Naugatuck Valley Savings and Loan will record a pre-tax charge of $800,000 during its first fiscal quarter this year related to underpaying interest on certain certificate of deposit accounts.
A routine internal review conducted in January found that some CD accounts were being renewed at a lower interest rate than had been promised customers when they first established the account, said John Roman, the bank’s president and chief executive.
Some of the affected accounts date back to 2007, he said.
The actual interest rates paid were between one-half of 1 percent and 2.5 percent lower than the promised rate, Roman said.
The affected CD accounts were those that were renewed under the accounts’ automatic renewal option feature at a time when the bank was offering promotional interest rates for new CD accounts, he said.
The bank has determined that no other deposit accounts have been affected by this issue.
Roman said about 5,000 CD accounts were underpaid, affecting roughly 3,000 customers. The average account was underpaid by about $155, he said. On a per-customer basis, the average affected customer was underpaid by about $260, he said.
The bank estimates the total underpayment ranges between $750,000 and $850,000.
All affected customers will be notified by June 30, he said.
“We intend to contact each affected customer directly and expect to pay the additional funds owed to each customer promptly after we determine the final amounts owed,” Roman said.
The bank expects to complete its investigation into the matter in a couple of weeks, and will begin reimbursing affected customers shortly thereafter, he said. Reimbursements will be deposited into the accounts of customers with existing accounts; all others will receive a check for the reimbursement amount, he said.
The charge the bank will record in the first quarter will be about $528,000, or 8 cents per diluted common share, on an after-tax basis, he said.