MSIC 2022 Annual Report

ANNUAL REPORT 2022

CHANGE

Embracing

EMBRACING CHA A EMBRACING CHANGE

EMBRACING CHANGE IS NOT NEARLY ENOUGH. It is true that the only constant is constant change and, like all financial institutions, our credit union movement is experiencing revolutionary change. Over the past two decades, the ever-emerging digital world continues to change all aspects of our lives and our professional activities. Financial service providers are going through radical transformation in technology and consumer behavior and, like all revolutionary change, we cannot foresee how it will unfold. What we do know, however, is that technological and information system changes have already radically altered consumer behavior: consumer buying processes, their attention to traditional marketing (or lack thereof), and the younger generation’s conception of value is totally different from a mere ten years ago. WHAT DOES THIS MEAN FOR THE MSIC COOPERATIVE AND OUR 73 CREDIT UNION MEMBERS? First, our research shows that far too many of our member credit unions still have a “walk-in” products operation; meaning: consumer members “walk-in” to a branch office, and the credit union provides loan and deposit services. Second, as a corollary to the “walk- in” operations culture, most credit unions nationwide still do not have an adequate sales culture; meaning: they operate as order takers, not as sales initiators. Third, while younger consumers like our cooperative model and the good works we do in our communities, we remain terrible at successfully broadcasting our

advantages; meaning: most young consumers still do not understand our movement, recognize that they can join as members, or know nothing of our business model advantages. Filene Research Institute has demonstrated that most consumers – young and old – still think credit unions are affiliated with labor unions and that membership is not open, unless you belong to a traditional union. At the same time, we are facing increasing competition from banks and other non-bank financial service providers. We are all seeing increasing numbers of fintech players offering all types of consumer banking services, without costly branch operations. When we look at the financial metrics today, our Cooperative looks very strong. As of September 30, 2022 our members enjoy average capital of 11%. We have had years of solid asset growth and a dramatic increase in excess insured shares and deposits. Total assets at September 30, 2022 were $31.50 billion, up 3.07% from a year earlier. Membership is also up overall. But if we look at a long-term horizon, the warning signs are flashing. Our Cooperative’s membership growth rate is significantly lower than the national average. Our membership base is aging rapidly, as are our executive

leadership and board members. WHAT SHOULD WE DO?

We need to break the mold and start anew! The answers are easy to list, but very hard to execute - but it is necessary, and time is not on our side.

A ANGE

and your charitable activities. Advertise and use the benefit of full deposit insurance – this emphasizes to new members that their interests come first. Help them become and feel a part of the movement! SIXTH : Recognize that you cannot do this alone. We must collaborate to spread costs across a larger economic footprint. Even the largest credit unions will have difficulty with the necessary changes. If you think you can do this alone, you are wrong, and your credit union will suffer the consequences. SEVENTH: You and your board must realize that your digital branch is the most important branch office you have. It is there that the consumer battle for wallet share will be decided. This concept needs more than just recognition – most of your branch budgetary dollars must be committed to developing and operating this digital platform successfully. Your “brick and mortar” branches are important for consumers’ sense of your legitimacy, but foot traffic in those branches will continue to decline dramatically. There is no going back on this trend. EIGHTH: As you go through this difficult process, you, as the CEO, need to objectively evaluate the competence of your operation and assess how you are doing in the eyes of your members. Customer service is something we pride ourselves in, but far too often our customer engagement is woefully lacking and we are falling behind the competition. These are not “nice to have” suggestions: These are the keys to the long-term survival of your institution! We are not here to tell you what you want to hear. We are here to help you thrive as a financial services leader, and thereby, your credit union will succeed. As a member of MSIC, your credit union is a member of a true cooperative – the first in the nation deposit insurer for credit unions – and an organization totally committed to your success. We are here to help, but you have to decide that you want this help in the first place. The winners over the next ten years (and beyond) will heed this advice and follow these steps. The future of our important credit union movement lies in your hands.

FIRST: We need to learn to be much better competitors! This will require a survey of our products and an expansive operational change to create a genuine sales culture in our credit unions. Don’t fool yourself – culture change

is very hard. SECOND :

We need to attract new, younger members. What do they need? Loans. Once we have updated our lending products and procedures, we then need to sell to these younger consumers and welcome them into the fold as members. THIRD: We need to advertise our unique business model in a new way. We need to use peer-to-peer marketing, digital formats and social media to get the word out about the value of credit union membership. We need to commit time, resources and technical competence to effectively tell our story. FOURTH: We need to connect our customer service operations to our lending activities. Just because a young consumer gets a loan from us does not mean they become members for life. Long-term membership requires attention and coordination to secure and retain an increasing slice of their consumer financial needs. FIFTH: Let your members know that they matter to you. Demonstrate your good works in your community

2022 ANNUAL REPORT

TABLE OF CONT TABLE OF CONTENTS

ENTS

6 8 6 8

Vision & Values

Leadership Letter

10 12 18 20 22 38 40 47 78 47 78 10 12 18 20 22 38 40

MSIC Cooperative Community

MSIC Insurance Fund Financial Report

MSIC Liquidity Reserve Fund

MSIC Properties

MSIC Highlights & Updates

MSIC Directors & Staff

MSIC Members

MSIC Audited Financial Statements

MSIC Mission

MSIC 2022 Annual Report/Issued January 26, 2023/Copyright © 2023 by MSIC/All Rights Reserved. Massachusetts Credit Union Share Insurance Corporation/233 Needham Street/Suite 510/Newton, MA 02464/800.622.4015/617.758.0540/ https://msic.website

VISION & VALUE VISION & VALUES

VISION MSIC is a recognized leader in providing excess deposit insurance, promoting sound public policies, addressing risks in the financial system, advocating for adequate consumer protection, and carrying out its notification and certification management responsibilities.

