and interest paid on borrowed funds


Officers

Eugene J. Foley President & CEO

Craig Leonard Executive VP, CFO

Cheryl Gorman Executive VP, Retail Services

board of directors

Guillermo Banchiere Since 2007

Karen DeBerio Since 2003

Joseph DeCristoforo Clerk, Since 1995

Stephen King Since 2011

John Lichten Treasurer Since 1992

Thomas Lucey Since 2006

Mary Straub Since 2004

Marie Trottier Vice Chair Since 1991

George White Chairman Since 1999


Peter Buchanan VP, Lending

John Degnan VP, Operations

Tom Montilli VP, Marketing

Edward Doctoroff Since 1979

Edward Emde Since 1993

Edward Feldman Since 1984

Jeremiah Murphy Since 2003

William Murphy Since 2010

Chris Schumann Since 2006


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)

Dumbarton Oaks Research Library

Radcliffe Institute for Advanced Study

Harvard Business School Publishing

American Repertory Theater

Harvard/M.I.T. Cooperative Society

Beth Israel Deaconess Medical Center

Harvard Management Company

Boston Shriners Hospital

Harvard Pilgrim Health Care

Brigham and Women’s Hospital

Harvard–Smithsonian Center for Astrophysics

Cambridge Hospital/ Cambridge Health Alliance Children’s Hospital Dana Farber Cancer Institute

Harvard Vanguard Medical Associates Joslin Diabetes Center


Judge Baker Children’s Center

Mount Auburn Hospital

Lesley University

The Center for Blood Research

McLean Hospital

The Schepens Eye Research

Massachusetts Eye and Ear Infirmary

Institute Spaulding Rehabilitation

Massachusetts General Hospital/ Partners Health Care System MGH Institute of Health Professions Massachusetts Mental Health Center Medical Academic and Scientific Community Organization

Hospital Veterans Administration Boston Healthcare System WGBH Boston


Main Office - Cambridge 16 Dunster Street Cambridge, MA 02138 Phone: (617) 495-4460 Fax: (617) 495-0444 Massachusetts General Hospital Bulfinch Building 55 Fruit Street Boston, MA 02114 Phone: (617) 726-1630 Fax: (617) 726-7409 Longwood Medical Area Kresge Building 677 Huntington Avenue Boston, MA 02115 Phone: (617) 432-2265 Fax: (617) 432-2854 Charlestown Navy Yard 149 13th Street Charlestown, MA 02129 Phone: (617) 643-9655 Fax: (617) 724-9979

Not a bank. A benefit. www.huecu.org | 617.495.4460


2011 HUECU Annual Report