NOTES PAYABLE

3 Months Ended

Mar. 31, 2012

At March 31, 2012 and December 31, 2011, the Company had $9,522,298 and $9,531,645 of debt outstanding, respectively.

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 Company had no borrowings during 2012 to date. At March 31, 2012 the outstanding principal balance on this debt was $3,291,411. The loan matures on December 7, 2012 with a final principal payment due of $3,291,411.

In addition to the above promissory note, First Tennessee Bank National Association also provided UTG, Inc. with a $5,000,000 revolving credit note. 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, Inc. 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 note also secures this credit note. During 2012, the Company had borrowings of $350,000 and made $350,000 in principal payments. At March 31, 2012, the outstanding principal balance on this debt was $1,000,000.

During 2011, UTG Avalon was extended a credit note from First National Bank of Tennessee in the amount of $5,000,000. This note is for a one year term 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 from this borrowing were used to purchase an investment. At March 31, 2012, the outstanding principal balance on this debt was $5,000,000. This note matures on January 3, 2013.

In November 2007, UG 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, the Company 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. The Company’s current LOC with the FHLB is $15,000,000. During 2012, the Company had no borrowings against or repayments to this LOC. At March 31, 2012 the Company had no outstanding principal balance attributable to this LOC.

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 HPG. The note bears interest at a fixed rate of 5%. There will be 119 regular payments of $3,965 followed by one irregular last payment estimated at $44,125. At March 31, 2012, the outstanding principal balance on this debt was $230,887.

The consolidated scheduled principal reductions on the 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