VALUES MSIC, its Directors and its employees have a tradition of distinguished service to Massachusetts and the credit union movement. Six core values guide us in accomplishing our mission :

INTEGRITY We adhere to the highest ethical and professional standards.

COMPETENCE We are a highly skilled, dedicated and diverse workforce that is empowered to achieve outstanding results.

TEAMWORK We communicate and collaborate effectively with one another, our members, the industry and regulatory agencies.

EFFECTIVENESS We respond quickly and successfully to operational requirements and the needs of our members.

ACCOUNTABILITY We are accountable to each other and to our stakeholders to operate in a financially responsible and operationally effective manner.

FAIRNESS We respect individual viewpoints and treat one another and our stakeholders with respect, impartiality, dignity and trust.

Massachusetts Credit Union Share Insurance Corporation (MSIC) was chartered by a special Act of the Massachusetts Legislature in 1961. Formed as a primary insurer, MSIC was the first insurance company in the nation to provide deposit insurance protection to the members of credit unions. It is operated by a Board of Directors elected by and from the member credit unions it insures. Today, MSIC provides excess deposit insurance to its member credit unions. MSIC member credit unions thereby provide full deposit insurance to their members. In addition to providing excess deposit insurance, the Corporation makes available a number of important services to strengthen its member credit unions and the industry. Throughout its history, MSIC has played a critical role in ensuring the stability of the credit union industry in Massachusetts. Over the years, the Corporation has wound up the affairs of liquidating credit unions (both voluntary and involuntary), temporarily managed and rehabilitated credit unions still independent today,

assisted in the merger of failing credit unions into healthy ones, and provided capital assistance to several healthy but capital deficient credit unions, which allowed them to remain independent and obtain federal primary deposit insurance. No member of a credit union insured by MSIC has ever lost any of their savings or been denied access to their funds.

THROUGHOUT ITS HISTORY,

MSIC HAS PLAYED A CRITICAL ROLE IN ENSURING THE STABILITY OF THE CREDIT UNION INDUSTRY IN MASSACHUSETTS.

2022 ANNUAL REPORT

LEADERSHIP LET LEADERSHIP LETTER

MICHAEL C. HANSON President & CEO

MICHAEL E. MURPHY Chairman of the Board

JANUARY 26, 2023

TO ALL OUR STAKEHOLDERS AND FRIENDS: Fiscal Year 2022 was another remarkable year for the MSIC Cooperative. MSIC’s Insurance Fund experienced exceptional growth in excess shares and deposits reported at June 30, 2022, up 17.49% to $2.5 billion, this is in addition to growth of 28.18% and 25.67% in the prior two years. Because of its consistent level, this growth reflects more than just consumer flight to safety in the face of the global COVID-19 Pandemic. We now believe this also reflects the growth of member business lending and other business activities, such as acceptance of out-of-state municipal deposits, cannabis-related business, and the active recruitment of large depositors as part of a broader business strategy.

Even in the face of this long-term dramatic rise in excess shares and deposits, MSIC and its Cooperative performed very well in Fiscal Year 2022. MSIC itself remained operationally profitable, even while experiencing headwinds from continuing fallout from the COVID-19 Pandemic, and now with the dramatic rise in interest rates and the looming possibility of a national recession in 2023. MSIC continues to broaden its business activities and is committed to regaining momentum in furtherance of collaboration with and between our credit union members. The past three years had seen an isolation of our membership and a slippage in the efforts to encourage cooperation and collaboration. The long-term effects of the necessary isolation we all experienced in our efforts to continue serving our consumer members through the global healthcare crisis will be felt for years to come. Additionally, many of our member credit unions welcomed new leadership as retirements soared throughout and following the worst part of the Pandemic. Ageing leadership was well predicted for a number of years, but the stress of the Pandemic advanced the projected retirement pace. We urge our new credit union leaders to take advantage of MSIC’s many services and become active members of our unique Cooperative.

WE URGE OUR NEW CREDIT UNION LEADERS TO TAKE ADVANTAGE OF MSIC’S MANY SERVICES AND BECOME ACTIVE MEMBERS OF OUR UNIQUE COOPERATIVE.

Now is the time to recover our Cooperative identity and resume all our efforts to prepare for the challenges ahead. As you have heard us say many times before: collaboration is the only way our Cooperative and the

TTER

entire credit union movement can weather the dramatic challenges ahead. Advancing technologies, ever- changing consumer behavior, different purchasing pathways and further digital developments will all present community financial institutions with a wave of new and difficult challenges. Some of those challenges may be detrimental to our movement, if we fail to adjust adequately. We firmly believe no single institution is large enough to handle the future years alone. We can only thrive if we, together, collaborate, share costs, and improve performance as a Cooperative. In addition, we are now experiencing our first significantly rising interest rate environment after a 20-year period of consistently declining rates. An entire generation of credit union leadership has never experienced the unique challenges of a rapidly rising rate environment, as well as a new higher standard level of rates. After a brief period of earnings improvement due to repricing of investment portfolios, we will see a significant rise in the cost of funds, thereby compressing net interest margins. Asset-liability practices and loan portfolio management over the past five years will be put to the test in 2023 and beyond. MSIC will continue to provide guidance and services designed to help your institution weather the future challenges. All of us need to become better competitors for both market share and consumer members. We have a number of people to thank for our performance in 2022. Our staff performed extremely well throughout, even as we struggled with the challenges of the continuing business effects of the Pandemic and the complications of a hybrid work environment. MSIC’s Board of Directors has worked tirelessly on behalf of the Cooperative and we thank them for their constant support and wise counsel. MSIC’s Advisory Committee has provided insight and guidance that have greatly assisted our continuing development. Finally, the Board of Managers of MSIC Partners, LLC has remained committed to its effort to seek profitability for the CUSO’s important and long-term objectives. Thank you all. To all our members: as we celebrate MSIC’s 61st year as the nation’s first deposit insurer for credit unions, we look forward to working with you to overcome the challenges ahead. We will continue to provide exceptional insurance protection and key services to our member credit unions because we know that our consumer members benefit greatly from our collective efforts. Best wishes for a successful 2023,

