2008 HUECU Annual Report

Harvard University Employees Credit Union

What can we do for you?

ANNUAL

2008REPORT

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.

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Highlights from 2008 Deepening Relationships2008 was the inaugural year for the Student Credit Card Design Contest, which allows students to design, vote and choose which credit card images they want to appear on their card.

Going GreenIn 2008, we consolidated our Administrative staff into one contiguous location. The new facility

earned the U.S. Green Building Council’s highly regarded Gold LEED certification for environmentally sustainable development.

Lending a HandThis year saw HUECU launch the Energy Assistance Loan. The loan provides payment assistance to members struggling to manage their winter heating costs.

Educating our MembersAs part of our commitment to financial literacy, we expanded our member workshop series in 2008. Workshops cover a range of subjects, from first-time home buying to basic budgeting.

Innovating Through TechnologyIn 2008, we launched a new interactive website. The site includes a wealth of new resources including financial calculators, educational resources, and an online mortgage application.

Getting InvolvedCommunity is at the heart of who we are and in 2008 the Credit Union supported a variety of social initiatives, including:

• Passionately Pink for the Cure: Raised over $400 for breast cancer awareness.

• WGBH Pledge Drive: Answered phones in support of public access television.

• Toys for Tots: Collected over 200 toys for families in need.

• Christmas in the City: Teamed with the Phillips Brooks house to provide gifts to children in homeless shelters.

• CU Community Hope Initiative: Raised over $500 for the Massachusetts Coalition for the Homeless through donation bins in branches and a candy drive fundraiser.

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Message from the Chairman of the Board

GEORGE WhiTEThe housing market tremor felt at the end of 2007 turned into a full scale

financial earthquake by 2008. In the past, housing bubbles grew and burst

within the confines of local economies, but the combination of sophisticated

investment instruments with Wall Street’s appetite for risky mortgage loans

has sent irreparable cracks throughout global markets. Starting with the

collapse of Bears Stearns in the spring, the country’s investment banking

industry was obliterated by the end of the summer.

On September 29th, when Congress rejected a $700 billion bank bail out

plan, the stock market plummeted, booking the greatest single point loss in

history. This free fall broke the back of credit markets and froze the liquidity

needed to keep goods and services flowing. In the wake of this banking

crisis a tsunami has spread throughout the financial markets, capsizing many

other industries and national economies along the way.

We are now in a significant economic recession, with home foreclosures and unemployment rising sharply. Congress is

wrestling daily with ways to keep the banking system in tact and get the economy growing again. Among the tasks yet

to be started will be a total overhaul of the financial regulatory structure.

The credit union system emerged from the last systemic crash of the banking system, during the Great Depression of

the 1930’s. Then, like now, Americans lost confidence in the motives and practices of banks and Wall Street.

This gave rise to the not for profit cooperative model that governs our Credit Union today. With restructuring of

the financial service industry, our cooperative model is being threatened by our for profit opponents. If you have ben-

efited from Credit Union membership, I ask for your support in advocating that our cooperative structure be

left unchanged.

For over three generations, our Credit Union has been

an indispensable resource in the financial lives of our

members. It is a special experience to be associated with

this organization and I am committed to our founding

mission of putting people before profits.

George White

Chairman of the Board

" It is a special experience to be associated with this organization and I am committed to our founding mission of putting people before profits."

While the past year was marked by large

bank failures and a near melt down of the

financial system, I am happy to report that

our Credit Union continued growing in

assets, profitability and liquidity.

The key to our success lies in our coopera-

tive structure. Our business model is simple

and effective; we take our members’ depos-

its to fund the needs of members that need

mortgages, cars or any other type of loan. This minimal amount of asset risk produces a predictable stream of steady

returns that we share with our members in the form of higher than market dividends on deposits and lower that

market interest rates on loans.

Even in today’s market turmoil, our Credit Union is profitable, fully insured and very well capitalized with money to

lend. As a credit union chartered by the Commonwealth of Massachusetts, we are required to keep every dollar on

deposit insured in full, which we do through two regulated agencies: federally through the National Credit Union

Administration and additionally by the Massachusetts Share Insurance Corporation.

