Yes, the closing of the time deposit before, or after maturity is a withdrawal.
If closed within the penalty period and no penalty is imposed, it becomes a demand deposit (no reservation of right to require advance notice of withdrawal), effective as of the deposit's inception. That may or may not make a difference with regard to one account. If it's a pattern that you allow it, however, your regulator may make you reclassify all your CD balances. THAT would make a difference.
The time deposit limitations apply to all time deposits.
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8