I. PURPOSE

This investment Policy of Health Care Credit Union, sets forth policies, procedures, and guidelines to guide the day-to-day administration of all Credit Union investment activities. The contents of this Policy are to be followed by operating personnel and the Investment Officers.

II. RESPONSIBILITY

The Board of Directors is responsible for the formulation and implementation of investment policies. The Board delegates decision-making authority with respect to specific investments to the President, and Investment Officers for implementing investment policies and executing day-to-day investment decisions. All investment decisions shall be consistent with this Policy. In addition to the asset-liability management functions specified in this ALM Policy, the investment-related functions are as follows:

1. Monitor and review investment criteria and standards;

2. Monitor investment decisions for compliance with this Policy Statement; and

3. Review this Policy and recommend changes to the Board when appropriate.

III. INVESTMENT OBJECTIVE

The main function of the Credit Union is to provide financial services for its members. Since loan demand and deposit flows are subject to variation over time, liquidity and cash management activities are required in the management of these assets and liabilities. Therefore, the primary objective of the investment portfolio is to provide liquidity and facilitate the cash management process. The portfolio will convert excess cash resulting from slack loan demand and/or deposit inflows into earning assets. Alternatively, the portfolio will be drawn down when necessary to accommodate loan demands, deposit withdrawals, or other contingencies.

IV. PORTFOLIO COMPOSITION

In light of the investment objective, the portfolio as a whole should have the following characteristics:

1. A low degree of default risk:

2. A low degree of price risk resulting from changes in interest rates; and

3. A reasonably high degree of liquidity.

These characteristics limit the types of investments that may be acquired. The emphasis is on liquidity and the safety of principal with respect to default risk and interest rate risk. The yield on investments is secondary to liquidity and safety.

In addition to the emphasis on liquidity and safety, regulations and/or policies of Board of Directors further constrain investment activity. In this section, authorized investments are outlined along with certain restricted and unauthorized investments and investment-related transactions. Maturity constrains and diversification requirements are also specified.

A. Authorized Investments

The Credit Union may invest only in securities that are specifically authorized in this section. All other investments are prohibited by regulations and/or Board policy. The following investments are legally permitted and authorized by the Board of Directors in the Credit Union.

1. U.S. Treasury Securities;

2. U.S. Government Agency and Agency Guaranteed Securities:

a. Federal Home Loan Banks (FHLB) Consolidated System Discount Notes and Bonds;

b. Federal National Mortgage Association (FNMA or "Fannie Mae") Discount Notes, Debentures.

c. Federal Home Loan Mortgage Corporation (FHLMC or "Freddie Mac")Z Guaranteed Mortgage Certificates, Capital Debentures.

d. Student Loan Marketing Association (SLMA or "Sally Mae") Discount Notes and Interest-Bearing Notes; and

e. General Services Administration (GSA) Participation Certificates.

3. Corporate Central Credit Union of Michigan

4. Certificates of Deposit, Deposit Notes and Bankers' Acceptances:

These securities may be acquired provided they are investment- grade as defined by one of the following ratings:

Keefe,

Bruyette Amer. Deposit Ratings by

& Woods Banker Moody's S&P

Highest Investment-Grade A,A/B A Aaa AAA

High Investment-Grade B,B/C B Aa AA

Medium Investment-Grade C C A-Baa A-BBB

Regarding the Keefe, Bruyette & Woods service, Qualified Ratings (QR-A, QR-B and QR-C) may be used as evidence of investment quality. Similarly, the corresponding ratings of other evaluation services may be used. If a security is downgraded after it is purchased such that it falls below the minimum acceptable KB&W rating above but not below C/D, the security may continue to be held at the discretion of management, provided the remaining maturity does not exceed nine months.