Over the past year we have enjoyed double digit deposit and loan growth. This stability enabled us to concentrate

on enhancing efficiency, convenience and member services. In June we consolidated staff from four separate

locations to relocate into new corporate offices in Harvard Square. This move reduced expenses and greatly

enhanced our operations. In addition, we significantly increased member access by developing a new online

experience including increased functionality with products like on line mortgage origination.

While we can not predict what changes we are likely to see as a result of the current national financial crisis, we have

historically seen our members turn to their Credit Union during times of economic uncertainty. Our Board and Staff

are committed to helping members weather even the worst of financial storms. We are working hard to develop

products and services to financially educate and empower our members. We have revenue to pay the highest

dividends possible on savings and cash to lend for members seeking loans. Most especially in these hard times,

we are asking; “What Can We Do for You?”

Eugene J. Foley

President & CEO

Message from the President & CEO

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EUGENE J. FOLEy" Even in today’s market turmoil, our Credit Union is profitable, fully insured and very well capitalized with money to lend. "

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Treasurer’s Report

JOhN h. LichTEN

The Credit Union grew in assets, liquidity and profitability in 2008, despite the near meltdown of the financial system

and economy. With bail outs and bank failures shaking consumer confidence, members in record numbers turned to

the safety and reliability of their Credit Union. Growth in membership, loans and deposits far exceeded business plan

projections, driving assets up at year end by over 17% to $266 million.

As reflected in the audited financial statements, the Credit Union continues to enjoy sustained growth and profitability.

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, especially in

these difficult times.

John H. Lichten

Treasurer

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

2004 2005 2006 2007 2008

MIL

LIO

NS

$50

$75

$100

$125

$150

$175

$200

5 Year Loan GraPH

2004 2005 2006 2007 2008

MIL

LIO

NS

$100

$150

$125

$50

$75

$175

$200

$225

5 Year DePosIT GraPH

Deposits grew by 16% in 2008 continuing the trend of consistent growth.

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Audit Committee Report

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 2008, this team met monthly to review compliance

programs and examine the financial records of the Credit Union.

Expenses related to Directors in 2008 totaled sixty-six thousand, seven hundred, and fifty-nine dollars. Expenses

related to the Credit Committee totaled one thousand, two hundred, and twenty-three dollars. Expenses related

to the Audit Committee totaled eighty-nine 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

AUdiT" The Credit Union has provided positive growth and change while staying true to its core values."

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aSSETS 2008 2007

Cash and cash equivalents $35,980,663 $19,243,737Investments Held-to-maturity 5,099,642 10,961,929 Other 23,284,200 15,883,300Loans to members, net 196,137,887 175,906,539Accrued interest receivable 780,991 909,541Property and equipment 2,456,588 1,554,380National Credit Union Share Insurance Fund deposit 1,900,781 1,735,624Other assets 380,564 350,320

$266,021,316 $226,545,370

LIaBILITIes anD memBers’ eQUITY

Liabilities Members’ shares $219,025,557 $189,229,398 Borrowed funds 17,539,660 9,098,213 Accrued expenses and other liabilities 1,473,893 1,207,513 Total liabilities 238,039,110 199,535,124

Commitments and contingent liabilities 0 0 Members’ Equity Retained earnings, substantially restricted 27,982,206 27,010,246 $266,021,316 $226,545,370

InTeresT InCome 2008 2007

Interest on loans to members $11,625,116 $10,357,279Interest on investments and cash equivalents 1,384,187 1,981,394 13,009,303 12,338,673

InTeresT eXPenseDividends on members’ shares 4,002,794 3,684,419Interest of borrowed funds 609,107 518,914 4,611,901 4,203,333

neT InTeresT InCome 8,397,402 8,135,340

ProVIsIon For Loan Losses 707,872 395,037

neT InTeresT InCome aFTer ProVIsIon For Loan Losses 7,689,530 7,740,303

non-InTeresT InCome Service charges and other fees 1,254,704 1,111,423Credit card interchange income 336,364 293,963 Loan servicing fee 223,920 150,224 1,814,988 1,555,610 9,504,518 9,295,913

