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Note 11 - Borrowings

9 Months Ended

Sep. 30, 2013

11. Borrowings

Correspondent Bank Lines of Credit

At December 31, 2012, the Bank had access to three secured and one unsecured lines of credit from three correspondent banks totaling $50 million. During September 2013, the Bank obtained an additional unsecured line of credit of $10 million resulting in total lines of credit of $60 million at September 30, 2013. None of the lines of credit were utilized as of either date. These correspondent bank funding sources may be canceled at any time at the correspondent bank’s discretion.

FHLB Borrowings

As disclosed in Note 4, Investment Securities Available for Sale, and Note 5, Loans, the Bank pledges investment securities and loans to collateralize FHLB borrowings. Additionally, the Bank may pledge cash and cash equivalents. The amount that can be borrowed is based on the balance of the type of asset pledged as collateral multiplied by lendable collateral value percentages as calculated by the FHLB. In September 2013, the Bank’s borrowing capacity with the FHLB was increased to 25% of total assets from its previous capacity of 15% of total assets.

The following table summarizes the utilization and availability of funds borrowed from the FHLB at the dates indicated (in thousands).

	September 30, 2013		December 31, 2012
Available lendable loan collateral value pledged to serve against FHLB borrowings	$	82,499	$	79,922
Available lendable investment security collateral value pledged to serve against FHLB borrowings		-		-
Total lendable collateral value pledged to serve against FHLB borrowings	$	82,499	$	79,922

At both September 30, 2013 and December 31, 2012, the Bank had no outstanding borrowings from the FHLB.

Federal Reserve Discount Window

At September 30, 2013 and December 31, 2012, $3.6 million and $4.1 million of loans and investment securities were pledged as collateral to cover the various Federal Reserve services that are available for use by the Bank, respectively. Of these amounts, $3.4 million and $3.9 million were available as lendable collateral, respectively. The Bank’s borrowings from the Federal Reserve Discount Window (“Discount Window”) are at the primary credit rate. Primary credit is available through the Discount Window to generally sound depository institutions on a very short-term basis, typically overnight, at a rate above the Federal Open Market Committee target rate for federal funds. The Bank’s maximum maturity for potential borrowings is overnight. The Bank has not drawn on this availability since its initial establishment in 2009 other than to periodically test its ability to access the line. The Federal Reserve has the discretion to deny approval of borrowing requests.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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