Harvard University Employees Credit Union

What can we do for you?

ANNUAL

2009REPORT

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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In accordance with our organizational vision, HUECU continued to promote our core values through our 2009 initiatives.

Financial LiteracyEmpowering members by providing the knowledge and resources they need to achieve financial success. Financial Workshops: Conducted over 30 financial workshops on a variety of topics including: - Buying Your First Home - Creating a Budget Blueprint - IRA and Retirement Strategies featuring Jonathan Pond - Developing and maintaining healthy credit Live Web-Chats: Conducted several live online chats via the Harvard University Employee intranet where

the Credit Union’s CEO answered questions and addressed financial concerns of Harvard employees.

Housing IssuesSupporting organizations that provide assistance to homeless and impoverished Massachusetts residents. Toys for Tots: Collected over 250 toys for children of families in need. Christmas in the City: Teamed up with Phillips Brooks House to provide gifts to children in

homeless shelters. CU Community Hope Initiative: Raised money for the Massachusetts Coalition for the homeless through in-branch donation bins and the annual Hebert Candy Bar sale. Book Drive: Participated in 9th Annual Massachusetts Credit Union Children’s Book Drive, collecting hundreds of books and for children in area shelters.

Green InitiativesPromoting eco-consciousness and sustainable business practices among our staff, members, and affiliates. Enhanced Recycling: Introduced single-stream recycling in our Administrative Offices Electronic Communication: Implemented a new email communication tool to reach out to members in a more sustainable way Digital Manuals: Developed an Online Product Manual System to allow all policies, procedures, and product information to be updated in real time and eliminate the need for paper-intensive printed manuals. Eco-Friendly Supplies: Replaced many internal supplies with more sustainable substitutes.

Community InvolvementStrengthening our relationship with our sponsor organizations through volunteer efforts and financial support. MGH Fund: Made a $100,000 donation to the MGH Fund, which provides unrestricted support for key areas of the MGH mission, including patient care, research, and education. WGBH: Credit Union employees volunteered to answer phones at the WGBH annual pledge drive for the 14th consecutive year. Harvard Athletics: Renewed our annual commitment as a corporate sponsor of Harvard University Athletics.

Values Report VALUESPUTTiNg

iN ACTiON

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In June of this past year, the Harvard University Credit Union celebrated the 70th anniversary of our inception. 2009 also marked the 100 years since the first credit union was established in the U.S. Though both of these milestones are a testament to the continued strength of the credit union movement, they come during a period of extraordinary transformation in the financial services industry.

The ongoing economic recession in the United States has been called the nation’s worst financial crisis since the Great Depression. Consumer spending has plummeted and the unemployment rates remain high. Costly government bailouts seem to have staved off a disaster of 1930's era proportions, but economic recovery will be a laborious process.

Though many institutions have struggled to survive in this trying climate, our Credit Union has flourished. 2009 marked our second consecutive year of double-digit asset growth. HUECU’s continued success emphatically demonstrates the power of our cooperative structure. This simple and effective model, along with our diligent fiscal responsibility, have helped protect the Credit Union from the dangers that have caused over 100 bank failures in the past year. Members continue to choose the Credit Union as a safe haven for their deposits and we in turn continue to extend credit to people under served by other institutions.

The credit union industry as a whole, however, has not been immune to economic hardship. Fallout from the sub-prime mortgage crisis has severely weakened many credit unions, especially in western states, as their home foreclosures reach record levels. Making matters worse, the Corporate Credit Union system, which has traditionally provided deposit and investment services to the nation’s natural person credit unions, lost billions in mortgage-backed securities. To prevent a complete collapse, the National Credit Union Association, called upon all credit unions to provide emergency funding. These stabilization payments, based on a percentage of each institution’s assets, caused a substantial reduc-tion in HUECU’s 2009 net income. We are anticipating a similar result from additional payments required in 2010.

Throughout the challenges of the past few years, I have been exceptionally proud of how our Credit Union has performed. Our strong leadership, dedicated staff, and loyal members epitomize what is meant by “The Credit Union Difference.” I am confident that in 2010 HUECU will continue on a course of stable growth, financial soundness, and a sustained commitment to putting members first in all that we do.

