Docstoc

Policies on Lending

Document Sample
Policies on Lending Powered By Docstoc
					                                               Common
                                               Good
                                               Bank
                                       POLICIES ON
                                       LENDING




                               Approved by the Board of Directors
                                          Mm/dd/yy




Common Good Bank Lending Policies          March 8, 2008            PAGE: 1
I.     GENERAL GUIDELINES                                                       6
       A.   Purpose                                                             6
       B.   Considerations                                                      6
       C.   Social and Environmental Responsibility                             6
       D.   Lending Areas                                                       6
       E.   Loan Products And Concentration Limits:                             7
       F.   Authority to Establish Rates and Fees and to Approve Loans:         8
       G.   Responsibility for Monitoring, Allocations, Records and Reporting   9
II.    HOUSING POLICY STATEMENT                                                 9
III.   FAIR LENDING PLAN AND PROCEDURES                                         9
       A.   Objective                                                           9
       B.   Oversight                                                           9
       C.   Training                                                            9
       D.   Implementation                                                      10
       E.   Examples Of What Is Considered Unlawfully Discriminatory            10
       F.   Examples of What Is Not Considered Discriminatory                   11
       G.   Responsibility for Implementing the Fair Lending/ECOA Policy        11
       H.   Loan And Collection Procedures And Credit Evaluation Standards      11
       I.   Marketing                                                           13
       J.   Monitoring                                                          13
       K.   Complaint Resolution                                                13
       L.   Forms Review                                                        14
       M.   Plan review                                                         14
IV.    TRUTH IN LENDING POLICY/REGULATION Z                                     14
       A.   Background And Objective                                            14
       B.   Applicability                                                       14
       C.   Policy Statement                                                    14
       D.   Structure For Implementation                                        15
       E.   Reports And Retention                                               17
V.     LOANS TO ONE BORROWER                                                    22
       A.   Purpose Of Policy                                                   22
       B.   Loan Limitations                                                    23
       C.   Disclosure Of Policy                                                23
       D.   Denial                                                              23
VI.    INSIDER TRANSACTIONS                                                     23
       A.   Purpose                                                             23
       B.   Regulatory Requirements                                             23
       C.   Definitions                                                         23
       D.   Loans To Insiders By The Bank                                       24
       E.   Loans To Related Interests And Associates Of Insiders               24
       F.   Approval Of Loans To Insiders And Employees                         24
       G.   Loans To An Insider By A Borrower Of The Bank:                      24
       H.   Loans By An Insider To A Borrower Of The Bank:                      24
       I.   Regulatory Reporting Requirements:                                  25
       J.   Compliance                                                          25



Common Good Bank Lending Policies             March 8, 2008                         PAGE: 2
VII.    APPRAISAL/EVALUATION POLICY                                                    25
        A.   Purpose                                                                   25
        B.   Definitions                                                               25
        C.   Responsibility For Implementation                                         26
        D.   Selection And Appointment Of Appraisers                                   27
        E.   Appraiser Classifications And Qualifications                              27
        F.   Engagement                                                                28
        G.   Assistance                                                                28
        H.   Appraiser Independence, Reporting And Compensation                        28
        I.   Minimum Appraisal/Evaluation Requirements                                 28
        J.   Transactions Requiring An Appraisal                                       30
        K.   Transactions Requiring A Summary Evaluation                               30
        L.   Transactions Requiring A Limited Evaluation                               30
        M.   Transactions Requiring Property Tax Assessment As Evidence Of Valuation   30
        N.   General Requirements                                                      30
        O.   Currency Of Appraisals/Evaluations                                        31
        P.   Appraisal/Evaluation Review And Enforcement                               31
        Q.   Designation Of Appraisal Review Personnel                                 32
        R.   Availability Of Appraisals To Applicants:                                 32
VIII.   ENVIRONMENTAL RISK                                                             32
        A.   Purpose Of Policy:                                                        32
        B.   Environmental Awareness:                                                  32
        C.   Pre-Application                                                           32
        D.   Appraiser's Responsibility:                                               32
        E.   Loan Documentation:                                                       33
        F.   Monitoring During Term Of Loan                                            33
        G.   Foreclosure                                                               33
        H.   Reporting                                                                 33
IX.     REAL ESTATE LOANS - GENERAL                                                    33
        A.   Mortgages - Types Of Investments:                                         33
        B.   Types Of Eligible Properties:                                             34
        C.   Term And Loan To Value - General:                                         34
        D.   Loan Term And Loan To Value Limits                                        35
        E.   Loan Term And Loan To Value Limits - Construction                         35
        F.   Loans That Do Not Meet Loan To Value Limits                               36
        G.   Debt To Income Ratios:                                                    36
        H.   Coverage Ratio                                                            36
        I.   Credit History                                                            36
        J.   Authority To Approve/Deny                                                 36
        K.   Approvals With Exceptions To This Policy                                  37
        L.   Second Review Of Denied Loans.                                            37
X.      1 TO 4 FAMILY RESIDENTIAL MORTGAGE LENDING PROCEDURES                          37
        A.   The Application                                                           37
        B.   Prequalification                                                          38
        C.   Application Documentation                                                 39
        D.   Expenses                                                                  39
        E.   Insurance                                                                 39
        F.   File Documentation                                                        39
        G.   Property Underwriting Considerations                                      40



Common Good Bank Lending Policies             March 8, 2008                             PAGE: 3
        H. Financial Underwriting Considerations                    41
        I. Other Underwriting Considerations                        42
        J. Financial Documentation and Verifications Required.      43
XI.     COMMERCIAL REAL ESTATE LENDING PROCEDURES                   43
        A.   General                                                43
        B.   Borrower Eligibility                                   43
        C.   Loan Terms                                             43
        D.   Second Mortgage Financing By Others                    44
        E.   Underwriting Considerations                            44
        F.   File Maintenance - Updated Financials Required         45
        G.   Exceptions                                             45
XII.    CONSTRUCTION/IMPROVEMENT LENDING PROCEDURES                 45
        A.   Objective                                              45
        B.   Application Documentation                              45
        C.   Appraisal                                              46
        D.   Disbursement Process                                   46
        E.   File Documentation                                     47
XIII.   HOME EQUITY LINES OF CREDIT                                 47
        A.   Objectives                                             47
        B.   Establishment Of Terms And Conditions:                 47
        C.   Allocation Of Funds For Home Equity Lines Of Credit:   47
        D.   Loan To Value Ratios                                   48
        E.   Interest Rate                                          48
        F.   Term                                                   48
        G.   Security                                               49
        H.   Property Restrictions                                  49
        I.   Other Underwriting Standards - Income, Credit, Etc     49
        J.   Authority To Approve/Deny                              49
        K.   Second Review Of Denied Loans                          49
        L.   Home Equity Lending Recordkeeping:                     49
XIV.    CONSUMER LOANS                                              50
        A.   Objectives:                                            50
        B.   Types Of Consumer Loans:                               50
        C.   Allocation Of Funds For Consumer Loans:                50
        D.   Collateral Requirements                                50
        E.   Debt To Income Ratios:                                 50
        F.   Credit History:                                        50
        G.   Authority To Approve Or Deny Consumer Loans            51
        H.   Second Review Of Denied Loans                          51
XV.     CONSUMER LOAN PROCEDURES                                    51
        A.   All Loans May Be Made On                               51
        B.   Automobile Loans                                       51
        C.   Property Improvement Loans                             52
        D.   Recreational And Leisure Vehicle Loans                 52
        E.   Personal Loans                                         52
        F.   Mobile Homes                                           53
        G.   Closed-End Loans On Owner Occupied Real Estate.        54
        H.   Overdraft Protection Loans                             55


Common Good Bank Lending Policies             March 8, 2008          PAGE: 4
       I.   Non-Installment Note Underwriting                            55
       J.   The Application And Borrower                                 55
       K.   Financial Considerations                                     55
       L.   Other Underwriting Considerations                            56
       M.   Financial Documentation and Verifications Required.          56
       N.   The File                                                     57
XVI.   COMMERCIAL LOANS                                                  57
       A.   Objectives                                                   57
       B.   Types Of Commercial Loans:                                   57
       C.   Allocation Of Funds For Commercial Loans:                    57
       D.   Collateral Requirements                                      58
       E.   Coverage Ratio                                               58
       F.   Credit History:                                              58
       G.   Authority To Approve Or Decline Commercial Loans             58
       H.   Approvals With Exceptions To This Policy                     58
       I.   Second Review Of Denied Loans                                59
XVII. COMMERCIAL LOAN PROCEDURES                                         59
       A.   All Loans May Be Made On:                                    59
       B.   Types Of Loans Available                                     59
       C.   General Underwriting Considerations                          61
       D.   The File                                                     63
XVIII. FLOOD INSURANCE COMPLIANCE POLICY                                 63
       A.   Objective                                                    63
       B.   Pre-Application Procedure                                    63
       C.   Determination Of Flood Hazard Area Designation               64
       D.   Conditions In Loan Commitment                                64
       E.   If Property In Special Flood Hazard Area                     64
       F.   Servicing Responsibility                                     64
XIX.   PASSBOOK LOANS                                                    64
       A. Objectives                                                     64
       B. Authority To Establish Terms                                   64
       C. Authority To Approve/Reject                                    64
XX.    COLLECTION POLICY                                                 65
       A. Responsibility                                                 65
       B. Loans Secured By Real Estate And Home Equity Loans             65
       C. Consumer/Commercial Loans – Not Secured By Real Estate         65
XXI.   COLLECTION PROCEDURES                                             66
       A. Responsibility                                                 66
       B. Loans Secured By Real Estate And Home Equity Lines Of Credit   66
       C. Consumer/Commercial Loans – Not Secured By Real Estate         69
XXII. ASSET CLASSIFICATION POLICY                                        71
       A.   Investments                                                  72
       B.   Non-Mortgage Consumer Loans                                  72
       C.   Non-Mortgage Commercial Loans                                72
       D.   Mortgage Loans Secured By 1-4 Family Real Estate             73
       E.   Mortgage Loans On Other Than 1-4 Family Real Estate          74


Common Good Bank Lending Policies            March 8, 2008                PAGE: 5
           F. Real Estate Owned                                                                            74
           G. In-Substance Foreclosure                                                                     74
           H. Responsibility                                                                               74
XXIII. LOAN LOSS RESERVE POLICY                                                                            74
           A.   Mortgage Loans Secured By 1-4 Family Real Estate                                           74
           B.   Loans Secured By Other Than 1-4 Family Real Estate                                         75
           C.   Consumer Non-Mortgage Loans                                                                75
           D.   Commercial Non-Mortgage Loans                                                              75


                                     I.      GENERAL GUIDELINES
A.    Purpose
The Board of Directors of the Common Good Bank (the Bank) has adopted the lending policies described in this
document, in order to assist the Bank's management in the safe and sound operation of the Bank, in
accordance with the Bank's mission to advance the common good of all. The Board of Directors recognizes the
Bank's obligations, under Federal Fair Lending laws and the Community Reinvestment Act, in meeting the credit
needs of the communities which it serves and has designed these policies to be consistent with that obligation.
B.    Considerations
Objective: These are the considerations that our survival and our mission depend upon.

In establishing and revising the bank's lending policies, The Board of Directors must take into consideration all
factors that may significantly impact the safety and soundness of the Bank or the common good of all. These
factors will include, at a minimum:
       1.     loan portfolio and geographic diversification
       2.     interest rate risk
       3.     deposit trends and liquidity requirements
       4.     local, regional and national trends and conditions
       5.     the well-being of the bank's customers, the local community, the wider community and the world.
C.    Social and Environmental Responsibility
      1.        The Bank will lend only to socially and environmentally responsible individuals, companies and
                organizations.
      2.        Companies to which the Bank extends a commercial loan must report on their social and
                environmental impact and sustainability.
      3.        Secured loans will require at least 5% of the funds to be earmarked for environmental or cost-
                effective energy-efficiency improvements unless and until the asset meets the Bank's standards
                detailed in the Policy on Environmental Responsibility (which may include the LEED Green Building
                standard, emissions standards for automobile loans, and standards for energy efficiency and/or
                renewable energy).
      4.        All borrowers must sign a pledge of social and environmental responsibility.
D.    Lending Areas
Objective: For economic justice, communities should enjoy the benefit of investments made with their savings.

In keeping with the Community Reinvestment Act, and in our efforts to promote the economic well being of the
communities in and around Western Franklin County and, later, other communities where the Bank attracts a
substantial constituency, the majority of the loans made by the bank will be made to borrowers who reside in the
delineated lending areas, on property located in the delineated areas, or on property where the sale of that
property originates in the delineated areas. Occasionally, loans will be made outside of the delineated areas;
however, such lending will not constitute a significant portion of our loan activity.




Common Good Bank Lending Policies                    March 8, 2008                                           PAGE: 6
The delineation of our primary and secondary lending areas merely sets forth the initial area of operations of our
institution. We expect to lend, within each of our lending areas, a percentage of the Bank's available funds
roughly equal to the percentage of the Bank's deposits that come from that area. We recognize that from time-
to-time business conditions may drive a greater proportion of lending activity in one area than the other but
expect to attain a balanced ratio of loans and deposits between our primary and secondary lending areas over
time. Our lending community is subject to change as the Bank grows, as patterns of commercial development
change, and as populations shift. As these changes occur, we will attempt to maintain a proportional balance of
loans and deposits from each of our lending areas.

      1.    Primary Lending Area
            Objective: Our focus on cooperation and community will be most effective within distinct
            communities with a strong sense of their identity as a community. Western Franklin County ("West
            County"), at the heart of our initial lending area, is such a community. Focusing a large fraction of
            our initial publicity and lending activity on this core community will allow us to prove the
            effectiveness of our model most quickly.

            The bank has delineated its primary lending area as THE 9 MASSACHUSETTS TOWNS OF
            WESTERN FRANKLIN COUNTY DIRECTLY SURROUNDING SHELBURNE FALLS:
                   Ashfield           Buckland          Charlemont
                   Colrain            Conway            Hawley
                   Heath              Shelburne         Rowe

      2.    Secondary Lending Area
            Objective: Most of the Bank's founders live and work in this area. The area is just large enough to
            support a new bank easily, is largely rural (making some of the Bank's features particularly
            attractive) and is supportive of innovation and community-oriented initiatives.

            The bank has delineated its secondary lending area as THE 41 MASSACHUSETTS TOWNS
            WITHIN 20 MILES OF SHELBURNE FALLS:
                   Amherst            Ashfield          Bernardston     Buckland
                   Charlemont         Chesterfield      Colrain         Conway
                   Cummington         Deerfield         Erving          Florida
                   Gill               Goshen            Greenfield      Hadley
                   Hatfield           Hawley            Heath           Huntington
                   Leverett           Leyden            Monroe          Montague
                   Northampton        Northfield        Pelham          Peru
                   Plainfield         Rowe              Savoy           Shelburne
                   Shutesbury         Sunderland        Wendell         Westhampton
                   Whately            Williamsburg      Windsor         Worthington

      3.    New Lending Areas (replaced by Policy on Branching)
            Objective: As the Bank grows, this policy will provide rough guidance, to maintain economic justice
            while supporting communities in growth toward establishing a Branch Office.

            The Bank may declare as a distinct New Lending Area any contiguous geographic community in
            which at least 50 residents have deposited in the Bank an aggregate total of $200,000 or more.
E.    Loan Products And Concentration Limits:
Objective: A balanced variety of loan types reduces risk, thereby contributing to the Bank's safety and
soundness.




Common Good Bank Lending Policies         August 20, 2006                                                 PAGE: 7
The Board of Directors and senior management in accordance with the specific underwriting policies and
procedures adopted for each loan type shall establish the Portfolio Concentration Limits, terms, and conditions
for each loan type.

      1.    The Bank's primary loan products, the products governed by this policy, are:
            a)   Residential mortgages (Monthly and biweekly payment loans)
            b)   Home equity loans (Monthly payment loans)
            c)   Commercial mortgages (Monthly payment loans)
            d)   Commercial loans (Monthly payment time and demand loans)
            e)   Passbook loans (Demand loans)
            f)   Other consumer loans. (Monthly payment, time and demand loans)

      2.    Portfolio Concentration Limits by Asset Category:

Asset Category                                    % Of Total Assets                     % Of Total Assets
                                                     Maximum                               Minimum
Residential Mortgages                                        70%                                  10%
Commercial Mortgages                                         20%                                   5%
Home Equity Loans                                            10%                                   0%
Consumer/Student/Passbook Loans                              20%                                   5%
Commercial Loans                                             70%                                  30%
TOTAL LOANS                                                  80%                                  70%

      3.    Portfolio Concentration Limits for Commercial Mortgages

Type Of Commercial Mortgage                                               % Of Total Commercial Mortgages -
                                                                                      Maximum
5 Unit or Greater Residential Commercial Properties                                          40%
Office Space                                                                                 40%
Other Retail/ Combination Retail and Other                                                   40%
Nursing Home/Intermediate Care Facilities                                                    20%
Gas Stations, Industrial, Working Farms, Shopping Centers, Bowling
                                                                                             20%
Alleys, Schools, Undeveloped Land
Churches                                                                                     10%
Restaurants                                                                                  10%
All Other Property Types                                                                     5.0%


F.    Authority to Establish Rates and Fees and to Approve Loans
Objective: This level of business detail is properly the province of the staff – not of the Board of Directors or of
the public. As the person with overall responsibility for running the business, the Chief Executive Officer (CEO)
may at his or her discretion reserve or delegate this authority.
        1.     The Chief Executive Officer (CEO) shall have the authority to establish the rates of interest and
               amount of origination and other fees, if any, which the bank will charge for each type of loan
               offered by the Bank.
        2.     Subject to specific limitations established by loan type elsewhere in this policy, the CEO shall
               have the authority to designate those members of the bank's staff who have the authority to
               approve and decline loans.
        3.     A listing of the staff members so authorized and their various approval authorities shall be
               provided not less frequently than annually to the Board of Directors.
        4.     Included with this authority is the authority to appoint a loan committee made up of Officers or
               Loan Officers of the Bank.




Common Good Bank Lending Policies          August 20, 2006                                                   PAGE: 8
        5.     The CEO shall also have the authority to limit the loan types and the amounts that a Bank Officer
               or Loan Officer may approve or decline.
        6.     For the purpose of the bank's Lending Policies, staff members who are designated as "Loan
               Officers" may be an appointed or elected officer of the bank, or may be an employee.
G.    Responsibility for Monitoring, Allocations, Records and Reporting
Objective: These responsibilities are critical to the Bank's soundness and accountability.
     1.     Monitoring Of Market Conditions
     Senior management shall monitor and keep the Board of Directors informed as to changes in the
     demographics, economy, valuation trends and other market conditions within each of the bank's service
     areas.
     2.     Allocation Of Funds
     The CEO shall allocate funds to the Loan Department, for lending.
     3.     Lending Recordkeeping
     The Loan Department shall be responsible for maintaining a record of all approvals and denials of loan
     applications, with related exceptions and reasons.
     4.     Lending Activity Reports
     At each regular monthly meeting of the Board of Directors, the bank's senior management shall submit to
     the Board, for its review, a report of all loan applications for which funding was granted or denied since the
     last such report.


                              II.      HOUSING POLICY STATEMENT
Objective: Shelter is a basic need of all people.

It is the policy of the Common Good Bank to support housing finance through the origination of mortgages and
home equity loans within the bank's market area, and to participate in affordable housing programs administered
by local and regional housing authorities.

The bank also supports housing finance by investing in mortgage-backed securities issued by government-
sponsored enterprises.

The bank shall make both fixed-rate and adjustable-rate mortgages available to all qualified individuals for
residential purposes, within the guidelines established by the Board of Directors.


                      III.     FAIR LENDING PLAN AND PROCEDURES
A.    Objective
To ensure that the Bank‟s lending practices comply with Fair Lending Requirements and the Equal Credit
Opportunity Act, the Common Good Bank has established a policy of making sound loans to all qualified
applicants. The Common Good Bank will not discriminate in its lending procedures regardless of race, creed,
color, national origin, sexual orientation, military status, age, sex, marital status, disability, or familial status of
any applicant or applicants or any member, stockholder, director, officer or employee of such applicant or
applicants or of the prospective occupants or tenants of such housing accommodation, land or commercial
space associated with its lending activities. The Common Good Bank will also not discriminate based on the
applicant‟s receipt of public assistance, or the borrower's good-faith exercise of rights under the Consumer
Credit Protection Act. The objective of this policy statement is to assist the management and employees of the
bank in the adherence to and administration of this nondiscrimination policy.
B.    Oversight
The Audit Committee of the Board of Directors shall fulfill the role of the “Fair Lending Committee” and is
designated responsibility for compliance with Fair Lending Laws.
C.    Training


Common Good Bank Lending Policies           August 20, 2006                                                     PAGE: 9
This Plan should includes a training program that provides adequate training to new hires and current
employees, including management and other key personnel, and provides lending personnel with at least semi-
annual updates on fair lending issues. Compliance personnel should administer and conduct the training
program and participants should certify that they understand and commit to upholding the principles of
Executive Law Section 296-a. and the policies and procedures contained in the Plan.
D.    Implementation
All management officials are expected to implement this policy by:
      5.  Distribution of the Policy Statement
          a)     To all management personnel with responsibility for lending operations and procedures
          b)     To all loan officers and to any other individuals who might be in a position to receive loan
                 applications
          c)     To collections officers
          d)     To marketing officers
      6.  Extending this Plan to the institution‟s refinancing, collection and foreclosure practices;
      7.  Describing the policy through publication or reference in all issues or releases of employee
           handbooks, personnel manuals, and similar literature;
      8.  Publicizing the fair lending/equal-opportunity-in-lending policy through news stories or other
           publications of the bank;
      9.  Stipulating in the Plan how the disclosure and documentation to an applicant that he or she meets
           underwriting standards that typically would qualify him or her for a conventional loan product;
      10. Emphasizing in the orientation programs or new employees in all departments and at all levels the
           equal-opportunity-in-lending policy of the Bank and its day-to-day implementation; and
      11. Including Equal Housing Lender statements in loan advertising
E.    Examples Of What Is Considered Unlawfully Discriminatory
      1.    In the case of applications for credit with respect to the purchase, acquisition, construction,
            rehabilitation, repair or maintenance of any housing accommodation, land or commercial space to
            discriminate against any such applicant because of the race, creed, color, national origin, sexual
            orientation, military status, age, sex, marital status, disability, or familial status of such applicant or
            applicants or any member, stockholder, director, officer or employee of such applicant or applicants,
            or of the prospective occupants or tenants of such housing accommodation, land or commercial
            space, in the granting, withholding, extending or renewing, or in the fixing of the rates, terms or
            conditions of, any such credit;
      2.    To discriminate in the granting, withholding, extending or renewing, or in the fixing of the rates,
            terms or conditions of, any form of credit, on the basis of race, creed, color, national origin, sexual
            orientation, military status, age, sex, marital status, disability, or familial status;
      3.    To use any form of application for credit or use or make any record or inquiry which expresses,
            directly or indirectly, any limitation, specification, or discrimination as to race, creed, color, national
            origin, sexual orientation, military status, age, sex, marital status, disability, or familial status;
      4.    To make any inquiry of an applicant concerning his or her capacity to reproduce, or his or her use or
            advocacy of any form of birth control or family planning;
      5.    To refuse to consider sources of an applicant's income or to subject an applicant's income to
            discounting, in whole or in part, because of an applicant's race, creed, color, national origin, sexual
            orientation, military status, age, sex, marital status, childbearing potential, disability, or familial
            status;
      6.    To discriminate against a married person because such person neither uses nor is known by the
            surname of his or her spouse – (this paragraph shall not apply to any situation where the use of a
            surname would constitute or result in a criminal act)
      7.    If, because of an applicant's or class of applicants' race, creed, color, national origin, sexual
            orientation, military status, age, sex, marital status or disability, or familial status,
            a)     An applicant or class of applicants is denied credit in circumstances where other applicants of
                   like overall credit worthiness are granted credit, or



