Exhibit 9.1
Sample Investment Policy
Policy:
Asset/Liability Management
Applicable
and Laws/Regulations:
National Credit Union Administration (NCUA) Rules
Regulations, 12 CFR 703
Areas of Responsibility:
Finance/Treasury
Last Board Review:
July 20XX
Last Revision:
September 20XX
BACKGROUND
The board of directors of Hometown Federal Credit Union (Hometown FCU), recognizing that it is solely
responsible for supervision of the credit union’s investment accounts, adopts the following policy for
governing investment activities.
PURPOSE AND OBJECTIVES
The purpose of this policy is to provide operating guidance for the administration of the credit union’s
investment portfolio in order to maintain a high-quality, low-risk portfolio, complying with the intent of
applicable federal regulations.
The major objectives of the policy are to minimize risks from interest rate changes or other factors, to
optimize the yield on surplus funds, and to ensure that the types and maturity mix of investments
purchased and held are sufficiently diversified to provide adequate liquidity to meet future needs.
The board will review this policy annually and record its review in the minutes of the board meeting to
ensure that the policy continues to meet the goals and objectives of the credit union.
INVESTMENT AUTHORITY
Credit union officials and employees given investment authority by this policy must be professionally
qualified by education and/or experience to exercise that authority in a prudent manner and to fully
comprehend and assess the risk characteristics of investments and investment transactions.
The board of directors of the credit union authorizes the asset/liability management committee (ALCO),
made up of the credit union officers listed below, to initiate investments on behalf of the credit union.
Investment decisions will adhere to the guidelines set forth in this policy.
Exhibit 9.1
Sample Investment Policy (cont.)

President/chief executive officer

Treasurer

Executive vice president

Senior vice president/finance

Controller
The above officers may assign responsibility for initiating investment transactions with broker/dealers to
a staff investment officer after written approval of each transaction has been obtained from at least two of
the above listed officers.
Responsibility for investment activity may not be delegated to a correspondent, brokerage house, or any
rating or advisory service.
The credit union will retain discretionary control over the purchase and sale of investments. The credit
union may delegate discretionary control over the purchase and sale of investments, within established
parameters, to a person other than an official or employee, provided that the person is an investment
adviser registered with the Securities and Exchange Commission (SEC) under the Investment Advisers
Act of 1940. In determining whether to transact business with an investment adviser, the ALCO:

Must analyze the background of the prospective investment adviser along with available
information from state or federal securities regulators, including any enforcement actions against
the adviser or associated personnel.

May not compensate an investment adviser with discretionary control over the purchase and sale
of investments on a per-transaction basis or based on capital gains, capital appreciation, net
income, performance relative to an index, or any other incentive basis.

When delegating discretionary control over the purchase and sale of investments to a person other
than an official or employee, may not direct the holdings under that person’s control, and must
classify those holdings as either available for sale or trading.

Must obtain a report from the investment adviser, at least monthly, that details those credit union
investments under the control of the investment adviser and how each is performing.

Must limit to 100 percent of net capital the aggregate delegation of discretionary control over the
purchase and sale of investments for all of the above.
Exhibit 9.1
Sample Investment Policy (cont.)
AUTHORIZED INVESTMENTS AND INVESTMENT ACTIVITY
Hometown FCU may make any investment permitted under the Federal Credit Union Act (FCUA) and
part 703.100 of the National Credit Union Administration (NCUA) Rules and Regulations that pertain to
the investment activity of federally chartered credit unions. All investments will be in U.S. dollars. All
portfolio purchases will be within portfolio limitations at the time of purchase. Investments in financial
institutions are subject to the limitations defined in this policy. The credit union may not invest in
vehicles prohibited by part 703.110 of the NCUA Rules and Regulations.
Hometown FCU may:

Contract for the purchase or sale of a security as long as delivery of the security is by regular-way
settlement. Regular-way settlement means delivery of a security from a seller to a buyer within
the time frame that the securities industry has established for that type of security.

Invest in a variable rate investment, as long as the index is tied to domestic interest rates. Except
in the case of Treasury Inflation Protected Securities, (TIPS) the variable rate investment cannot,
for example, be tied to foreign currencies, foreign interest rates, domestic or foreign commodity
prices, equity prices, or inflation rates. For example, the U.S. dollar denominated London
Interbank Offered Rate (LIBOR) is a domestic interest rate.