Michael E. Murphy, Chairman of the Board

Michael C. Hanson, President & CEO

2022 ANNUAL REPORT

MSIC COOPERAT MSIC COOPERATIVE COMMUNITY

AT-A-GLANCE as of September 30, 2022

Million Members

Billion in Total Assets

Member Credit Unions

$31.5

1.7

MSIC IS A TRUE COOPERATIVE. Founded in 1961, MSIC is the first deposit insurer in the nation for credit union members. Today, it is the fourth largest credit union cooperative in the world. During the fiscal year ended September 30, 2022, MSIC member institutions demonstrated solid growth and remained safe and sound. At that date 69 member institutions remained “well-capitalized” under the NCUA’s Prompt Corrective Action guidelines, while the other four remained “adequately capitalized.” During the year, total shares, excess shares and loans were all higher, while net charge offs and delinquent loan levels remained low. ROAA showed significant improvement as well, especially compared to the national credit union average.

MSIC member credit unions have successfully endured the ill effects of the pandemic and are well positioned for the challenges ahead relating to the potential for a national recession, significantly higher interest rates, and global economic and political instability. Increased interest rates and a significant slowing of the mortgage market over the past few months will pose the biggest challenges for MSIC members in the coming year. Interest rate risk will also likely be elevated as higher rates will dramatically increase the cost of funds. Member institutions will see increased competition for both deposits and loans and they must focus on their competitive capabilities and position in their respective markets in 2023 and beyond.

MSIC AND MEMBER CREDIT UNIONS’ AGGREGATE ASSETS As of September 30 ($ in Billions)

MSIC AND MEMBER CREDIT UNIONS’ AGGREGATE ASSETS YEAR-OVER-YEAR GROWTH RATE Fiscal Years Ended September 30

11.91%

$31.50

$30.50

$28.03

9.09%

$25.04

$23.34

7.18%

6.10%

3.07%

2018

2019

2020

2021

2022

2018

2019

2020

2021

2022

TIVE COMMUNITY

Billion of Excess Shares and Deposits

Regulatory Capital or Approximately $3.5 Billion

Billion of Total Shares and Deposits

11%

$25.8

$2.5

MSIC COMPARATIVE ROAA for Fiscal 2022

MSIC COMPARATIVE NET WORTH RATIOS as of September 30, 2022

11.06%

10.69%

0.62%

9.10%

0.54%

0.53%

MSIC

All MA

Nationwide

MSIC

All MA

Nationwide

MSIC COMPARATIVE DELINQUENCY RATIOS for Fiscal 2022

MSIC COMPARATIVE NET CHARGE-OFF RATIOS for Fiscal 2022

0.30%

0.53%

0.42%

0.35%

0.15%

0.07%

MSIC

All MA

Nationwide

MSIC

All MA

Nationwide

2022 ANNUAL REPORT

MSIC INSURANCE MSIC INSURANCE FUND FINANCIAL REPORT

AS FINANCIAL CONCERNS SURROUNDING THE PANDEMIC SUBSIDED DURING THE YEAR,

GROSS REVENUES Fiscal Year Ending September 30, 2022

MSIC began to unwind its Pandemic Plan. The discontinuance of this plan led to net income of $134,000 for the year ended September 30, 2022 compared to a net loss of $742,000 for the year ended September 30, 2021. The continued surge in insured excess shares resulted in significant member assessment income. However, several items offset this income: 1) the restructuring of the investment portfolio at the onset of the Pandemic to be able to respond to members’ needs and potential pandemic related deposit insurance risk, resulted in a shorter maturity and lower yielding investment portfolio; 2) the real estate investment experienced unfavorable results; 3) the nature of investment in MSIC Partners resulted in a loss of $560,000, as MSIC Partners experienced a delay in marketing caused by the Pandemic, which was followed

0.45%

Membe Other In Mortgag Recover Gain (Lo MSIC Pr Investm Investm

13.88%

14.28%

63.99%

2.85%

4.55%

NET INCOME Fiscal Years Ending September 30 ($ in Thousands) 0.45%

$933

Member Assessments ($5,134,462)

13.88%

Investment Income - Non-Debt Financed ($227,079) Investment Income - Debt Financed ($366,828)

$522

$345

14.28%

Other Income ($36,192) Mortgage Fulfillment Services ($1,113,893) Recoveries of Capital Infusions ($0) Gain (Loss) on Sale of Securities ($0) MSIC Properties ($1,145,663)

$134

2021

63.99%

2019 2.85%

2018

2020

2022

4.55%

-$742

E FUND FINANCI by a significant slowdown in the mortgage market due to interest rate increases and economic concerns; 4) the increase in the general insurance reserve in the amount of $600,000 to cover potential losses or other costs associated with restoring stability to member credit unions that may face financial or operational difficulties resulting from economic unease caused by inflationary concerns and geopolitical conflicts and instability. ASSET DIVERSIFICATION at September 30, 2022