George White

Chairman of the Board

Message from the Chairman of the Board WHiTEgEORgE

" Throughout the challenges of the past few years, i have been exceptionally proud of how our Credit Union has performed."

Despite a struggling U.S. economy and continuing trouble for the nation’s largest finan-cial institutions, I am pleased to report that our Credit Union experienced extraordinary growth again in 2009 and is now one of the fastest growing U.S. credit unions.

Deposits grew by nearly thirty percent as members have come to view the Credit Union as a safe haven for their funds. With fully insured deposits, a very strong capital position and an aversion to excessive risk, our Credit Union is positioned to leverage and honor the trust our members have placed in us.

We have also seen double digit loan growth as members take advantage of historically low mortgage rates. With a declining housing market and the subsequent collapse of the credit markets, the advantage of Credit Union membership became even greater, while most commercial providers were unable or unwilling to lend.

The Credit Union offered student loans for the first time in 2009, when the national capital markets imploded and left students without a resource for educational funding. Initially, our private student program is geared toward the Harvard graduate students, with the hope that in the future we will extend this program to any students in our membership.

The most compelling evidence of our ability for long lasting, sustainable growth is the deepening relationships with current members. We now enjoy some of the highest levels for services and balances per member in the industry. In addition, we saw a six percent increase in total membership last year, nearly three times the national average.

At a time when consumers often feel that the large commercial providers have failed them, the Credit Union has emerged as a national industry leader. While our ongoing commitment to innovation and service has been instru-mental in our success, it is our core mission of “people helping people” that provides our strong foundation.

I would like to recognize and applaud our volunteer Board, our hard working staff and most especially our dedicated members for this shining example of help and cooperation in these difficult times. My hope is that you feel truly good about your relationship with the Credit Union, and that we are making a positive difference in your life.

Eugene J. Foley

President & CEO

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Message from the President & CEO FOLEYEUgENE

" At a time when consumers often feel that the large commercial providers have failed them, the Credit Union has emerged as a national industry leader."

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In 2009, the Credit Union continued to grow in assets and liquidity despite

the ongoing economic recession. Growth in membership, loans and

deposits were well above projections in the business plan, and year-end

assets were up by more than 22% at $325 million.

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

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

2005 2006 2007 2008 2009

MIL

LIO

NS

$100

$125

$150

$175

$200

$225

$250

5 YEAR LOAN GRAPH

2005 2006 2007 2008 2009

MIL

LIO

NS

$175

$225

$200

$125

$100

$150

$250

$275

$300

5 YEAR DEPOSIT GRAPH

Deposits grew by 28% in 2009 continuing the trend of consistent growth.

Treasurer's Report LiCHTENJOHN H.

" 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.

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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 2009, this team met monthly to review compliance

programs and examine the financial records of the Credit Union.

Expenses related to Directors in 2009 totaled thirty-six thousand, three hundred, and sixteen dollars. Expenses

related to the Credit Committee totaled one thousand, six hundred, and thirty-six dollars. Expenses related to the

Audit Committee totaled one hundred and seventy-six 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 Committee ReportCOmmiTTEEAUdiT

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ASSETS 2009 2008

Cash and cash equivalents $56,633,062 $35,980,663Investments Available-for-sale 18,513,396 0 Held-to-maturity 5,046,441 5,099,642 Other 15,334,499 23,284,200Loans to members, net 223,341,965 196,137,887Accrued interest receivable 896,425 780,991Property and equipment, net 2,158,803 2,456,588National Credit Union Share Insurance Fund deposit 2,486,086 1,900,781Other assets 558,922 380,564

$324,969,599 $266,021,316

LIABILITIES AND MEMBERS’ EQUITY

Liabilities Members’ shares $280,170,895 $219,025,557 Borrowed funds 14,667,218 17,539,660 Accrued expenses and other liabilities 1,300,589 1,473,893 Total liabilities 296,138,702 238,039,110

Commitments and contingent liabilities 0 0 Members’ Equity Retained earnings, substantially restricted 28,773,003 27,982,206 Accumulated other comprehensive income 57,894 0 Total members’ equity 28,830,897 27,982,206

Total liabilities and members’ equity $324,969,599 $266,021,316

INTEREST INCOME 2009 2008

Interest on loans to members $12,170,373 $11,625,116Interest on investments and cash equivalents 827,427 1,384,187 12,997,800 13,009,303