Purchase shares or deposits in a corporate credit union, except where the NCUA board has
notified the credit union that the corporate credit union is not operating in compliance with part
704 of the NCUA Rules and Regulations. The aggregate purchase of member paid-in capital and
membership capital in one corporate credit union is limited to 1 percent of the assets of
Hometown FCU.

Invest in a registered investment company or collective investment fund, as long as the
prospectus of the company or fund restricts the investment portfolio to investments and
investment transactions that are permissible for federal credit unions. For the purposes of this
part, the following definitions apply:
— A registered investment company is an investment company that is registered with the SEC
under the Investment Company Act of 1940. Examples include mutual funds and unit
investment trusts.
— A collective investment fund is a fund maintained by a national bank under 12 CFR part 9.

Invest in a fixed- or variable-rate collateralized mortgage obligation (CMO) or real estate
mortgage investment conduit (REMIC) only if it meets all of the following tests:
— Average life test. The CMO/REMIC’s estimated average life is 10 years or less.
Exhibit 9.1
Sample Investment Policy (cont.)
— Average life sensitivity test. The CMO/REMIC’s estimated average life extends by four
years or less, assuming an immediate and sustained parallel shift in interest rates of up to and
including plus 300 basis points, and shortens by six years or less, assuming an immediate
and sustained parallel shift in interest rates of up to and including minus 300 basis points.
— Price sensitivity test. The CMO/REMIC’s estimated price change is 17 percent or less, as a
result of an immediate and sustained parallel shift in interest rates of up to and including plus
or minus 300 basis points.
The credit union must retest CMOs/REMICs at least quarterly or more frequently if market or
business conditions indicate.
If the credit union uses individual prepayment estimates for testing, estimates must be obtained
from all of the prepayment sources listed in this policy. When purchasing a CMO/REMIC, it
must pass the tests for each estimate. When retesting a CMO/REMIC, it must pass the tests for a
majority of estimates.
When using a median prepayment estimate, the median estimate when the CMO/REMIC is
purchased must be based on at least five prepayment sources. When retesting the CMO/REMIC,
the median estimate must be based on at least two repayment sources.

Purchase and hold a municipal security only if a nationally recognized statistical rating
organization has rated it in one of the four highest rating categories.

Sell federal funds to section 107(8) institutions and credit unions, as long as the interest or other
consideration received from the financial institution is at the market rate for federal funds
transactions.

Invest in the following instruments issued by a section 107(8) institution or branch:
— Yankee dollar deposits
— Eurodollar deposits
— Banker’s acceptances
— Deposit notes
— Bank notes with original weighted average maturities of less than five years

Enter into a repurchase agreement transaction as long as:
— The repurchase securities are legal investments for federal credit unions.
— A daily assessment of the market value of the repurchase securities is received, including
accrued interest, and an adequate margin that reflects a risk assessment of the repurchase
securities and the terms of the transaction is maintained.
— The credit union has entered into signed contracts with all approved counterparties.
Exhibit 9.1
Sample Investment Policy (cont.)

Enter into reverse repurchase and collateralized borrowing transactions as long as:
— Any securities received are permissible investments for federal credit unions.
— A daily assessment of the security’s market value is received, including accrued interest.
— An adequate margin that reflects a risk assessment of the securities and the term of the
transaction is maintained.
— Any cash received is subject to the borrowing limit specified in section 107(9) of the act, and
any investments purchased with that cash are permissible for federal credit unions and
mature no later than the maturity of the transaction.
— A signed contract has been entered into with all approved counterparties.

Enter into a securities lending transaction as long as:
— A written confirmation of the loan is received.
— Any collateral received is a legal investment for credit unions.
— A perfected first priority interest in the collateral is obtained.
— The credit union takes physical possession or control of the collateral or is recorded as owner
of the collateral through the Federal Reserve Book-Entry Securities Transfer System.
— A daily assessment of the market value of the collateral is received, including accrued
interest, and an adequate margin that reflects a risk assessment of the collateral and the term
of the loan is maintained.
— Any cash received is subject to the borrowing limit specified in section 107(9) of the act, and
any investments purchased with that cash are permissible for federal credit unions and
mature no later than the maturity of the transaction.
— A written loan and security agreement has been executed with the borrower.

To maintain a diversified portfolio, no more than _______ percent should be invested in a single
type of investment or issuer, unless the securities are fully guaranteed as to principal and interest
by the U.S. government.