0.99% 1.04%

Gross Revenue for Fiscal Year 2022 remained the same due to the consolidation with MSIC Partners for Fiscal Year 2022. While the surge in excess shares continued, it was at a slower rate which led to a $600,000 decrease in assessment revenue. The investment strategy implemented at the onset of the Pandemic, which gave MSIC the ability to respond quickly to members’ needs for financial assistance during those difficult times, was discontinued during the fiscal year. However, the results of changes in investment strategy are typically not immediate which resulted in investment income decreasing by $300,000. Furthermore, the Gross Rental Income on the real estate investment, which excludes MSIC’s use of space, decreased by $200,000. A significant portion of this decrease resulted from the termination of one large tenant’s lease during the prior fiscal year. Lastly, given MSIC’s ownership percentage in the MSIC Partners, MSIC was required to consolidate 0.99% 1.04%

0.21%

Real Est

Other A FHLBB Cash & Municip Certifica Mortgag FNMA D FHLB D FFCB D US Trea

12.95%

24.26%

3.59%

7.27%

6.42%

14.28%

17.22%

11.77%

0.21%

Real Estate ($27,009,707)

Cash & Cash Equivalents ($14,416,691) Municipal Debt Securities ($231,738) Certificates of Deposit ($4,000,000) Mortgage Backed Securities ($8,091,294) FNMA Debt Securities ($7,151,181) FHLB Debt Securities ($19,178,568) FFCB Debt Securities ($13,108,636) US Treasury Securities ($15,902,283)

6.42% GROSS REVENUE FOR FISCAL YEAR 2022 REMAINED THE SAME DUE TO THE CONSOLIDATION 3.59% 7.27% 12.95%

24.26%

14.28%

17.22% WITH MSIC PARTNERS FOR FISCAL YEAR 2022.

11.77%

Other Assets ($1,156,422) FHLBB Stock ($1,099,700)

2022 ANNUAL REPORT

MSIC INSURANCE MSIC INSURANCE FUND FINANCIAL REPORT

INVESTMENT BALANCE & INVESTMENT YIELD (Includes MSIC Properties, LLC) Fiscal Years Ending September 30 ($ in Millions)

(FHLBB), a $13.7 million net decrease in Liquidity Reserve Fund (LRF) deposits, and the paydown of the $4.5 million borrowing on a line of credit used to temporarily finance the garage improvement project upon completion of the project. The investment balance further decreased due to substantial increases in interest rates during the fiscal year, which resulted in a $5.1 million increase in the unrealized losses on the investment portfolio. Investment yield decreased due to the restructuring of the investment portfolio in Fiscal Year 2020 at a time when interest rates were low. The yield was further impacted by the negative annual return on the real estate investment. Consumers continue to have great trust and confidence in MSIC’s member credit unions, which has led to a continued surge in excess deposits. During Fiscal Year 2022, MSIC experienced its 4th consecutive year of double-digit excess deposit growth. However, as the growth rate dropped from last year’s impressive rate, Assessment Revenue decreased by $600,000 during Fiscal Year 2022.

$150.8

$142.2

$124.8

$150.8

$111.9

$109.8

$142.2

$124.8

$111.9

$109.8

2.75%

2.72%

2.13%

2.75%

2.72%

2.13%

0.53%

-0.05%

2018

2019 2019

2020

2021

2022

2018

2020

2021

2022

Investment Balance Investment Balance

Investment Yield

with MSIC Partners, which brought over mortgage fulfillment revenue of $1.1 million. Liquid assets (cash and cash equivalents, certificates of deposit and investment securities with maturities of one year or less) totaled $32.3 million or 29.05% of total assets at September 30, 2022 compared to $40.3 million or 28.01% of total assets at September 30, 2021. The investment securities maturing in one to five years and in over five years were 40.23% and 8.50% of total assets, respectively. The majority of the investment securities maturing in over five years are federal agency mortgage backed securities. In addition, the investment securities are almost entirely in U.S. Treasury, U.S. government agencies and fully insured certificates of deposit. At September 30, 2022, the weighted average life of the certificates of deposit and investment securities was 26.1 months compared to 32.6 months at September 30, 2021. Investment assets, which include the real estate investment, decreased during the year. This decrease primarily resulted from decreased borrowings of $9 million at the Federal Home Loan Bank of Boston

ASSESSMENT REVENUES Fiscal Years Ending September 30 ($ in Thousands)

$5,751

$5,134

$3,742

$2,430

$1,344

2018

2019

2020

2021

2022

E FUND FINANCI

INSURED EXCESS SHARES Year-Over-Year-Growth Rate

CONSUMERS CONTINUE TO

28.18%

25.67%

HAVE GREAT TRUST AND CONFIDENCE IN MSIC’S MEMBER CREDIT UNIONS, WHICH HAS LED TO A CONTINUED SURGE IN EXCESS DEPOSITS.