INTEREST EXPENSEDividends on members’ shares 3,675,011 4,002,794Interest of borrowed funds 690,316 609,107 4,365,327 4,611,901 NET INTEREST INCOME 8,632,473 8,397,402

PROVISION FOR LOAN LOSSES 612,079 707,872

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 8,020,394 7,689,530

NON-INTEREST INCOME Service charges and other fees 1,374,311 1,173,724 Recapitalization gain on National Credit Union Share Insurance Fund deposit 1,404,110 0Credit card interchange income 368,568 336,364 Loan servicing fee income 1,149,493 304,900 4,296,482 1,814,988 12,316,876 9,504,518

GENERAL AND ADMINISTRATIVE EXPENSESSalaries and benefits 4,841,244 4,397,932Operations 3,856,521 3,192,871National Credit Union Share Insurance Fund deposit impairment 1,404,110 0National Credit Union Share Insurance Fund premium assessment, net 372,913 0Occupancy 1,051,291 941,755

11,526,079 8,532,558 NET INCOME $790,797 $971,960

Statements of Financial Condition FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

Statements of Income FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

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Statements of Members' Equity FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

Regular Reserve Unappropriated Total

Balance, December 31, 2007 $3,811,094 $23,199,152 $27,010,246 0Net Income 0 971,960 971,960 0Net change in unrealized gains (losses) 0 0 0 0 on available-for-sale investments

Balance, December 31, 2008 3,811,094 24,171,112 27,982,206 0Net Income 0 790,797 790,797 0Net change in unrealized gains (losses) 0 0 0 57,894 on available-for-sale investments Balance, December 31, 2009 $3,811,094 $24,961,909 $28,773,003 $ 57,894

OPERATING ACTIVITIES 2009 2008

Net income $790,797 $971,960Adjustments to reconcile net income to net cash provided by operating activities: Amortization (accretion) of investments, net 80,831 (33,453) Impairment loss on National Credit Union Share Insurance Fund deposit 1,404,110 0 Recapitalization gain on National Credit Union Share Insurance Fund deposit (1,404,110) 0 Provision for loan losses 612,079 707,872 Depreciation and amortization 443,072 382,857 Net changes in operating assets and liabilities: Accrued interest receivable (115,434) 128,550 Other assets (178,358) (30,244) Accrued expenses and other liabilities (173,304) 266,380

Net cash provided by operating activities 1,459,683 2,393,922

INVESTING ACTIVITIES Purchases of available-for-sale investments (18,483,132) 0 Purchases of held-to-maturity investments 0 (5,104,260) Proceeds from maturities of held-to-maturity investments 0 11,000,000 Net change in other investments 7,949,701 (7,400,900) Net change in loans to members (27,816,157)) (20,939,220) Increase in the National Credit Union Share Insurance Fund deposit (585,305) (165,157) Purchases of property and equipment (145,287) (1,285,065) Net cash used in investing activities (39,080,180) (23,894,602)

FINANCING ACTIVITIESProceeds from borrowed funds 0 10,000,000 Repayment of borrowed funds (2,872,442) (1,558,553) Net change in members’ shares 61,145,338 29,796,159

Net cash provided by financing activities 58,272,896 38,237,606

INCREASE IN CASH AND CASH EQUIVALENTS 20,652,399 16,736,926 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 35,980,663 19,243,737

CASH AND CASH EQUIVALENTS AT END OF YEAR 56,633,062 35,980,663

SUPPLEMENTAL CASH FLOW INFORMATIONDividends paid on members’ shares and interest paid on borrowed funds $4,281,505 $4,575,282

Statements of Cash Flows FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

RETAINED EARNINGS

Accumulated Other Comprehensive Income (Loss)

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Eugene J. Foley:President and CEO

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

Cheryl Gorman:Senior VP, Retail Services

Tom Montilli Vice President, Marketing

Officers

Board 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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Board of Directors

Our Sponsor Organizations YOUTHANK

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

Daycares operating on Harvard property

Dumbarton Oaks Research Library

Episcopal Divinity School

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 - 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

www.huecu.org | 617.495.4460

Federally Insured by NCUA

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