Trade securities1 as long as:
— It can be shown that there are sufficient resources, knowledge, systems, and procedures to
handle the risks.
1.
Hometown FCU does not currently engage in trading activities. If at some future date this activity is permitted by the
board, this policy will be revised to include guidelines to be followed, addressing the following: the persons who have
purchase and sale authority, trade account size limitations, allocation of cash flow to trading accounts, stop loss or sale
provisions, dollar size limitations of specific types, quantity, and maturity to be purchased, limits on the length of time an
investment may be inventoried in the trading account, and internal controls, including appropriate segregation of duties.
Exhibit 9.1
Sample Investment Policy (cont.)
— A record is kept of securities purchased or sold for trading purposes at fair value on the trade
date.
— A written monthly report is given to the board of directors listing all purchase and sale
transactions of trading securities and the resulting gain or loss on an individual basis.
PROHIBITED INVESTMENTS AND INVESTMENT ACTIVITIES
Hometown FCU may not:

Purchase or sell financial derivatives, such as futures, options, interest rate swaps, or forward rate
agreements, except those permitted under 701.21(i) of the NCUA Rules and Regulations.

Engage in adjusted trading or short sales.

Purchase stripped mortgage-backed securities, residual interests in CMOs/REMICs, mortgage
servicing rights, commercial mortgage-related securities, or small business-related securities.

Purchase a zero coupon investment with a maturity date that is more than 10 years from the
settlement date.
GENERAL PRACTICES AND PROCEDURES FOR INVESTMENT TRANSACTIONS

Financial statement classification of investment acquisitions will comply with the Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 115
(FAS 115) accounting requirements at the time of purchase (i.e., available for sale, held to
maturity, or trading). The ALCO will review the market value of each security and its
classification on a monthly basis and recommend any necessary adjustments. All investments will
be made with the supposition that they will be held to maturity even though they may be marked
available for sale. If it is later determined that changes in economic conditions have arisen that
call for a security in the available-for-sale classification to be sold for asset/liability management
purposes, the ALCO may divest the investment with a full report to the board of directors at its
next monthly meeting.

The credit union must conduct and document a credit analysis of an issuing entity and/or
investment before the purchase of the investment, except when such investments are issued or
fully guaranteed as to principal and interest by the U.S. government or its agencies, U.S.
government-sponsored agencies or enterprises, or corporations fully insured by NCUA or the
Federal Deposit Insurance Corporation (FDIC). Analyses required under this policy must be
updated at least annually for as long as the credit union holds the investment(s).
Exhibit 9.1
Sample Investment Policy (cont.)

The ALCO will notify the board of directors as soon as possible, but not later than the next
regularly scheduled board meeting, of any investment that either is outside board policy after
purchase or has failed a requirement of this policy. The board’s action regarding investments will
be documented in the minutes of the board meeting to include a detailed explanation of any
decision not to sell an investment that has failed a requirement of this policy. Within five days
after the board meeting, the credit union will notify the appropriate NCUA regional director in
writing of any investment that has failed the requirements of this policy.

The credit union will maintain documentation on each investment transaction for as long as the
investment is held, audited, and examined. Documentation will include, where applicable, bids
and prices at purchase and sale, including periodic updates, purchase confirmations, and other
relevant disclosure documents or a description of the security from an industry-recognized
information provider, financial date, and test reports required by this policy.
INTEREST RATE RISK
To protect the credit union’s earnings and to guard against capital pressures arising from future
fluctuations in interest rates, the ALCO will prudently manage the investment portfolio to ensure that
exposure is sufficiently measured and that capital is available and adequate. To support the exposure, a
tiered-term investment portfolio will be maintained.
Monitoring Interest Rate Risk
The ALCO will monitor interest rate risk sources that directly affect the bottom line and base investment
decisions for the credit union on that information. The primary risk factors include:

Repricing risk. The risk resulting from unexpected parallel shifts in the yield curve caused by
differences between the time of rate changes and the cash flows of assets vs. liabilities.

Basis risk. The risk from unexpected changes in the spread between two or more different rates of
different maturities.

Yield curve risk. The risk from unexpected changes in the spread between two or more rates of
different maturities.

Option risk. The risk of being obligated to perform when an option holder wishes to exercise an
option right.
The ALCO will keep written records of all investment decisions.

At least monthly, the ALCO will prepare a written report showing the book value, fair market
value, unrealized gain or loss, and dollar change since the prior month-end for each security held,
including summary information for the entire portfolio.
Exhibit 9.1
Sample Investment Policy (cont.)