Common Good Bank Lending Policies          August 20, 2006                                                   PAGE: 10
            b)    Special requirements or conditions, such as requiring co obligors or reapplication upon
                  marriage, are imposed upon an applicant or class of applicants in circumstances where
                  similar requirements or conditions are not imposed upon other applicants of like overall credit
                  worthiness.
F.    Examples of What Is Not Considered Discriminatory
      1.    If credit differentiations or decisions are based upon factually supportable, objective differences in
            applicants' overall credit worthiness, which may include reference to such factors as current income,
            assets and prior credit history of such applicants, as well as reference to any other relevant factually
            supportable data; provided, however, that no creditor shall consider, in evaluating the credit
            worthiness of an applicant, aggregate statistics or assumptions relating to race, creed, color,
            national origin, sexual orientation, military status, sex, marital status or disability, or to the likelihood
            of any group of persons bearing or rearing children, or for that reason receiving diminished or
            interrupted income in the future.
      2.    The consideration of age in determining credit worthiness is not discriminatory when age has a
            demonstrable and statistically sound relationship to a determination of credit worthiness.
G.    Responsibility for Implementing the Fair Lending/ECOA Policy
The responsibility for implementing this policy is assigned to the Chief Executive Officer, who will render
assistance and support for those seeking help in implementing the equal-opportunity-in-lending policy.
      1.    Forms review as described below
      2.    Review of all loan procedures
H.    Loan And Collection Procedures And Credit Evaluation Standards
Every applicant will be judged on the basis of his or her own credit rating and income unless such applicant
specifically requests the consideration of another's income or credit history.
      1.      Prohibited acts:
              a)   Discounting of:
                  (1)    Spouse's income
                  (2)    Part-time income
                    (3) Income from alimony, child support, or separate maintenance
            b)      Use of assumptions or aggregate statistics relating to the likelihood that any group of persons
                    will bear or rear children or will receive diminished or interrupted income in the future.
      2.    Collateral security
            In considering the individual's creditworthiness, the value of the security property is a proper
            consideration; however, the fact that the security property is in a certain geographical area shall not
            in itself be grounds for loan turndown. Accordingly, this Bank will not refuse to lend in a particular
            area solely because of the age of the homes or the income level or racial composition of that area.
      3.    Age of borrower
            Provided the applicant has reached the legal age stipulated by the Commonwealth of
            Massachusetts, the age of the applicant as such must not be a criterion for loan rejection or for
            discouraging the filing of a loan application. If the applicant's long-term income and financial
            reserves are adequate to support the extension of the credit until its maturity, considering such
            things as occupation and length of time to retirement, pensions, deferred retirement income, and the
            adequacy of the security being offered where the term of the loan will exceed applicant's life
            expectancy, the loan must be considered acceptable. Age will be considered in our underwriting
            only in connection with evaluating any of the foregoing factors of creditworthiness.
      4.    Special Instructions to Loan Officers and Collections Officers
            All loan officers and persons receiving loan applications are hereby instructed:
            a)      Not to ask any questions that do not appear on the loan application form
            b)      Not to discourage any applicants from applying on the basis of race, creed, color, national
                    origin, sexual orientation, military status, age, sex, marital status, disability, familial status, the
                    receipt of public assistance, or the borrower's good-faith exercise of rights under the



Common Good Bank Lending Policies           August 20, 2006                                                     PAGE: 11
               Consumer Credit Protection Act. Loan officers are specifically advised not to make any
               remarks to potential applicants that may discourage those potential applicants from filling out
               an application for a loan.
          c)   To assist any loan applicant in filling out his or her loan application unless otherwise
               requested by the applicant.
     5.   Loan Application Procedures
          a)   It is the policy of the Common Good Bank to accept only:
                (1)   signed, written loan applications on Bank provided forms OR
                (2)    applications submitted through loan application forms on the Bank's website,
                       accompanied by electronic payment of an application fee.
          b)    All loan originators are hereby instructed to refrain from any activity that gives the appearance
                of taking an application without the completion of a signed, written application form. Such
                referenced activities include, but are not limited to:
                (1)   Such things as substantial discussion of potential borrower creditworthiness or eligibility
                      for a loan over the telephone
                (2)    Discussion of borrower creditworthiness or eligibility for a loan in a face-to-face
                       conversation prior to the completion of a signed, written application
          c)    No inquiries shall be made as to whether any of the applicant's income is derived from
                alimony, child support, or separate maintenance payments, unless the loan officer discloses
                to the applicant that such income need not be revealed if the applicant does not desire the
                creditor to consider such income.
          d)    No questions shall be asked regarding the birth control practices, intentions concerning the
                bearing or rearing of children, or capability to bear children of the loan applicants or their
                spouses.
          e)    No question may be asked regarding the race, color, religion, national origin, handicap,
                familial status, or sex of an applicant or any other person in connection with a loan
                transaction.

                However, in credit applications related security provided by the applicant's dwelling,
                applicants will be asked to respond to Federal discrimination monitoring questions concerning
                race and sex located on the application, either by initialing that they do not wish to respond to
                the questions or by marking the corresponding boxes on the application concerning their race
                and sex.

                In the event that an applicant does not wish to respond (e.g. - either refuses altogether, or
                initials indicating a desire not to respond) he/she must be informed by the loan officer that the
                officer is required to make note of both race and sex of the applicant on another Federally
                required form regardless of the applicant's decision not to respond.
          f)    The signature of a spouse shall not be required on any document unless:
                (1)   The spouse will be permitted to use the account.
                (2)   The income of the spouse is desired by the applicant to be included in the income
                      available to meet the Bank's credit standards;
                (3)   The spouse wishes to become contractually liable; or
                (4)   The applicant is relying on alimony, child support, or separate maintenance payments
                      from a spouse or former spouse as a basis for repayment of the credit requested.
                (5)    The signature is required under state law to create a valid lien, pass clear title, or waive
                       inchoate rights to property.
          g)    All loan applicants will be notified in writing of action taken on a loan within
                (1)   30 days after receipt of a completed loan application (our goal is to respond in not less
                      than 10 days)




Common Good Bank Lending Policies       August 20, 2006                                                  PAGE: 12
                   (2)   30 days after taking adverse action on an incomplete application
                   (3)   30 days after taking adverse action on an existing account
                   (4)    90 days after notifying the applicant of a counter offer if the applicant does not
                          expressly accept or use the credit offered.
            h)     Where the applicant's request for a loan is denied or the Bank has decided not to grant credit
                   in substantially the amount or terms requested by the applicant, the notification must be in
                   writing and contain the Equal Credit Opportunity Act Notice and either:
                   (1)   A statement of specific reasons for the action taken; or
                   (2)   A disclosure of the applicant's right to a statement of reasons within 30 days after
                         receipt by the creditor of a request made within 60 days after such notification, including
                         the name, address, and telephone number of the person or office from which the
                         statement of reasons may be obtained.
            i)     Assumptions - buyers of property indicating an interest in assuming a mortgage shall be
                   treated as applicants.
            j)     Additional requirements
                   (1)   If so requested by an applicant for credit, loan officers shall furnish such applicant with
                         a statement of the specific reasons for rejection of the applicant's application for credit.
                   (2)   If so requested in writing by an individual who is or was married, the Common Good
                         Bank shall maintain in its records a separate credit history for any such individual. Such
                         separate history shall include all obligations to the bank as to which the bank has notice
                         with respect to which any such person is or was individually or jointly liable.
                   (3)   No provision of this section providing spouses the right to separately apply for credit,
                         borrow money, or have separate credit histories maintained shall limit or foreclose the
                         right of the Bank, under any other provision of law, to hold one spouse legally liable for
                         debts incurred by the other.
                   (4)   The provisions of these procedures, as they relate to age, shall not apply to persons
                         under the age of eighteen years.
      6.    Appraisals
            It is the routine practice of the bank that, upon payment by the applicant of the cost of the appraisal
            and within a reasonable period of time, a copy of the appraisal performed in connection with the
            loan application will be provided to the applicant.
I.    Marketing
A process by which marketing strategies directed to any protected class applicants or minority communities
shall be reviewed and periodically evaluated by the Compliance Officer prior to distribution to ensure that those
strategies comply with the provisions of Executive Law Section 296-a.
J.    Monitoring
The fair lending compliance program should monitor the implementation of and adherence to the Plan‟s policies
and procedures.
      1.     Monitoring shall be conducted for the institution as a whole, as well as sub-parts of the institution.
      2.     This Plan shall provide for monitoring, on an ongoing basis, the institution‟s consumer, small
             business and mortgage application and underwriting process as well as the institution‟s pricing
             policies.
      3.     In particular, the compliance program shall ensure that the business personnel understand their
             duties and responsibilities under this Plan and that such duties are being carried out.
      4.     This Plan shall provide for an automatic and timely review by a higher level supervisor of all
             applications that are rejected or withdrawn.
K.    Complaint Resolution




Common Good Bank Lending Policies          August 20, 2006                                                  PAGE: 13
A process by which complaints from applicants relating to alleged violations of Executive Law Section 296-a are
resolved efficiently without being unduly burdensome to the applicant shall be established;
L.    Forms Review
All loan application forms and procedures must be reviewed at least annually to ensure that this policy of equal
opportunity in lending is being carried out.
M.    Plan review
The Plan should be periodically reviewed by the Compliance Officer and senior management to ensure that it
remains current.


IV.     TRUTH IN LENDING POLICY/REGULATION Z
A.    Background And Objective
The Truth in Lending Act (the “Act”) was enacted by Congress in 1968 and is implemented by Federal Reserve
Regulation Z (the “Regulation”). The Act and Regulation assure a meaningful disclosure of credit terms so that
consumers will be able to compare more readily the various terms available and avoid the uninformed use of
credit. The Act and Regulation also give the consumer the right to cancel certain credit transactions that involve
a lien on a consumer‟s principal dwelling and protect the consumer against inaccurate and unfair credit billing
and credit card practices. In addition, the Regulation requires a maximum interest rate to be stated in variable-
rate contracts secured by the consumer‟s dwelling, and imposes limitations on home equity plans. The Act and
Regulation do not, however, tell financial institutions how much interest they may charge or whether they must
grant a consumer a loan.
B.    Applicability
In general, the Regulation applies to each individual or business that offers or extends credit, when these four
conditions are met:
      1.     The credit is offered or extended to consumers;
      2.     The offering or extension of credit is done regularly;
      3.     The credit is subject to a finance charge or is payable by a written agreement in more than four
             installments; and
      4.     The credit is primarily for personal, family or household purposes.
C.    Policy Statement
It is our policy to comply with all requirements of the Truth in Lending Act and Regulation Z. In order to
implement those requirements, we:
        1.     Developed a written Truth in Lending policy
        2.     Appointed the Compliance Officer
               To implement the policy by developing procedures and providing training
        3.     For all credit
               a)    Properly credit a consumer‟s account and handle credit balances;
               b)    Provide rescission notices to the appropriate consumers on a timely basis;
               c)    Accept a consumer‟s waiver of right to rescind only for a bona fide financial emergency;
               d)    Make proper oral disclosures in response to consumer inquiries about the cost of credit;
               e)    Insure that all advertising is in compliance with the Act and the Regulation;
        4.     For open end credit:
               a)    Make the required open-end credit initial disclosures in a form the consumer can keep before
                     a transaction on the plan takes place;
               b)    Send periodic statements;
               c)    Furnish a summary statement of billing rights with each periodic statement;
               d)    Provide at least 15 days‟ advance notice of any change in terms;



Common Good Bank Lending Policies         August 20, 2006                                                PAGE: 14
          e)    Properly credit a consumer‟s account;
          f)    Following billing error resolution procedures, including applicable time limits;
     5.   For closed-end credit
          Furnish the proper completed disclosures on a timely basis
     6.   Audit
          To insure that Truth in Lending policies and procedures are complied with.
     7.   Train all employees upon hire and when procedures change.
D.   Structure For Implementation
     1.   Board of Directors
          a)     The Board of Directors sets policy and conveys the priority and importance of compliance with
                 the Truth in Lending Act and Regulation Z.
          b)     The Board shall review and approve this policy whenever amendments are required. The
                 Board delegates to the Compliance Officer responsibility and authority for instituting,
                 monitoring and suggesting revisions of the policy.
     2.   Senior Management
          The Chief Executive Officer shall oversee the development and implementation of the procedures
          that affect this policy.
     3.   Compliance Officer
          The Compliance Officer is responsible for developing policies that ensure compliance with the Act
          and Regulation. Their duties include, but are not limited to, the following:
          c)     Provide assistance and guidance to all employees regarding interpretation and
                 implementation of the Act, Regulation and bank policy;
          d)     Develop operating procedures to insure compliance with the law and this policy;
          e)     Ensure that all consumer loan forms are in compliance with the Act and Regulation;
          f)     Serve as the bank liaison with all federal agencies for matters pertaining to the Act and
                 Regulation;
          g)     Ensure that all employees are trained in procedures relating to the Act, Regulation and bank
                 policy.
     4.   Responsible Departments
          h)     Lending
                (1)   Loan Origination – All Credit
                      (a)    Ensures that consumers are provided with proper disclosures in a timely manner;
                (2)   Open-end credit
                      (a)    If a security interest is or will be retained or acquired in a consumer‟s principal
                             dwelling as a result of advances under an open-end credit plan, we follow the
                             applicable rescission procedures, including furnishing the notice of the right to
                             rescind and delaying our performance.
                      (b)    Home equity lines
                             (i)     Deliver the home equity brochure at the time of application or within three
                                     business days of receiving an application other than in person;
                             (ii)    Furnish pre-application disclosures on or with the home equity line
                                     application or within three business days of receiving an application other
                                     than in person;
                             (iii)   Collect only refundable fees before the end of the three business days after
                                     the consumer receives the disclosures and brochure (or six days from the
                                     date of mailing) and refund any fees we collect when the consumer rejects
                                     the plan before the time period expires;
                             (iv)    Refund all fees when a consumer rejects a plan due to a change in terms;



Common Good Bank Lending Policies        August 20, 2006                                               PAGE: 15
               (3)   Closed end
                     (a)    Furnish completed disclosure statements before consummation and, in the case
                            of residential mortgage transactions subject to the Real Estate Settlement
                            Procedures Act, furnish early disclosures within three business days of receipt of
                            a written application and in no event later than consummation;
                     (b)    Furnish the proper disclosures for refinancing;
                     (c)    Furnish the proper disclosures for assumptions;
                     (d)   If a security interest is or will be retained or acquired in a consumer‟s principal
                           dwelling, we follow the applicable rescission procedures, including furnishing the
                           notice of the right to rescind and delaying our performance.
          i)   Loan servicing
               (1)   All credit
                     (a)    When credit balances in excess of $1.00 are created, in consumer accounts:
                            (i)     Credit the balance amounts to those accounts;
                            (ii)    Refund the amounts upon receipt of a written request;
                            (iii)   Make a good faith effort to refund the amounts after six months without
                                    receipt of any request;
               (2)   Open-end credit
                     (a)    Sends periodic statements;
                     (b)    Furnishes a statement of billing rights;
                     (c)    Credits payments as of the date of receipt;
                     (d)    Follows billing error resolution procedures;
                     (e)    Home equity lines of credit
                            (i)     Do not terminate an account and demand payment, in advance of the
                                    original term, for repayment of the balance unless there is:
                                    (a)   Fraud or material misrepresentation;
                                    (b)   Failure to meet the repayment terms of the plan;
                                    (c)   An action or failure to act by the consumer that adversely affects our
                                          security for the plan or any right in the security;
                            (ii)    Maintain the same account terms, after the agreement has been entered
                                    into, unless:
                                    (a)   We are permitted to terminate the plan under (i) above;
                                    (b)   The change will unequivocally benefit the consumer;
                                    (c)   A specified change occurs when a specific event takes places, as
                                          provided in the initial agreement;
                                    (d)   The index or margin is changed because the original index is no
                                          longer available;
                                    (e)   The consumer specifically agrees to a certain change in writing at the
                                          time of the change;
                                    (f)   The change is insignificant;
                            (iii)   Do not reduce the credit limit and do not prohibit additional extensions of
                                    credit, except temporarily, under any of the following circumstances:
                                    (a)   When we are permitted to terminate the account under f. above;



Common Good Bank Lending Policies         August 20, 2006                                             PAGE: 16
                                  (b)   When the value of the dwelling securing the plan declines
                                        significantly;
                                  (c)   When the consumer‟s financial circumstances change materially;
                                  (d)   When the consumer defaults on any material obligation under the
                                        agreement;
                                  (e)   When government action restricts an APR increase;
                                  (f)   When our security interest is adversely affected due to government
                                        action and the security value is less than 120 percent of the credit
                                        line;
                                  (g)   When we are notified by a regulatory agency that continued advances
                                        constitute an unsafe and unsound practice;
                                  (h)   When the maximum APR is reached;
                           (iv)  Mail notice of adverse action to consumer within three days of reducing the
                                 consumer‟s credit line or freezing the account and respond properly when
                                 reinstatement is appropriate.
          j)   Loan Administration
               (1)   Open-end credit
                     (a)   Provides at least 15 days‟ advance notice for changes in terms
               (2)  Home equity lines of credit
                    For variable-rate home equity lines, base changes in the APR on an index that is
                    available to the public and not under the bank‟s control.
          k)   Marketing
               The Marketing Department ensures that all advertisements are in compliance with the Act and
               the Regulation. Duties associated with this responsibility include but are not limited to:
               (1)   Place advertisements that state only rates or other terms actually offered at the time;
               (2)   When triggering terms are advertised, properly disclose other prescribed credit terms
               (3)   If the APR is subject to increase after consummation, disclose that fact;
               (4)   Express all rates of finance charge only as an “annual percentage rate” using that term
                     or, as alternately permitted, using the abbreviation “APR”;
               (5)   When credit terms are advertised, they include the term “annual percentage rate” or
                     APR;
               (6)    Home equity lines of credit ads that refer to the possible tax deductibility of interest are
                      not misleading in that regard;
          l)   Testing
               A Truth in Lending Act sub-program is performed by internal audit that includes audits of all
               areas listed in section 4. (Responsible Departments), above. Audit also reviews this policy to
               ensure compliance with the requirements of the Act. The Compliance Officer has the
               authority to conduct regular and ad hoc reviews to ensure compliance. These reviews are
               independent of the bank's normal internal audit function.
          m)   Education
               The Compliance Officer provides assistance and guidance to all employees regarding
               interpretation and implementation of the Truth in Lending Act, Regulation Z and bank policy.
               All department heads are provided with this policy. The Compliance Officer and Department
               Managers implement training upon hire and change in procedure.
E.   Reports And Retention
     1.   disclosures



Common Good Bank Lending Policies       August 20, 2006                                                 PAGE: 17
          a)   General Disclosures
               The terms “finance charge” and “APR” are disclosed when required and are more
               conspicuous than any other required disclosure.
          b)   Home equity line of credit -- pre-application disclosure
               The following disclosures are furnished on or with the home equity line application or within
               three business days of receiving an application other than in person:
               (1)   A statement that the consumer should retain a copy of the disclosures;
               (2)   The manner in which an application must be submitted to obtain the specific disclosed
                     terms;
               (3)   An identification of any disclosed term that is subject to change before the plan opens;
               (4)   The fact that the consumer may receive a refund of all fees if the consumer elects not to
                     enter into the plan due to a change in terms before the agreement is final;
               (5)   The fact that the consumer‟s dwelling secures the line and in case of default the loss of
                     the dwelling may occur;
               (6)   The creditor‟s rights under certain conditions to:
                     (a)   Terminate the plan;
                     (b)   Require immediate repayment;
                     (c)   Impose fees upon termination;
                     (d)   Prohibit additional extensions of credit;
                     (e)   Reduce the credit limit;
                     (f)   Implement changes in the plan as specified in the initial agreement.
               (7)   A statement that the consumer may receive, upon request, the conditions that might
                     trigger the actions listed under (6) above;
               (8)   The payment terms for the draw and repayment periods, including:
                     (a)   The length of the draw and any repayment;
                     (b)   An explanation of how the minimum periodic payment will be computed;
                     (c)   The timing of periodic payments;
                     (d)   Whether a balloon payment may or will result;
                     (e)   A $10,000 example:
                           (i)     Using a recent APR;
                           (ii)    Showing the minimum periodic payment;
                           (iii)   Showing any balloon payment;
                           (iv)    Showing the time to pay off the balance.
               (9)   An itemization of fees imposed by the bank and when the fees are payable;
               (10) A good faith estimate of any fees that might be imposed by third parties to open the
                    account;
               (11) A statement that the consumer may receive upon request a good faith itemization of
                    any fees that might be imposed by third parties to open the account;
               (12) Transaction requirement under the plan, including:
                     (a)   Limitations on the number of advances that may be obtained during any time
                           period;
                     (b)   Limitations on the amount of credit that may be obtained during any time period;



Common Good Bank Lending Policies      August 20, 2006                                               PAGE: 18
                     (c)   Minimum outstanding balance requirements;
                     (d)   Draw requirements.
               (13) A statement that the consumer should consult a tax advisor;
               (14) For fixed-rate home equity lines, the recent corresponding APR and a disclosure that
                    the APR does not include costs other than interest;
               (15) For variable rate home equity lines, the following:
                     (a)   That the APR, payment or term may change;
                     (b)   That the APR excludes costs other than interest;
                     (c)   Identification and source of the index used;
                     (d)   How the rate will be determined;
                     (e)   That the consumer should ask about current:
                           (i)     Index value;
                           (ii)    Margin;
                           (iii)   Discount or premium;
                           (iv)    APR;
                     (f)   That the initial APR is not based on the index and margin used to make later rate
                           adjustments and the period of time the initial APR will be in effect;
                     (g)   The frequency of APR changes;
                     (h)   Rules relating to changes in the index value and APR and resulting changes in
                           the payment amount;
                     (i)   The limitations of APR changes;
                     (j)   Minimum periodic payment requirements;
                     (k)   A 15-year historical table;
                     (l)    That rate information will be provided with the periodic statement;
          c)   Periodic statements
               Periodic statements are sent on all open-end credit accounts and include the following
               disclosures:
               (1)   The balance in the account at the beginning of the billing cycle;
               (2)   An identification of each transaction on or with each periodic statement;
               (3)   The amount and date of any credit to the account;
               (4)   Each periodic rate used to compute the finance charge, the range of balances to which
                     each is applicable and the corresponding APR;
               (5)   If different periodic rates apply to different types of transactions, the types of
                     transactions to which each periodic rate applies;
               (6)   The balance amount to which each periodic rate was applied and an explanation of how
                     that balance was determined;
               (7)   If a balance is determined without first deducting all credits and payments made during
                     the billing cycle, that fact and the amount of the credits and payments;
               (8)   The amount of any finance charge debited or added to the account during the billing
                     cycle, using the term “finance charge”;
               (9)   The components of the finance charge individually itemized and identified to show the
                     amounts due to the application of a periodic rate and the amounts of any other type of
                     finance charge;


Common Good Bank Lending Policies      August 20, 2006                                             PAGE: 19
               (10) If a finance charge was imposed during the billing cycle, the annual percentage rate(s)
                    using the term “annual percentage rate”;
               (11) The amounts, itemized and identified by type, of any charges other than finance
                    charges debited to the account during the billing cycle;
               (12) The closing date of the billing cycle and the account balance on that date;
               (13) The date by which or period within which the new balance must be paid to avoid
                    additional finance charges;
               (14) The summary statement of billing rights.
          d)   Closed-end credit -- disclosure
               The following disclosures are provided to consumers prior to consummation or in the case of
               certain residential mortgage transactions no later than three business days following receipt
               of application:
               (1)   The disclosures are grouped together, segregated from other material are made clearly
                     and conspicuously and are in a form the consumer may keep;
               (2)   Any itemization of amount financed is separated from the segregated disclosures;
               (3)   The bank name;
               (4)   The “amount financed“, using that term, and a brief description, such as ”the amount of
                     credit provided to you or on your behalf”;
               (5)   A separate written itemization of the amount financed, except where there is included a
                     statement that the consumer has the right to receive written itemization and the
                     consumer has not indicated in a space provided that such an itemization is described;
               (6)   The “finance charge”, using that term, and a brief description, such as “the dollar
                     amount the credit will cost you”;
               (7)   The „‟annual percentage rate”, using that term, and a brief description, such as “the cost
                     of your credit as a yearly rate”;
               (8)   The variable rate disclosures if the annual percentage rate may increase after
                     consummation and:
                     (a)   The loan is not secured by the consumer‟s principal dwelling with a term of more
                           than one year:
                           (i)     The circumstances under which the rate may increase;
                           (ii)    Any limitations on the increase;
                           (iii)   The effect of an increase;
                           (iv)    An example of the payment terms that would result from an increase;
                     (b)   The loan is secured by the consumer‟s principal dwelling with a term of more than
                           one year:
                           (i)     The fact that the transaction contains a variable rate feature;
                           (ii)    A statement that variable-rate disclosures have been provided earlier;
               (9)   The number, amounts and timing of payments scheduled to repay the obligation;
               (10) The “total of payments”, using that term, and a descriptive explanation such as “the
                    amount you will have paid when you have made all scheduled payments”;
               (11) If the obligation has a demand feature, that fact and also that the disclosures are based
                    on an assumed maturity of one year if no alternate maturity date is stated;
               (12) If the obligation includes a finance charge computed from time to time by application of
                    a rate to the unpaid principal balance, a statement indicating whether a penalty may be
                    imposed if the obligation is prepaid in full or alternatively, if the obligation includes any