GeneraL anD aDmInIsTraTIVe eXPensesSalaries and benefits 4,397,932 4,175,737Operations 3,192,871 2,967,714Occupancy 941,755 778,197

8,532,558 7,921,648 neT InCome $971,960 $1,374,265

Statements of Financial Condition For THe Years enDeD DeCemBer 31, 2008 anD 2007

Statements of Income For THe Years enDeD DeCemBer 31, 2008 anD 2007

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Statements of Members' Equity For THe Years enDeD DeCemBer 31, 2008 anD 2007

Regular Reserve Unappropriated Total

Balance, December 31, 2006 $3,811,094 $21,824,887 $25,635,981Net Income 1,374,265 1,374,265

Balance, December 31, 2007 3,811,094 23,199,152 27,010,246Net Income 971,960 971,960 Balance, December 31, 2008 $3,811,094 $24,171,112 $27,982,206

oPeraTInG aCTIVITIes 2008 2007

Net income $971,960 $1,374,265Adjustments to reconcile net income to net cash provided by operating activities: (Accretion) amortization of investments, net (33,453) (60,938) Provision for loan losses 707,872 395,037 Depreciation and amortization 382,857 292,816 Net change in: Accrued interest receivable 128,550 (195,361) Other assets (30,244) (21,611) Accrued expenses and other liabilities 266,380 (104,936)

Net cash provided by operating activities 2,393,922 1,679,272

InVesTInG aCTIVITIes Purchases of held-to-maturity investments (5,104,260) (8,901,506) Proceeds from maturities of held-to-maturity investments 11,000,000 12,000,000 Net change in other investments (7,400,900) (1,000,000) Net change in loans to members (20,939,220) (13,448,704) Increase in the National Credit Union Share Insurance Fund deposit (165,157) (24,576) Purchases of property and equipment (1,285,065) (578,057) Net cash used in investing activities (23,894,602) (11,952,843)

FInanCInG aCTIVITIesNet change in borrowed funds 8,441,447 (4,901,787) Net change in members’ shares 29,796,159 15,490,096

Net cash provided by financing activities 38,237,606 10,588,309

InCrease In CasH anD CasH eQUIVaLenTs 16,736,926 314,738 CasH anD CasH eQUIVaLenTs aT BeGInnInG oF Year 19,243,737 18,928,999

CasH anD CasH eQUIVaLenTs aT enD oF Year $35,980,663 $19,243,737

sUPPLemenTaL CasH FLoW InFormaTIonDividends paid on members’ shares and interest paid on borrowed funds $4,575,282 $4,226,853

Statements of Cash Flows For THe Years enDeD DeCemBer 31, 2008 anD 2007

RETaINED EaRNINGS

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

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

Our Sponsor Organizations

ThANk yOU

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Eugene J. Foley:President and CEO

William Hanify: Executive VP & Chief Financial Officer John Degnan: Vice President, Operations Peter Buchanan: Vice President, Lending

Cheryl Gorman:Senior VP, Retail Services

officers

Board

Board of Directors

Guillermo Banchiere since 2007

Karen DeBerio since 2003 Joseph DeCristoforo: Clerk since 1995

Edward Doctoroffsince 1979

Edward Emde since 1993

Edward Feldman since 1984 Elizabeth Hess since 2004 John Lichten: Treasurersince 1992 Thomas Luceysince 2006 Jeremiah Murphysince 2003 Chris Schumann since 2006 Eileen SullivanSince 2008

Mary Straubsince 2004

Maria Trottier: Vice Chair since 1991 George White: Chairman since 1999

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www.huecu.org

Made from recycled materials

main office - Cambridge16 Dunster StreetCambridge, MA 02138Mon.-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) 495-4460Fax: (617) 495-0444

Massachusetts General HospitalBulfinch Building 55 Fruit StreetBoston, MA 02114Mon. - Fri., 9:00 a.m. - 4:00 p.m.Thur, 8:00 a.m. - 4:00 p.m.Phone: (617) 726-1630Fax: (617) 726-7409

Longwood Medical areaKresge Building677 Huntington AvenueBoston, MA 02115Mon. - Fri., 9:00 a.m. - 4:00 p.m.Phone: (617) 432-2265Fax: (617) 432-2854

What can we do for you?