At least quarterly, the ALCO will prepare a written report showing the sum of the fair values of
all fixed- and variable-rate securities held that have one or more of the following features:
— Embedded options
— Remaining maturities greater than three years
— Coupon formulas that are related to more than one index or are inversely related, or
multiples of an index

When the amount calculated above is greater than 1 percent of the net capital of the credit union,
the quarterly report must state a reasonable and supportable estimate of the potential impact,
stated in percentage and dollar terms, of an immediate and sustained parallel shift in market
interest rates of plus and minus 300 basis points on:
— The fair value of each security in the portfolio
— The fair value of the portfolio as a whole
— The net capital of the credit union

Distribution of the above described reports will be made to each member of the ALCO. Each
member of the board will receive a summary of the information in these reports.
MATURITY LIMITS AND LIQUIDITY RISKS
For purposes of maturity distribution, variable-rate securities will be placed in a maturity range according
to their repricing intervals. To support the tiered-term maturity objective to provide liquidity within the
portfolio, and to be consistent with the rate sensitivity exposure, maturities will be maintained within the
following parameters:

At least 40 percent of the portfolio will be maintained for a term of three years or less.

A maximum of 20 percent of the portfolio will be at terms over 7 years but less than 15 years.
Unless identified in a special trading account, all investments will be purchased with the intent to hold
them to maturity, but they may be categorized as available for sale. Securities with call provisions will be
included in the maturity range of the first call opportunity.
AUTHORIZED FINANCIAL INSTITUTIONS
Hometown FCU will make investments only with authorized financial institutions. Investment personnel
are authorized to invest only in:

FDIC-insured financial institutions
Exhibit 9.1
Sample Investment Policy (cont.)

Federally insured natural person credit unions

Federally insured corporate credit unions

State or mutual savings banks operating in accordance with the laws of this state
When selecting investments in these institutions, the credit union will use the following independent
rating systems as a guideline:

The ABC Bank Sentinel

XYZ Financial Bank Guardian

XYZ Financial Mutual Savings Bank Guardian

XYZ Financial Credit Union Guardian
Qualifying Factors
The following rules apply to investments in authorized financial institutions:

A bank or its holding company must have a top-four ABC Bank Sentinel rating or better and/or
an XYZ rating in the top four categories on the trade date.

A mutual savings bank must have an equity-to-assets ratio of at least 6 percent, and assets of at
least $50 million. The investment will be limited to the insurable amount ($100,000). It must also
hold the highest XYZ rating.

For investments of $100,000 or greater in a bank or holding company, the institution’s holding
company must have a capital and surplus of $100,000 or greater.

Investments greater than $100,000 in a mutual savings bank will be limited to those institutions
having an equity-to-assets ratio greater than 8 percent (per generally accepted accounting
principles), total assets of at least $200 million, and/or a maximum XYZ rating.

Investments in corporate credit unions will be limited to federally insured institutions operating in
full compliance with part 704 of the NCUA Rules and Regulations.

Investments in natural person federal credit unions will be limited to the insurable amount
($100,000). Eligible credit unions must have an equity-to-assets ratio of at least 7 percent and
total assets of $10 million or more with the top XYZ rating.

Amounts invested in any one institution will be limited to the lower of 10 percent of the total
investment portfolio, less overnight federal funds, or 10 percent of the equity of the institution.
Exhibit 9.1
Sample Investment Policy (cont.)

Financial ratios and minimum asset requirements will be verified using the most recent publicly
available financial information.
SAFEKEEPING
Where possible, investments will be held in book-entry form. Purchased investments and repurchase
collateral must be held in the possession of the credit union, recorded as owned by the credit union
through the Federal Reserve’s Book-Entry Securities Transfer System, or held by a board-approved
safekeeper under a written custodial agreement, which is a contract in which a third party agrees to
exercise ordinary care in protecting the securities held in safekeeping for its customers.
Hometown FCU:

Must obtain an individual confirmation statement for each investment purchased or sold.

May not allow the selling broker/dealer to safekeep purchased investments or repurchase
collateral, except where the broker/dealer is a bank or corporate credit union. The credit union
may allow a separately identifiable department or division of the bank or corporate credit union to
safekeep investments or collateral.

Must obtain and reconcile monthly a statement of purchased investments and repurchase
collateral held in safekeeping.