Common Good Bank Lending Policies       August 20, 2006                                                PAGE: 20
                     other type of finance charge, a statement indicating whether the consumer is entitled to
                     rebate of any finance charge if the obligation is prepaid in full;
               (13) Any dollar or percentage charge that may be imposed before maturity due to a late
                    payment;
               (14) The fact that the creditor has or will acquire a security interest in property purchased as
                    part of the transaction, or in other property identified by item or type;
               (15) The disclosures required to exclude certain insurance premiums from the finance
                    charge;
               (16) The disclosures required to exclude certain security interest charges from the finance
                    charge;
               (17) A statement that the consumer should refer to the appropriate contract document for
                    information about nonpayment, default, the right to accelerate the maturity or obligation
                    and repayment rebates and penalties;
               (18) In a residential mortgage transaction, a statement as to whether a subsequent
                    purchaser of the dwelling may be permitted to assume the remaining obligation on its
                    original terms;
               (19) If the consumer is required to maintain a deposit account as a condition of the specific
                     transaction, a statement that the APR does not reflect the effect of the required deposit
                     will exist.
          e)   Closed-end credit -- assumption disclosures
               The following disclosures are required for assumptions:
               (1)   The unpaid balance of the obligation assumed;
               (2)   The total charges imposed by the bank in connection with the assumption;
               (3)   If the obligation includes a finance charge computed from time to time by application of
                     a rate to the unpaid principal balance, a statement indicating whether a penalty may be
                     imposed if the obligation is prepaid in full or alternatively, if the obligation includes any
                     other type of finance charge, a statement indicating whether the consumer is entitled to
                     rebate of any finance charge if the obligation is prepaid in full;
               (4)   Any dollar or percentage charge that may be imposed before maturity due to a late
                     payment;
               (5)   The fact that the creditor has or will acquire a security interest in property purchased as
                     part of the transaction, or in other property identified by item or type;
               (6)   The APR originally imposed on the obligation;
               (7) The payment schedule and the total of payments based on the remaining obligation.
          f)   Closed-end credit -- Adjustable Rate Mortgage disclosures
               (1)   Loans covered are those in which:
                     (a)   The APR may increase after consummation;
                     (b)   The transaction is secured by the consumer‟s principal dwelling;
                     (c)   The term is greater than one year
               (2)   The following disclosures are furnished at the time the application form is provided or a
                     non-refundable fee is paid by the consumer, whichever is earlier:
                     (a)   Consumer Handbook on Adjustable Rate Mortgages;
                     (b)   A loan program disclosure for each variable-rate program in which the consumer
                           expresses and interest. The following disclosures, as applicable, are provided:
                           (i)   The fact that the interest rate, payment or term of the loan can change;




Common Good Bank Lending Policies      August 20, 2006                                                  PAGE: 21
                            (ii)    The index or formula used in making adjustments, and a source of
                                    information about the index or formula;
                            (iii)   An explanation of how the interest rate and payment will be determined,
                                    including an explanation of how the index is adjusted, such as by the
                                    addition of a margin;
                            (iv)    A statement that the consumer should ask about the current margin value
                                    and current interest rate.
                            (v)     The fact that the interest rate will be discounted, and a statement that the
                                    consumer should ask about the amount of the interest rate discount;
                            (vi)    The frequency of interest rate and payment changes;
                            (vii)   Any rules relating to:
                                    (a)   Changes in the index;
                                    (b)   Interest rate;
                                    (c)   Payment amount;
                                    (d)   Outstanding loan balance
                            (viii) A 15-year historical table;
                            (ix)    An explanation of how the consumer may calculate payments for the
                                    amount to be borrowed;
                            (x)     The maximum interest rate and payment amount for a $10,000 loan
                                    originated at the most recent interest rate in the historical example
                                    assuming maximum increases in rates and payments under the program;
                            (xi)    The fact that the loan program contains a demand feature;
                            (xii)   The type of information that will be provided in notices of adjustments and
                                    the timing of such notices;
                            (xiii) A statement that disclosure forms are available for the bank‟s other
                                   variable-rate loan programs.
          g)    Rescission notice
                For a transaction subject to rescission, we deliver two copies of the right to rescind to each
                consumer entitled to rescind. The notice identifies the transaction clearly and conspicuously
                discloses the following:
                (1)   The retention or acquisition of a security interest in the consumer‟s principal dwelling;
                (2)   The consumer‟s right to rescind the transaction;
                (3)   How to exercise the right to rescind, with a form for that purpose, designating the bank‟s
                      address;
                (4)   The effects of rescission;
                (5) The date the rescission period expires;
     2.   Retention
          We retain evidence of compliance with the Act and the Regulation for two years after the date the
          disclosures were required to be made or other action was required to be taken.


                           V.        LOANS TO ONE BORROWER
A.   Purpose Of Policy




Common Good Bank Lending Policies         August 20, 2006                                               PAGE: 22
The intent of this policy is not to restrict the bank's lending activity or to preclude qualified borrowers from
obtaining loans from the bank, but to control the bank's exposure to potential loss relative to extensions of credit
to any one borrower.
B.    Loan Limitations
The total extension of credit to any one borrower shall be limited to 5% of the bank's capital, unless it is
determined that the applicant can clearly demonstrate the ability to repay a higher debt limit without undue risk
to the bank. In determining cumulative debt to the bank, the bank shall include all outstanding mortgages, home
equity loans, consumer loans, demand notes, etc. in the name of the borrower individually, jointly, as guarantor,
etc.
All applications which when added to existing debt with the bank exceed 5% of the bank's capital, must be
approved by the CEO and must be so noted in the records of the bank.
C.    Disclosure Of Policy
If the loan interviewer determines that the loan being requested would result in the applicant having cumulative
debt to the bank in excess of 5% of the bank's capital, the interviewer shall be required to inform the applicant of
the bank's policy and that the loan may be denied based upon the policy.
        1.    Acceptance Or Withdrawal
              If the applicant so requests, the application may be accepted by the interviewer for processing. If
              the applicant does not wish the application to be processed it shall be treated as a withdrawn
              application, not as a denial.
D.    Denial
       1.     Denial Based On Policy
If the application is processed and subsequently denied based on the bank's policy, the applicant shall be so
informed, in writing.
       2.     Denial For Other Reasons
              If the application is denied for reasons other than the bank's policy, even if it would have been
              denied based on the bank's policy, the formal denial shall be based on such other reasons.


                                  VI.     INSIDER TRANSACTIONS
A.    Purpose
The purpose of this policy is to prevent insiders, their related interests, or associates from being advantaged in
their dealings with the bank simply because the insider is associated with the bank. It is the responsibility of
each insider to fully comply with this policy and to bring to the attention of the bank any loan or extension of
credit which may constitute an insider transaction.
B.    Regulatory Requirements
The bank's dealings with its insiders, their related interests and associates, and its insiders dealings with their
related interests and associates, and their loans to and from borrowers of the bank, are covered in a variety of
regulations to which the bank is subject; including the Banking Laws of the Commonwealth of Massachusetts,
the Rules and Regulations of the Federal Deposit Insurance Corporation and Regulation O of the Federal
Reserve System.
C.    Definitions
For the purpose of this policy the following definitions shall apply:
      1.    Insider
            An insider is any member of the Board of Directors or officer of Common Good Bank, or any
            employee of the bank who has a Power of Attorney that authorizes them to borrow from the bank on
            behalf of a bank customer.
      2.    Related Interest - Related interests include:
            a)    Any partnership of which the insider is a member




Common Good Bank Lending Policies          August 20, 2006                                                 PAGE: 23
             b)   Any corporation or organization or association in which the insider is the beneficial owner,
                  either singly or in the aggregate, of 10 percent or more of any class of equity securities or 10
                  percent of the equity interest
             c)   An insider's spouse
             d)   Any relative of the insider or the insider's spouse, if such relative has the same home as the
                  insider
             e)   An insider's parent, stepparent, child or stepchild
             f)   Any affiliate of the insider, and
             g)   Any political or campaign committee that is controlled by an insider or where the funds or
                  services of which will benefit the insider.
      3.     Associate - an associate of an insider is:
             a)   Any person who is a partner of an insider, or
             b)   Any person or entity which is the beneficial owner, either singly or in the aggregate of 10
                  percent or more of any class of equity securities or 10 percent of the equity interests of any
                  corporation, organization or association which is a related interest of an insider.
      4.     Loan or Extension of credit includes:
             a)   Any borrowings of an insider, their related interests or associates from the bank
             b)   Any borrowings of an insider from an individual or entity who is a borrower from the bank
             c)   Any loans or extensions of credit granted by an insider to an individual or entity who is a
                  borrower from the bank, and
             d)   Any loan or extension of credit by an officer, their related interests or associates from a
                  correspondent bank of the Common Good Bank.
D.    Loans To Insiders By The Bank
             a)     Loans to Trustees, Directors, Officers, and Employees may be granted only upon the same
                    terms and conditions as the bank would use to make a comparable loan to the general public;
                    except by use of a Power of Attorney granted them by a bank customer.
             b)     Insiders may not participate in the deliberations or voting relative to any loan under
                    consideration to their related interest or associates.
E.    Loans To Related Interests And Associates Of Insiders
Loans made by the bank to the related interests or associates of an insider may be granted only upon the same
terms and conditions as the bank would use to make a comparable loan to the general public.
F.    Approval Of Loans To Insiders And Employees
      1.     loans to an officer
             Must be approved by the Loan Committee of the Board or Board of Directors.
      2.     Loans to non-officer employees
             Must be approved by the CEO or the Loan Committee of the Board of Directors.
G.    Loans To An Insider By A Borrower Of The Bank:
It is the responsibility of all insiders to report to the bank, in writing, any loans or extensions of credit that they
obtain from an individual or entity that is a borrower from the bank.
        1.    The report to the bank must include:
              a)    The name, address and relationship, if any, of the lender
              b)    The date, amount and terms of the extension of credit
              c)    The purpose for which the proceeds have been or are to be used, and
              d)    Whether the source of the funds are represented by a loan, or extension of credit from the
                    Common Good Bank.
H.    Loans By An Insider To A Borrower Of The Bank:



Common Good Bank Lending Policies            August 20, 2006                                                    PAGE: 24
It is the responsibility of all insiders to report to the bank, in writing, any loans or extensions of credit that they
grant to an individual or entity that is a borrower from the bank.

The report to the bank must include:
      1.    The name, address and relationship, if any, of the borrower
      2.    The date, amount and terms of the loan or extension of credit
      3.    The purpose for which the proceeds have been or are to be used, and
      4.    Whether the proceeds are to be applied toward an outstanding loan of the borrower at the Common
            Good Bank.
I.    Regulatory Reporting Requirements:
Each regulatory agency has reporting requirements relative to loans and extensions of credit to insiders, their
related interests and associates. In addition to the reporting requirements specified above, the following reports
are to be made to the Board of Directors and retained by the Bank:
             a)    An annual listing by each insider of their related interests and associates.
             b)    An annual report by the bank's executive officers of their indebtedness, and that of their
                   related interests and associates, to the bank and to its correspondents.
             c)    A report by the bank's executive officers, within 10 days, whenever they obtain a loan or other
                   extension of credit from a depository institution, other than for the purpose of financing the
                   education of their children or which represents a first lien on their residence, which loan(s)
                   cumulatively with all other outstanding loans and extensions of credit from depository
                   institutions equals or exceeds $100,000. The report must state:
                    (1)   The lender's name
                    (2)   The date and amount of the loan or extension of credit
                    (3)   Any security for the loan, and
                    (4)   The purpose for which the proceeds have been or are to be used.
J.    Compliance
It is the responsibility of each insider to comply with this policy and to make such reports as are required. It shall
be the responsibility of the Internal Auditor to monitor compliance with this policy and all applicable regulations
relative to insider transactions and to report to the Board of Directors any known or suspected violations thereof.


                            VII.     APPRAISAL/EVALUATION POLICY
A.    Purpose
The Common Good Bank provides real estate and other appropriate forms of financing for the communities in
which it operates. Major importance is placed on making economical, nondiscriminatory home mortgages
available for the residents of these communities along with other forms of lending which contribute to the
economic growth and stability of these same communities.

Appraisals/Evaluations prepared for these and a number of other purposes relating to the Bank's loan and
investment activities must be of high quality, nondiscriminatory, prepared in accordance with professional
standards, and the particular needs and concerns of the Bank as articulated in these policies.

In order to insure that the objectives are achieved, the Board of Directors is adopting certain policies and
procedures believed to be necessary and incident to these goals.

In the event of default, the bank, in order to recover its investment may be required to dispose of the collateral
property pledged to secure the loan. In such an event, the bank may be relying solely on the value of the
security property for that recovery. A valid appraisal/evaluation is the single most effective way to ascertain the
value of that security property prior to the bank's investment in a loan against that property.
B.    Definitions


Common Good Bank Lending Policies            August 20, 2006                                                    PAGE: 25
      1.    Appraisal
            A written statement independently and impartially prepared by a qualified appraiser setting forth an
            opinion as to the market value of an adequately described property as of a specific date(s)
            supported by the presentation and analysis of relevant market information and developed under
            USPAP.
      2.    Appraisal Foundation
            The Appraisal Foundation established on November 30, 1987, as a not-for-profit corporation under
            the laws of the State of Illinois.
      3.    Appraiser
            A person employed by the bank on an independent fee basis, to conduct appraisals/evaluations and
            render appraisal/evaluations reports for the benefit of the Bank.
            Note: This definition extends to approve appraisers of other institutions from whom loans are
            purchased in whole or part in a secondary market transaction. In such cases a copy of the loan
            sellers written appraisal/evaluation policies must be obtained and found to be satisfactory by the
            bank.
      4.    Evaluation
            A written statement independently and impartially prepared by a qualified individual setting forth an
            opinion as to the market value of an adequately described property as of a specific date [See
            Standards for Summary and Limited Evaluations (Sec. V) for further information].
      5.    Market Value
            The most probable price which a property should bring in a competitive and open market under all
            conditions requisite to a fair sale, the buyer and seller each acting prudently, knowledgeably and
            assuming the price is not affected by undue stimulus. Implicit in this definition are the
            consummation of a sale as of a specified date and the passing of title from seller to buyer under
            conditions whereby:
            a)      Buyer and seller are typically motivated;
            b)      Both parties are well informed or well advised, and each acting in what he considers his own
                    best interest;
            c)      A reasonable time is allowed for exposure in the open market;
            d)      Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements
                    comparable thereto; and
            e)      The price represents the normal consideration for the property sold, unaffected by special or
                    creative financing or sale concessions granted by anyone associated with the sale.
      6.    Market Value As If Complete On Appraisal/Evaluation Date
            Market Value of the property with all proposed construction, conversion, or rehabilitation
            hypothetically completed, or under other specified hypothetical conditions, as of the date of
            appraisal/evaluation.
      7.    State Certified Appraiser
            Any individual who has satisfied the requirements for certification in a State or territory whose
            criteria for certification as a real estate appraiser currently meet the minimum criteria for certification
            issued by the Appraiser Qualifications Board of the Appraisal Foundation and which has not been
            rejected by the Appraisal Subcommittee of the Federal Financial Institutions Examination Council.
      8.    State Licensed Appraiser
            Any individual who has satisfied the requirements for licensing in a State or territory where the
            licensing procedures comply with title XI of the Financial Institutions Recovery, Reform and
            Enforcement Act and which has not been rejected by the Appraisal Subcommittee of the Federal
            Financial Institutions Examination Council.
      9.    USPAP
            The Appraisal Foundation's Uniform Standards of Professional Appraisal Practice as amended from
            time to time.
C.    Responsibility For Implementation
The chief executive officer of the Bank or his designee is specifically assigned the responsibility of implementing
and maintaining the policies adopted by the Board and to recommend for the Board's consideration such
additions, revisions or adjustments as they feel are necessary and proper from time to time.


Common Good Bank Lending Policies          August 20, 2006                                                   PAGE: 26
D.    Selection And Appointment Of Appraisers
      1.    Responsibility of the Chief Executive Officer of the Bank
            Is to screen appraisers, to determine which applicants meet the Bank's criteria and to select
            qualified appraisers.
      2.    The number of approved appraisers
            Should be sufficient to assure the ability to avoid conflicts of interest and to assure that assignments
            can always be performed in a timely and effective manner.
      3.    The Bank may employ appraisers
            In order to clearly identify the educational and experience criteria for appraisers as adopted herein
            and described below, all appraisers are to be qualified individually, not as a firm and they must so
            sign the value certification as a principal appraiser.
      4.    approval Term
            The standard term for which each appraiser is approved shall typically be for a term ending one
            calendar year after the year in which the appraiser was initially approved. Following acceptable
            performance review any appraiser may be reappointed for an additional term of one year. Should
            the term of an approved appraiser expire prior to the annual review and reappointment action such
            appraiser's approved status shall continue until conclusion of his review and reappointment.
      5.    Records shall be maintained by Management
            Which identify all appraisers currently authorized to render appraisals/evaluations for the bank.
E.    Appraiser Classifications And Qualifications
Membership with a current educational certification from a professional organization devoted to fostering
education and professional standards may be considered as evidence of meeting the qualifications outlined
below. However, membership in any particular organization is not adequate evidence in and of itself or
competence and is also not a requirement for approval.
     1.    Residential Appraisers may appraise and/or evaluate:
           a)     The fee interest in an existing or proposed residential property up to and including four units
                  or a construction project of not more than four single family residences; and
           b)     The fee interest in individual lots for residential use,
     2.    Qualifications for Residential Appraiser
           a)     Successful completion of a basic course in real estate appraising conducted by a junior
                  college; by an accredited four-year college or from an extension program thereof; by a
                  recognized professional appraisal society; or other course of instruction that has been
                  approved by the bank; and
           b)     Six months of full-time appraisal/evaluation experience as Residential Appraiser with
                  adequate field training in procedures appropriate to appraising/evaluating existing and
                  proposed residential properties up to and including four units; or
           c)     One year of appraisal/evaluation experience as a fee appraiser with experience primarily in
                  one to four family residential properties.
     3.    Residential/Commercial Appraiser
           A Residential Commercial Appraiser is permitted to appraise/evaluate any type of real property that
           may be accepted as the security for a loan by the bank.
     4.    Qualifications for Residential/Commercial Appraiser
           a)     Successful completion of an advanced course in real estate appraising conducted by a junior
                  college; by an accredited four-year college or from an extension program thereof; by a
                  recognized professional appraisal society; or a course of instruction that has been approved
                  by the Bank; or
           b)     Endorsement by a recognized professional appraisal society as a qualified senior real
                  property appraiser; and
           c)     At least four years of appraisal experience as a fee appraiser gained within the past ten
                  years, with significant experience appraising/evaluating commercial properties.
     5.    State Certified or Licensed Appraisers




Common Good Bank Lending Policies         August 20, 2006                                                 PAGE: 27
            Appraisers employed by the bank as independent fee appraisers must be either State certified or
            licensed, as appropriate for appraisal assignments as specified below. This certification or licensing
            requirement is in addition to and not in substitution of any other appraiser qualifications contained in
            these policies.
            a)    A State certified appraiser is required to prepare all appraisal reports when:
                  (1)   The transaction value is more than $250,000
                  (2)   The real estate to be appraised is complex in that the property, forms of ownership, or
                        market conditions are atypical. The Bank will assess projects as necessary and make
                        the final determination of when the subject property is complex. If a property being
                        appraised by other than a State certified appraiser is determined to be complex, a
                        certified appraiser must either approve or co-sign the appraisal report or be engaged to
                        complete the appraisal assignment.
                  (3)   Notwithstanding the foregoing licensing or certification requirements, evaluations where
                        the transaction value is less than or equal to $250,000 may be prepared by appraisers
                        who are not licensed or certified, but who otherwise meet the qualifications of
                        residential or residential/commercial appraiser.
F.    Engagement
      1.    Specific appraisal/evaluation assignments
            Will be made in writing by memorandum.
      2.    Exception to "in Writing" Rule
            For one-to-four family residences where time is of the essence appraisers may be authorized
            verbally to proceed with an appraisal/evaluation. However, such verbal authorization shall
            subsequently be confirmed by the bank in writing.
      3.    Assurance of appraisal/evaluation integrity
            An appraisal/evaluation may be utilized by the bank only if the appraisal/evaluation states that the
            Common Good Bank or other federally related lender is/was the client for whom the appraisal was
            performed.
G.    Assistance
The bank shall assist the appraiser in obtaining information and documentation needed to fulfill the engagement.
This includes legal descriptions, plans and specifications, material lists regarding improvements, surveys, copies
of leases, rent rolls, sales histories, operating statements and other pertinent data necessary to a proper
analysis. Loan applicants are expected to provide the bank with such information whenever it is reasonably
available.
H.    Appraiser Independence, Reporting And Compensation
      1.    Appraiser independendence
            Appraisers must be independent of the lending, investment and collection functions of the Bank.
            Appraisers must have no other involvement in the transaction, and no direct or indirect interest,
            financial or otherwise, in the property to be appraised/evaluated or in the outcome of the
            transaction.
      2.    appraiser compensation
            All appraisers are to look solely to the Bank for compensation. If the cost of the appraisal/evaluation
            is to be borne by the proposed borrower, the Bank should arrange for an advance deposit by the
            borrower, from which payment to the appraiser will be made.
I.    Minimum Appraisal/Evaluation Requirements
      1.    All Appraisals must:
            a)    Except for Uniform Residential Appraisal Reports (URAR), be prepared in narrative format.
            b)    Conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") adopted by
                  the Appraisal Standards Board of the Appraisal Foundation, as amended from time to time
                  except that the Departure Provision of the USPAP shall not apply.
            c)    Be based upon a definition of market value as set forth in these policies.



Common Good Bank Lending Policies         August 20, 2006                                                 PAGE: 28
          d)     Be written and contained sufficient information and analysis to support the Bank's decision to
                 engage in the transaction.
          e)     Analyze and report appropriate deductions and discounts for any proposed construction, or
                 any completed properties that are partially leased or leased at other than market rents as of
                 the date of the appraisal or any tract developments with unsold units;
          f)     Contain sufficient supporting documentation with all pertinent information reported so that the
                 appraiser's logic, reasoning, judgment, and analysis in arriving at a conclusion indicate to the
                 reader the reasonableness of the market value reported;
          g)     Include a description of the real estate being appraised.
          h)     Follow a reasonable valuation method that addresses the direct sales comparison, income,
                 and cost approaches to market value, reconciles those approaches, and explains the
                 elimination of each approach not used.
          i)     Identify whether or not any part of the subject is located in a special flood hazard area and
                 disclose both the source used and method employed to make the determination.
          j)     State the Real property interest being appraised, including any encumbrances.
          k)     State the scope, purpose, and intended use of the appraisal.
          l)     State and reference a definition of the value to be estimated.
          m)     State the effective date of the appraisal and the date of the report.
          n)     State all assumptions and limiting conditions that affect the analyses, opinions, and
                 conclusions.
          o)     State the appraiser's opinion of the highest and best use of the real estate, if appropriate.
          p)     Include an estimate of market value as herein defined on the appraisal date.
          q)     Set forth the information considered, the appraisal procedures followed, and the reasoning
                 that supports the analyses, opinions, and conclusions.
          r)     Set forth any additional information that may be appropriate to show compliance with or
                 clearly identify and explain permitted departures from, the requirements of these policies.
          s)     Include a signed certification in accordance with USPAP.
          t)     If information required or deemed pertinent to the completion of an appraisal report is
                 unavailable, that fact shall be disclosed and explained in the appraisal.
     2.   all Summary Evaluations must:
          a)     Be based upon a definition of market value as set forth in this policy.
          b)     Be written and presented in a narrative format or on forms that satisfy all the requirements of
                 the Bank's policies;
          c)     Be sufficiently descriptive to enable the reader to ascertain the estimated market value and
                 the rationale for the estimate;
          d)     Report appropriate deductions and discounts for any proposed construction;
          e)     Include a description of the real estate being evaluated;
          f)     Follow a reasonable valuation method that addresses the direct sales comparison, income,
                 and cost approaches to market value, reconciles those approaches, and explains the
                 elimination of each approach not used.
          g)     Identify whether or not any part of the subject is located in a special flood hazard area and
                 disclose both the source used and method employed to make the determination.
          h)     State the purpose and intended use of the evaluation.
          i)     State the effective date of the evaluation and the date of the report.
          j)     State the appraiser's opinion of the highest and best use of the real estate, if appropriate.
          k)     Include an estimate of market value as herein defined on the evaluation date.
          l)     Include a signed certification substantially comparable to USPAP certification requirements.
          m)     If information required or deemed pertinent to the completion of an evaluation report is
                 unavailable, that fact shall be disclosed and explained in the evaluation.
     3.   all Limited Evaluations must:



Common Good Bank Lending Policies       August 20, 2006                                                 PAGE: 29
           a)    Be based upon a definition of market value as set forth in this policy;
           b)    Be written and presented in a narrative format or on forms that satisfy all the requirements of
                 the Bank's policies;
           c)    Include a description of the real estate being evaluated;
           d)    Identify whether or not any part of the subject is located in a special flood hazard area and
                 disclose both the source used and method employed to make the determination.
           e)    State the effective date of the evaluation and the date of the report.
           f)    State the appraiser's opinion of the highest and best use of the real estate, if appropriate.
           g)    Include an estimate of market value as herein defined on the evaluation date.
           h)    Include a signed certification substantially comparable to USPAP certification requirements.
           i)    If information required or deemed pertinent to the completion of an evaluation report is
                 unavailable, that fact shall be disclosed and explained in the evaluation.
J.    Transactions Requiring An Appraisal
      1.   Residential Real Estate Mortgages exceeding $150,000.
      2.   consumer loans secured by real estate exceeding $150,000.
      3.   Commercial Real Estate Mortgages exceeding $100,000
      4.   Commercial Loans secured by real estate exceeding $100,000
K.    Transactions Requiring A Summary Evaluation
      1.   Residential Real Estate Mortgages not exceeding $150,000,
      2.   consumer loans secured by real estate not exceeding $150,000.
      3.   Commercial Real Estate Mortgages not exceeding $100,000
      4.   commercial loans secured by real estate not exceeding $100,000.
L.    Transactions Requiring A Limited Evaluation
      1.   consumer non-mortgage loans not exceeding $50,000.
      2.   Commercial Non-Mortgage loans not exceeding $50,000.
M.    Transactions Requiring Property Tax Assessment As Evidence Of Valuation
Residential mortgage loans not exceeding 40% LTV and collateral mortgage loans (Further restricted by the
following conditions):
       1.   Non-purchase (refinance) transactions only
       2.   Borrower credit score to be 700 or higher
       3.   Borrower debt-to-income ratios not to exceed policy guidelines
N.    General Requirements
      1.   Form Reports
           a)   For existing or proposed one-to-four family residences and existing multi-family property,
                appraisal/evaluation reports for Federally Related Transactions where an appraisal/evaluation
                is required may be prepared on forms such as the Uniform Residential Appraisal Reports
                (URAR) prescribed by the Federal National Mortgage Bank or the Federal Home Loan
                Mortgage Corporation. Appraisal reports shall be prepared in compliance with form
                instructions and the appraisal standards of those agencies unless the Bank believes that the
                property is of such an unusual nature that a narrative format should be utilized
           b)   In performing other appraisals for the Bank, each appraiser shall be guided by USPAP, the
                code of professional ethics and professional standards of the appraisal organization (if any) to
                which the appraiser belongs, and the policies of the Bank. In the event of a conflict, the
                policies of the Bank shall prevail and in cases where standards differ in detail, the more
                restrictive shall apply.




