SHORT TERM BORROWINGS

12 Months Ended

Dec. 31, 2011

Short-term Debt [Abstract]

SHORT-TERM BORROWINGS

6. SHORT-TERM BORROWINGS

The Bank has a demand note through the US Treasury, Tax and Loan system with the Federal Reserve Bank of Richmond. The Bank may borrow up to $1,000,000 at December 31, 2011 and 2010 under the arrangement at an interest rate set by the Federal Reserve. The note is secured by Government Sponsored Enterprise Securities with a market value of $1,025,042 at December 31, 2011. The amount outstanding under the note totaled $0.00 and $767,497 at December 31, 2011 and 2010, respectively. At December 31, 2011, the Company had no outstanding federal funds purchased with the option to borrow $21,000,000 on short term lines of credit. The Company has also established a Borrower-In-Custody arrangement with the Federal Reserve. This arrangement permits the Company to retain possession of assets pledged as collateral to secure advances from the Federal Reserve Discount Window. Under this agreement the Company may borrow up to $61,527,194. The Company established this arrangement as a secondary source of liquidity. In addition, at December 31, 2009 the Company had a loan of $7,500,000 from the Federal Reserve Bank’s Term Auction Facility (TAF) at a rate of .25% for a term of 42 days. This loan was paid off by the Company on April 8, 2010. On December 30, 2011, the Federal Reserve Bank eliminated retained electronic tax deposits. As a result the electronic tax deposits will no longer be deposited into the Company’s TT&L main account balance.

At December 31, 2011 and 2010, the Bank had unused short-term lines of credit totaling approximately $21,000,000 and $23,000,000, respectively (which are withdrawable at the lender’s option).