WALLINGFORD MUNICIPAL FEDERAL CREDIT UNION

SHARE CERTIFICATE POLICY

EFFECTIVE MAY 1, 2005

PURPOSE AND CONTENTS

· General

This section outlines the Share Certificate Policy formalized by the Board of Directors of the Wallingford Municipal Federal Credit Union on April 21, 2005. The Wallingford Municipal Federal Credit Union realizes the importance of providing our members with competitive dividend rate Share Certificates (CD’s) to enhance their experience and relationship with us.

· Effective Date

All employees of the Wallingford Municipal Federal Credit Union, herein referenced throughout this policy as the “Credit Union”, must comply with the terms of this policy immediately.

POLICY DESCRIPTION, AUTHORITY AND SCOPE

· General

It is the Credit Union’s policy that it may provide/offer Share Certificate accounts to our members. It is the Credit Union’s intent that it may offer this service to retain and attract members, generate additional Credit Union deposits, and provide a competitive dividend-earning term product to meet the needs of our members.

· Enforcement

Changes to this policy require approval by the Board of Directors of the Credit Union. Changes in operating procedures, standards, guidelines and technologies, provided they are consistent with this policy, may be authorized by the Manager/CEO. The Board of Directors has the authority to approve this policy, and annually approves the merit thereafter. Management is responsible for ensuring the directives are implemented and administered in compliance with the approved policy. No part of this policy or its supporting operating procedures should be interpreted as contravening or superseding any other legal and regulatory requirements placed upon the Credit Union. Protective measures should not impede other legally mandated processes such as records retention or subpoenas.

· Exceptions to Policy

The primary responsibility for enforcement of this policy and its operating procedures rests with the Manager/CEO and our employees. Requests for exceptions to this policy must be very specific and may only be granted on specific items, rather than to entire sections. Credit Union personnel with exceptions are to communicate their requests by completing an internal memorandum to the Manager/CEO for consideration.

PRODUCT DEFINITION

· General

A Share Certificate (Certificate) is a non-negotiable receipt for funds deposited in a dividend bearing account for a specific period of time. The Certificate (receipt) stipulates the terms and conditions of the account agreement. Additional funds may be deposited only at maturity. Withdrawals, prior to maturity, are permitted only with a substantial dividend penalty as specified by Regulation D, except in cases where the depositor is deceased or has been declared legally incompetent by court order.

· Product Types

The Credit Union plans to offer the following types of certificate accounts:

- Six month, Twelve month, Eighteen month and Twenty-four month term certificates.

- Fixed rate.

- Interest is calculated by the CUSA system on the daily balance method.

- Payable on maturity.

DIVIDEND RATES AND MATURITIES

The duration and amount of the deposit determines the dividend rate paid. Generally, higher rates are paid on Certificates than on regular share deposits because of the commitment of funds for a fixed period of time. The dividend rate is constant for the maturity period for which the funds are committed. New dividend rate sheets and disclosure statements will be made available when the Manager/CEO or the Head Bookkeeper changes rates.

· Occasionally, it will be necessary to calculate dividends manually by using the following formula:

Principal x number of days through yesterday x rate of dividend being paid/365 days = dividend earned.

AUTOMATICALLY RENEWABLE & NOTIFICATION

Certificates will be renewed automatically. Maturity date of the certificate will be shown on the certificate. Certificates automatically renew at the same term but at current rate upon maturity date. Certificate owners will receive notification approximately two weeks prior to the maturity date of the Certificate. If contact is not made within the two-week notification period the Certificate will automatically renew.

DISCLOSURE REQUIREMENTS

At the time a certificate is opened, the member will be given a receipt, which clearly states that he or she has contracted to keep the funds on deposit for the stated maturity period. The receipt also describes penalties that will be imposed in case of early withdrawal of funds. The Credit Union's policy is to obtain the member's signature on the certificate of deposit receipt acknowledging receipt of this statement.

EARLY WITHDRAWAL PENALTIES

· General

Federal regulations prohibit the payment of any portion of the principal balance of a certificate prior to maturity unless an early withdrawal penalty is assessed, except in instances where an owner is deceased or declared to be legally incompetent by a court or other administrative body. Any amendment of a certificate contract that results in an increase in the rate being paid or a change in the certificate amount or that results in a shorter maturity period constitutes payment before maturity and an early withdrawal penalty must be assessed. The Credit Union does not have the authority to waive an early withdrawal penalty. If there is an irresolvable dispute with a member concerning a misunderstanding of instructions, the penalty must be applied and charged-off as a Credit Union expense if approved by the Manager/CEO or Head Bookkeeper.

NOTE: Depository institutions are required to invade the principal of the account, if necessary, to impose the early withdrawal penalty.