Common Good Bank Lending Policies       August 20, 2006                                                PAGE: 30
            c)  In the event an appraiser finds the policies of this section in conflict with the binding
                requirements of the professional group to which he or she belongs, the assignment should be
                declined.
      2.    Knowledge and Experience
            d)  Not all appraisers are qualified for all assignments. Therefore, prior to entering into an
                agreement to perform a real estate appraisal/evaluation both the Bank and the appraiser must
                carefully consider the knowledge and experience that will be required to complete the
                appraisal/evaluation. The appraiser must either:
                  (1)   Have the knowledge and experience necessary to competently complete the
                        appraisal/evaluation; or
                  (2)   Immediately disclose the lack of knowledge or experience to the Bank.
                  (3)   In the event the Bank still desires the appraiser to proceed, the appraiser shall take all
                        steps necessary or appropriate to complete the appraisal/evaluation service
                        competently.
O.    Currency Of Appraisals/Evaluations
      1.    Each appraisal/evaluation
            Should be sufficiently current to reduce the likelihood that material changes in actual market
            conditions may have occurred by the time the loan or investment decision is made. Market volatility
            varies with type of property as well as local economic conditions. Therefore, subject to review by
            the Board as conditions warrant, the Bank requires that appraisals/evaluations report effective
            valuation dates within the following time span from the date of funds commitment:
            a)    One year for all properties for Appraisal, Summary and Limited Evaluation purposes.
            b)    Within a period equal to eighteen months for all properties, an appraisal may be brought
                  current through a letter update signed by the original appraiser, certifying that, in his or her
                  opinion, the value is unchanged. Such a certification should indicate the scope of the
                  appraiser's review and research.
            c)    Within a period equal to two years for all properties, a Summary/Limited Evaluation may be
                  brought current through a letter update signed by the original appraiser, certifying that, in his
                  or her opinion, the value is unchanged. Such a certification should indicate the scope of the
                  appraiser's review and research.
            d)    Following the expiration of the time span stipulated above, the Chief Executive Officer may
                  determine that a complete new appraisal/evaluation is required or that an extended revision,
                  reflecting significant changes in the property and/or the marketplace will suffice.
P.    Appraisal/Evaluation Review And Enforcement
The following procedure will be followed for review and audit upon receipt of an appraisal/evaluation:
      1.    Appraisal Review
            A properly trained and designated employee shall review the appraisal/evaluation to ascertain:
            a)    That the property appraised/evaluated is the same as the proposed security or investment;
            b)    That the definition of market value is correct;
            c)    That, where applicable, principal mathematical computations are accurate, and
            d)    That the appraisal/evaluation format and content generally follow these policies.
      2.    Residential Appraisals/Evaluations involving standard forms
            FHLMC standard form review requires only that the reviewer indicate that the review has been
            completed and that the appraisal/evaluation is accepted when all requested adjustments have been
            completed.
      3.    lack of comparison properties:
            Due to the fact that significant numbers of residential properties appraised in our market area lack
            comparison properties without the use of significant adjustments and/or with sale dates outside of
            regularly recognized parameters, reviewers may accept residential form appraisals with adjustments
            to and/or sale dates on comparison properties outside of recognized parameters.
      4.    Evidence of such reviews


Common Good Bank Lending Policies         August 20, 2006                                                PAGE: 31
            Should be placed in the loans files for future reference.
Q.    Designation Of Appraisal Review Personnel
It shall be the responsibility of the Chief Executive Officer to designate those employees authorized to review
appraisals/evaluations.
R.    Availability Of Appraisals To Applicants:
Federal Reserve Board Regulation B (Equal Credit Opportunity) requires the bank to make a copy of the
appraisal available to applicants for a mortgage, home equity loan, business loan or consumer loan which is
secured by a lien on a residential structure containing one to four units.
      1.    The bank will inform all affected applicants
            As a part of the Good Faith Estimate, that a copy of the appraisal will be made available at the time
            the bank makes a decision concerning their application.
      2.    If the application is approved
            The bank will provide a copy of the appraisal to the applicant prior to or at closing.
      3.    If the application is denied or withdrawn
            The bank will provide a copy of the appraisal at that time, if the property has been appraised.


                                  VIII. ENVIRONMENTAL RISK
A.    Purpose Of Policy:
The potential adverse effect of environmental contamination on the value of real property, and the potential for
liability under various environmental laws, are important factors in evaluating real estate transactions and in
making loans secured by real estate. The purpose of this policy is to address those concerns in order to protect
the bank against potential or actual environmental risk in connection with its real estate lending activities.
B.    Environmental Awareness:
      1.    Responsibility of Lending Department Personnel
            All personnel who are involved in the bank's real estate lending process should have the knowledge
            and experience to determine the types of environmental concerns that could affect the bank. Such
            knowledge may be ascertained through familiarity with the bank's lending areas, through public
            disclosures of environmental issues, and through information obtained by the bank and
            disseminated to them. It shall be the responsibility of all bank personnel to inform the Chief
            Executive Officer of any environmental matters that they ascertain and believe could have an
            adverse affect on the bank.
C.    Pre-Application
      1.    interviewer inquiry about environmental problems.
            The loan interviewer shall inquire of the applicant if there are any environmental problems
            associated with the subject property, or within a reasonable distance of the property (to be
            determined on a case by case basis).
      2.    interviewer's informed of a potential problem
            The applicant shall be immediately notified that the bank may not proceed with the processing of the
            application until such time as it can reasonably determine the extent of the potential environmental
            problem and the effect, if any, it may have on the security of the loan under consideration.
      3.    Notification to The Chief executive Officer
            The Chief Executive Officer shall be notified of the potential problem, so a determination can be
            made relative to continuing the application process. The Chief Executive Officer may require that
            an environmental review and analysis of the property be conducted, the cost of which shall not be
            borne by the bank.
D.    Appraiser's Responsibility:




Common Good Bank Lending Policies         August 20, 2006                                                PAGE: 32
It shall be the responsibility of the appraiser to perform a routine inspection of the property and its surrounding
area for apparent hazardous substances and/or detrimental environmental conditions. This includes reporting
the existence of buried fuel storage containers.
       1.     the appraiser reports an environmental risk
              The application shall not be processed any further unless the applicant is willing to incur the cost of
              having an environmental review and analysis performed by a qualified environmentalist who has
              been pre- approved by the bank.
       2.     property determined to be free of contamination:
              If the environmental review and analysis results in a determination that the property is totally free of
              any environmental contamination the application process shall be continued. Otherwise, it shall be
              discontinued and the applicant shall be informed of the bank's determination not to grant a loan on
              the subject property. This includes the required removal of the buried fuel tank with subsequent
              testing by a Bank approved firm to ensure that contamination has not occurred.
E.    Loan Documentation:
Loan documentation shall include language to safeguard the bank against potential environmental losses and
liabilities, including but not limited to the following:
         1.     The borrower is required to comply with all environmental laws, to disclose information about the
                environmental status of the property during the term of the loan, and to grant the bank the right to
                acquire information about actual or potential hazardous contamination by inspecting the property at
                any time during the term of the loan.
         2.     Provide that the bank has the right to call the loan, refuse to extend funds under a line of credit, or
                foreclose if hazardous contamination is discovered.
         3.     Indemnification of the bank for environmental liability associated with the real property collateral.
F.    Monitoring During Term Of Loan
Should during the term of the loan the bank become aware of actual or potential environmental problems
associated with real property collateral, the bank shall require the borrower to resolve the environmental
conditions and to take those actions that are necessary to protect the value of the real property.
G.    Foreclosure
Since the bank's exposure to environmental liability may increase significantly if it takes title to real property held
as collateral, the bank shall evaluate the potential environmental costs and the potential for environmental
liability in conjunction with its assessment of the value of the collateral in reaching a decision as to whether to
take title to the property by foreclosure or other means.
H.    Reporting
It shall be the responsibility of the bank's senior management to keep the Board of Directors fully informed of
any environmental problems associated with its real estate portfolio; and to review the bank's Environmental
Risk Policy with the Board of Directors not less frequently than annually.


                           IX.      REAL ESTATE LOANS - GENERAL
A.    Mortgages - Types Of Investments:
      1.     Primary type of mortgage
             The bank considers its primary type of mortgage to be the Adjustable Mortgage Loan (AML).
             However, the bank's management has the authority to offer fixed-rate mortgages whenever it
             determines that it is in the best interest of the bank for diversification or competitive reasons. As an
             additional service to its mortgagors, the bank offers the option of biweekly or monthly payments.
             Mortgagors who select the biweekly option shall be required to maintain a transaction account with
             the bank, against which their biweekly payments can be automatically debited.
      2.     Bank will consider conventional and insured loans.
      3.     Secondary Market Loans




Common Good Bank Lending Policies           August 20, 2006                                                   PAGE: 33
            Loans granted for sale in the secondary mortgage market may also be considered by the bank, in
            which case the bank may require title insurance, property surveys, private mortgage insurance, etc.
            All such loans whose terms are outside those currently in effect for local mortgages must be
            reported to the Board of Directors.
      4.    Participations with other lenders
            The bank as a means of sharing possible risk and/or to diversify the bank‟s loan portfolio may also
            consider the purchase of whole loans through private or public mortgage companies. All such loans
            whose terms are outside those currently in effect for local mortgages must be reported to the Board
            of Directors.
B.    Types Of Eligible Properties:
The Board of Directors has established the following types of properties as the types of properties on which the
bank will accept mortgage applications:
     1.     1-4 Family Owner Occupied Primary Residences
     2.     1-4 Family Owner Occupied Secondary Residences
     3.     1-4 Family Non-Owner Occupied Residential Property
     4.     Manufactured housing - acceptable types defined:
            a)    Single Family Owner Occupied Permanently Affixed Manufactured Housing. (Poured slab,
                  foundation or pier supports required - tongue and wheel axles removed)
            b)    Singlewide manufactured housing units must have been constructed within 25 years of
                  origination. Earlier models are ineligible as collateral for a loan.
     5.     Owner occupied MIXED RESIDENTIAL AND COMMERCIAL
            Defined as property which is generally residential in appearance and normal use, but which may
            have a commercial use in a portion thereof. Property that is commercial in appearance and normal
            use should be considered commercial regardless of occupancy.
     6.     Vacant land for residential development
     7.     5 or More Unit Residential Properties
     8.     Commercial Real Estate
            c)    Examples of Commercial Real Estate deemed acceptable as collateral for a mortgage from
                  the bank include:
                  (1)   Retail commercial and office property.
                  (2)   Mixed retail commercial and office property.
                  (3)   Mixed retail commercial and residential properties - defined as property that is
                        commercial in appearance and normal use but which may have a residential use in a
                        portion thereof.
            d)    Examples of Commercial Real Estate deemed unacceptable as collateral for a mortgage from
                  the bank include, but may not be limited to:
                  (1)   Industrial commercial property
                  (2)   Mobile home parks
                  (3)   Working farms (where the primary income available to support payments is derived
                        from the operation of the farm)
                  (4)   Any commercial property at which hazardous materials/wastes are stored for use in
                        connection with the operation of the business or where hazardous material/waste
                        including petroleum products are located on the premises for resale to the public.
C.    Term And Loan To Value - General:
      1.    Definition of value
            a)    Purchase Transactions




Common Good Bank Lending Policies        August 20, 2006                                               PAGE: 34
                  Value shall be based on the sale price or appraised value; whichever is less in the case of
                  arms length transactions and on the appraised value in the case on non-arms length
                  transactions or where Massachusetts Law supersedes.
            b)    Refinance
                  Value shall be based on the appraised value.
            c)    Vacant Land
                  Value shall be based upon the sale price (as evidenced by an executed purchase and sale
                  agreement) or appraised value, whichever is less.
            d)    Construction
                  (1)   Contracted construction - the lesser of the appraised value, as complete, of the
                        property, or the actual hard costs of construction including investment in land, well, etc.
                  (2)    Self built construction - additional consideration shall be given to labor equity; however,
                         such labor equity shall be limited to the equivalent of 25% of material costs involved in
                         the self-built portions of the construction
      2.    Restriction of collateral
            Notwithstanding the following, the Board of Directors may restrict the types of collateral on which
            the bank will grant mortgages, as well as establish lower Loan-to-Value Limits and shorter terms for
            mortgages.
D.    Loan Term And Loan To Value Limits
The maximum term and loan-to-value ratio permitted for which mortgages will be granted are as follows:

                                                                                            Maximum Loan To
Type Of Loan                                                      Maximum Term
                                                                                                 Value
                                                                 Conform to term for
disposition of owned real estate                                 appropriate property                100%
                                                                  type listed below
owner occupied 1-4 family (conventional - primary
                                                                       30 years                       80%
residence)
residential use vacant land                                            10 years                       70%

owner occupied 1-4 family (PMI - primary residence)                    30 years                      103%

owner occupied 1-4 family (secondary residence)                        20 years                       75%
singe family owner occupied manufactured housing -
                                                                       30 years                       80%
doublewide (conventioal - primary residence)
single family owner occupied manufactured housing -
                                                                       30 years                       95%
doublewide (PMI - primary residence)
single family owner occupied manufactured housing -
                                                                       20 years                       75%
singlewide
owner occupied mixed residential and commercial                        30 years                       80%
all nonowner occupied properties and 5 or more unit
                                                                       15 years                       75%
residential and all commercial properties
single family non-owner occupied                                       20 years                       80%

E.    Loan Term And Loan To Value Limits - Construction
      1.    The maximum term and loan-to-value ratio permitted for which construction/permanent mortgages
            will be granted are as follows:

                                         Maximum Total                                        Maximum Loan To
Type Of Loan                                                        Construction Term
                                         Term                                                      Value


Common Good Bank Lending Policies         August 20, 2006                                                 PAGE: 35
owner occupied 1-4 family                   30 years +
                                                                            1 year                     80%
(conventional primary residence)            construction term
owner occupied 1-4 family (contracted
only, no self built units allowed). *only   30 years +
                                                                            1 year                     90%
under certain conditions as noted           construction term
below.
owner occupied 1-4 family (PMI - no         30 years +
                                                                            1 year                     95%
self built units allowed)                   construction term
all non-owner occupied properties and       15 years +
                                                                            1 year                     75%
5 or more unit residential properties       construction term

      2.     *Construction Loans Without PMI
             Borrower must have sufficient verifiable assets and an appraised value to support 80% LTV and
             favorable FICO score (in excess of 720).
F.    Loans That Do Not Meet Loan To Value Limits
The bank's management shall have the authority to exceed the loan-to-value limits established by the Board in
connection with 1-4 family owner-occupied residences, if they determine such action is in the best interest of the
bank.
G.    Debt To Income Ratios:
Where applicable, borrower's debt to income ratios should not exceed:
     1.    housing ratio:
           a)     33% of gross monthly income for principal residence housing expense.
     2.    total debt ratio:
           b)     41% of gross monthly income for total debt.
H.    Coverage Ratio
It is anticipated that a percentage of the bank's real estate mortgage loans will be dependent on the income
generated by the underlying real estate for repayment. In the case of these loans, procedures will ensure that
cash flow analyses with adequate supporting documentation will be completed and include a determination of
projected “coverage ratio”.
        1.    Definitions
              a)     gi = gross income
              b)     oe = operating expenses (operating expenses do not include depreciation, amortization, one
                     time exceptional expenses or interest associated with the debt service)
              c)     ds = total debt service
              d)     cr = (gi - oe) / ds = coverage ratio
        2.    Minimum Coverage Ratio
              cr >= 1.1 (That is, gross income minus operating expenses must exceed debt service by 10% or
              more.)
I.    Credit History
A current (dated within 30 days of approval) written credit report shall be obtained on every applicant for a loan.
Applicant credit history should be substantially free of unexplained derogatory items and should be of sufficient
duration to establish a reasonable probability of the continuation of satisfactory status.
      1.     Inaccurate information
             The Board of Directors recognizes that credit reports occasionally contain inaccurate information
             and correction of such information frequently takes significant time. Therefore, where a borrower
             disputes the information provided by a report, the Lending Department shall use reasonable
             judgment in its analysis of the report and in determining the accuracy of the report.
J.    Authority To Approve/Deny



Common Good Bank Lending Policies           August 20, 2006                                               PAGE: 36
The following is the bank's policy relative to the authority of Loan Officers to approve or deny mortgage
applications. A separate document outlining individual limits provides further detail regarding approval ability.
      1.     Limits
             a)    The maximum amount of a 1-4 family residential mortgage application that the Chief
                   Executive Officer may authorize an Officer or a Loan Officer to approve or decline is
                   $250,000.
             b)    Any two members of the internal Loan Committee may approve 1-4 family residential
                   mortgage applications in accordance with the limits set forth in the approval authority
                   guidelines.
             c)    Any two members of the internal Loan Committee may approve 5+ family residential
                   mortgages and commercial mortgages up to a maximum amount of $150,000.
             d)    Mortgage applications on 5+ family and commercial property in excess of $150,000 shall be
                   submitted to the Executive Committee or the Board of Directors for approval or denial.
             e)    Bank Officers and Loan Officers who have been designated with lending authority shall have
                   the authority to approve or decline all modifications, extensions or releases in connection with
                   any mortgage which has been granted by or is being serviced for the bank; subject to the
                   execution of all required legal documents in connection therewith.
             f)    No Officer or Loan Officer may approve individually any loan that was originated by that
                   officer.
K.    Approvals With Exceptions To This Policy
Policy exceptions may be granted by designated loan underwriters under the following conditions:
      1.    File documentation
            File documentation shall include notation by the respective underwriter regarding the exception
            granted and the related reason(s) for doing so.
      2.    Monthly report
            Each underwriter shall submit a monthly report to the Chief Executive Officer specifying all policy
            exceptions and related reasons. The Chief Executive Officer shall compile a comprehensive report
            for Board presentation containing the following information:
            a)     Borrower name
            b)     Property address
            c)     Loan amount
            d)     Specific exception
            e)     Reason(s) for making the exception
            f)     Originator name
            g)     Underwriter name


L.    Second Review Of Denied Loans.
The purpose of this second review process is to insure that the bank is in compliance with all fair lending laws
and regulations, and that there is no disparate treatment as it relates to the applicant.

All denied loans should be reviewed by a member of the internal Loan Committee (or when appropriate, an
additional member of the Loan Committee) or by another officer with lending authority for this type of loan.
Loans may be denied up to double the internal Loan Committee limit or up to the collective approval authority of
the denying officers (whichever is greater).


 X.        1 TO 4 FAMILY RESIDENTIAL MORTGAGE LENDING PROCEDURES
A.    The Application
      1.    Form. The application shall be either:
            a)   in writing on the Bank's loan application form, signed by one or more of the applicants or


Common Good Bank Lending Policies         August 20, 2006                                                PAGE: 37
            b)    online, using the appropriate form on the Bank's website, accompanied by electronic payment
                  of an application fee, as a digital signature / proof of identity.
      2.    Completeness
            The application shall not be deemed to be completed until supported by the typical documents
            necessary for internal Loan Committee action and signed – digitally or in writing – by one or more of
            the applicants.
B.    Prequalification
Under the provisions of both Federal Regulations and internal bank policy, a loan interviewer may be required to
take certain actions when discussing a mortgage with a prospective borrower.
      1.     Inquiry versus prequalification
             a)    An inquiry is made at a time when the bank is not accepting any mortgage applications or is
                   not accepting applications for a mortgage of the type, for which an inquiry is being made, and
                   therefore no discussion takes place as to the customer's eligibility to obtain such a mortgage,
                   and the loan interviewer has so informed the prospective borrower. The request may be
                   treated as an inquiry - no prequalification has taken place and no further disclosures or
                   notification is required.
             b)    An inquiry is made by a prospective borrower and the loan interviewer provides only general
                   information such as loan terms, the maximum amount that a consumer could borrow under
                   various programs, and current underwriting standards such as down payment requirement,
                   loan to value ratios, debt to income ratio etc. and no discussion take place as to the
                   prospective borrower's eligibility to obtain such a mortgage. The request may be treated as an
                   inquiry - no prequalification has taken place and no further disclosures or notification is
                   required.
             c)    A prospective borrower wishes to be pre-qualified for a loan and/or the prospective borrower
                   discloses, or the loan interviewer receives information normally used in determining eligibility
                   for a loan such as income, cash available for closing, etc. Prequalification has been initiated
                   and the loan interviewer should:
                  (1)    Request a completed written application
                  (2)    Request income information (pay stubs, tax returns, w-2 forms, etc.)
                  (3)    Request a credit report
                  (4)    Determine the general vicinity of interest (lending area)
                  (5)    Apply underwriting standards by:
                         (a)   Reviewing credit history
                         (b)   Reviewing housing and debt ratios.
                         (c)   Reviewing length and nature of employment.
                  (6)    Refer the application to a properly authorized Bank or Loan Officer for a decision.
                  (7)    Properly authorized Bank or Loan Officers may:
                         (a)   Approve the request subject to:
                               (i)    A satisfactory property appraisal
                               (ii)   Further income or other verification
                         (b)   Deny the request based on the submitted information.
                  (8)    Decision notification must be provided to the prospective borrower as follows:
                         (a)   Within 30 days after receiving a completed application concerning the approval
                               of, counteroffer to, or adverse action on the application.
                         (b)   Within 30 days after taking adverse action on an incomplete application.
                         (c)   Within 30 days after taking adverse action on an existing account.