17.49%

16.80%

7.58%

June 2018

June 2019

June 2020

June 2021

June 2022

During the early 1990s, Capital Infusions were made to six members, as a condition for these six credit unions obtaining federal primary insurance through the NCUA. By September 30, 2018, all but one of these members repaid the capital infusions they received at that time. Given the uncertainties created by the Pandemic and the resulting economic conditions, repayment was not pursued during the past three fiscal years from the sole member. When appropriate, MSIC will continue to pursue repayment of the member’s outstanding balance of $1.4 million. During the Fiscal Year 2022, Gross Revenues were unchanged, as a result of the consolidation with MSIC Partners. Changes within the revenue categories included a decrease in assessment revenue, significantly lower investment income, lower rental income from the real estate investment, which decreases were offset by a new revenue category, mortgage fulfillment revenue, brought over in the consolidation with MSIC Partners. For the fiscal year ended September 30, 2022 Total Expenses decreased by $0.6 million. This change was caused by several items. The large paydowns of FHLBB

FIVE-YEAR HISTORY OF CAPITAL INFUSION REPAYMENTS Fiscal Years Ending September 30 ($ in Thousands)

$269

$80

2018

2019

2020 2021 2022

2022 ANNUAL REPORT

DESPITE THIS DECREASE, THIS RATIO REMAINS THE STRONGEST COVERAGE RATIO FOR ANY DEPOSIT INSURER IN THE NATION. MSIC INSURANCE MSIC INSURANCE FUND FINANCIAL REPORT advance and LRF deposits led to lower interest expense. MSIC’s salaries and benefits decreased due to having less staff and a decrease in certain benefits. Further, there was a reduction in legal expenses incurred by MSIC in preparing to meet future challenges presented both by the Pandemic and future crises, as significant efforts had been made during the prior fiscal years. During the prior fiscal year, a general insurance reserve of $2 million was established for potential losses or other costs associated with restoring stability to member credit unions that may face financial or operational difficulties. The increase in this reserve was much lower during the current fiscal year. Also, during the prior fiscal year, a reserve was established for MSIC Partners related costs. As MSIC Partners received additional funding during this fiscal year, through both a loan and additional capital contributions, this reserve

RESULTS OF OPERATIONS Fiscal Years Ending September 30 ($ in Thousands)

was no longer deemed necessary. With the pay down of the temporary debt used to finance the garage improvement project, there was a decrease in the interest expense on the borrowings. A couple of larger expense items offset the decreases. The larger offset was related to the consolidation with MSIC Partners, which increased both salaries and benefits and other general and administrative expenses. Depreciation expense related to the garage improvement project increased. In addition, there were two large repairs and maintenance events at the property which led to an increase in the expenses. During the year ended September 30, 2022, insured excess shares increased by $374 million or 17.49%, MSIC’s total assets decreased by $32.7 million, and the Fund Balance decreased by $5.0 million. As a result of the increase in excess shares and the decrease in the Insurance Fund balance, the ratio of the Insurance Fund balance to insured excess shares (coverage ratio) decreased to 2.29% at September 30, 2022. Despite this decrease, this ratio remains the strongest coverage ratio for any deposit insurer in the nation.

$8,027 $8,769

$8,436

$8,027 $8,769

$8,024 $7,890

$8,436

$8,024 $7,890

$7,503

$6,487 $7,009

$7,503

$6,487 $7,009

$5,701 $6,046

$5,830

$5,701 $6,046

$5,830

$5,323

$4,353

$3,675

$3,463

$3,675

$3,463

$2,156

$1,654

$1,392

$1,654

$1,392

-$700

-$1,097

2018

2019

2020 2021

2022

2018

2019

2020 2021

2022

Gross Revenues (Includes Gain/Loss on Sales) Total Expenses* Total Expenses (Excludes Interest and Rental Expenses) Net Investment Income Gross Revenues (Includes Gain/Loss on Sales) Total Expenses* Total Expenses (Excludes Interest and Rental Expenses) Net Investment Income

*Includes loss attributable to non-controlling interest in MSIC Partners, LLC

E FUND FINANCI

TOTAL ASSETS & TOTAL FUND BALANCE As of September 30 ($ in Millions)

$152.9

$143.9

$126.3

$152.9

$113.4

$143.9

$111.3

$126.3

$113.4

$111.3

$63.5

$62.7

$62.5

$58.1

$57.5

$63.5

$62.7

$62.5

$58.1

$57.5

2018

2019

2020

2021

2022

2018

2019

2021

2022

Total Assets Total Assets

Total Fund Balance Total Fund Balance

INSURED EXCESS SHARES Reported as of June 30 ($ in Millions)

FUND BALANCE & INSURED COVERAGE RATIO As of September 30 ($ in Millions) $62.7 $63.5

$62.5

$58.1

$57.5

$63.5

$2,514

$62.7

$62.5

$58.1

$57.5

5.11%

$2,140

4.72%

5.11%

$1,670

4.72%

$1,329

3.80%

$1,137

3.80%

2.92%

2.29%

2018

2019

2020 2020

2021

2022

June 2018

June 2019

June 2020

June 2021

June 2022

2018

2019

2021

2022

Fund Balance Fund Balance

Insured Coverage Ratio Insured Coverage Ratio

2022 ANNUAL REPORT

MSIC LIQUIDITY MSIC LIQUIDITY RESERVE FUND

THE PURPOSE OF THE LIQUIDITY RESERVE FUND (LRF) IS TO TRANSFER EXCESS LIQUIDITY THROUGHOUT THE MSIC COOPERATIVE. This is accomplished by attracting the excess liquidity of member credit unions through offering enhanced yields on their LRF deposits and holding these funds to meet the emergency liquidity needs of other member credit

LIQUIDITY RESERVE FUND BALANCE Fiscal Years Ending September 30 ($ in Millions)

$48.1

$37.5

$34.5

$25.9

$23.8

2018

2019

2020

2021

2022

unions. Currently Massachusetts state-chartered credit unions can participate in product offerings with a maturity of up to three years. Member institutions were financially healthy and did not have liquidity concerns during Fiscal Year 2022, so the need for the increased LRF level continued to decline. This enabled the LRF to decrease from the prior fiscal year by $13.7 million to end the current fiscal year at $23.8 million in deposits. The LRF remains a viable investment opportunity for MSIC members.