Must make payment for an investment simultaneously with its delivery.
CONTROLS
An employee with neither authority to place investments nor responsibility for investment transactions
will verify a written confirmation of each investment purchase or sale against the credit union’s
investment account records. The confirmation will be held permanently with the required documentation
originating or booking the investments.
Investments Exceeding $1 Million
Investments exceeding $1 million must be approved by the ALCO at its next regularly scheduled meeting.
If the investment requires immediate action, the ALCO will hold a special meeting to address the issue.
Credit union management will prepare a written report for the board of directors concerning the
immediate and foreseeable risks. The report will be forwarded to the board for consideration at the next
regularly scheduled board meeting.
Exhibit 9.1
Sample Investment Policy (cont.)
BROKER/DEALERS
The ALCO is responsible for maintaining current, adequate information regarding the broker/dealers with
whom the credit union transacts business and for maintaining a list of approved broker/dealers. To
qualify, a broker/dealer must either be registered with the SEC under the Securities Exchange Act of
1934, or be a depository institution whose broker/dealer activities are regulated by a regulatory agency.
Documentation used to approve a broker/dealer relationship must be maintained as long as the
broker/dealer is approved and until the documentation has been audited and examined by NCUA.
In determining whether to buy or sell investments through a broker/dealer, the ALCO must analyze and
annually update the following items:

The background of any sales representative with whom the credit union is doing business.

Information available from state or federal securities regulators and securities industry selfregulatory organizations, such as the National Association of Securities Dealers and the North
American State Administrations Association, regarding any enforcement actions against the
broker/dealer, its affiliates, or associated personnel.

The ability of the broker/dealer and its subsidiaries or affiliates to fulfill commitments, as
evidenced by capital strength, liquidity, and results, considering current financial data, annual
reports, reports of nationally recognized statistical rating agencies, relevant disclosure documents,
and other financial information sources.
The following broker/dealers currently meet all of the above criteria and have been approved by the board
of directors and the ALCO to handle transactions on behalf of Hometown FCU:

ABC Brokerage, Inc.

Squeaky-Clean Securities Dealers, Ltd.

Brown, Simon and Chandler

Allied Capital Management Corporation
PROHIBITED ACTIVITY BY OFFICIALS AND EMPLOYEES
In accordance with part 702.120 of the NCUA Rules and Regulations, officials and senior management
employees, and their immediate family members, may not receive anything of value in connection with
an investment transaction. This prohibition does not include compensation for employees.
Exhibit 9.1
Sample Investment Policy (cont.)
Restrictions on Investors
Those charged with investment responsibility are restricted to conducting credit union business with
authorized broker/dealers. Gifts or offerings of gifts or gratuities must be approved by the ALCO before
acceptance. Acceptance of gifts is normally prohibited. Any costs associated with training or travel
expense in conjunction with seminars the broker/dealer may conduct must be approved and paid for by
the credit union.
Restrictions on Investments
Authorized investment vehicles are limited to those permitted by part 703.13 and 703.14 of the NCUA
Rules and Regulations. Restrictions on each type of investment as set forth in part 703 apply in all cases.
GRANDFATHERED INVESTMENTS
Subject to safety and soundness considerations, our credit union may hold a CMO/REMIC residual,
stripped mortgage-backed securities, security with a maturity greater than 10 years, if we purchased the
investment before December 2, 1991; or on or after December 2, 1991, but before January 1, 1998, if for
the purpose of reducing interest rate risk.
We may hold a zero-coupon investment with a maturity greater than 10 years, a borrowing repurchase
transaction in which the investment matures at any time later than the maturity of the borrowing, or
CMRS that cause our aggregate amount of CMRS from issuers other than government-sponsored
enterprises to exceed 25 percent of our net worth. In each case we must have purchased the investment or
entered the transaction under the Regulatory Flexibility Program before July 2, 2012.
However we must meet the requirements of 703.18 of the NCUA rules, which include:

Implementation of a monitoring and reporting system that provides the documentation necessary
to evaluate the expected and actual performance of the investment under different interest rate
scenarios.

Conduct and document an analysis that shows, before purchase, that the proposed investment will
reduce our interest rate risk.

Evaluate the investment at least quarterly to determine whether or not it actually has reduced the
interest rate risk.

Account for the investment consistent with generally accepted accounting principles.
All grandfathered investments are subject to the valuation and monitoring requirements of parts 703.10,
703.11, and 703.12 of the NCUA regulations.
Exhibit 9.1
Sample Investment Policy (cont.)
APPEAL PROCESS (12 CFR 703.20)
As a federal credit union we may submit a written request to the regional director seeking expanded
authority above the following limits:

Borrowing repurchase transaction maximum maturity mismatch of 30 days

Zero-coupon investment 10-year maximum maturity up to a maturity of no more than 30 years.

CMRS aggregate limit of 25 percent of net worth, up to no more than 50 percent of net worth.