Common Good Bank Lending Policies         August 20, 2006                                                 PAGE: 38
                        (d)   Within 90 days after notifying the applicant of a counteroffer if the applicant does
                              not expressly accept the credit offered.
C.    Application Documentation
      1.    A completed application shall contain the following:
            a)   Completed application form – written or digital
            b)   Credit report
            c)   Appraisal – Except under conditions where there is a high loan to value ratio (as established
                 by assessed value documentation and/or previously obtained appraisal and a drive-by photo)
                 AND the assessed value is under $250,000.
            d)   Offer to purchase, when applicable
            e)   Verification of employment/income
            f)   Operating statement, when applicable
            g)   Rent Roll, when applicable
            h)   Complete income tax returns, when applicable
            i)   Leases, when applicable
            j)   Verification of deposits, when applicable
            k)   Evidence of mortgage insurance, when applicable
            l)   Signed Pledge of Social and Environmental Responsibility
D.    Expenses
Closing expenses paid by the borrower shall include but not be limited to:
      1.   An appraisal fee (when applicable)
      2.   Abstract continuation fees
      3.   Attorney fees related to preparation of documents and title examination.
      4.   Recording fees
      5.   Mortgage Recording Tax
      6.   Points (when applicable)
      7.   Private Mortgage Insurance premiums (when applicable)
      8.   Other inspection fees (when applicable)
      9.   Equalization fee
      10. Building and Loan agreement
E.    Insurance
Property insurance (homeowners, or comparable extended coverage insurance) in at least the loan amount with
Common Good Bank listed as mortgagee is required on all secured loans in this category.
F.    File Documentation
Loan files shall contain:
      1.     The items specified under Application Documentation above.
      2.     Signed note, mortgage, and rider
      3.     Evidence of Fire, Liability, and Extended coverage insurance in effect at closing and naming
             Common Good Bank as mortgagee
      4.     Survey description - if required by our attorney
      5.     Good faith estimate of closing expenses
      6.     Verification of receipt of AML/TIL disclosures
      7.     Abstract of Title with attorney's certification or title insurance policy
      8.     Settlement papers showing expenses paid at closing
      9.     A copy of the commitment letter to the customer



Common Good Bank Lending Policies        August 20, 2006                                                PAGE: 39
     10.   Documentation showing approval of the loan and by whom approved
     11.   Flood zone certificate
     12.   pre-application disclosure
     13.   Escrow disclosure
     14.   Servicing Disclosure
     15.   Documentation of customer identification as required by the USA Patriot Act. This documentation
           does not include the photocopying of such source. It shall be limited to recording the type of
           identification used, the identifying number and the expiration date. Expired sources of identification
           are not considered valid
G.   Property Underwriting Considerations
     1.    Appraisal/evaluation
           An appraisal/evaluation report or equivalent prepared by a qualified appraiser conforming to
           requirements set forth in our appraisal/evaluation policy, completed and signed prior to the approval
           of the application is required.
     2.    Property Condition:
           The Common Good Bank will consider an application on any property regardless of age of the
           property to be encumbered. The structure should preferably be in fair to average or better repair
           and condition or be brought up to such condition from the proceeds of the loan. Factors contributing
           to condition shall be accepted at the discretion of the loan underwriter. The Bank shall rely heavily
           on the market approach to value when evaluating property of all ages.
     3.    Property Amenities - Primary Residences
           All year-round primary residence property to be pledged as collateral must:
           a)     Be supplied with potable water from a legally accessible source.
           b)     Have a functioning septic system or be on public sewer.
           c)     Have interior plumbing.
           d)     Have a minimum 100 amp electrical entrance.
           e)     Have a centralized heating system.
           f)     Be located on a public highway or deeded right of way.
           g)     Be eligible to receive a certificate of acceptable title from the Bank attorney or be eligible to
                  receive a mortgage title insurance policy.
     4.    Property Amenities - Seasonal Residences
           All seasonal residential property to be pledged as collateral must:
           h)     Have its own water supply.
           i)     Have a functioning septic system or be on public sewer.
           j)     Have interior plumbing.
           k)     Have a minimum 100 amp. electrical entrance.
           l)     Be located on a public highway or deeded right of way.
           m)     Be eligible to receive a certificate of acceptable title from the Bank attorney or be eligible to
                  receive a mortgage title insurance policy.
     5.    Environmental and Structural Considerations
           a)     Hazards
                  Inquiry should be made at the time of application concerning the existence of (or inspection
                  by Bank-assigned appraisers may indicate the existence of) potential hazards in the form of
                  serious structural deficiency, the existence of hazardous waste, buried fuel tanks, etc. In that
                  event, further inspections may be required in the form of a structural inspection by a qualified
                  engineer or an environmental assessment by a known firm specializing in that form of
                  inspection. Any expenses involved with either form of inspection shall be borne by the
                  applicant. Earmarked funds for remediation of such problems, as a percentage of the loan
                  amount, may satisfy the Bank's commitment to lend only to socially and environmentally
                  responsible borrowers.
           b)     Improvements


Common Good Bank Lending Policies        August 20, 2006                                                 PAGE: 40
               Earmarked funds for cost-effective energy improvements as a percentage of the loan amount,
               may satisfy the Bank's commitment to lend only to socially and environmentally responsible
               borrowers.
     6.   Subordinate Liens of Other Lenders
          Second mortgages held by others are acceptable subject to the following conditions:
          a)   On primary residences, the combination of the 1st and 2nd mortgages shall not exceed 103%
               of value.
          b)   On all other residential property, the combination of the 1st and 2nd mortgages shall not
               exceed 90% of value.
H.   Financial Underwriting Considerations
     1.   Income
          a)   Only "stable monthly income" shall be considered in the evaluation of affordability. "Stable
               monthly income" is the borrower's gross monthly income from primary employment base
               earnings, plus recognizable secondary income. Non-taxable income may be increased by up
               to 33% to provide the applicant with an accurate allowance.
          b)   Secondary income of any borrower, such as bonuses, commissions, overtime, rental income,
               or part-time employment, should only be recognized in "stable monthly income" if such items
               of secondary income are substantiated by borrower's previous year's earnings and
               continuation is probable based on foreseeable economic circumstances.
          c)   If the loan applicant chooses to disclose income from alimony, child support or maintenance
               payments, the Bank agrees to consider such payments as income to the extent that they are
               likely to be consistently made. Factors used to determine this include but are not limited to:
                (1)   Whether the payments are received pursuant to a written agreement or court decree
                (2)   The length of time the payments have been received
                (3)   The regularity of receipt of the payments
                (4)   The availability of procedures to compel payment
                (5)   The creditworthiness of the payer, and
               (6) Duration of time over which payments are expected to be received
     2.   Debt Ratios - owner occupied property.
          d)   Monthly Housing Expense-to-Income Ratio - Owner Occupied Property:
               The Bank will normally prefer that the monthly housing expense (first and second mortgage
               payments plus escrows/impounds, whether held by the Bank or retained by the borrower, for
               payment of taxes, insurance premiums, and other expenses required to be paid under the
               mortgage, not exceed the approximate percentage of applicant's "verified monthly income” for
               housing debt as established in the DEBT TO INCOME RATIOS portion of the REAL ESTATE
               LOANS - GENERAL policy.
                (1)    Instances of housing expense ratios of up to 30% will not be considered exceptions to
                       policy provided that total debt service does not exceed the approximate percentage of
                       applicant's "verified monthly income” or all debt as established in the DEBT TO
                       INCOME RATIOS portion of the REAL ESTATE LOANS - GENERAL policy.
          e)    Monthly Debt Payment-to-Income Ratio:
                The Bank will normally prefer that the total amount of monthly housing expense (or adjusted
                monthly housing expense as defined above) plus all other monthly payments on all
                installment debts having remaining terms of more than twelve months not exceed the
                approximate percentage of applicant's "verified monthly income” or all debt as established in
                the DEBT TO INCOME RATIOS portion of the REAL ESTATE LOANS - GENERAL policy.
                (1)   Income Producing Owner Occupied Property:
                      (a)   Instances where other apartments exist in two-to-four family owner occupied
                            properties shall be analyzed by dividing the property into income producing and
                            owner occupied sections.


Common Good Bank Lending Policies      August 20, 2006                                              PAGE: 41
                      (b)   Debt service, taxes, and property insurance against the property shall be
                            apportioned according to the percentage of the house that is owner occupied
                            versus rental resulting in an "adjusted housing expense" and a "rental expense".
                      (c)   A cash flow analysis shall be completed on the income-producing portion of the
                            property utilizing the verified income produced by the rented portions of the
                            property, the "rental expense" determined above and other expenses of the rental
                            portion of the property. The resulting positive/negative cash flow (including
                            appropriate adjustment of the effect on income of non-taxed cash flow) will be
                            added/subtracted to/from the borrower‟s personal income to result in an "adjusted
                            personal income".
                      (d)   Debt service, taxes, and property insurance allocated to the owner occupied
                            portion of the house plus other personal debt service shall be applied against the
                            "adjusted personal income" calculated above to determine housing and debt
                            service ratios.
                (2)   Alimony and child support payments are considered as long-term obligations, unless
                      such obligations terminate in less than ten months. However, gross monthly income
                      shall be reduced by 100% of the alimony and 133% child support payments and such
                      payment shall not be included in monthly debt payments when figuring monthly debt
                      payment to income ratios.
     3.   Coverage ratios on non-owner occupied rental property
          a)    The limits for coverage ratios are those established in the COVERAGE RATIO portion of the
                REAL ESTATE LOANS - GENERAL policy.
          b)    Rent rolls, historic operating statements and projected operating statements (3 years) and
                current leases should be obtained to support this calculation.
     4.   Self employment analysis required
          An analysis of tax returns/operating statements of self employed individuals shall be completed
          which considers such cash flow items as depreciation and extraordinary expenses, auto expense,
          business debt, etc., and which results in a gross personal income which can then be utilized for
          personal debt to income calculations.
I.   Other Underwriting Considerations
     1.   Credit History
          A current (dated within 30 days of approval) written credit report shall be obtained on every
          applicant for a loan. Applicant credit history should be substantially free of unexplained derogatory
          items and should be of sufficient duration to establish a reasonable probability of the continuation of
          satisfactory status.
          a)     Must be ordered from an accredited credit reporting agency on every application - Insufficient
                 information should be followed up by oral report from local credit bureau or direct references.
          b)     Report should contain at least 2-year satisfactory active credit history.
          c)     Report should be substantially free of unexplained delinquent history and should be examined
                 to ascertain that no unexplained open accounts are listed that do not exist on borrowers
                 application.
          d)     Reports containing multiple (three or more) credit/charge accounts drawn to the maximum
                 available line of credit may indicate an increased risk and should be addressed.
          e)     Written explanations of mitigating circumstances associated with delinquencies as described
                 above should be maintained in the credit file of the borrower involved.
     2.   Guarantors
          Guarantors may be considered in the event that an applicant's income or credit history is insufficient
          for a loan to be approved. A guarantor may be considered under the following conditions:
          f)     The guarantor must be an immediate family member (i.e. - parent, grandparent, son,
                 daughter, or sibling).
          g)     The guarantor must have sufficient assets to either pay the loan in full upon default or
                 sufficient income to pay the "monthly housing expense" of the property to be mortgaged as



Common Good Bank Lending Policies       August 20, 2006                                                PAGE: 42
                 well as paying all other personal housing expenses and monthly installment pensions. For the
                 calculation purposes of this section, the "monthly housing expense" of the property to be
                 mortgaged shall be considered to be another monthly obligation of the guarantor, and the
                 guarantor must meet previously described underwriting considerations as they pertain to
                 income, credit history, debt ratios and documentation.
           h)    The primary applicant must meet a "monthly debt payment-to-income ratio" not in excess of
                 40%; and
           i)    The credit history of the applicant must not include previous unsatisfactorily explained
                 bankruptcy, foreclosures, repossessions, unpaid charge offs, or judgments.
J.   Financial Documentation and Verifications Required.
     1.    Verification of income is required on all borrowers.
     2.    Types of income verification
           a)    Standard verification forms, pay-stubs in combination with most recent W-2 statements
           b)    Signed copies of immediate past year tax returns (complete return) of non self-employed
                 borrowers
           c)    Signed copies of the immediate past two years tax returns (complete return) and/or profit and
                 loss statements and/or audited financial statements of self-employed borrowers
           d)    Verification of income necessary to qualify borrower from sources not substantiated by the
                 above-recommended documents may be substantiated by other means such as copies of
                 leases or other verification in writing from a reliable source.
     3.    Liquid asset verifications
           Substantiating the source of down payment shall be required on all purchase loans.
     4.    Types of liquid asset verification
           Forms of verification may include but are not limited to:
           e)    Standard deposit verification forms.
           f)    Copies of bank statements
           g)    Broker account statements
           h)    Statement of cash value on life insurance


          XI.    COMMERCIAL REAL ESTATE LENDING PROCEDURES
A.   General
     1.    First mortgage loans
     2.    Second mortgage loans
           Where Common Good Bank presently holds a first mortgage, on commercial properties, shall be
           considered
B.   Borrower Eligibility
     1.    Individuals, partnerships, and corporations
           In the case of corporations, at least one guarantor may be required.
     2.    Borrowers operating a business in the subject property
           Which business provides the primary source of repayment must have experience working in or
           associated with that or a similar business.
C.   Loan Terms
     1.    Maximum Loan
           The maximum loan available for a commercial property mortgage shall be $500,000 unless
           specifically approved as an exception by the Board of Directors.
     2.    Interest Rate
           The interest rate to be charged for commercial property mortgages shall be established periodically
           as needed by the Chief Executive Officer.


Common Good Bank Lending Policies       August 20, 2006                                              PAGE: 43
D.    Second Mortgage Financing By Others
Is authorized only on a purchase or construction loan or where the secondary financing was pre-existent to the
application and will be subordinated, and is prohibited unless specifically disclosed in the application. In no
event shall the combination of the first and second mortgage exceed ninety (90) percent of the lesser of the
purchase price or the appraised value, as is, of the property being purchased.
E.    Underwriting Considerations
      1.    Income - coverage ratios
            Rent rolls, historic operating statements and projected operating statements (3 years) and current
            leases should be obtained to support this calculation.
            a)    Rental Only Properties
                  The limits for coverage ratios are those established in the COVERAGE RATIO portion of the
                  REAL ESTATE LOANS - GENERAL policy.
            b)    Borrower Operated Business Properties
                  The relationship of net business income (net income plus any deductions taken for any real
                  estate depreciation and debt service on the building), less personal wage/expense allotment
                  (unless already deducted from income to arrive at net business income), to annual debt
                  service shall maintain the limits for coverage ratios as established in the COVERAGE RATIO
                  portion of the REAL ESTATE LOANS - GENERAL policy.
                  (1)    Personal wage/expense allotment shall be determined by calculating that amount
                         necessary in the form of pre-tax personal income that, when added to other pre-tax
                         personal income (i.e.: other investment income, spouses income, etc.) total personal
                         (non-business related) debt service should be not greater than 41% of total pre-tax
                         personal income.
            c)    Combination Rental and Business Operation
                  The relationship of net business income (net income plus any deductions taken for any real
                  estate depreciation and debt service on the building), less personal wage/expense allotment
                  (unless already deducted from income to arrive at net business income), plus the net income
                  of the property before debt service and depreciation (unless already included in net business
                  income), to the annual debt service must the limits for coverage ratios as established in the
                  COVERAGE RATIO portion of the REAL ESTATE LOANS - GENERAL policy. Personal
                  wage/expense allotment shall be calculated as defined above.
      2.    Credit History
                  (1)   Credit report and history requirements shall be the same as those outlined in the
                        CREDIT HISTORY portion of 1 TO 4 FAMILY RESIDENTIAL MORTGAGE LENDING
                        PROCEDURES.
      3.    Appraisal
            A narrative appraisal report prepared by a qualified appraiser conforming to requirements set forth
            in our APPRAISAL POLICY, completed and signed prior to the approval of the application is
            required.
      4.    Application Documentation
            The following documents shall be required before an application may be acted upon:
            d)     A completed application, signed by the borrower or authorized agent, and containing
                   information that discloses the purpose of the loan and the identity of the security property.
            e)     A comprehensive cash flow projection (detailing income and expenses) prepared and signed
                   by the borrower that shall include a summary of actual historical cash flows as well as cash
                   flows projected three years into the future.
            f)     Recent written credit reports on the borrower and any guarantors.
            g)     A narrative appraisal report as described above.
            h)     A minimum level of statement quality with regard to financial statements consisting of either a
                   Compiled or Management Prepared statements, along with tax returns (as specified in item e.
                   above) for loan requests below $250,000.



Common Good Bank Lending Policies        August 20, 2006                                                PAGE: 44
            i)     A minimum level of statement quality with regard to financial statements consisting of either a
                   Compiled or Management Prepared statements, along with tax returns (as specified in item e.
                   above) for loan requests below $250,000
            j)     Signed financial statements of the guarantors, when applicable
      5.    File Documentation
            In addition to the items specified under Application Documentation, above, the following shall be
            required to be incorporated into each loan file:
            a)     Signed note, mortgage, and rider as applicable.
            b)     Evidence of Fire, Liability, and Extended Coverage Insurance in effect at closing and naming
                   Common Good Bank as mortgagee.
            c)     Survey description-if required by our attorney.
            d)     Appropriate resolutions if the borrower is a corporation -- as determined by our attorney.
            e)     Abstract of Title with attorney's certification or title insurance policy.
            f)     Settlement papers showing expenses paid at closing.
            g)     Documentation showing approval of the loan
            h)     A copy of the commitment letter provided to the borrower.
            i)     An agreement signed by the borrower to submit updated information as may be requested.
            Commercial loan documentation will be properly completed by the loan originator prior to loan
            closing and retained in the loan file. Such documents will be reviewed and verified by the loan
            servicing department prior to closing.


F.    File Maintenance - Updated Financials Required
Annually, "borrowers" representing the "largest loans" shall be asked to provide updated financials, tax returns,
and cash flow statements and rent rolls (if applicable) associated with the mortgaged premises.
      1.    Definition of "largest loans"
            a)    The aggregate of all loans upon the security of the same commercial real estate that exceed
                  1/2 of one percent of the bank's capital funds.
            b)    The aggregate of all commercial real estate loans to the same borrower where the
                  aggregated amount exceeds one percent of the bank's capital funds.
      2.    definition of "borrower"


G.    Exceptions
Exceptions to this policy may be made by majority decision of the Loan Committee of the Board of Directors.


        XII.     CONSTRUCTION/IMPROVEMENT LENDING PROCEDURES
A.    Objective
The objective of this policy is to assist the lending department personnel of the Common Good Bank in the safe
and sound operation of the Institution.
B.    Application Documentation
In addition to the documentation required under the "One to Four Family Residential Mortgage Lending
Procedures" and "Commercial Real Estate Lending Procedures" documentation required at application for
construction/permanent loans and improvement loans (where a portion of the loan is to be secured by improved
value resulting from the completion of improvements to the property) shall include:
      1.     Blueprints or floor plans with front, rear, and side elevations.
      2.     Complete materials specifications
      3.     Complete estimates for all materials (from intended suppliers)
      4.     Construction contract, if applicable



Common Good Bank Lending Policies         August 20, 2006                                                PAGE: 45
      5.    Complete estimates for any labor to be hired
            (From parties who will be performing the work involved)
      6.    A proposed construction disbursement schedule
      7.    For self-completion construction loans
            Borrowers will be required to supply a resume on themselves as well as on major assistants
            detailing construction experience and expertise.
      8.    building permit issued by the appropriate authority.
            (Prior to the first disbursement)
C.    Appraisal
The Bank shall require a market appraisal complying with the "Appraisal Policy" of the Bank, detailing the
anticipated value upon completion of the project. "Market Comparison" should be stated in the appraisal as the
emphasis, upon which the value conclusion is reached.
D.    Disbursement Process
Progress payments may be made to borrowers as work progresses on individual construction projects.
Disbursements shall be made by Bank personnel on a basis substantially consistent with the construction
disbursement schedule filed.
      1.   Advance checks will be made payable
           a)    To both the borrower and the billing entity for each disbursement made in the case of
                 outstanding bills. This includes contractors and building suppliers.
           b)    To the borrower for reimbursement of previously paid bills for which receipts have been
                 presented.
      2.   Progress Inspections
           Each disbursement shall be preceded by an inspection of the construction progress.
           a)    Engagement of inspectors
                 The Bank shall engage and assign qualified individuals to complete progress inspections.
                  (1)   Qualified individuals include:
                        (a)   Appraiser
                        (b)    Other individuals who, in the opinion of management, have sufficient practical
                               background to satisfactorily perform such inspections.
            b)    Information provided to inspectors
                  Inspectors shall be provided with sufficient information concerning the extent of work to be
                  completed such that they may adequately determine that the work being completed conforms
                  to that which was proposed.
            c)    Inspector rotation
                  Inspections shall be rotated between inspectors such that on a home construction the original
                  appraiser shall complete a mid-point and the final inspection.
            d)    Inspector reporting
                  The inspectors shall file a report in connection with each inspection containing the following:
                  (1)   A description, by percentage of completion, of the status of each segment of the
                        project.
                  (2)   A photo verifying the status of the project.
                  (3)   A percentage of overall completion at time of inspection; and,
                  (4)    Any comments deemed relevant by the inspector concerning adequacy of the work
                         being done.
      3.    Partial Disbursements
            In the event that a partial disbursement is made at the borrower's request (and work has been
            completed in excess of that required for the partial disbursement and has been verified by
            inspection at the time of the partial advance), an additional advance may be authorized without an



Common Good Bank Lending Policies         August 20, 2006                                              PAGE: 46
            additional inspection provided that the additional funds to be advanced fall within the amount that
            could have been authorized previously.
      4.    Authorization
            e)     A disbursement analysis should be completed for each advance made.
            f)     Funds should not be disbursed which reduce the remaining balance of loan funds to a level
                   below the calculated retention required to complete the work funded.
            g)     Authorization forms shall be signed by a loan originator.
E.    File Documentation
In addition to the items specified under "Application Documentation" above, and "File Documentation" and
"Application Documentation" required by other sections of the Bank's lending policies, the following shall be
required to be incorporated into each loan file:
      1.     A building and loan agreement prepared by the closing attorney
      2.     Proof of property inspection and advance authorization
             For each advance made during the construction period.
      3.     Certificate Of Occupancy


                           XIII. HOME EQUITY LINES OF CREDIT
A.    Objectives
The Tax Reform Act of 1986 eliminated the deductibility of interest on consumer debt, but allows for the
continued deductibility of interest on principal and second homes, subject to certain limitations. As a result of
the change in tax law, many individuals are using the equity in their homes as a source of funds for educational,
medical and other major expenses. As a primary mortgage lender in the bank's service areas, the offering of
Home Equity Loans is an extension of its historic business practice.
B.    Establishment Of Terms And Conditions:
The Board of Directors shall establish the types of properties on which the bank will accept home equity loan
applications, the maximum loan-to-value ratio permitted, and the periods for which Home Equity Loans will be
granted. The Chief Executive Officer has the authority to establish the rates of interest that the bank will charge;
provided, however, that after the loan has been granted the relationship of the initial rate to the index must
remain constant.
      1.     Home Equity Line Parameters:
             a)    Maximum Loan - Two Hundred Thousand Dollars ($200,000) less any outstanding mortgage
                   balance.
             b)    Home Equity Loans may be made only on owner occupied residences.
             c)    A Home Equity Loan is written to provide for an Open-End Period and a Closed-End Period.
                   (1)   During the Open-End Period the borrower, through a Line of Credit, can gain access to
                         all or any portion of the loan proceeds. The payment of interest and principal on the
                         outstanding balance is required, and the borrower has the right to repay all or any
                         portion of the outstanding principal balance.
                   (2)   During the Closed-End Period the borrower may no longer access their Line of Credit,
                         and shall be required to make regular monthly payments of principal and interest
                         sufficient to satisfy the outstanding balance within the term specified in the mortgage
                         note.
                   (3)   During both periods, the rate of interest charged by the bank shall be subject to
                         adjustment quarterly based on changes in the index used at the time the loan was
                         granted.
C.    Allocation Of Funds For Home Equity Lines Of Credit:




Common Good Bank Lending Policies         August 20, 2006                                                 PAGE: 47
The Chief Executive Officer shall have the authority to allocate funds for Home Equity lending; said allocations
to be made to the Loan Department either as a single bank-wide allocation or a separate allocation for each
office.
D.    Loan To Value Ratios
      1.    Primary Residence
            a)   Lines may be established at closing simultaneously with a first mortgage. Such
                 considerations are made at the time the mortgage is underwritten and closed. Fees shall be
                 charged in accordance with attorney fee schedules. Equity line establishment should follow
                 the related loan-to-value and credit score guidelines as outlined in item b.
            b)   Is limited to a percentage of the "as is" value, less any outstanding mortgage balance. Value
                 is to be determined by a property evaluation as defined in our Appraisal/Evaluation Policy.
                 This loan–to-value percentage is directly related to the credit scores of the borrowers as
                 outlined below:

                          Credit                      Combined
                                                                                     Term
                          Score                       LTV
                                                                                     5 yrs open-end/20 yrs
                          >780                        100%
                                                                                     closed-end*
                          730 –                                                      5 yrs open-end/20 yrs
                                                      90%
                          779                                                        closed-end
                 A        700 –                                                        5 yrs open-end/20 yrs
                 d                                    80%
                          729                                                          closed-end
                 d
                          670 –                                                        5 yrs open-end/20 yrs
                 i                                    75%
                          699                                                          closed-end
                 a
                 *Additional extensions of open-end phase are available for this credit score level
      2.    Loans up to $12,500 or including additional collateral:
            c)   Loans of up to $12,500 plus 100% of the determinable value of additional collateral (if any)
                 may be made without evaluation of the real estate involved. However, a verification of actual
                 investment equity in excess of the portion of the loan being secured by the real estate should
                 be completed. (IE. -- an existing appraisal, actual substantiated investment in the property, or
                 current full value tax assessment of the property should be greater than total of loans against
                 the property)
            d)   Loans where the portion secured by real estate is $12,500 and less made within one year of
                 the later of either 1) the purchase of the property, or 2) a refinance of the property should be
                 limited to the abovementioned percentages of the "as is" value as determined by a property
                 evaluation as defined in our Appraisal/Evaluation Policy less any outstanding mortgage
                 balance.
E.    Interest Rate
The interest rate shall be adjustable based upon the National Average Contract Interest Rate for the Purchase
of Previously Occupied Homes published by the Federal Housing Finance Board in accordance with the change
date established at closing.
F.    Term
Terms for Home Equity Line of Credit Loans shall be structured as follows:
     1.    Initial open-end term of five years
           An additional open-end term of five years may be granted at customer request. Customers
           requesting an additional open-end term shall file an application and shall be subject to normal
           underwriting considerations concerning such extension.
     2.    At the end of the open-end term of the loan
           The loan must convert to a closed-end loan and must amortize over a term not to exceed twenty
           (20) years (or twenty-five years less its original open-end term/terms).




