Harvard University employees Credit Union AnnuAl RepoRt 2012

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.

H U e C U : o U r v i s i o n

MobilE banking laUnCH

in March, the Credit Union launched a Mobile banking platform. This was the first step in

a larger project to give members comprehensive mobile access to their accounts. Soon to

follow are iPhone and android apps, Mobile Check Deposits, and Mobile bill Pay.

balanCE FinanCial FiTnESS PrograM

in May, as part of our ongoing commitment to promoting financial literacy, HUECU launched

the balanCE Financial Fitness Program. Through balanCE, members can take advantage

of free one-on-one financial counseling and a wealth of online resources covering a broad

range of financial topics.

rECorD MorTgagE bUSinESS

This past year, the Credit Union lent over $130 million in home loans, more than any

previous year. as rates remained at historic lows, homeowners everywhere sought

to refinance their loans. Many others saw the favorable rate environment as a perfect

opportunity to become first-time home buyers.

nEW CHECking aCCoUnTS

HUECU designed and launched a new line of checking accounts in 2012. Developed

in response to feedback from our members, our Crimson Checking accounts give

unprecedented access to Free aTM transactions nationwide. The new accounts also

feature valuable perks like free checks, discounted rates on auto loans, cash credits toward credit cards

and mortgages, bonus rates on deposit accounts, and more.

aTM nETWork UPgraDES

HUECU’s aTM network underwent a system-wide upgrade in 2012. older machines were

replaced with new state-of-the-art units that leverage the latest technology to provide

members with higher levels of convenience and security. The rollout also included installation

of a new aTM in the Science Center, located just north of Harvard Yard.

HarvarD alUMni CarD

in September, HUECU introduced the new Harvard alumni Card in partnership with the

Harvard alumni association. The Harvard alumni Card features a robust rewards program

and is available to all Harvard alumni, faculty, and staff.

Crimson Checking...

Harvard Square 16 Dunster Street

Cambridge, MA 02138

Massachusetts General Hospital Bulfinch Building

55 Fruit Street Boston, MA 02114

Longwood Medical Area Kresge Building

677 Huntington Avenue Boston, MA 02115

Charlestown Navy Yard 149 13th Street

Charlestown, MA 02129

www.huecu.org | 617.495.4460huecu@harvard.edu

twitter.com/myHUECU

facebook.com/myHUECU

#104 Rev. 10/12

ATM Fees 101

ATM Fees vs. Surcharges

When you use an ATM that is not owned by your financial institution, the owner of the ATM will often charge you a “surcharge.” This is the annoying fee (usually $2 - $3) that you are asked to accept on-screen before continuing.

In addition to the surcharge you pay, the ATM owner will also charge your financial institution a fee for use of the machine. To offset a portion of the cost, your institution may charge a foreign ATM fee (usually $1 - $2).

Going “Fee-Free” with Crimson Checking

What makes HUECU’s Crimson Checking Accounts so exceptional, is that you can avoid paying ATM surcharges and ATM fees altogether. With each Crimson account, HUECU will waive a number of foreign ATM fees each month. Better yet, some or all of the surcharges that you accepted and paid at other bank’s ATMs will be returned to your Checking account in one lump sum at the end of the month.*

ATM Introducing*

*The number of ATM fee waivers and refunds differs by account. For more detailed information, refer to table on reverse side.

2 0 1 2 H i g H l i g H t s

as many financial institutions continued to struggle in a sluggish economy, the credit union

industry flourished in 2012. at year end, U.S. credit unions held just over $1 trillion in assets,

up 6.2% from the previous year. The number of credit union members nationwide also rose

significantly, surpassing 93 million. These ongoing trends are indicative of a widespread

movement toward more consumer-friendly, dependable community institutions.

The economic recession set off by the 2008 sub-prime mortgage implosion has been called

the worst financial crisis in our country since the great Depression. i am exceptionally proud

of the Harvard University Employees Credit Union’s success during these challenging times.

While other institutions were content to weather the storm, HUECU embraced this as an

opportunity to grow and prosper.

m e s s a g e f r o m t H e C H a i r m a n o f t H e B o a r d

g e o r g e w H i t e

“i aM ExCEPTionallY ProUD oF THE HarvarD UnivErSiTY

EMPloYEES CrEDiT Union’S SUCCESS DUring THESE

CHallEnging TiMES. WHilE oTHEr inSTiTUTionS WErE

ConTEnT To WEaTHEr THE STorM, HUECU EMbraCED

THiS aS an oPPorTUniTY To groW anD ProSPEr.”

The dissatisfaction with big banks that emphasize profits over people has led more consumers

to seek out a safer, more trustworthy alternative. in this changing landscape, our not-for-profit,

cooperative business model resonates like never before, and our commitment to putting

people’s needs first, which has been at the core of our philosophy for over three generations,

is being celebrated by Credit Union members new and old.

our national economy is gradually mending from the crisis. The housing market began to right

itself in 2012, as indicated by rising prices, a surge in new construction, and a five-year low in

foreclosure filings. in addition, this year’s record low interest rates ignited a flurry of mortgage

refinance activity. The Credit Union responded to the immense volume by creating several

new jobs in our mortgage division. This expansion has increased our capacity to serve current

members and positioned us well for future growth.