RESERVE FUND

2022 ANNUAL REPORT

MSIC PROPERTIE MSIC PROPERTIES MSIC PROPERTIES, LLC, IS A WHOLLY- OWNED SUBSIDIARY OF MSIC AND IT HOLDS A COMMERCIAL REAL ESTATE PROPERTY LOCATED IN NEWTON, MASSACHUSETTS.

for completing improvement projects. In addition, a significant amount of this tenant’s space was leased in September 2022, which helped reduce the vacancy rate to below 17%. As a result of the positive leasing activity, looking forward, the property will have improved financial results. Despite the two consecutive years of losses, the earnings before interest, taxes, depreciation and amortization (EBITDA) remained positive. The favorable EBITDA results have allowed MSIC Properties to weather the financial storm and afforded it the ability to improve the conditions of the property. Several positive factors contribute to the attractiveness of the property to new and existing tenants, which will result in the property returning to profitability. The property is located in an attractive suburban location that is being improved by the Massachusetts Department

This location is home to MSIC’s executive offices, operations and in-person training and educational programs. In addition, an affiliated entity, MSIC Partners, LLC, utilizes the space. During the previous fiscal year, the property was impacted negatively by the loss of a significant tenant who used the Massachusetts Pandemic legislation to benefit itself, which led to the termination of this tenant’s lease. The effects of the tenant’s lease termination continued into the current fiscal year. However, this period of lower occupancy was beneficial

MSIC PROPERTIES, LLC EBITDA RESULTS Fiscal Years Ending September 30 ($ in Thousands)

of Transportation Needham Street/Highland Avenue Improvement Project currently in process. The location will be further improved by the abutting Northland Newton Development Project, which when the project is complete, will include 10 acres of public open space, 800 residential units, office space and retail space. This development project will transform the 30 acre site into a walkable, environmentally sustainable new neighborhood. Of direct benefit to the property is the completion of the garage improvement project during November 2021, at a total cost of $6.6 million. This project is the most recent example of MSIC’s long term strategy to improve the condition of the property to attract and retain tenants and to increase its valuation.

$1,368

$1,153

$1,087

$524

$199

2018

2019

2020

2021

2022

MSIC PROPERTIES, LLC OPERATING RESULTS Fiscal Years Ending September 30 ($ in Thousands)

$865.6

$756.6 $756.6

$645.8 $645.8

4.20%

3.70% 3.70%

3.16%

2021

2022

2021

2022

2020

2018

2019

2020

-0.73%

-$153.3

-2.62%

-$657.1

Net Income MSIC Properties Net Income MSIC Properties

Investment Yield

2022 ANNUAL REPORT

MSIC HIGHLIGHT MSIC HIGHLIGHTS & UPDATES

TS & UPDATES After a two-year effort to keep its staff, Board and members safe in the face of COVID-19 and following the easing of health restrictions, in the Spring of 2022 MSIC moved to a hybrid format for its operations and meetings.

IT WAS WITH GREAT PLEASURE THAT MSIC RETURNED TO AN IN-PERSON FORMAT FOR EVENTS INCLUDING ITS MEMBER SUMMIT, A CHARITY GOLF TOURNAMENT AND ITS ANNUAL MEMBER DINNER.

In addition, after two years of successfully staying digitally connected with credit union members through ongoing webinar presentations, it was with great pleasure that MSIC returned to an in-person format for events including its Member Summit, a charity golf tournament and its Annual Member Dinner.

JANUARY 21, 2022 MSIC’s 60th Annual Meeting

For its second time, MSIC held its 60th Annual Meeting in a virtual format to address the membership. During the event, attended by credit union executives and their senior staff, the membership heard from new MSIC Board Chairman Mike Murphy, regarding the impressive performance of the MSIC Cooperative and on corporate matters including adopting the 2021 Annual Meeting Minutes and to ratify the election of the directors. Remarks were also provided by MSIC President and CEO Mike Hanson about the remarkable perseverance of the MSIC Cooperative during an incredibly challenging time. Mr. Hanson also encouraged members to attend the upcoming MSIC Member Summit and 60th Anniversary celebration in June, 2022 at the Mount Washington Hotel in Bretton Woods, New Hampshire.

2022 ANNUAL REPORT

MSIC HIGHLIGHT MSIC HIGHLIGHTS & UPDATES JUNE 27-29, 2022 Member Summit and 60th Anniversary Celebration

With great excitement MSIC held its Member Summit and 60th Anniversary Celebration in June at the Omni Mount Washington Resort and Hotel in Bretton Woods, New Hampshire. MSIC’s much anticipated first in-person event in over two years was a gathering not only to discuss the issues and opportunities ahead for the credit union movement, but also a time to reconnect with peers in person. For many it was the first MSIC corporate event without a screen or phone as the means of communication. This tremendously successful and enjoyable event attended by almost 90 attendees representing 28 credit union member institutions continues to receive positive feedback and rave reviews. While there was socializing, breaking bread and networking opportunities enjoyed by all over the 3-day, 2-night member event, MSIC also had a robust agenda with first-rate speakers and industry experts to address the large, small and medium sized credit unions from across the Commonwealth on topics relevant to the credit union industry. The agenda included: 1. An update on the COVID-19 Virus and Pandemic from MSIC Board Director and Professor of Pathology at Harvard Medical School/Senior Pathologist at Brigham & Women’s Hospital, Dr. Rick Mitchell; 2. A summary of the current condition of the Massachusetts and the regional economy from Dr. Michael Goodman of the University of Massachusetts Dartmouth; 3. A SWOT Analysis Leadership Panel discussion led by: President & CEO of Mass Bay Credit Union, Terry Dorilas, now-retired President & CEO of Boston Firefighters Credit Union, Bernie Winne, and President & CEO of St. Jean’s Credit Union, David Surface;