Common Good Bank Lending Policies         August 20, 2006                                               PAGE: 48
G.    Security
      1.    First and second mortgages on residential property shall secure home Equity Loans
      2.    Second liens to first mortgages held by others are acceptable provided that a federally related
            lending institution holds the first lien.
H.    Property Restrictions
Property pledged as collateral must:
     1.     Be the homeowner's residence
     2.     Be of average or better condition.
     3.     Have a potable water supply from a legally accessible source.
     4.     Have functioning septic system or public sewer.
     5.     Have interior plumbing.
     6.     Have a minimum 100 amp. electrical entrance.
     7.     Have a centralized heating system.
     8.     Be Located on a paved public highway.
     9.     Be eligible to receive a certificate of acceptable title from the Bank attorney.
     10. Be of stick built or modular construction (Singlewide Mobile homes are not eligible).
I.    Other Underwriting Standards - Income, Credit, Etc
same as underwriting standard for consumer loans
See "CONSUMER LOAN PROCEDURES" below.
J.    Authority To Approve/Deny
The following is the bank's policy relative to the authority of Loan Officers to approve or deny Home Equity Loan
applications:
      1.     The maximum amount of a Home Equity Loan application that the Chief Executive Officer may
             authorize a Bank Officer or a Loan Officer to approve or decline is $150,000.
      2.     Any two members of the internal Loan Committee may approve home Equity Loan applications in
             excess of $150,000 but not more than $300,000.
      3.     The Board of Directors or the Loan Committee of the Board must approve home Equity Loan
             applications in excess of $300,000.
      4.     Bank Officers and Loan Officers with approval authority for Home Equity Loans shall have the
             authority to approve or decline all modifications, extensions or releases in connection with any
             Home Equity Loan which has been granted by the bank; subject to the execution of all required
             legal documents in connection therewith.
K.    Second Review Of Denied Loans
Objective: The purpose of this second review process is to insure that the bank is in compliance with all fair
lending laws and regulations, and that there is no disparate treatment as it relates to the applicant.

All denied loans shall be reviewed by a member of the internal Loan Committee (or when appropriate, an
additional member of the internal Loan Committee) or by another officer with lending authority for this type of
loan. Loans may be denied up to the double the internal Loan Committee limit or up to the collective approval
authority of the denying officers (whichever is greater)
L.    Home Equity Lending Recordkeeping:
The Loan Department shall be responsible for maintaining a record of all approvals and denials of Home Equity
Loan applications, except those that are approved or denied by the Executive Committee or the Board of
Directors.

A list of originated loans shall be submitted to the Board of Directors not less often than once each month, for
their review.



Common Good Bank Lending Policies         August 20, 2006                                                PAGE: 49
                                       XIV. CONSUMER LOANS
A.    Objectives:
Consumer Loans provide the bank with a means to diversify its lending activities and to increase operating
income. It shall be the objective of the bank to provide a broad range of consumer loans and to make them
available to any qualified applicant.
B.    Types Of Consumer Loans:
The Board of Directors shall establish the types of consumer loans that the bank will grant, and the periods for
which the bank will grant each type of consumer loan. The bank considers its primary types of consumer loans
to be:
       1.   automobile loans
       2.   property improvement loans
       3.   recreational and leisure vehicle loans
       4.   secured and unsecured personal loans
       5.   mobile home loans
       6.   closed-end collateral mortgage loans
            On owner occupied real estate
       7.   overdraft protection - overdraft/lines of credit
            To qualified depositors with a Checking Account, NOW Account, WOW Account, or Money Market
            Demand Account with the bank
C.    Allocation Of Funds For Consumer Loans:
The Chief Executive Officer shall have the authority to allocate funds for consumer lending; said allocation to be
made to the Loan Department either as a single bank-wide allocation or a separate allocation for each office.
D.    Collateral Requirements
The Chief Executive Officer shall have the authority to determine loan to value and collateral determination
requirements of loans made under this section
      1.   If collateral is required
            To secure the consumer loan being granted,
           a)     The loan originator shall ascertain, to the best of their ability, the current value of the collateral
                  required and whether or not there are any outstanding loans against it.
      2.   If the collateral securing the loan
           Is a vehicle, watercraft, recreational vehicle, motorcycle, mobile home, or is otherwise eligible for
           coverage under the bank's Vendors Single Interest Insurance (VSI) Policy,
           b)     The applicant shall be informed that such coverage is required as a condition of the bank's
                  granting the loan, and that the fee for such insurance shall be included in the amount
                  financed.
E.    Debt To Income Ratios:
Where applicable, a borrower's total debt should not exceed this fraction of the borrower's gross monthly
income: 41%.
F.    Credit History:
A current written credit report shall be obtained on every applicant for a loan. Applicant credit history should be
substantially free of unexplained derogatory items and should be of sufficient duration to establish a reasonable
probability of the continuation of satisfactory status.
      1.     inaccurate information
             The Board of Directors recognizes that credit reports occasionally contain inaccurate information
             and correction of such information frequently takes significant time. Therefore, where a borrower
             disputes the information provided by a report, the Lending Department shall use reasonable
             judgment in its analysis of the report and in determining the accuracy of the report.



Common Good Bank Lending Policies           August 20, 2006                                                   PAGE: 50
G.    Authority To Approve Or Deny Consumer Loans
      1.    Maximums
            The maximum amounts for consumer loans that the Chief Executive Officer may authorize an officer
            or loan officer to approve are:
            a)    Auto Loans - $60,000
            b)    Property Improvement Loans - $50,000
            c)    Recreational and Leisure Vehicle Loans - $50,000
            d)    Secured Loans - $50,000
            e)    Unsecured Loans - $12,500
            f)    Mobile Home Loans - $50,000
            g)    Closed End Collateral Mortgages - $50,000
            h)    Overdraft Protection Loans - $5,000
      2.    Loans In Excess Of Limits:
            i)    Loans in excess of individual limits must be approved by any two members of the internal
                  Loan Committee appointed by the Chief Executive Officer.
            j)    The Loan Committee of the Board must approve loans in excess of the above limits.
H.    Second Review Of Denied Loans
The purpose of this second review process is to insure that the bank is in compliance with all fair lending laws
and regulations, and that there is no disparate treatment as it relates to the applicant.

All denied loans shall be reviewed by a member of the internal Loan Committee (or when appropriate, an
additional member of the internal Loan Committee) or by another officer with lending authority for this type of
loan. Loans may be denied up to two-times the internal Loan Committee limit or up to the collective approval
authority of the denying officers (whichever is greater).


                          XV. CONSUMER LOAN PROCEDURES
A.    All Loans May Be Made On
      1.    installment
      2.    short term time
            a)    Short-term time notes are to be defined as those notes of 90 days or less duration.
      3.    extended term time
            b)    Extended term time notes are to be defined as those notes in excess of 90 days. No
                  extended term time note shall have a term in excess of one year.

            A preference is, however, given for installment loans.
B.    Automobile Loans
      1.    Personal Vehicles only
      2.    Rates and Terms - See consumer loan rate chart
      3.    Vehicles of standard design
            Where the value can be readily determined by an industry standard reference is preferred.
            However, loans on customized vehicles may be made based on purchase price plus sales tax.
      4.    Intended primary use of the vehicles
            a)    Should be within the Commonwealth of Massachusetts, and further, vehicles should not be
                  removed from Massachusetts for other than temporary periods of time.
      5.    Maximum Loan
            b)    100% of purchase price including sales tax or average retail value as determined by NADA
                  Guidebook (used vehicles) plus sales tax.


Common Good Bank Lending Policies         August 20, 2006                                                PAGE: 51
     6.   loans in excess of the maximum:
          c)   It is contemplated that some loans will be made for amounts in excess of 100% of purchase
               price including sales tax or average retail value as determined by NADA Guidebook (used
               vehicles) plus sales tax.
                (1)   Loans in excess of the above limit may be made subject to underwriting of the amount
                      in excess of 100% of purchase price including sales tax or average retail value as
                      determined by NADA Guidebook (used vehicles) plus sales tax as unsecured loans of
                      an amount equivalent to the amount of the excess.
     7.   Advances may be decreased
          a)    Based on condition and mileage as determined by physical inspection.
     8.   Loans are to be secured by a first lien on the vehicle
     9.   Insurance - comprehensive insurance required
          Coverage, including collision coverage, with Common Good Bank named on the policy as loss
          payee. A copy of insurance policy shall be requested.
C.   Property Improvement Loans
     1.   Maximum Loan
          a)    Unsecured -- $12,500, $3,500 where less than a 6 month previous lending relationship exists.
          b)    Collateral Mortgage Security -- $50,000 - further limited to 80% of the "as improved" value,
                less any outstanding mortgage balance. Value is to be determined by a property evaluation
                as defined in our Appraisal/Evaluation Policy. Collateral mortgage secured loans of up to
                $12,500 may be made without evaluation of the real estate involved. However, a verification
                of actual investment equity in excess of the portion of the loan being secured by the real
                estate should be completed. (IE. -- an existing appraisal, actual substantiated investment in
                the property including the cost of new improvements, or current full value tax assessment plus
                cost of new improvements should be greater than total of loans against the property)
     2.   Rates and Terms - See consumer loan rate chart.
     3.   Insurance
          a)    Property insurance (homeowners, or comparable extended coverage insurance) in at least
                the loan amount, with the Common Good Bank listed as loss payee/mortgagee is required on
                all secured loans in this category. Evidence of such should be obtained.
D.   Recreational And Leisure Vehicle Loans
     1.   Personal - NON COMMERCIAL Vehicles only
     2.   Rates and Terms - See consumer loan rate chart
     3.   Maximum Loan
          a)      80% of the lesser of the purchase price including sales tax, or average retail value as
                  determined by NADA Guidebook (used recreational vehicles) plus sales tax.
     4.   loans in excess of the maximum:
          It is contemplated that some loans will be made for amounts in excess of 80% of purchase price
          including sales tax or average retail value as determined by NADA Guidebook (used vehicles) plus
          sales tax.
          a)      Loans in excess of the above limit may be made subject to underwriting of the amount in
                  excess of 80% of purchase price including sales tax or average retail value as determined by
                  NADA Guidebook (used vehicles) plus sales tax as unsecured loans of an amount equivalent
                  to the amount of the excess. It is not necessary to blend the rate in these instances.
     5.   Advances may be decreased
          a)      Based on condition and or mileage as determined by physical inspection.
     6.   Loans are to be secured by a first lien evidenced by the appropriate filing statement
E.   Personal Loans
     1.   Maximum Loan



Common Good Bank Lending Policies      August 20, 2006                                               PAGE: 52
          a)   Unsecured -- $12,500, $3,500 where less than a 6 month previous lending relationship exists.
          b)   Liquid collateral -- $100,000
          c)   All other forms of collateral -- $50,000
     2.   Loan to Value - collateralized loans only
          a)   Purchase loans should be limited to 100% of purchase price or verifiable collateral value.
               Non-purchase loans should be limited to 75% of verifiable collateral value where borrower is
               requesting cash-out and 100% of verifiable collateral value when refinancing from another
               lender with no cash-out. Loans on collateral subject to significant price fluctuation such as
               stocks or bond should be limited to 50% of value.
          b)   Acceptable security includes, bank accounts, certificates of deposit, stocks, bonds, life
               insurance policies, and other forms of personal property.
          c)   Unacceptable forms of security include - un-assignable accounts, collectibles, jewelry,
               precious metals, and presently owned furnishings.
          d)   Non-purchase loans greater than 75% up to 100% of collateral value will not be considered
               exceptions to policy in instances where the collateral is liquid, not subject to significant price
               fluctuation, and is owned by the borrower.
          e)   Loans greater than 75% up to 90% of collateral value will not be considered exceptions to
               policy in instances where the collateral is liquid, not subject to significant price fluctuation, and
               is owned by a third party.
     3.   Assignments
          a)   Will be taken on all bank accounts, stocks and bonds (physical possession required).
     4.   Rates and Terms - See consumer loan rate chart
     5.   Consolidation loans
          a)   "Consolidation Loans" shall be defined as:
                (1)   Any combination of two or more closed end consumer loans
                (2)   Any combination of closed end and open-end loans
                (3) Any refinance of one or more open-end loans. (Credit lines)
          b)     May not be made under this policy except as an exception
F.   Mobile Homes
     1.   Maximum Loan to value
          a)   Mobile home only
                (1)   (Owner Occupied) -- the lesser of 80% of purchase price including sales tax or 80% of
                      the NADA Guidebook value of the home plus sales tax.
                (2)   (Non-Owner Occupied) -- the lesser of 70% of purchase price including sales tax or
                      70% of the NADA Guidebook value of the home plus sales tax.
          b)    Mobile home and lot (combination loans)
                (1)   (Owner Occupied) -- the lesser of 80% of purchase price of the property plus sales
                      taxes (mobile home and lot), or 80% of the lesser of the NADA value or purchase price
                      of the mobile home alone plus sales tax plus 75% of the value evaluation of the lot as
                      defined in our Appraisal/Evaluation Policy. [Combined value evaluation should not
                      exceed total cost of purchase and set up including well, septic, foundation, etc.]
                (2)   (Non-Owner Occupied) -- the lesser of 70% of purchase price of the property (mobile
                      home and lot), or 70% of the lesser of the NADA value or purchase price of the mobile
                      home alone plus 65% of the value evaluation of the lot as defined in our
                      Appraisal/Evaluation Policy. [Combined value evaluation should not exceed total cost of
                      purchase and set up including well, septic, foundation, etc.]
     2.   condition
          Mobile Homes must be in average or better condition to be eligible for a loan.
     3.   Maximum Term


Common Good Bank Lending Policies        August 20, 2006                                                  PAGE: 53
          a)     New - 15 years.
          b)     <5 years old - 10 years
          c)     >5 <12 years old - 7 years
          d)     >12 years old but not more than 25 years old - 5 years
          e)     Older than 1980 -Not available
     4.   Rates and Terms - See consumer loan rate chart
     5.   Security
          By a first lien UCC-1 and first lien collateral mortgage on real estate (if any)
     6.   Insurance
          Property insurance (homeowners, or comparable extended coverage insurance) in at least the loan
          amount with Common Good Bank listed as loss payee is required on all secured loans in this
          category. Evidence of such insurance should be obtained.
G.   Closed-End Loans On Owner Occupied Real Estate.
     1.   Maximum Loan
          Fifty Thousand Dollars ($50,000).
     2.   Loan to value
          a)     Primary Residence - limited to 75% of the "as is" value, less any outstanding mortgage
                 balance. Value is to be determined by a property evaluation as defined in our
                 Appraisal/Evaluation Policy. Amounts may be increased by 100% of the determinable value
                 of additional collateral (if any).
          b)     Other Residence - further limited to -
                 balance. Value is to be determined by a property evaluation as defined in our
                 Appraisal/Evaluation Policy. Amounts may be increased by 100% of the determinable value of
                 additional collateral (if any).
          c)     Loans of up to $12,500 plus 100% of the determinable value of additional collateral (if any)
                 may be made without evaluation of the real estate involved. However, a verification of actual
                 investment equity in excess of the portion of the loan being secured by the real estate should
                 be completed. (IE. -- an existing appraisal, actual substantiated investment in the property, or
                 current full value tax assessment of the property should be greater than total of loans against
                 the property)
                (1)   Loans where the portion secured by real estate is $12,500 and less made within one
                      year of the later of either 1) the purchase of the property, or 2) a refinance of the
                      property should be limited to the abovementioned percentages of the "as is" value as
                      determined by a property evaluation as defined in our Appraisal/Evaluation Policy less
                      any outstanding mortgage balance.
     3.   Term
          Maximum term of 10 years
     4.   Security
          To be secured by first and second liens.
     5.   Rates and Terms - See consumer loan rate chart.
     6.   Insurance
          Property insurance (homeowners, or comparable extended coverage insurance) in at least the loan
          amount with Common Good Bank listed as loss payee is required on all secured loans in this
          category. Evidence of such insurance should be obtained.
     7.   Closing Expenses
          Closing expenses paid by the borrower may, from time to time, be suspended by the Board of
          Directors, but may include but not be limited to:
          a)    An evaluation fee (if required).
          b)    Abstract continuation fees
          c)    Attorney fees for preparation of documents and title examination
          d)    Recording fees



Common Good Bank Lending Policies       August 20, 2006                                                PAGE: 54
            e)    State Mortgage Tax
H.    Overdraft Protection Loans
Maximum Loan - $5,000


I.    Non-Installment Note Underwriting
      1.    Eligibility
            a)    Only borrowers demonstrating anticipated cash flows that would allow payoff of notes by the
                  maturity date requested will be eligible for receipt of non-installment notes.
            b)    Affordability calculations shall be made utilizing 1/60th of the balance of the loan as a monthly
                  equivalent payment and utilizing the debt service ratio outlined in "FINANCIAL
                  CONSIDERATIONS" section below.
            c)    In all other respects these loans are to be underwritten similarly to all other consumer loans.
      2.    Renewal/Conversion
            a)    In the event that a Time note matures, and the borrower is unable to pay the note in full, but
                  can demonstrate an ability to pay the loan as described under "ELIGIBILITY" above, that
                  Time note may be renewed for one additional term.
            b)    Any renewal/conversion to installments must be underwritten subject to the considerations
                  defined above and must be accompanied by:
                  (1)   A newly completed application
                  (2)   A newly run credit report
J.    The Application And Borrower
All loan requests
       1.   Must be accompanied by a written application provided by the borrower
       2.   An application shall be deemed to be ”received” for initial regulatory disclosure purposes when an
            application, signed by the borrower or authorized agent, and containing information that discloses
            the purpose of the loan, the amount and term requested, and the identity of the security property (if
            any), is delivered into the possession of loan department personnel.
       3.   An application shall be deemed to be ”completed” for regulatory disposition time frame purposes
            when it is ”received” accompanied by all requested supporting documentation required to enable
            loan department personnel to process the loan for a decision.
K.    Financial Considerations
      1.    Stable monthly income
            Borrower‟s gross monthly income from primary employment base earnings, plus recognizable
            secondary income. Secondary income of any borrower, such as bonuses, commissions, overtime,
            or part-time employment should be recognized as stable monthly income if such items of secondary
            income are substantiated by borrower‟s previous year earnings and continuation is probable based
            on foreseeable economic circumstances. If the borrower chooses to disclose alimony, child support
            or maintenance income, such payments may be considered as stable monthly income to the extent
            that they are likely to be received. Except in limited circumstances, employment terms of less than
            three months shall not be considered as sufficient to provide stable monthly income.
      2.    Debt to income ratios
            a)     Total debt service (including housing expense) should not normally exceed the percentage of
                   stable Gross monthly income outlined in the DEBT TO INCOME RATIOS portion of the
                   CONSUMER LENDING POLICY.
                  (1)   Installment debt with remaining terms of 12 months or less and closed end installment
                        debt being paid off with the proceeds of our loan shall not be included in debt to income
                        calculations.




Common Good Bank Lending Policies         August 20, 2006                                                PAGE: 55
                (2)   In cases where the borrower has no housing obligation, $250.00 shall be factored in for
                      borrower cost.
                (3)   In instances where debt service ratios exceed the above percentages due solely to the
                      borrower's selection of a term shorter than the term actually available shall not be
                      considered exceptions to policy.
                (4)   Extenuating Circumstances - unusual items, such as extensive liquid assets may afford
                      debt service ratios beyond normal limits and may be given consideration on an
                      individual basis.   Loans exhibiting these extenuating circumstances should be
                      considered exceptions to policy and labeled as such.
                (5)   Alimony and child support payments are considered as long-term obligations, unless
                      such obligations terminate in less than ten months. However, gross monthly income
                      shall be reduced by 100% of the alimony and 133% of child support payments and such
                      payments shall not be included in monthly debt payments when figuring monthly debt
                      payment - to - income ratio.
                (6)   Evidence of the calculations associated with the above items should be attached to
                      application submitted for consideration and should be maintained in the associated
                      consumer loan files.
                (7)   Adjustable rate loans affordability calculations shall be done based on an interest rate
                      two percentage points higher than the rate in existence at the time of application and, in
                      the case of Equity Lines of Credit, shall be based on the maximum credit line balance
                      requested by the borrower.
          b)    Non-Owner Occupied Mobile Homes - Coverage ratio -- the relationship of net income of the
                property prior to interest and depreciation deductions to the debt service (Principal and
                Interest Payment) must be a ratio of at least 1.1 or better. (i.e.: cash flow before debt service
                divided by debt service must be greater than or equal to 1.1.)
          c)    Self employment analysis required
                An analysis of tax returns/operating statements of self employed individuals shall be
                completed which considers such cash flow items as depreciation and extraordinary expenses,
                auto expense, business debt, etc., and which results in a gross personal income which can
                then be utilized for personal debt to income calculations.
L.   Other Underwriting Considerations
     1.   Credit History
          Credit report and history requirements shall be the same as those outlined in the CREDIT HISTORY
          portion of 1 TO 4 FAMILY RESIDENTIAL MORTGAGE LENDING PROCEDURES.
     2.   Guarantors
          Guarantors may be considered in the event that an applicant's income or credit history is insufficient
          for a loan to be approved. A guarantor may be considered under the following conditions:
          a)     The guarantor must be an immediate family member (i.e. - parent, grandparent, son,
                 daughter, or sibling).
          b)     The guarantor must have sufficient assets to either pay the loan in full upon default or
                 sufficient income to pay the "monthly housing expense" of the property to be mortgaged as
                 well as paying all other personal housing expenses and monthly installment pensions. For the
                 calculation purposes of this section, the "monthly housing expense" of the property to be
                 mortgaged shall be considered to be another monthly obligation of the guarantor, and the
                 guarantor must meet a previously described underwriting consideration as they pertain to
                 income, credit history, debt ratios and documentation.
          c)     The primary applicant must meet a "monthly debt payment-to-income ratio" not in excess of
                 41%; and
          d)     The credit history of the applicant must not include previous unsatisfactorily explained
                 bankruptcy, foreclosures, repossessions, unpaid charge offs, or judgments.
M.   Financial Documentation and Verifications Required.