This past year also marked a significant milestone for HUECU, surpassing $400 million in total

assets. This is a testament to you, our members, who continue to entrust us with your finances.

We continue to dedicate ourselves to enhancing our members’ lives through the products and

services we offer, as well as ensuring we have the best delivery channels that suit your needs.

it is a truly rewarding experience to be associated with this organization. i would like to

recognize and applaud the board, management team, staff, and members for everything

you do in support of our mission. Together you epitomize what is meant by “The Credit

Union Difference.”

gEorgE WHiTE

Chairman of the Board

While the national economy showed only gradual improvement in 2012, i am pleased to report

that our Credit Union had one of its most successful years on record with continued growth in

assets and profitability.

Total assets surpassed $400 million for the first time, driven by strong loan originations of over $175

million and deposit growth of more than 10%. Membership increased by over 9%, more than four

times the national average, as our reputation for value and integrity continued to grow within the

communities we serve.

low-interest rates persisted throughout 2012, fueling extraordinary home loan volume. The

substantial demand created many challenges, but thanks to our staff’s hard work and unwavering

commitment to service, we were able to provide home loans to more members than ever before.

our exceptional financial performance has allowed us to return additional value to our members

in the form of enhanced services. in 2012, we launched a new line of checking accounts featuring

a generous aTM surcharge refund program. Developed as a direct response to feedback from our

members, this program provides unprecedented access to free aTM transactions nationwide.

m e s s a g e f r o m t H e p r e s i d e n t & C e o

e U g e n e j . f o l e y

“i aM PlEaSED To rEPorT THaT oUr CrEDiT Union HaD

onE oF iTS MoST SUCCESSFUl YEarS on rECorD WiTH

ConTinUED groWTH in aSSETS anD ProFiTabiliTY.

The Credit Union also made significant investments in our member-facing technology. We launched

a web-based mobile banking platform, the first of several mobile technologies that HUECU will be

rolling out over the next year. We also conducted a systematic upgrade of our aTM network, replacing

older machines with state-of-the-art units and adding a key aTM location in the Harvard Science Center.

HUECU strives to provide unique solutions for the needs of our diverse membership organizations.

This was demonstrated in 2012 with the introduction of the Harvard alumni Card, an affinity credit

card program developed by the Harvard alumni association (Haa) in partnership with HUECU. as a

result of this collaborative effort, Haa is able to better serve the needs of alumni around the world

while keeping their financial relationships within the Harvard community.

Promoting financial literacy within our member communities has been a long-standing priority.

in 2012, we significantly expanded our capabilities in this area with the balanCE™ Financial

Fitness Program. Free to all HUECU members, this new service offers one-on-one budget and debt

counseling, and a wealth of online tools and resources.

growth and prosperity allow the Credit Union to invest in better technology and broader service

offerings. However, it is our commitment to the Credit Union’s core values of honesty, integrity,

and personal service that ensures our enduring success. Doing what is in our members’ best interest

remains a guiding principle in all that we do, and we will continue to listen and respond to their

changing needs.

i would like to thank our volunteer board, dedicated staff, and most especially our loyal members for

helping our Credit Union to thrive in difficult economic times. The cooperative spirit is alive and well

at HUECU and we look forward to making a positive difference in our members’ lives for many years

to come.

EUgEnE J. FolEY

President & CEO

The audit Committee is comprised of five Directors dedicated to ensuring that the Credit

Union’s actions are held to the highest standards of integrity and value. Throughout 2012,

this team met monthly to review compliance programs and examine the financial records

of the Credit Union.

Expenses related to Directors in 2012 totaled $66,333. Expenses related to the Credit

Committee totaled $1,386. Expenses related to the audit Committee totaled $100. all

Director expenses and reimbursements were made in compliance with the regulations

of 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

William Murphy, Chair • guillermo banchiere Ed Emde • Edward Feldman • Stephen king

aUd i t Committee report

m e s s a g e f r o m t H e t r e a s U r e r

j o H n H . l i C H t e n

Despite economic conditions that remain challenging, the Credit Union maintained healthy

profitability and steady asset growth. Year-end assets were up nearly 8% at $415 million.

