NOTES PAYABLE AND LINES OF CREDIT

12 Months Ended

Dec. 31, 2011

12.	NOTES PAYABLE AND LINES OF CREDIT

At December 31, 2011 and 2010, the Company had $9,531,645 and $10,372,239, respectively, of debt outstanding.

On December 8, 2006, UTG borrowed funds from First Tennessee Bank National Association through execution of an $18,000,000 promissory note. The note is secured by the pledge of 100% of the common stock of UG. The promissory note carries a variable rate of interest based on the 3 month LIBOR rate plus 180 basis points. Interest is payable quarterly. Principal is payable annually beginning at the end of the second year in five installments of $3,600,000. The loan matures on December 7, 2012. The Company made principal payments of $3,600,000 and $3,600,351 during 2011 and 2010, respectively. At December 31, 2011 and 2010, the outstanding principal balance on this debt was $3,291,411 and $6,891,411, respectively.

In addition to the above promissory note, First Tennessee Bank National Association also provided UTG with a $5,000,000 maximum revolving credit note. During 2010, Management decided that a reduction to a maximum $2,750,000 in this line of credit was more reasonable for current operations. On July 14, 2011, the Company signed a Change in Terms Agreement increasing the line of credit back to 5,000,000. This note is for a one-year term and may be renewed by consent of both parties. The credit note is to provide operating liquidity for UTG. The promissory note carries a variable rate of interest based on the 90-day LIBOR rate plus 2.75 percentage points, but at no time will the rate be less than 3.25%. The collateral held on the above promissory note also secures this credit note. During 2011 UTG had borrowings of $2,943,000 and $2,233,000 in principal payments. During 2010, UTG had borrowings of $290,000 and made no payments. At December 31, 2011 and 2010, the outstanding principal balance on this debt was $1,000,000 and $290,000, respectively.

On April 6, 2011, UTG Avalon was extended a promissory note from First National Bank of Tennessee in the amount of $5,000,000. This note matures on January 3, 2013 and may be renewed by consent of both parties. The promissory note carries interest at a rate of 4.0%. During 2011, the Company had borrowings of $5,000,000 against this note. The funds were used to purchase a real estate investment, which serves as the collateral for the loan. At December 31, 2011 the outstanding principal balance on this debt was $5,000,000.

In November 2007, the Company became a member of the Federal Home Loan Bank (FHLB). This membership allows the Company access to additional credit up to a maximum of 50% of the total assets of UG. To be a member of the FHLB, UG was required to purchase shares of common stock of FHLB. Borrowing capacity is based on 50 times each dollar of stock acquired in FHLB above the "base membership" amount. UG's current line of credit with the FHLB is $15,000,000. During 2011, UG made payments of $2,000,000. During 2010, UG had borrowings of $2,000,000 against this line of credit. At December 31, 2011 and 2010, the outstanding principal balance on this debt was $0 and $2,000,000, respectively.

On February 7, 2007, HPG Acquisitions ("HPG"), a 74% owned affiliate of the Company, borrowed funds from First National Bank of Midland, through execution of a $373,862 promissory note. The note is secured by real estate owned by the HPG. The note bears interest at a fixed rate of 5%. The first payment was due January 15, 2008. There will be 119 regular payments of $3,965 followed by one irregular last payment estimated at $44,125. HPG made repayments of $36,089 during 2011 and $34,804 during 2010. At December 31, 2011 and 2010, the outstanding principal balance was $240,234 and $276,323, respectively.

The consolidated scheduled principal reductions on the long-term notes payable for the next five years are as follows:

Year		Amount

2012	$	4,320,618
2013		5,031,586
2014		34,154
2015		36,935
2016		39,941

- 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.

+ References+ Details