Common Good Bank Lending Policies      August 20, 2006                                                 PAGE: 56
      1.    when Verification of income is required
            a)   On all unsecured loans in excess of $4,000 or on loans where the unsecured portion is in
                 excess of $4,000 is required. Where multiple unsecured loans exist for the same borrower,
                 loan balances should be combined in the calculation of the $4,000 limit.
            b)   On all Mobile Home Loans, Home Equity Loans, Collateral Mortgages, and Leisure and
                 Recreational Vehicle Loans in excess of $20,000.
      2.    acceptible types of income verification
            a)   Standard verification forms
            b)   Pay Stubs
            c)   Copies of last year tax returns on non self-employed borrowers
            d)   Two years tax returns and/or profit and loss statements and/or management prepared
                 financial statements on self-employed borrowers
            e)   Verification of income necessary to qualify borrower from sources not substantiated by the
                 above-recommended documents may be substantiated by other means such as copies of
                 leases or other verification in writing from a reliable source.
N.    The File
      1.    The file should contain:
            In addition to items described elsewhere in this policy, the following:
            a)    A completed application, signed by the borrower or authorized agent, and containing
                  information that discloses the purpose of the loan and the identity of the security property.
            b)    A signed note, collateral agreements, mortgages, and/or UCC forms as applicable
            c)    Evidence of insurance coverage for the collateral, as applicable
            d)    Invoices, as applicable
            e)    Abstract of title with attorney's certification as applicable
            f)    Settlement papers showing expenses paid at closing as applicable
            g)    Documentation showing approval of the loan
            h)    Lines of Credit secured by real estate only -- a copy of the commitment letter provided to the
                  borrower.
            i)    Property evaluation as applicable
            j)    Flood zone determination certificate and evidence of flood insurance as applicable
            k)    Verifications as applicable


                                    XVI. COMMERCIAL LOANS
A.    Objectives
Commercial Loans provide the bank with a means to meet the credit needs of our small business customers, to
diversify its lending activities and to increase operating income. It shall be the objective of the bank to provide a
limited range of commercial loans to small business applicants located within our delineated lending area.
B.    Types Of Commercial Loans:
The Board of Directors shall establish the types of commercial loans that the bank will grant, and the periods for
which the bank will grant each type of commercial loan. The bank considers its primary types of commercial
loans to be:
      1.     Motor Vehicles. (no floor planning available)
      2.     Other equipment loans - (non-real ESTATE RELATED).
      3.     unsecured business loans
      4.     closed-end collateral mortgage loans
C.    Allocation Of Funds For Commercial Loans:


Common Good Bank Lending Policies          August 20, 2006                                                 PAGE: 57
The Chief Executive Officer shall have the authority to allocate funds for commercial lending; said allocation to
be made to the Loan Department either as a single bank-wide allocation or a separate allocation for each office.
D.    Collateral Requirements
The Chief Executive Officer shall have the authority to determine loan to value and collateral determination
requirements of loans made under this section
      1.   If collateral is required
            To secure the commercial loan being granted,
           a)     The loan originator shall ascertain, to the best of their ability, the current value of the collateral
                  required and whether or not there are any outstanding loans against it.
      2.   If the collateral securing the loan
           Is a vehicle or other equipment, or is otherwise eligible for coverage under the bank's Vendors
           Single Interest Insurance (VSI) Policy,
           b)     The applicant shall be informed that such coverage is required as a condition of the bank's
                  granting the loan, and that the fee for such insurance shall be included in the amount
                  financed.
E.    Coverage Ratio
Coverage Ratio should be greater than or equal to 1.1.
F.    Credit History:
A current written credit report shall be obtained on every applicant for a loan. Applicant credit history should be
substantially free of unexplained derogatory items and should be of sufficient duration to establish a reasonable
probability of the continuation of satisfactory status.
      1.     inaccurate information
             The Board of Directors recognizes that credit reports occasionally contain inaccurate information
             and correction of such information frequently takes significant time. Therefore, where a borrower
             disputes the information provided by a report, the Lending Department shall use reasonable
             judgment in its analysis of the report and in determining the accuracy of the report.
G.    Authority To Approve Or Decline Commercial Loans
      1.     limits
             The maximum amounts for consumer loans that the Chief Executive Officer may authorize an officer
             or loan officer to approve are:
             a)     Auto Loans - $60,000
             b)     Other Secured Loans - $50,000
             c)     Unsecured Loans - $12,500
      2.     Loans In Excess Of Limits:
             a)     Loans in excess of individual limits must be approved by any two members of the lending
                    committee appointed by the Chief Executive Officer
             b)     The Loan Committee of the Board must approve loans in excess of the above limits.
H.    Approvals With Exceptions To This Policy
Policy exceptions may be granted by designated loan underwriters under the following conditions:
      1.    file documentation
            File documentation shall include notation by the respective underwriter regarding the exception
            granted and the related reason(s) for doing so.
      2.    monthly report
            Each underwriter shall submit a monthly report to the Chief Executive Officer specifying all policy
            exceptions and related reasons. The Chief Executive Officer shall compile a comprehensive report
            for Board presentation containing the following information:
            a)     Borrower name
            b)     Property address



Common Good Bank Lending Policies           August 20, 2006                                                   PAGE: 58
            c)    Loan amount
            d)    Specific exception
            e)    Reason(s) for making the exception
            f)    Originator name
            g)    Underwriter name
I.    Second Review Of Denied Loans
The purpose of this second review process is to insure that the bank is in compliance with all fair lending laws
and regulations, and that there is no disparate treatment as it relates to the applicant.

All denied loans shall be reviewed by a member of the internal Loan Committee (or when appropriate, an
additional member of the internal Loan Committee) or by another officer with lending authority for this type of
loan. Loans may be denied up to the double the internal Loan Committee limit or up to the collective approval
authority of the denying officers (whichever is greater).


                         XVII. COMMERCIAL LOAN PROCEDURES
A.    All Loans May Be Made On:
      1.    installment
      2.    short term time
            a)    Short-term time notes are to be defined as those notes of 90 days or less duration.
      3.    extended term time
            Extended term time notes are to be defined as those notes in excess of 90 days. No extended term
            time note shall have a term in excess of one year.

A preference is, however, given for installment loans.
B.    Types Of Loans Available
      1.    Motor Vehicles (no floor planning available)
            a)   Vehicles to be used in the generation of income only - not for resale.
            b)   Rates and terms available from currently dated auto loan rate chart.
            c)   Vehicles of standard design where the value can be readily determined by an industry
                 standard reference are preferred. However, loans on customized vehicles may be made
                 based on purchase price.
            d)   Intended primary use of the vehicles should be within the Commonwealth of Massachusetts,
                 and further, vehicles should not be removed from Massachusetts for other than temporary
                 periods of time.
            e)   Maximum Loan
                  (1)    Standard passenger vehicles - Limited to the lesser of $60,000 or 100% of purchase
                         price including sales tax for new vehicles of average retail value as determined by
                         NADA Guidebook or other source plus sales tax.
                  (2)  All other vehicles - Limited to the lesser of $60,000 or 80% of purchase price including
                       sales tax for new vehicles of average retail value as determined by NADA Guidebook or
                       other source plus sales tax.
            f)   Advances may be decreased based on condition and mileage as determined by physical
                 inspection.
            g)   Insurance - comprehensive insurance coverage with collision coverage with Common Good
                 Bank named on the policy as loss payee. A copy of insurance policy shall be requested.
            h)   Loans are to be secured by a first lien (evidenced by an MV 900) on the vehicle.
      2.    Other Commercial - (non-real ESTATE RELATED)
            a)   Maximum Loan


Common Good Bank Lending Policies         August 20, 2006                                                PAGE: 59
                (1)   Unsecured -- $12,500 for existing customers; $5,000 for new (less than 6 month lending
                      relationship) or non-customers.
                (2)   Liquid collateral -- $100,000
                (3)   All other forms of collateral -- $50,000
                (4)   Purchase loans should be limited to 80% of purchase price or verifiable collateral value.
                      Non-purchase loans should be limited to 60% of verifiable collateral value.
                      (a)   Acceptable security includes bank accounts, certificates of deposit, stocks,
                            bonds, life insurance policies, accounts receivable, and other forms of
                            business/commercial property.
                      (b)   Unacceptable forms of security include: Un-assignable accounts, collectibles,
                            inventory held for sale, jewelry, and precious metals.
                      (c)   Loans greater than 60% up to 100% of collateral value will not be considered
                            exceptions to policy in instances where the collateral is liquid, not subject to
                            significant price fluctuation, and is owned by the borrower.
                      (d)   Loans greater than 60% up to 80% of collateral value will not be considered
                            exceptions to policy in instances where the collateral is liquid, not subject to
                            significant price fluctuation, and is owned by a third party.
          b)   Assignments will be taken on all bank accounts, stocks and bonds. (Physical possession
               required)
          c)   UCC-1's and/or chattel mortgages shall be filed on all other forms of collateral.
          d)   Consolidation loans shall not be made under this type unless 100% of the funds involved
               consist of existing obligations with Common Good Bank.
          e)   Rates - See currently dated non-mortgage loan rate chart.
     3.   Closed-End Equity Loans
          a)   Maximum Loan - One Hundred Fifty Thousand Dollars ($150,000) less any outstanding
               mortgage balance.
                (1)   The maximum loan available shall be further limited to 65% of the "as is" value as
                      determined by a property evaluation as defined in our Appraisal/Evaluation Policy less
                      any outstanding mortgage balance. Amounts may be increased by 80% of the
                      determinable value of additional collateral (if any).
                (2)   Loans of up to $12,500 plus 80% of the determinable value of additional collateral (if
                      any) may be made without evaluation of the real estate involved. However, a
                      verification of actual investment equity in excess of the portion of the loan being
                      secured by the real estate should be completed. (IE. -- an existing appraisal, actual
                      substantiated investment in the property, or current full value tax assessment of the
                      property should be greater than total of loans against the property)
                (3)   Loans where the portion secured by real estate is $12,500 and less made within one
                      year of the later of either 1) the purchase of the property, or 2) a refinance of the
                      property should be limited to the abovementioned percentages of the "as is" value as
                      determined by a property evaluation as defined in our Appraisal/Evaluation Policy less
                      any outstanding mortgage balance.
          b)    Lien Position - first mortgage only or second to our first only.
          c)    Term
                (1)   Closed End Loans
                      (a)  Term available shall include Time Notes of not more than one-year duration and
                           Installment Notes of not more than ten (10) years duration.
          d)    Property Restrictions - Property pledged as collateral must meet the following requirements:
                (1)   Potable water supply from a legally accessible source
                      (a)   Functioning septic system or public sewer


Common Good Bank Lending Policies       August 20, 2006                                              PAGE: 60
                      (b)   Interior plumbing
                      (c)   Minimum 100 amps electrical entrance
                      (d)   Centralized heating system
                      (e)   Location on a paved public highway
                      (f)   Must be eligible to receive a certificate of acceptable title from the Bank attorney
                      (g)   Must be of Stick Built or Modular construction (Mobile Homes are not eligible).
          e)    Interest Rate
                (1) Closed End Loans - See currently dated non-mortgage loan rate chart.
          f)    Closing Expenses - Closing expenses paid by the borrower shall include but not be limited to:
                (1)   An evaluation fee (if required)
                (2)   Abstract continuation fees
                (3)   Attorney fees for preparation of documents and title examination.
                (4)   Recording fees
               (5) Mortgage Recording Tax
          g)   Insurance - Property insurance (extended coverage insurance) in at least the loan amount
               with the Common Good Bank listed as loss payee is required on all secured loans.
     4.   Underwriting Considerations For Non-Installment Notes
          a)    Eligibility
                (1)   Only borrowers demonstrating anticipated cash flows that would allow payoff of notes
                      by the maturity date requested will be eligible for receipt of non-installment notes.
                (2)   Affordability calculations shall be made utilizing 1/75th of the balance of the loan as a
                      monthly equivalent payment and utilizing the debt service ratios outlined in section (V)
                      below.
                (3)     The 1/75th rule shall not apply to instances where the loan proceeds solely represent
                        the equivalent of a cost of goods sold. Verification of the cost of the goods sold should
                        be obtained. (IE. The loan is secured by an account receivable representing product
                        sold, but for which payment has not yet been received. An invoice from the supplier of
                        the product to the merchant/borrower should be provided verifying that the loan does
                        not exceed the cost of the product to the merchant/borrower)
          b)    In all other respects these loans are to be underwritten in accordance with the standards
                below.
          c)    Renewal/Conversion
                (1)   In the event that a Time note matures, and the borrower is unable to pay the note in full,
                      but can demonstrate an ability to pay the loan according to the eligibility items above,
                      the Time note may be renewed for one additional term.
                (2)   Any renewal/conversion to installments must be underwritten subject to the
                      considerations defined above and must be accompanied by:
                      (a)   A newly completed application
                      (b)   A newly run credit report
C.   General Underwriting Considerations
     1.   The Application And Borrower
          a)   All loan requests must be accompanied by a written application provided by the borrower.
                (1)   An application shall be deemed to be received for initial regulatory disclosure purposes
                      when an application, signed by the borrower or authorized agent, and containing
                      information that discloses the purpose of the loan, the amount and term requested, and



Common Good Bank Lending Policies      August 20, 2006                                                 PAGE: 61
                      the identity of the security property (if any), is delivered into the possession of loan
                      department personnel.
                (2)   An application shall be deemed to be completed for regulatory disposition time frame
                      purposes when it is received accompanied by all requested supporting documentation
                      required to enable loan department personnel to process the loan for a decision.
          b)    All Borrowers
                (1)   Borrowers will be expected to provide the two most recently available tax returns
                      concerning the business enterprise for which funds are being borrowed.
                (2)   Borrowers will be required to provide a personal financial statement listing all personal
                      assets and liabilities as well as other income and debt service payments
                (3)   Verification of other income on all borrowers is required. Pay stubs and/or copies of
                      last year tax returns, and/or standard verification forms on non self-employed
                      borrowers, and two years tax returns, and/or audited financial statements, and/or profit
                      and loss statements on self-employed borrowers, shall be sufficient to meet this
                      requirement.
                (4)   Verification of income necessary to qualify borrower from sources not substantiated by
                      the above-recommended documents, may be substantiated by other means such as
                      copies of leases, bank account statements showing consistent historic receipt of
                      periodic payments such as social security, SSI, or other pension, or other verification in
                      writing from a reliable source.
                (5)     Borrowers will further be required to provide a pro-forma outlining anticipated cash
                        flows from the business enterprise for a period of at least one year into the future. Such
                        pro-forma should anticipate sufficient cash flows to pay all obligations of the business
                        enterprise as well as the loan obligation being entered into as a result of the application
                        being filed.
     2.   Debt To Income Ratios
          After deduction of all business related expenses including loan payments from business cash flow,
          the remaining cash flow of the business should be sufficient to meet the following guidelines:
          a)     Coverage Ratio - After deduction of all business related expenses, the business coverage
                 ratio (total business debt payments divided by net income including depreciation, interest, and
                 other nonrecurring expenses) should be greater than or equal to 1.1.
                (1)   Adjustable rate loans affordability calculations shall be done based on an interest rate
                      two percentage points higher than the rate in existence at the time of application and, in
                      the case of Equity Lines of Credit, shall be based on the maximum credit line balance
                      requested by the borrower.
                (2)   Loans with coverage ratios of greater than or equal to 1.00 and less than 1.1 shall not
                      be considered exceptions to policy provided that total personal debt service after
                      inclusion of business income (net of all expenses and payments) does not exceed 41%
                      of Stable Gross Monthly Income.
                      (a)    Alimony and child support payments are considered as long-term obligations,
                             unless such obligations terminate in less than ten months. However, gross
                             monthly income shall be reduced by 100% of the alimony and by 133% of child
                             support payments and such payments shall not be included in monthly debt
                             payments when figuring monthly debt payment to - income ratio.
                      (b)    In instances where debt service ratios exceed the above percentages due solely
                             to the borrower's selection of a term shorter than the term actually available shall
                             not be considered exceptions to policy.
                (3)   Extenuating Circumstances - unusual items, such as extensive liquid assets may afford
                      debt service ratios beyond normal limits and may be given consideration on an
                      individual basis. Loans exhibiting these extenuating circumstances should be
                      considered exceptions to policy and labeled as such.




Common Good Bank Lending Policies       August 20, 2006                                                   PAGE: 62
                  (4)   Documented evidence of the calculations associated with items in this section, should
                        be attached to the application submitted for consideration and should be maintained in
                        the associated commercial loan file.
      3.    Credit History
                  (5)  Credit report and history requirements shall be the same as those outlined in the
                       CREDIT HISTORY portion of 1 TO 4 FAMILY RESIDENTIAL MORTGAGE LENDING
                       PROCEDURES.
      4.    Co-signers/Guarantors
            a)   Must meet debt service ratios above, or have sufficient liquid collateral to enable payment of
                 the obligation.
            b)   Must have a satisfactory credit history as evidenced by an established credit reporting agency
            c)   Must file a fully completed financial statement
            d)   May be denied if significant negative information exists concerning the original borrower
D.    The File
In addition to items described elsewhere in this policy
The following shall be required to be incorporated into each loan file:
      1.     A completed application, signed by the borrower or authorized agent, and containing information
             that disclosed the purpose of the loan and the identity of the security property.
      2.     A signed note and collateral agreements, and/or mortgage, and/or UCC form as applicable.
      3.     Evidence of insurance coverage for the collateral as applicable
      4.     Appropriate corporate resolutions as applicable
      5.     Abstract of title with attorney's certification as applicable
      6.     Settlement papers showing expenses paid at closing as applicable
      7.     Documentation showing approval of the loan
      8.     Closed-end equity loans secured by real estate only -- a copy of the commitment letter provided to
             the borrower.
      9.     Property evaluation as applicable
      10. An agreement signed by the borrower to submit updated financial information as may be requested.
      11. Flood zone determination certificate and evidence of flood insurance as applicable


                   XVIII. FLOOD INSURANCE COMPLIANCE POLICY
A.    Objective
The National Flood Insurance Reform Act of 1994 requires flood insurance to be purchased for the term of a
loan whenever the security property is located in a Special Flood Hazard Area in a community that participates
in the National Flood Insurance Program. It further requires that if the lender maintains an escrow in connection
with the subject loan for the payment of taxes or hazard insurance, it must also escrow for the payment of flood
insurance premiums.
B.    Pre-Application Procedure
      1.    loan officers must inform prospective borrowers:
            a)    If they accept the bank's commitment for a loan, there will be a one-time fee imposed by the
                  bank to determine if the property is located in a Special Flood Hazard Area.
            b)    If the property is located in a Special Flood Hazard Area, that they will be required to obtain
                  and maintain flood insurance during the duration of the loan, with the initial premium to be
                  paid by them and subsequent premiums to be paid by the bank from their escrow.
            c)    At a minimum, flood insurance purchased must cover the lesser of the outstanding principal
                  balance of the loan or the maximum amount of coverage allowed for the type of property
                  under the National Flood Insurance Program. Flood insurance coverage is limited to the



Common Good Bank Lending Policies         August 20, 2006                                                PAGE: 63
                   overall value of the property securing the loan minus the value of the land on which the
                   property is located.
C.    Determination Of Flood Hazard Area Designation
Upon receipt of a signed commitment letter, the bank shall utilize the services of a qualified third-party to
perform an initial flood status determination and to monitor the flood status of the property during the term of the
loan.
D.    Conditions In Loan Commitment
Included as a part of the bank's commitment letter:
      1.    "Flood insurance will be required if the property securing the loan is located in an area already
            designated by FEMA as a special flood hazard area, or at anytime during the term of the loan if it is
            designated a flood hazard area. If flood insurance is required, you will have to provide evidence of
            coverage."
E.    If Property In Special Flood Hazard Area
If at the time of the closing, or at any other time during the term of the loan, it is determined that the property is
located in a Special Flood Hazard Area, the bank must determine if the community in which the property is
located participates in the National Flood Insurance Program.
        1.    If insurance is not available:
              a)     Flood insurance is not available or required.
        2.    If flood insurance is available
              The bank must take the following actions:
              a)     Forward a required "Notice of Special Flood Hazards and Availability of Federal Disaster
                     Relief Assistance" to the borrower, in duplicate, requiring that one copy be signed and
                     returned to the bank for inclusion in the loan file.
              b)     Obtain a copy of the flood insurance policy naming the bank as mortgagee. If the borrower
                     does not obtain a policy, the bank must obtain coverage and bill the borrower for immediate
                     reimbursement.
F.    Servicing Responsibility
It is the responsibility of the Loan Department to supervise the maintenance of flood insurance policies in
connection with all loans granted in Special Flood Hazard Areas.


                                       XIX. PASSBOOK LOANS
A.    Objectives
Passbook Loans provide a means for depositors to utilize a portion of their funds on deposit in the bank, for the
securing of short-term loans, and to avoid a loss of earnings or the payment of an early withdrawal penalty.
B.    Authority To Establish Terms
The Chief Executive Officer shall have the authority to establish the types of deposit accounts which may be
pledged as collateral for a passbook loan; the terms for which passbook loans may be granted; the rate (or
rates) of interest which shall be charged by the bank on passbook loans, including a minimum rate; and such
other conditions as he may, from time to time, deem appropriate in connection with the granting of passbook
loans.
C.    Authority To Approve/Reject
Each Loan Originator shall have the authority to approve or deny passbook loans; subject to compliance with
the Banking Laws of the Commonwealth of Massachusetts, the rules and regulations of the Federal Deposit
Insurance Corporation, and the following bank policies:
      1.   loan to value limits




Common Good Bank Lending Policies           August 20, 2006                                                   PAGE: 64
            a)    It is the policy of the bank to limit the amount of a passbook loan to 90% of the account
                  balance at the time the loan is granted.
      2.    single pledged account per Loan
            b)    It is the policy of the bank that only one passbook loan may be granted in connection with
                  each account. Should it be necessary for the depositor to pledge more than one account as
                  collateral, in order to obtain a passbook loan of the amount desired, then separate passbook
                  loans shall be granted for each such account being pledged as collateral.
      3.    repayment terms
            a)    It is the policy of the bank that all passbook loans shall be evidenced by a demand note and
                  shall be payable in full:
                   (1)   In the case of a delinquency in the payment of interest,
                   (2)   If the account matures and is not renewed, or
                   (3)     If the difference between the rate of interest being charged on the passbook loan and
                           the rate of interest being paid on the account pledged as collateral does not meet the
                           bank's minimum requirements.
      4.    Hold placement
            It is the policy of the bank to place a "hold" against the account on the bank's records equal to the
            amount of the outstanding balance of the passbook loan.
      5.    disbursement procedure
            It is the policy of the bank that the proceeds of a passbook loan shall be in the form of a bank check
            made payable to the depositor(s) whose account has been pledged as collateral for the loan; and
            not in cash or in the form of a check made payable to a third party.


                                     XX. COLLECTION POLICY
A.    Responsibility
It is the responsibility of the Collections Manager to directly supervise collection activities on behalf of the Bank.
It is the responsibility of the Chief Executive Officer to oversee the general operation of the collections function.
B.    Loans Secured By Real Estate And Home Equity Loans
Since there are various reasons why a particular mortgage or home equity loan may be delinquent, it is the
responsibility of the Collections Department to determine the cause of the delinquency, in order to implement
collection procedures applicable to the situation. Procedures shall be developed and initiated pertaining to each
of the following levels of delinquency or action items in connection with mortgage and home equity loans.
       1.    failure to make a payment within the grace period
       2.    failure to make a payment within 30 days of due date
       3.    failure to make a payment within 60 days of due date
       4.    failure to make a payment within 90 days of due date
       5.    Loans reaching 120+ day delinquency status
       6.    legal action
       7.    Failure to respond to the 30 day notice of legal action
       8.    Workout restructurings
       9.    ESCROW DEFICIENCIES
       10. Real Estate Owned (REO)
       11. uncollectible loans – charge-offs
C.    Consumer/Commercial Loans – Not Secured By Real Estate
Since there are various reasons why a particular consumer loan may be delinquent, it is the responsibility of the
Collections Department to determine the cause of the delinquency in order to implement collection procedures




Common Good Bank Lending Policies           August 20, 2006                                                  PAGE: 65
applicable to the situation. Procedures shall be developed and initiated pertaining to each of the following levels
of delinquency or action items in connection with both secured and unsecured consumer loans.
       1.    failure to make a payment within 10 days of due date
       2.    failure to make a payment within 30 days of due date
       3.    failure to make a payment within 60 days of due date
       4.    legal action
       5.    failure to respond to notice of legal action
       6.    Workout restructurings
       7.    90 days delinquent loans
       8.    uncollectible loans – charge-offs
       9.    repossessed property


                                XXI. COLLECTION PROCEDURES
A.    Responsibility
It is the responsibility of the Collections Manager to supervise collection activities on behalf of the bank. It is the
responsibility of the Chief Executive Officer to oversee the general operation of the collections function.