In addition to being investment-grade, the issuer must meet another test. CD's Deposit Notes, and BAs are eligible for investment only if the issuing bank is FDIC-insured, or in the case of Yankee issues, the issuing subsidiary, branch or agency is related to an FCIC-insured bank. (Note that this provision relates to the issuer and not the CD, Deposit Note, or BA itself since these instruments, with the exception of the First $100,000 of a large-denomination CD and some Deposit Notes, are uninsured.)

a. Insured CD's-Domestic. Negotiable and non-negotiable CDs of any domestic commercial bank, savings and loan association and savings bank may be acquired if the deposit does not exceed $100,000 and the deposit is insured by an agency of the U.S. Government;

b. Uninsured CDs-Domestic. Investments exceeding $100,000 in the CDs or Deposit Notes of a domestic bank may be made only in those banks that are FDIC-insured and investment-grade as defined above;

c. "Yankee" CDs. These are dollar-denominated CDs issued by domestic branches of foreign banks. To be eligible for investment, such CDs must be investment-grade and the branch insured by the FDIC;

d. Deposit Notes. These instruments constitute certificates of deposit, usually with an original maturity of eighteen months or longer. To be eligible for investments, these Notes must be investment-grade and the issuer insured by the FDIC; and

e. Bankers' Acceptances. These are drafts for payment in the future, written and acknowledged (accepted) by a bank, usually for international trade purposes. They are short-term instruments usually with maturities of less than 180 days. Such investments are limited to accepting banks that are investment-grade and insured by the FDIC.

5. Federal Funds Sold

This is the sale of overnight or very short-term, immediately available funds to a commercial bank or Corporate Central. Although the term of fed funds transactions is usually one to three days, longer maturity transactions known as "term fed funds" are allowed provided the term does not exceed 360 days. Sales of fed funds may be made only to investment-grade institutions.

B. Maturity of Investments

The maturity structure of the investment portfolio is subject to the constraints and conditions that follow:

1. Management is restricted to securities that mature not later than five years.

2. Within the spectrum defined above, the maturity structure of the portfolio shall be managed in an ALM context. That is, the maturity distribution shall be determined by jointly considering the Credit Unions interest rate risk (ALM) position and liquidity position. The price risk associated with longer-term, fixed-rate securities and the foregoing income associated with an excessively liquid, short-term portfolio shall be important considerations when structuring the maturity distribution in an ALM context;

3. The Board recognizes that, at times, an ALM problem may exist but market conditions or other factors may justify a delay in taking corrective action through the investment portfolio. The solution to an ALM problem may require investments in particular maturities that are in short supply or other investments may be more attractive. In such cases, the problems may be resolved later as market conditions change. The magnitude of the ALM problem plays a key role in this analysis; and

4. The Investment Officers will provide the Board with guidance regarding the investment process in an ALM context.

C. Restricted and Unauthorized Transactions and Investments

Regulations prohibit or limit the use of certain types of investments and investment-related transactions. Pursuant to these regulations and/or this policy, the following transactions or securities are either unauthorized or restricted as indicated:

1. Futures Contracts. A futures contract is an agreement calling for a fixed-price, future delivery of standardized securities, usually Treasury and Agency issues. This is unauthorized.

2. Forward Placement Contracts. These are two types of forward placement contracts;

a. Standby Commitment. This calls for the sale of a security at a future date whereby the buyer of the security is required to accept delivery at the option of the seller. The use of this contract is limited to hedging the risk associated with packaging mortgage loans.

b. Cash Forward Agreement. This is an agreement to purchase or sell a security at a future date with mandatory delivery and acceptance. This is unauthorized.

3. Zero-Coupon Bonds. Because of their extreme degree of price volatility, bonds that bear no contractual interest are unauthorized if the maturity exceeds three years.

4. Short Sales. This is the sale of a security that is not owned by the Credit Union. This is a prohibited activity.

5. Equity Securities. Common stock, preferred stock, and debt securities with possible equity participation through a conversion feature or warrants are unauthorized investments.

6. Adjusted Trades. This is a method of hiding an investment loss by selling a security at a fictitiously high price to a dealer and simultaneously buying another over-priced security from the same dealer. This is a prohibited activity.

7. IOs and POs. Interest-only (IOs) and Principal-only (POs) are stripped mortgage-backed instruments. Because of their extreme price volatility, these securities are unauthorized.

8. Residuals. This security is the excess cash flow from a mortgage-backed security after all other payments have been satisfied. These securities are unauthorized.

9. When-Issued Trading. This is the purchase and sale of a security between the announcement date of the sale and the settlement date. This practice is unauthorized.

10. Pair-Offs. A pair-off results from the purchase and sale of the same security prior to the settlement date. This is a prohibited activity.