· If a time deposit (certificate) is paid before maturity, a depositor shall forfeit an amount equal to three month's (92 days) dividends earned, or that could have been earned, on the amount withdrawn at the simple dividends rate being paid on the deposit, regardless of the length of time the funds withdrawn have remained on deposit.

Principal x 92 days x % rate of dividend being paid / 365 days = Early Withdrawal Penalty

· Exceptions to Early Withdrawal Penalties

As stated before, an early withdrawal penalty is not assessed in instances where an owner is deceased or declared legally incompetent. Neither is a penalty assessed if a member wishes to change a name on the account. In the latter case, the existing deposit may be redeemed and reissued as a new time deposit, provided that:

1. The reissue is in exactly the same dollar amount;

2. The dividend rate on the reissue is the same or lower; and

3. The reissue matures no sooner than the original time deposit.

DIVIDEND PAYMENTS

Dividends will be paid at maturity into the members existing regular demand share account.

OPENING A SHARE CERTIFICATE

· Preparing the Share Certificate

All fields of a staff prepared worksheet must be completed. The required information includes the following:

1. Issue date;

2. Duration of deposit;

3. Original maturity date;

4. Name(s) of owner;

5. Primary taxpayer identification number (TIN);

6. Dollar amount; and

7. Dividend rate.

The certificate worksheet must be reviewed for accuracy and signed by the Manager/CEO or the Head Bookkeeper. Staff will then enter into the Credit Union’s mainframe computer system the information supplied and print a Certificate, which must be signed by the member.

· Penalty Notice

Per federal regulations, each time a new certificate is opened, the owner of a certificate must be provided with a written disclosure statement, which clearly defines the penalty a depositor will suffer if such funds are withdrawn prior to their maturity.

· Distribution of the Share Certificate

The member will receive the original certificate and the Credit Union will maintain a file with a copy of the signed certificate and worksheet.

CHANGING OR CORRECTING ACCOUNT INFORMATION

· General

The Credit Union’s mainframe computer system is to be used to change or correct certificate account information using established procedures.

· Changing or Correcting Ownership

According to Regulation D, ownership of a certificate may be changed without an early withdrawal penalty if the principal amount, maturity date and dividend rate remain unchanged on the replacement instrument.

1. To Add or Delete a Signer. This procedure involves closing the original certificate and issuing a new one that reflects current ownership. It is recommended that this type of change be done at maturity if the member is agreeable. However, if the member insists that the change be made prior to maturity, any accrued dividends must be paid to the member in order to preserve the same principal amount on the replacement instrument and thereby avoid an early withdrawal penalty.

A. Obtain the ORIGINAL certificate from the member and have it endorsed. Cancel the certificate.

B. Issue a new certificate. Check the appropriate box to show that this Certificate has been reissued.

C. Use the Credit Union’s mainframe computer system to set up the new certificate using established procedures. In the original amount field, enter the certificate amount as reflected in the current balance. The dividend rate and balance on deposit must remain the same.

CLOSING A SHARE CERTIFICATE

· General

A member must provide the ORIGINAL certificate at the time the Certificate is to be closed. If the member has lost the certificate, refer to "Lost Time Certificates of Deposit" in this policy.

1. Review all available information to make sure no holds or pledges are in effect. Obtain the member's endorsement on the certificate and verify the signatures to the signature card on file. Once the member has been properly identified and it has been determined that there are no holds or pledges on the funds, the certificate may be closed.
2. When a certificate is being closed during the grace period, the current balance represents the amount to be paid to the member. Payment to the member will be made in the form of a credit to the members primary share account.
3. The original certificate should be documented with date closed, amount paid and filed in the Credit Union Certificate file.

· Closing a certificate When an Early Withdrawal Penalty is involved

Review all available information and file copy to make sure no holds or pledges are in effect. Obtain the member's endorsement on the reverse side of the certificate and verify the signatures to the signature card on file. Once the member has been properly identified and it has been determined that there are no holds or pledges on the funds, the certificate may be closed.

The original certificate should be documented with date closed, amount paid and filed.

LOST CERTIFICATES OF DEPOSIT

When a certificate is reported lost, stolen or destroyed, a staff member must make a thorough investigation of the circumstances. The certificate may have been pledged as collateral for a loan at the Credit Union or may be held as assignment for another entity.

Investigating personnel are to review all available information to make sure no holds are in effect. Search the member's loan portfolio, if any, to further verify that the certificate is not pledged as collateral for a loan.

After staff determines that the certificate has not been pledged as collateral or is not being held as assignment, the following procedure may be followed:

1. A notation must be placed on the office copy of the certificate stating that the original Certificate has been lost.

2. All payees must sign the Credit Union copy of the Certificate stating that the Original Certificate is lost, etc.

RETENTION OF DOCUMENTATION

Closed Certificates, documentation and reports contained therein are to be retained in the permanent certificate files.

APPROVED BY THE BOARD OF DIRECTORS AT THEIR

MEETING OF APRIL 21, 2005