B.    Loans Secured By Real Estate And Home Equity Lines Of Credit
Since there are various reasons why a particular mortgage or home equity loan may be delinquent, it is the
responsibility of the Collections Department to determine the cause of the delinquency, in order to implement
collection procedures applicable to the situation. The following is the normal procedure used in connection with
a delinquent mortgage or home equity loan:
       1.    failure to make a payment within the grace period:
             a)     When a borrower has failed to make their required monthly payment by the 15th day following
                    their due date:
                   (1)    A late charge shall be assessed equal to 2% of their regular monthly payment of
                          principal and interest, and
                   (2)    The Collections Department shall prepare a Delinquency File, if one does not already
                          exist
                    (3) A late charge notice will be sent to the borrower.
             b)     Situations may arise where late charge removal or deletion is in order. The loan servicing
                    staff and the collections department have been granted the authority to waive late charges at
                    their discretion. Such waivers shall be recorded in the loan file.
      2.     failure to make a payment within 30 days of due date
             a)     When a loan becomes 30 days delinquent, the Collections Department shall attempt to reach
                    the borrower by telephone. If they are unable to reach the borrower, they shall mail an initial
                    delinquency letter.
             b)     When a loan becomes 45 days delinquent, the Collections Department shall immediately
                    check the loan file to ascertain the sufficiency of the collateral, insurance coverage, status of
                    taxes (if applicable) and for the existence of guarantors if any.
      3.     failure to make a payment within 60 days of due date
             When a loan becomes 60 days delinquent, the Collections Department:
             a)     Shall evaluate the cause for the delinquency and
             b)     Shall develop a collection procedure deemed appropriate to resolve the delinquency.
      4.     failure to make a payment within 90 days of due date
             When a loan becomes 90 days delinquent:
             a)     The Accounting Department shall remove from accrual all interest previously accrued but
                    uncollected on the loan so that all accrued and unpaid interest is reversed from and is not


Common Good Bank Lending Policies           August 20, 2006                                                  PAGE: 66
               taken into income by the Accounting Department until such time as the loan is no longer 90
               days or more delinquent. Further detail regarding this procedure are included in the
               Accounting Department procedures.
          b)   Shall report the status of the loan at the next regular Board of Directors meeting.
     5.   Loans reaching 120+ day delinquency status.
          a)   Closed end loans at 120 days delinquent and open end loans at 180 days delinquent.
                (1)    A current evaluation of the property (not necessarily a full appraisal) should be made for
                       purposes of determining loss amounts.
     6.   legal action:
          When a borrower appears to be unable or unwilling to respond to the requests of the Collections
          Department a decision should be made to turn the matter over to the bank's attorney for legal
          action, the borrower must be notified by letter of such intended action at least 30 days in advance.
     7.   Failure to respond to the notice of legal action
          a)    Thereafter, if the borrower fails to respond to the 30 day letter, or fails to comply with any
                arrangements that have been made to bring the loan current, the Collections Department
                shall commence a foreclosure action against the borrower as authorized by the Chief
                Executive Officer.
          b)    Prior to doing so, the Collections Department shall have the property reappraised, where
                possible, by an independent appraiser, for the purpose of determining its current estimated
                market value and whether there are any apparent hazardous substances and/or detrimental
                environmental conditions.
     8.   Workout restructurings
          Frequently borrowers will request consideration of a restructure of the delinquent loan. While
          workout restructuring is acceptable in some cases, workouts can have the undesirable effect of
          hiding a delinquency.
          a)    Workouts should be entered into only under the following conditions.
                (1)   Borrower meets all underwriting criteria (exclusive of credit history.) and gives evidence
                      of a renewed willingness and ability to pay. The Collections Manager may consider a
                      trial period where the borrower has the opportunity to demonstrate the ability to make
                      the payments that would be required under a formal restructuring, but the borrower
                      remains delinquent throughout the trial period and legal action is only postponed
                      temporarily in order to provide the borrower with that opportunity.[(See #(4) below]
                (2)   Restructured loans shall consist only of funds currently due Common Good Bank or for
                      taxes and property insurance or other funds required to protect the property.
                (3)   The account has existed for at least nine months
                (4)   We have received at least three minimum consecutive monthly payments or an
                      equivalent lump sum.
                (5)   Loans may not be restructured more than once in any 12 month period or more than
                      twice in any 60 month period.
          b)   Borrowers who have reached a restructuring agreement with the bank may not receive any
               new credit until the balance falls below the pre-delinquency credit limit. (i.e. Balance was
               $33,252 at date of restructuring. We capitalized delinquent interest and taxes for a
               restructured balance of $36,300. No other credit whatsoever may be extended to that
               borrower until the balance of the restructured loan falls below $33,252)
          c)   All workout restructurings shall be reported to the Board of Directors at the regular monthly
               meeting held the month following the restructure.
     9.   Escrow Deficiencies:
          a)   If the bank maintains an escrow and there is a negative balance in the escrow account, the
               Collections Department shall adhere to applicable federal regulations in the collection of such
               negative balances. This shall be done in co-ordination with the Escrow Department.




Common Good Bank Lending Policies       August 20, 2006                                                PAGE: 67
           b)   If the bank does not maintain an escrow account and it becomes necessary for the bank to
                advance funds for unpaid items, the Collections Department may take one or more of the
                following actions:
                (1)   Bill the borrower for the full amount due,
                (2)   Require the establishment and maintenance of an escrow for the payment of delinquent
                      and future taxes,
                (3)    Enter into a formal modification agreement with the borrower authorizing the funds
                       advanced by the bank to be capitalized to the principal balance of the loan. (See
                       restructurings in #7 above)
     10.   Real Estate Owned (REO)
           The following is the normal procedure used upon receiving a property into Real Estate Owned.
           a)    REO file set up
                (1)   The loan servicer shall remove the property from mortgage status and install as an
                      REO.
                (2)  The original file shall be relabeled with all of the original documents, verifications, notes,
                     and legal references intact. This becomes the permanent retention material.
           b)   Accounting for REO
                (1)   The Collections Manager shall prepare entries for the accounting department pertaining
                      to book value and carrying value.
                      (a)   Book value is determined by adding together outstanding loan balance at
                            foreclosure plus and capitalized costs incurred subsequent to foreclosure.
                      (b)   Carrying Value is derived by determining 80% of the lesser of appraised value or
                            asking price and comparing that amount to the book value determined above. If
                            the lesser of the two compared values is the book value, no specific reserve is
                            established and the carrying value is the book value. If 80% of the lesser of the
                            appraised value or asking price is lower than the book value, this lower number is
                            utilized as the carrying value with the difference between carrying value and book
                            value established as the specific reserve against the book value.
           c)   Preparation and research on REO property
                (1)   The file is reviewed for existing survey. (This is often asked for by potential buyers.)
                (2)   Insurance coverage is placed with the Banks policy for the principle amount plus
                      negative expense and legal expense.
                (3)   Inspection of the property
                      (a)   All windows and doors should be secured and the locks changed when
                            necessary.
                      (b)   The location of the electrical box should be noted, along with the AMPS, and size.
                            If the power is on, the main breaker should be left in the on position; if the power
                            is off, the main breaker should be put into the off position (required by the power
                            company before power may be turned back on). The location of the meter should
                            be noted along with the meter ID number for ease in transfer of service. The
                            power company should be called to transfer the power into the banks name.
                      (c)   The water source should be checked to determine whether it is village water or
                            well water in addition to checking to see if the water is on. A determination
                            should be made to turn the water off, winterize, or leave as is and heat the
                            property.
                      (d)   The need for lawn care or plowing should be determined. If plowing, access to
                            the house also needs to be cleared.
                      (e)   A determination should be made concerning any maintenance needed which
                            requires immediate attention



Common Good Bank Lending Policies       August 20, 2006                                                  PAGE: 68
                        (f)    An appraisal shall be ordered
                        (g)    The real estate taxes and districts on the property shall be confirmed and any
                               unpaid bills shall be paid.
                        (h)    Upon receipt of the appraisal, the property will be listed with a realtor at a price
                               based on the appraisal.
                  (4)   If tenants are in the property at the time of possession
                        (a)    The tenants shall be notified via phone or in writing of the change in ownership of
                               the property
                        (b)    It is necessary to obtain the lease agreements from the previous owner or
                               possibly from the tenants. The tenants will be allowed to complete the terms of
                               their lease as required by law. Continuation of the lease after the original terms
                               would be on a month-by-month basis at the discretion of the Bank.
                  (5) Is shall not be the policy of the Bank to actively seek tenants for the property.
            d)    Retention and Sale of REO Property
                  (1)   The Collections Department shall make every effort to dispose of such property in an
                        expeditious manner as is possible.
                        (a)    1 to 4 family residential homes should be disposed of within 6 months under
                               normal circumstances
                        (b)    Multi-family and commercial real estate should be disposed of within one year.
                  (2)   Any REO property remaining on the Bank‟s books after the expiration of the above
                        described terms will be reported as unsold to the Chief Executive Officer.
                  (3)   Pricing shall be at the discretion of the Collections Department subject to consideration
                        of the most recent appraisal and to the length of time that the property has been for
                        sale.
                  (4)    Financing of REO property for prospective borrowers is available and shall be handled
                         in conformity with non-arms length transactions as described in Real Estate Lending –
                         General above.
      11.   uncollectible loans - Chargeoffs
            Due to the nature of real estate lending, loans secured by real estate will be unlikely to be charged
            off. In the event, however, that the Collections Manager concludes that a loan should be charged
            off, a recommendation should be made to the Chief Executive Officer to do so. The request shall
            then be forwarded to the Chief Executive Officer for acknowledgement and agreement by initialing
            the recommendation. The initialed recommendation should be retained in the Collections
            Manager‟s file for future reference.
C.    Consumer/Commercial Loans – Not Secured By Real Estate
Since there are various reasons why a particular consumer loan may be delinquent, it is the responsibility of the
Collections Department to determine the cause of the delinquency in order to implement collection procedures
applicable to the situation. The following is the normal procedure used in connection with a delinquent
consumer loan:
      1.     failure to make a payment within 10 days of due date:
             When a borrower has failed to make their required monthly payment by the 10th day following their
             due date:
             a)     A late charge shall be assessed according to the terms of the contractual documents, and
             b)     The Collections Department shall prepare a Delinquency File, if one does not already exist
             c)     A late charge notice will be sent to the borrower.
      2.     failure to make a payment within 30 days of due date
             When a loan becomes 30 days delinquent, the Collections Department:




Common Good Bank Lending Policies         August 20, 2006                                                 PAGE: 69
          a)     Shall immediately check the loan file to ascertain the sufficiency of the collateral, insurance
                 coverage, status of taxes (if applicable) and for the existence of guarantors if any. (All
                 subsequent mailings should include copies to guarantors if any)
          b)     Shall attempt to reach the borrower and guarantors (if any) by telephone. If they are unable
                 to reach the borrower and guarantors (if any), they shall mail an initial delinquency letter.
          c)     Shall evaluate the cause for the delinquency and
          d)     Shall develop a collection plan deemed appropriate to resolve the delinquency.
     3.   failure to make a payment within 60 days of due date
          When a loan becomes 60 days delinquent, the Collections Department:
          a)     Shall send a 10 day “notice of intent” to repossess any existing collateral and/or to seek other
                 legal recourse necessary to recover the loan.
          b)     Shall make every reasonable effort to make direct contact with the borrower.
          c)     Shall arrange for pickup of any collateral prior to the attainment of 90 days delinquent.
     4.   failure to respond to 10 day notice
          If the borrower fails to respond to the 10 day notice, or fails to comply with any arrangements that
          have been made to bring the loan current, the Collections Manager shall have the authority to
          authorize repossession of the collateral or to seek judgment if deemed appropriate based on the
          size of the loan and the costs associated with repossession and/or judgment proceedings.
     5.   Workout restructurings
          Frequently borrowers will request consideration of a restructure of the delinquent loan. While
          workout restructuring is acceptable in some cases, workouts can have the undesirable effect of
          hiding a delinquency.
          a)     Workouts should be entered into only under the following conditions.
                (1)   Borrower meets all underwriting criteria (exclusive of credit history.) and gives evidence
                      of a renewed willingness and ability to pay.
                      The Collections Manager may consider a trial period where the borrower has the
                      opportunity to demonstrate the ability to make the payments that would be required
                      under a formal restructuring, but the borrower remains delinquent throughout the trial
                      period and legal action is only postponed temporarily in order to provide the borrower
                      with that opportunity.[(See #(4) below]
                (2)   Restructured loans shall consist only of funds currently due Common Good Bank or for
                      insurance or other funds required to protect the collateral.
                (3)   The account has existed for at least nine months
                (4)   We have received at least three minimum consecutive monthly payments or an
                      equivalent lump sum.
                (5)   Loans may not be restructured more than once in any 12 month period or more than
                      twice in any 60 month period.
          b)   Borrowers who have reached a restructuring agreement with the bank may not receive any
               new credit until the balance falls below the pre-delinquency credit limit. (i.e. Balance was
               $13,252 at date of restructuring. We capitalized delinquent interest for a restructured balance
               of $14,100. No other credit whatsoever may be extended to that borrower until the balance
               of the restructured loan falls below $13,252)
     6.   90 days delinquent loans
          When a loan becomes 90 days delinquent:
          a)   The Accounting Department shall remove from accrual all interest previously accrued but
               uncollected on the loan so that all accrued and unpaid interest is reversed from and is not
               taken into income by the Accounting Department until such time as the loan is no longer 90
               days or more delinquent.
     7.   uncollectible loans – Charge-offs
          a)   Due to the nature of non real estate related consumer and commercial loans, charge-offs are
               a likely alternative in certain circumstances. Loans should be listed as charged off when:



Common Good Bank Lending Policies       August 20, 2006                                                 PAGE: 70
                  (1)   If at any time during the collection procedure the Collections Department determines
                        that the loan is uncollectible, or that the item financed has insufficient value to justify
                        repossession.
                  (2)   Bankruptcy – unsecured loans to borrowers who declared bankruptcy should be
                        charged off within 60 days of receipt of notification from the bankruptcy court. Chief
                        Executive Officer approval is not required.
                  (3)   Fraud – fraudulent loans should be charged off within 90 days of discovery.
                  (4)  Accounts of deceased persons – loans should be charged off when the loss can be
                       determined.
            b)    Charge-off Procedure
                  (1)   On a regular basis, the Collections Manager shall present a list of all non-real estate
                        related loans delinquent 120 days or more as of the end of the prior month to the Chief
                        Executive Officer with recommendations for either retention as an impaired asset or
                        charge-off.
                        (a)   Loans delinquent 120 days or more upon which at least one full payment has
                              been received within the 120 immediately preceding the date of the report may be
                              retained as an impaired asset and not charged off provided that none of the four
                              characteristics in the preceding paragraph exist.
                        (b)   Loan delinquent 120 days or more upon which no payment has been received
                              during 120 days immediately preceding the date of the report but which loans, in
                              the opinion of the Collections Manager, exhibit the potential for some repayment
                              should be charged off, but should be retained as “exclude from reporting” loans
                              on the bank‟s computer tracking system. A specific reserve will be established
                              for those loans in the bank‟s accounting system and such loans will no longer be
                              reported as assets of the bank.
                        (c)   Loans which meet the definition of a charge-off with no potential for collection and
                              loans chosen for recovery by legal judgment shall be charged off and removed
                              from the bank‟s computer system entirely.
                  (2)    The Chief Executive Officer will indicate his assent to the recommendations by initialing
                         the recommendation list and the list shall be retained for future reference by the
                         Collections Manager.
            c)   Once a loan is written-off, the Chief Executive Officer may decide to forward the matter to the
                 bank's attorney so that a judgment can be taken against the borrower.
      8.    repossessed property
            a)   If repossession is accomplished and the bank is unable to dispose of the collateral for the
                 amount due on the loan, the bank shall have the bank's attorney file a deficiency judgment
                 against the borrower.
            b)   If the loan is covered under the bank's Vendors Single Interest Insurance (VSI) policy and the
                 bank is unable to repossess the collateral, or if the collateral is damaged to the extent that a
                 VSI claim is warranted, it shall be the responsibility of the Collections Department to file such
                 claim with the VSI insurer.


                          XXII. ASSET CLASSIFICATION POLICY
The risk of nonpayment (credit risk) is the single most important factor to consider in an analysis for asset
classification. Asset quality -- appraised value vs. book value, the prime factor under previous rules, remains
important but is only one factor in establishing the level of credit risk exposure. In the case of many types of
loans -- one-to-four family mortgages, small commercial real estate loans, small consumer loans, and small
commercial loans, examination of payment status provides a manageable method to determine risk of
nonpayment. In other cases - larger commercial real estate mortgages and larger commercial loans, the
primary source of repayment needs to be examined, be it business cash flows, or personal income. If the
primary source appears to be insufficient, secondary sources need to be looked at. (Secondary sources are



Common Good Bank Lending Policies        August 20, 2006                                                 PAGE: 71
generally the liquidation value of collateral, and any loan guarantors.) Ultimately we will be addressing five
factors when considering credit risk; Overall Risk, Payment Status, Financial Capacity, Collateral Valuation, and
Timely Liquidation of Collateral.
A.    Investments
The first step will be to examine investment type. The second step will be to examine payment stream.
       1.    U.S. Government and Agencies - no classification required.
       2.    Other investments
             a)      Investments with delinquent interest and/or principal payments will be initially classified as
                     substandard.
             b)      Investments with current payments will have no preliminary classification.
             c)      After examining payments, where possible we will review information from Moody's or
                     Standard & Poor's Bond Rating Guides to determine if other factors exist that warrant
                     classification.
                   (1)    Investments that fall below the first four rating categories will be closely scrutinized.
                          Where ratings are unavailable we will examine past experience with these types of
                          investments in order to better classify them. We will also examine whether or not the
                          investment would be considered speculative in nature. The preliminary classification of
                          investments will be re-evaluated based upon the additional information that is gathered.
B.    Non-Mortgage Consumer Loans
      1.     examine payment status on installment loans,
      2.     examine interest due status on demand loans,
      3.     examine maturity date status on time loans.
      4.     examine payment status on closed end loans
             a)     If delinquent 90 days, it will be given a preliminary classification of substandard.
             b)     If delinquent 120 days, it will be given a preliminary classification of loss.
             c)     Interest left unpaid on demand loans and time loans not renewed with interest paid at renewal
                    within the 90 and 120 day time frames described above for closed end loans will result in
                    initial classification as substandard and loss respectively.
      5.     Examine payment status on open-end loans.
             a)     If delinquent 90 days, it will be considered substandard.
             b)     If delinquent 180 days, it will be initially classified as loss.
      6.     Loans previously classified
             Loans that have been sufficiently delinquent to be classified as substandard or loss that have been
             rewritten shall continue to carry their previous classification level. Rewritten loans of this type may
             be removed from classification once a consistent history of satisfactory payment performance has
             been observed.
      7.     loans that are delinquent 60 days and not more than 89 days
             Shall be initially classified as "special mention".
      8.     Unsecured loans involving bankruptcy protection
             Shall be classified as loss.
C.    Non-Mortgage Commercial Loans
      1.     examine payment status on installment loans,
      2.     examine interest due status on demand loans,
      3.     examine maturity date status on time loans.
      4.     examine payment status on closed end loans
             a)   If delinquent 60 days, it will be given a preliminary classification of substandard.
             b)   If delinquent 120 days, it will be given a preliminary classification of loss.




Common Good Bank Lending Policies           August 20, 2006                                                  PAGE: 72
          c)     Interest left unpaid on demand loans and time loans not renewed with interest paid at renewal
                 within the 60 and 120 day time frames described above for closed end loans will result in
                 initial classification as substandard and loss respectively.
     5.   Examine payment status on open-end loans.
          a)     If delinquent 60 days, it will be considered substandard.
          b)     If delinquent 180 days, it will be initially classified as loss.
     6.   Loans previously classified
          Loans that have been sufficiently delinquent to be classified as substandard or loss that have been
          rewritten shall continue to carry their previous classification level. Rewritten loans of this type may
          be removed from classification once a consistent history of satisfactory payment performance has
          been observed.
     7.   Post preliminary classification
          After the preliminary classification, a description of collateral will be examined. Substandard loans
          that are well collateralized, guaranteed, or insured and give evidence of a minimal degree of
          possibility for a loss will not be classified but will be referred to "special mention". Loans classified
          as loss which are well collateralized, guaranteed, or insured may be reclassified according to other
          factors (i.e. customer history, other assets of the customer, and the ability of the customer to repay
          the debt from other sources). If there is no collateral, or the collateral is deemed inadequate, we will
          examine the other factors concerning the borrower's ability to repay the debt before making the final
          classification.
     8.   criteria for Large Loans (>$50,000)
          Such loans will be further examined according to the following criteria:
          a)     The overall risk of the business.
          b)     The financial capacity of the borrower.
          c)     The value of the collateral.
          d)     The capacity for timely liquidation of the collateral.
D.   Mortgage Loans Secured By 1-4 Family Real Estate
     1.   examine payment status on mortgage loans.
          a)   If a mortgage loan is delinquent 90 days, it will be given a preliminary classification of
               substandard.
          b)   Mortgage loans involving tax advances other than normal tax escrow disbursements as well
               as mortgage loans with significantly negative escrow balances should be given a preliminary
               classification of substandard on the consolidated amount of the loan plus tax advance or
               negative escrow.
          c)   Additionally, loans that have been sufficiently delinquent to be classified as substandard or
               loss that have been rewritten shall continue to carry their previous classification level.
                (1)    Rewritten loans of this type may be removed from classification once a consistent
                       history of satisfactory payment performance has been observed.
          d)    Mortgage loans delinquent 60 days but not more than 89 days will be given a preliminary
                classification of "special mention".
          e)    After the preliminary classification a description of collateral will be examined.
                (1)   Substandard loans that are well collateralized, guaranteed, or insured and give
                      evidence of a minimal degree of possibility for a loss will not be classified but should be
                      referred to "special mention".
                (2)   Similarly, loans may have been given a preliminary classification of substandard, but
                      evidence may indicate that full recovery of funds is questionable. In this instance
                      reviewers should use their discretion and assign portions of the loan to lower
                      classification levels. For example: a loan of $50,000 is preliminarily classified as
                      substandard, but an inspection or other knowledge of the property indicates that the
                      property may no longer be valued at more than $50,000 but instead may be worth less.
                      The reviewer should consider classifying a portion of the $50,000 as doubtful or even
                      loss if conditions so indicate. If a new appraisal of the property is received indicating a


Common Good Bank Lending Policies       August 20, 2006                                                  PAGE: 73
                         value less that the loan amount, that portion of the loan amount equal to the appraisal
                         should be classified a substandard and any excess as either doubtful or loss as
                         conditions warrant.
E.    Mortgage Loans On Other Than 1-4 Family Real Estate
      1.    Loans on this type of real estate shall be classified quarterly
            Based on loan payment status utilizing the same criteria as utilized in the residential mortgages
            classification process described above.
      2.    additional examination criteria:
            a)     The overall risk of the project.
            b)     The financial capacity of the borrower.
            c)     The collateral value of the real estate.
            d)     The capacity for timely liquidation of the collateral.
      3.    SPECIAL CONSIDERATION ON performing Larger LOANS
            Meeting the definition of "largest loans" located in "Commercial Real Estate Lending Procedures"
            e)     On an annual basis performing large mortgage loans secured by other than 1-4 family real
                   estate shall be examined according to the four previously listed criteria. These four factors will
                   be granted equal weight to determine if adverse classification is necessary
                   (1)   The overall risk of the project;
                   (2)   The financial capacity of the borrower;
                   (3)   The collateral value of the real estate
                   (4)   The capacity for timely liquidation of the collateral
F.    Real Estate Owned
In reviewing real estate owned of the Association will be appraised and adjusted to the lesser of market value or
actual investment at the time we take title to the asset.
G.    In-Substance Foreclosure
Mortgaged properties giving evidence of having been abandoned, and properties in foreclosure that, as a result
of an appraisal would indicate the lack of any owner equity in the property and lack of cash flows capable of
providing sufficient funds for payments on the loan shall be considered to be an in-substance real estate owned
and shall be so classified. All properties classified as In-substance Real Estate Owned shall be appraised and
adjusted to market value within a reasonable period of time from the date at which the In-substance Real Estate
Owned classification is made.
H.    Responsibility
The Chief Executive Officer shall be responsible for assigning classification responsibility to staff members or
outside consultants.
      1.    independence of classification process
            Those individuals or consultants engaged in the process of classification should be independent of
            the loan approval process.


                             XXIII. LOAN LOSS RESERVE POLICY
After due consideration of historic loan losses, loan and investment underwriting standards observed, the
market conditions within which the Common Good Bank operates, and the types of security involved the Board
of Directors establishes the following Loan Loss Reserve percentages to be used in determining appropriate
loss reserve levels:
A.    Mortgage Loans Secured By 1-4 Family Real Estate
Aware of the low historic loss levels and the secure nature of the collateral involved with this form of investment,
the Board of Directors establish the following loss reserve allowances for Real Estate Mortgages:



Common Good Bank Lending Policies          August 20, 2006                                                 PAGE: 74
      1.    Pass                                    .15%
      2.    Special Mention                        2.50%
      3.    Substandard                           20.00%
      4.    Doubtful                              50.00%
      5.    Loss                                 100.00%
B.    Loans Secured By Other Than 1-4 Family Real Estate
Aware of the higher historic loss levels and the less secure nature of the collateral involved with this form of
investment, the Board of Directors establishes the following loss reserve allowances for Non-residential Real
Estate Mortgages:
      1.    Pass                                    1.00%
      2.    Special Mention                         5.00%
      3.    Substandard                            20.00%
      4.    Doubtful                               50.00%
      5.    Loss                                  100.00%
C.    Consumer Non-Mortgage Loans
Noting the historic loss levels maintained in the consumer loan portfolio, and aware of the increased risk posed
by this type of lending and aware of the less secure form of collateral accepted in much of this type of lending,
Board of Directors establishes the following loss reserve allowances for Consumer Non-mortgage Loans:
       1.    Pass                                    1.00%
       2.    Special Mention                        10.00%
       3.    Substandard                            20.00%
       4.    Loss                                 100.00%
D.    Commercial Non-Mortgage Loans
Noting the increased risk associated with commercial non-mortgage lending and aware of the less secure form
of collateral accepted in much of this type of lending, the Board of Directors establishes the following loss
reserve allowances for Commercial Non-mortgage Loans:
       1.     Pass                                   2.00%
       2.     Special Mention                       20.00%
       3.     Substandard                           40.00%
       4.     Loss                                100.00%




Common Good Bank Lending Policies         August 20, 2006                                                 PAGE: 75

				
DOCUMENT INFO