You will be paid the disclosed APY until the first maturity date of the certificate. The annual percentage yield assumes interest will remain on deposit until maturity.
Interest will be compounded and credited to your account quarterly. If you close your account before the end of the quarter, you will receive the interest accrued to the date of closure. Interest begins to accrue on the business day you deposit noncash items (for example, checks). The daily balance method is used to calculate the interest on your account. This method applies a daily periodic rate to the principal in the account each day.
The certificate will automatically renew on each succeeding maturity. You will have ten (10) calendar days after the maturity date to withdraw funds without penalty. Each renewal term is the same as the original term. You must notify us in writing before or within a ten-day grace period after the maturity date if you do not want this account to be automatically renewed. Interest earned during one term that is not withdrawn during or immediately after the term is added to principal for the renewal term. The rate for each renewal term will be determined by us on or just before the renewal date. You may call us on the maturity date and we can tell you what the interest rate will be for the next renewal term.
Interest may be withdrawn at any time during the term it is earned after it is credited to your account. The annual percentage yield assumes interest will remain on deposit until maturity. A withdrawal will reduce earnings.
You have agreed to keep your funds with us in this account until the maturity date. If we consent to a request for a withdrawal that is otherwise not permitted, you may have to pay a penalty. The penalty will be an amount calculated as follows:
(1) If the original term of this certificate of deposit is one year or less, the penalty amount will be the greater of:
- 1% of the amount withdrawn;
- or One-half of the interest that would have been earned on the amount withdrawn during the entire term of the account at the interest rate being paid on the account.
(2) If the original term of this certificate of deposit is more than one year, the penalty amount will be the greater of:
- 1% of the amount withdrawn;
- or The Replacement Cost of the amount withdrawn.
Example of Calculation of Early Withdrawal Penalty for CD with Term of More Than One Year
The following example shows how the early withdrawal penalty would be calculated for a withdrawal from a certificate of deposit with a term of more than one year. This example may not reflect the actual terms of your certificate of deposit.
Assume that you have a 3-year CD with an interest rate of 1.50% and that you request a withdrawal of $25,000 of principal 2 years before the maturity date of the CD. Assume that interest rates have risen since you purchased the CD.
Since the CD has a term of more than one year, the early withdrawal penalty is the greater of
- 1% of the amount withdrawn (which would be $25,000.00 x 1.00% = $250.00), or
- the Replacement Cost of the amount withdrawn.
To calculate the Replacement Cost of the amount withdrawn, the Replacement Rate would first be determined. The Replacement Rate is the difference between the interest rate that we are paying on your CD and the approximate rate we would have to pay on a new CD to replace the funds you withdraw.
The Replacement Rate is calculated as follows:
The yield of a U.S. Treasury instrument which could be purchased on the date of withdrawal and which would mature on the maturity date of the CD would be determined. Assume that the yield on a 2-year Treasury instrument purchased on the date of withdrawal and maturing on the maturity date of your CD is 3.00%.
The bank’s estimated market risk premium of 0.50% would be added to the yield of the Treasury instrument, as follows: 3.00% + 0.50% = 3.50%
The interest rate on your current CD will be subtracted to get the Replacement Rate, as follows: 3.50% - 1.50% = 2.00%
The Replacement Rate of 2.00% is then used to calculate the Replacement Cost using the following formula: Amount Withdrawn x Remaining Term of CD in years x Replacement Rate = Replacement Cost $25,000.00 x 2.0 years x 0.020 = $1,000.00 In this example, the early withdrawal penalty would be the greater of
- (a) 1% of the amount withdrawn, which is $250.00, or
- (b) the Replacement Cost, which is $1,000.00.
So the early withdrawal penalty would be $1,000.00.
This example may not reflect the actual terms of your certificate of deposit.
The Replacement Cost is an estimate of the interest cost to us of replacing the funds you withdraw with other funds in a certificate of deposit with a term approximately equal to the remaining term of your certificate of deposit, taking into account current market rates. The Replacement Cost is the product obtained by MULTIPLYING the amount you withdraw TIMES the remaining term of your certificate of deposit expressed in years (or fractions of years) TIMES the Replacement Rate.
The Replacement Rate is an annual interest rate equal to the SUM of the yield of a U.S. Treasury instrument which can be purchased on the date you withdraw the funds which will mature on the maturity date of your certificate of deposit, PLUS the bank’s estimated market risk premium of 0.50%, MINUS the interest rate being paid on your certificate of deposit.
If there is no U.S. Treasury instrument which can be purchased on the date of withdrawal which will mature on the exact maturity date of your certificate of deposit, then the Replacement Rate will be calculated by using the hypothetical yield of a hypothetical Treasury instrument purchased on the date you withdraw the funds and maturing on the maturity date of your certificate of deposit. The hypothetical yield will be determined by interpolating the yields of actual U.S. Treasury instruments which could be purchased on the date you withdraw the funds and which would mature immediately before and immediately after the maturity date of your certificate of deposit.
Minimum Balance Information
For all terms, a minimum balance of $10,000 is required to open the account and obtain the annual percentage yield. We may treat any withdrawal which would reduce the balance remaining in the account below the required minimum balance as a withdrawal of the entire account balance and calculate the amount of the penalty accordingly.
You may not make deposits into your account until the maturity date.
We reserve the right to limit your aggregate deposit balances to $1,000,000 per taxpayer identification number.