Positive growth was realized in membership, loans and deposits. loan quality remains extremely

high even through these economic times.

as reflected in the unaudited 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

5-Year Deposit growth 5-Year loan growth

MIL

LIO

NS

$350

$400

$300

$250

$200

$150

$100

$50

2012

MIL

LIO

NS

20122008 2009 2010 20112008 2009 2010 2011

$300

$250

$200

$150

$100

$50

aSSETS

Cash and cash equivalents investments available-for-sale, at fair cost 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

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’ EquityTotal liabilities and Members’ Equity

inTErEST inCoME

interest on loans to membersinterest on investments and cash equivalents

inTErEST ExPEnSE

Dividends on members’ sharesinterest 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 feesCredit card interchange incomeloan servicing fee incomegain/loss on investments

ToTal inCoME bEForE ExPEnSES

gEnEral anD aDMiniSTraTivE ExPEnSES

Salaries and benefitsoperationsnat’l Credit Union Share insurance Fund assessments, netoccupancy

nET inCoME

2012

34,696,600

66,345,941 13,452,678

291,080,496 1,885,894 2,787,797 3,481,117 1,296,951

415,027,474

2012

14,057,113 1,120,142

15,177,255

2,450,865 406,240

2,857,105

12,944,337

1,088,000

11,856,337

2,118,678 444,767

1,981,615 6,612

4,551,672

16,408,009

6,461,390 5,493,374

330,706 1,561,472

13,846,942

2,561,067

372,084,260 1,445,942 5,911,774

379,441,976

0

34,616,132969,366

35,585,498415,027,474

338,453,833 10,612,790

2,767,623

351,834,246

0

32,055,065788,043

32,843,108384,677,354

2011

58,202,755

57,288,818 9,860,071

250,577,138 1,720,457 2,800,139 3,099,716 1,128,260

384,677,354

2011

13,954,928 876,859

14,831,787

3,234,776 488,995

3,723,771

11,974,682

864,443

11,110,239

1,900,192 458,255

1,111,067 51,764

3,521,278

14,631,517

5,921,853 4,440,422

774,929 1,454,260

11,667,909

2,040,053

StatementS of financial condition

StatementS of income

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

Balance, December 31, 2011 net income net change in unrealized gains (losses) on available-for-sale investments

Balance, December 31, 2012

oPEraTing aCTiviTiES

net incomeadjustments to reconcile net income to net cash provided by operating activities: • amortization (accretion) of investments, net • gain on sale of available-for-sale investments • 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

Purchases of available-for-sale investmentsProceeds from maturities of available-for-sale investmentsProceeds from sales of available-for-sale investmentsnet change in other investmentsnet change in loans to membersincrease in the national Credit Union Share insurance Fund depositPurchases of property and equipment

net cash used in investing activities

FinanCing aCTiviTiES

repayment of borrowed fundsnet change in members’ shares

net cash provided by financing activities

inCrEaSE (DECrEaSE) in CaSH anD CaSH EQUivalEnTS

CaSH anD CaSH EQUivalEnTS aT THE bEginning oF THE YEar

CaSH anD CaSH EQUivalEnTS aT THE EnD oF THE YEar

SUPPlEMEnTal CaSH FloW inForMaTion

Dividends paid on members’ shares and interest paid on borrowed funds

regular reserve

3,811,094

3,811,094

3,811,094

Unappropriated

26,203,918 2,040,053

28,243,971 2,561,067

30,805,038

Total

30,015,012 2,040,053

32,055,065 2,561,067

34,616,132

accumulated other Comprehensive income (loss)

2012

2,561,067

594,281 (6,612)

1,088,000 643,159

(165,437) (168,691)

3,144,151

7,689,918

(30,243,146) 18,756,612

2,023,065 (3,592,607)

(41,591,358)(381,401) (630,817)

(55,659,652)

(9,166,848) 33,630,427

24,463,579

(23,506,155)

58,202,755

34,696,600

2,261,484

StatementS of memberS’ equity

StatementS of caSh flowS: yearS ended december 31, 2012 & 2011

112,489 0

675,554

788,043 0

181,323

969,366

2011

2,040,053

607,888 (51,764) 864,443 474,772

(6,872)

(185,507) 967,371

4,710,384

(44,328,908) 22,308,965

606,807 (2,558,448)

640,915 (277,750) (895,184)

(24,503,603)

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

31,222,892

11,429,673

46,773,082

58,202,755

2,865,617

Eugene J. FoleyPresident & CEo

Craig leonard Executive vP, CFo

Cheryl gorman Executive vP, retail Services

guillermobanchiereSince 2007

karen DeberioSince 2003

JosephDeCristoforoClerk, Since 1995

Edward DoctoroffSince 1979

Thomas luceySince 2006

Jeremiah MurphySince 2003

William MurphySince 2010

Chris SchumannSince 2006

o f f i C e r s

B o a r d o f d i r e C t o r s

John Degnan vP, operations

Tom Montilli vP, Marketing

Edward EmdeSince 1993

Edward FeldmanSince 1984

John lichtenTreasurerSince 1992

Mary StraubSince 2004

Marie Trottiervice ChairSince 1991

george WhiteChairmanSince 1999

Stephen kingSince 2011

Peter buchanan vP, lending

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.

o U r s p o n s o r s

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 THESE

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

Main Office - caMbridge

16 Dunster StreetCambridge, Ma 02138

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

Massachusetts general hOspitalbulfinch building

55 Fruit Streetboston, Ma 02114

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

lOngwOOd Medical areaKresge building

677 Huntington avenueboston, Ma 02115

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

charlestOwn navy yard

149 13th Street Charlestown, Ma 02129

Phone: (617) 643-9655Fax: (617) 724-9979