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2022 ANNUAL REPORT

MSIC HIGHLIGHT MSIC HIGHLIGHTS & UPDATES

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4. A presentation regarding the economic advantages of CUSO development from Filene Research Director, Paul Dionne; and 5. A presentation regarding how to build a profitable world-class mortgage operation with remarks from MSIC Partners Vice Chairman and President & CEO of Holyoke Credit Union, Mike Murphy, Freedom Credit Union, Vice President & Chief Lending Officer Jeffrey Smith, MSIC Partners President, Jeff Lipes, and MSIC Partners Credit Union Services Director, Chris Brennan. During the Summit, MSIC hosted an impeccably timed 18-hole round of golf on the Mount Washington Course: just after an all-morning downpour, followed by parting clouds and a sunny, summer afternoon. Member attendees and their guests also enjoyed an unforgettable celebratory evening for MSIC’s 60th Anniversary, at the stunning Rosebrook Lodge located at the peak of Bretton Woods. MSIC guests experienced a scenic gondola ride up to the Lodge where they took in the breathtaking panoramic views of Mount Washington and the entire Presidential Mountain Range. Guests then enjoyed cocktails, hors d’oeuvres and lively conversation to the relaxing sound of a jazz trio, followed by a plated dinner as the sun set on the mountain range. It was a dazzling evening of fun and friendship that celebrated the enduring success of the MSIC Cooperative.

2022 ANNUAL REPORT

MSIC HIGHLIGHT MSIC HIGHLIGHTS & UPDATES

AUGUST 24, 2022 How to Build a World-Class Mortgage Operation Beginning in August, on a monthly basis, MSIC shared with the entirety of its members, the recorded Summit sessions for those who were unable to attend in person. This also provided MSIC’s credit union CEOs the opportunity to share the valuable content with their respective teams. The first broadcast of a Summit Session as part of its webinar series was the presentation made by MSIC Partners, LLC: a multi-credit union owned mortgage CUSO offering a flexible approach to credit unions that want to become better mortgage lenders. During the recorded session webinar attendees heard the perspectives of key credit union team members on mortgage lending. Following the video presentation there was a live Q&A with a panel of industry leaders including Jeff Lipes, the President of MSIC Partners; Mike Murphy, President & CEO of Holyoke Credit Union; and Laura Ybarra, President & CEO of AllCom Credit Union in Worcester.

DURING THE RECORDED SESSION WEBINAR

ATTENDEES HEARD THE

PERSPECTIVES OF KEY CREDIT UNION TEAM MEMBERS ON MORTGAGE LENDING.

TS & UPDATES SEPTEMBER 28, 2022 The State of the Massachusetts Economy In September, MSIC continued its Summit Session Webinar Series with a presentation from Dr. Michael Goodman of the University of Massachusetts Dartmouth who discussed the state of the Massachusetts economy. During his presentation, Dr. Goodman paid special attention to the ongoing impact of COVID-19 on current conditions and the subsequent economic recovery, as well as the state and national economic outlook. He also covered other topics including inflation levels, cost of living challenges, the condition of labor and housing markets, relevant demographic trends, the possibility of a recession, and the implications for credit unions. Following the video presentation Dr. Goodman participated in a lively Q&A with webinar attendees.

DR. MICHAEL GOODMAN Senior Advisor to the Chancellor for Economic Development and Strategic Initiatives at the University of Massachusetts Dartmouth

2022 ANNUAL REPORT

OCTOBER 3, 2022 MSIC Charity Golf Tournament MSIC held its 3rd Charitable Golf Tournament at Thorny Lea Golf Club in Brockton, Massachusetts, its first since the Summer of 2019. During this fun and intimate tournament of 40 golfers, MSIC celebrated another successful fundraising event with total donations of over $36,000 for the Asthma and Allergy Foundation of America, New England Chapter (AAFA New England). Many thanks to the generosity and kindness of MSIC’s members and business partners in support of AAFA New England’s important and life-saving efforts for individuals who battle asthma and allergy related health conditions throughout New England. Special thanks to MSIC Director Greg Martucci for welcoming us to his beautiful golf club. MSIC HIGHLIGHT MSIC HIGHLIGHTS & UPDATES

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2022 ANNUAL REPORT

MSIC HIGHLIGHT MSIC HIGHLIGHTS & UPDATES

OCTOBER 12, 2022 The Return of MSIC’s Annual Member Dinner MSIC was delighted to host the return of MSIC’s Annual Member Dinner at the Michael Jordan Steakhouse at Mohegan Sun which coincided with the Cooperative Credit Union Association’s Annual Convention. MSIC’s 6th Annual Member Dinner welcomed 75 guests with an evening focused on fellowship, delicious food and a toast to a return to normalcy.

AN EVENING FOCUSED ON FELLOWSHIP, DELICIOUS FOOD AND A TOAST TO A RETURN TO NORMALCY.