11. Dual Indexed Bonds. These are floating rate bonds whose rate is determined by using more then one index. IE: Prime plus 2-- bp minus 3 month Libor. The rate of return is extremely volatile.

V. GENERAL PORTFOLIO POLICIES

A. Trading Activity Prohibited

Trading securities with the intent to profit from short-term swings in interest rates is a prohibited activity. However, this does not mean that all securities must be held to maturity, as explained in B and C below.

B. ALM Risk Adjustments

Changes in the Credit Union's ALM risk position occur over time, especially when interest rate conditions change. Thus, adjustments in the existing balance sheet structure may be necessary. Changes in the ALM Guidelines as approved by the Board or the ALCO Target may also necessitate changes in the balance sheet structure. Under such circumstances, changes in the investment portfolio should be given a high priority because of the ease and speed with which adjustments may be made by selling securities and reinvesting the proceeds in a manner consistent with making the necessary ALM adjustments. The intent of this activity is to make portfolio adjustments in an ALM context and not for the purpose of attempting to take advantage of short-term price swings in the bond market. Any adjustments made under this section must be consistent with FASB 115 considerations discussed below.

C. Changes in Relative Value

Yield relationships between different types of securities, quality levels, and maturity sectors tend to shift over time. This is reflected by changes in the interest rate spreads between different types of securities and maturity ranges. Portfolio adjustments made in this context to improve income or shift the portfolio emphasis are permissible. Similarly, actual or anticipated changes in the creditworthiness or quality rating of certain investments may necessitate portfolio adjustments. Any portfolio adjustments made under this section must be consistent with FASB 115 considerations discussed below.

D. FASB 115 Considerations

Pursuant to the Financial Accounting Standards Board Statement No. 115 (FASB 115) each investment at the time of purchase shall be classified in one of the following categories: a) hold-to-maturity, b) available-for-sale, or c) a trading account. In order for securities to be classified as hold-to-maturity category, the Credit Union must have the positive intent and ability to hold the securities to maturity. These securities will be carried at amortized cost. Securities not classified as hold-to-maturity or as a trading security shall be classified as available-for-sale with changes in the market value reflected in a separate equity account, Accumulated Unrealized Gains/Losses on Available-for-Sale Securities. (Unrealized gains or losses on trading securities are reflected in the Income Statement. However, trading is a prohibited activity under Part V (A) of this Policy.)

The primary investment portfolio objective is to provide liquidity and facilitate the cash management process. Implementation of FASB 115 "Accounting for Certain Investments in Debt and Equity Securities" does not change this objective. It is our intention to categorize the majority of debt and equity securities in the "Hold to Maturity" category. We do, however, reserve the right to sell such securities that are within six months of date of maturity. This includes securities with call dates of six months or less and a high probability of being called. Investment purchases will be lattered to mature at peek low liquidity periods. Other liquidity needs will be met by investments other than debt securities and short-term borrowings.

VI. OTHER PROCEDURES

Other procedures must be followed to protect the assets of the Credit Union.

A. Investment Firms

Investment transactions will be conducted with strong, reputable securities firms that are SIPC-insured and subject to regular audits of customer accounts by the SEC.

B. Payment, Delivery, and Safekeeping

With respect to payment, delivery, and the safekeeping of securities, the following policies will be followed:

1. When physical delivery of securities is made, payment for securities will be made against delivery, and for sales of securities, delivery will be made against payment;

2. When a security is purchased, evidence of the wire transfer of the funds shall be retained until the instrument matures and the funds are returned;

3. U.S. Treasury and Agency securities will be held in safekeeping by the Federal Reserve Bank. These instruments exist in "book entry" form, i.e. computer entries maintain by the Federal Reserve Bank;

4. Securities not in the physical possession of the Credit Union may be held in a safekeeping account with a financial institution other than a Federal Reserve Bank or a reputable securities firm; and

5. Securities held in a safekeeping account will be evidenced by a safekeeping receipt or other evidence of a safekeeping obligation.

VII. EXCEPTIONS AND REVIEW

The Board recognizes that minor policy exceptions may arise from time to time. Significant deviations from the Policy must be avoided. This Policy shall be reviewed periodically by the Board of Directors and amended as circumstances warrant.