Harvard University Employees Credit Union

Annual Report 2010

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.

Our Vision

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

Values Report

Supporting Environmental SustainabilitySustainable 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 CommunityHaiti 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 spon-sor of Harvard University Athletics.

Promoting Financial LiteracyHome 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.

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 and create new fees. Our Credit Union in contrast left its low fee structure unchanged and expanded its product offering to provide our members with the greatest flexibility and value possible.

Just as it was during the last great depression that the credit union movement in this country took hold and grew, it is no surprise that adverse conditions in the current economy are contributing to more and more members relying upon their Credit Union during these difficult 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 WhiteChairman

Chairmain of the Board George White

Letter from the Chairman of the Board

"Our Credit Union left its low

fee structure unchanged and

expanded its product offering

to provide our members with

the greatest flexibility and

value possible."

President & CEO Eugene J. Foley

Letter from the President

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 local, not-for-profit cooperative, run by members for members. We measure success not in quarterly earnings reports to stock holders, but by returning as much value as possible back to our members. One indication of our success can clearly be seen in the extraordinary growth we have been enjoying year over year.

In the midst of a declining national economy our Credit Union has also grown to fill the void left by other financial service providers. When the private student loan market imploded two years ago, we developed the expertise to meet this need. By the 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. FoleyPreisdent & CEO

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Letter from the President CEO

"In the midst of a

declining national

economy our Credit

Union has grown to

fill the void left by

other financial

service providers."

Audit Committee Report

GuillermoBanchiere•WilliamMurphy

EdEmde•EdwardFeldman•EileenSullivan,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 exam-ine 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 BanchiereWilliam MurphyEdward FeldmanEileen Sullivan, Chair

Values Report

In accordance with our organizational vision, HUECU continued to

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Treasurer John H. Lichten

Treasurer’s Report

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.

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

5-Year Loan GraphLoans 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. LichtenTreasurer

$

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2006 2007 2008 2009 2010

$50

$100

$150

$200

$250

$300

$350

2006 2007 2008 2009 2010

$50

$100

$150

$200

$250

$300

MIL

LIO

NS

MIL

LIO

NS

Statements of Income

Statements of Financial Condition

ASSETS

Cash and cash equivalentsInvestments Available-for-sale Held-to-maturity OtherLoans to members, netAccrued interest receivableProperty and equipment, netNational Credit Union Share Insurance Fund depositOther Assets

Total Assets

2010

46,773,082

35,756,2520

7,301,623252,082,496

1,667,3002,379,7272,821,966

989,038

349,771,484

2009

56,633,062

18,513,3965,046,441

15,334,499223,341,965

896,4252,158,8032,486,086

558,922

324,969,599

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

305,208,22112,635,510

1,800,252

319,643,983

0

30,015,012112,489

30,127,501

349,771,484

280,170,89514,667,218

1,300,589

296,138,702

0

28,773,00357,894

28,830,897

324,969,599

INTEREST INCOME

Interest on loans to membersInterest on investments and cash equivalents

2010

13,632,147599,684

2009

12,170,373827,427

14,231,831 12,997,800

INTEREST EXPENSE

Dividends on members’ sharesInterest on borrowed funds

3,234,776488,995

3,675,011690,316

3,723,771 4,365,327

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

NON-INTEREST INCOME

Service charges and other feesRecapitalizaion gain on National Credit Union Share Insurance Fund depositCredit card interchange incomeLoan servicing fee incomeGain/Loss on Investments

1,581,856

0470,506

1,329,33029,013

1,374,311

1,404,110368,568

1,149,4930

3,410,705 4,296,482

TOTAL INCOME BEFORE EXPENSES 12,909,918 12,316,876

GENERAL AND ADMINISTRATIVE EXPENSES

Salaries and benefitsOperationsNat’l Credit Union Share Insurance Fund deposit impairmentNat’l Credit Union Share Insurance Fund assessments, netOccupancy

5,480,8834,042,058

0729,921

1,415,047

4,841,2443,856,5211,404,110

372,9131,051,291

11,667,909 11,526,079

NET INCOME 1,242,009 790,797

Regular Reserve

Unappropriated Total

Accumulated Other

Comprehensive Income (Loss)

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

3,811,094 24,171,112790,797

27,982,206790,797

00

57,894

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

3,811,094 24,961,9091,242,009

28,773,0031,242,009

00

54,595

Balance, December 31, 2010 3,811,094 26,203,918 30,015,012 112,489

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Statements of Members’ Equity

Statements of Cash Flows

OPERATING ACTIVITIES

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

2010

1,242,009

493,314 (29,013)

0

0 1,008,847

462,931

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

2009

790,797

80,831 0

1,404,110

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

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

Net cash provided by operating activities 2,476,760 1,459,683

INVESTING ACTIVITIES

Purchases of available-for-sale investmentsProceeds from maturities of available-for-sale investmentsProceeds from sales of available-for-sale investmentsProceeds from maturities of held-to-maturity investmentsNet change in other investmentsNet change in loans to membersIncrease in the Nat'l Credit Union Share Insurance Fund depositPurchases 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)

FINANCING ACTIVITIES

Repayment of borrowed fundsNet 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 equivalentsCash 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

SUPPLEMENTAL CASH FLOW INFORMATION

Dividends paid on members' shares and interest paid on borrowed funds 3,704,225 4,281,505

Officers

Board

Eugene J. FoleyPresident & CEO

Craig LeonardExecutive VP, CFO

Cheryl Gorman Executive VP, Retail Services

Peter Buchanan VP, Lending

John Degnan VP, Operations

Tom MontilliVP, Marketing

Guillermo BanchiereSince 2007

Karen DeBerioSince 2003

JosephDeCristoforoClerk, Since 1995

Edward DoctoroffSince 1979

Edward Emde Since 1993

Edward Feldman Since 1984

John LichtenTreasurerSince 1992

Thomas LuceySince 2006

Jeremiah MurphySince 2003

William MurphySince 2010

Chris SchumannSince 2006

Eileen SullivanSince 2008

Mary StraubSince 2004

Marie TrottierVice ChairSince 1991

George WhiteChairman Since 1999

Officers & Board of Directors

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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:

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

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

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

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

www.huecu.org | 617.495.4460