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2022 ANNUAL REPORT

MSIC HIGHLIGHT MSIC HIGHLIGHTS & UPDATES

OCTOBER 19, 2022 COVID-19: Virus, Disease, Diagnostics, Treatment, Vaccine In mid-October, MSIC Director Dr. Rick Mitchell (Lawrence J. Henderson Professor of Pathology and Health Sciences and Technology at Harvard Medical School, and Senior Pathologist at Brigham and Women’s Hospital in Boston) joined MSIC for its continuing Summit Session Webinar Series to further the conversation and answer questions in regards to the COVID-19 Pandemic. At the Member Summit in June, Dr. Mitchell led a riveting discussion about the current status of COVID-19, including details about the disease itself, diagnostics and treatment, and the efficacy of the vaccine and boosters. Over the past couple of years with COVID looming, Dr. Mitchell has been gracious in offering his knowledge and insights about the virus from his unique perspective and we are grateful for his time and wisdom.

Dr. Mitchell has been gracious in offering his KNOWLEDGE AND INSIGHTS about the virus from his unique perspective

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IN MEMORY OF SUSAN CLAWSON It was with great sadness that we said goodbye to our friend and colleague, Susan Clawson, in June of 2022 after a courageous battle with cancer. Susan served as MSIC’s Accounting Manager since 2019 and did an outstanding job throughout her tenure. We will long remember Susan for her good nature, can-do attitude and genuine kindness. She is deeply missed.

NOVEMBER 17, 2022 The Next Generation CUSO In November, MSIC shared its presentation from the Member Summit by Research Director Paul Dionne of the Filene Research Institute. Mr. Dionne discussed Filene’s research findings regarding CUSOs and why they are a natural partnership for credit unions. He discussed the challenges of today’s credit unions including the pressures on the traditional credit union business model, new consumer trends, as well as the unique strengths of credit unions. Mr. Dionne also led a detailed discussion about how Next Generation CUSOs will push the credit union system toward a new model that allows credit unions to leverage their assets and resolve shortfalls, all while delivering cutting edge products and services.

2022 ANNUAL REPORT

T MSIC HIGHLIGHTS & UPDATES MSIC HIGHLIGHT

BOARD & STAFF UPDATES BOARD & STAFF UPDATES

DIRECTORS

STAFF

In 2022, MSIC welcomed two new Directors to the MSIC Board. Welcome, Matt and Glenn, and thank you for your commitment to the MSIC Cooperative.

MSIC was delighted to welcome two new staff members in FY 2022:

GLENN WELCH President & CEO Freedom Credit Union

ROBERT NEAL MSIC’s Information Systems Support Specialist who joined the team in December 2021.

MATTHEW SCHONDEK President & CEO Fall River Municipal Credit Union

ASHLEY SILVA MSIC’s Accounting

Manager who joined the team in September 2022.

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ANNOUNCEMENT MSIC will host the IADI Annual General Meeting and Conference in Fall of 2023! MSIC is honored to announce that it was chosen to host the International Association of Deposit Insurers (IADI) Annual General Meeting this upcoming fall. The IADI works in partnership with deposit insurers from around the world to share knowledge and expertise on matters related to deposit insurance. As a proud member of IADI, MSIC will work cooperatively with the IADI Secretariat and the Executive Council (EXCO) in planning this internationally esteemed event.

MARTA CARNEY Manager Cabot Boston Credit Union ROBERT CASHMAN President/CEO Metro Credit Union BARBARA FRAZIER President/CEO New England Teamsters Federal Credit Union MSIC ADVISORY COMMITTEE MEMBERSHIP JOHN HOWARD President/CEO Merrimack Valley Credit Union KARL MOISAN President/CEO Homefield Credit Union DOUG PETERSEN CEO Workers’ Credit Union

BONNIE RAYMOND SVP Member Experience Polish National Credit Union DAVID SURFACE President/CEO St. Jean’s Credit Union JIM VAN ARSDALE Financial Advisor Stearns Financial Group

2022 ANNUAL REPORT

MSIC DIRECTORS MSIC DIRECTORS & STAFF

MSIC BOARD OF DIRECTORS OF DIRECTORS As of September 30, 2022 MSIC BOARD

MICHAEL E. MURPHY Chairman President/CEO Holyoke Credit Union

DIRECTOR SINCE 1990 1990

GREGORI A. MARTUCCI Vice President of NE Sales Shaw Industries, Inc.

RICHARD N. MITCHELL, M.D., PH.D Professor of Pathology

Harvard Medical School and Brigham & Women’s Hospital

DIRECTOR SINCE 2011 2011

DIRECTOR SINCE 2010 2010

GEORGE G. HARDIMAN, ESQ. President/CEO Tremont Credit Union

THERESA DORILAS President/CEO Mass Bay Credit Union

DIRECTOR SINCE 2019 2019

DIRECTOR SINCE 2020 2020

MSIC STAFF MSIC STAFF As of September 30, 2022

MICHAEL C. HANSON, ESQ. President/CEO

ERIKA MORIN Manager of Training and Member Services

ASHLEY SILVA Accounting Manager

S & STAFF

RALPH P. MOORE Vice Chairman President/CEO 600 Atlantic Federal Credit Union

DIANE M. PERALTA,CPA Director of Audit Spinelli CPAs

DIRECTOR SINCE 2014 2014

DIRECTOR SINCE 2001 2001

JOHN D. FINNEGAN, ESQ. Attorney at Law Hill Law

NEIL J. CREAN President/CEO Massachusetts Family Federal Credit Union DIRECTOR SINCE 2018 2018

DIRECTOR SINCE 2011 2011

MATTHEW G. SCHONDEK President/CEO Fall River Municipal Credit Union

GLENN S. WELCH President/CEO Freedom Credit Union

DIRECTOR SINCE 2022 2022

TONY ST. PIERRE Vice President Technology and Security

JOHN CIAMPA, CPA Treasurer

ROBERT NEAL Information Systems Support Specialist

2022 ANNUAL REPORT

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