NOTE 10 - SHORT-TERM BORROWINGS AND LONG-TERM DEBT

The Bank’s long-term debt consists of advances from the Federal Home Loan Bank (FHLB) of Atlanta. The Bank classifies debt based upon original maturity and does not reclassify debt to short-term status during its life. These include fixed-rate, fixed-rate convertible and variable-rate convertible advances. Rates and maturities on these advances at December 31, 2011 and 2010 were as follows:

	Fixed-			Fixed-Rate			Variable
	Rate			Convertible			Convertible
2011
Highest rate		4.04	%		4.30	%		4.00	%
Lowest rate		0.84	%		3.47	%		4.00	%
Weighted average rate		2.76	%		3.88	%		4.00	%
Matures through		2036			2018			2020

2010
Highest rate		4.04	%		4.30	%		4.00	%
Lowest rate		0.84	%		3.47	%		4.00	%
Weighted average rate		2.74	%		3.88	%		4.00	%
Matures through		2036			2018			2020

Average rates of long-term debt and short-term borrowings were as follows:

	At or for the Year Ended December 31,
(dollars in thousands)	2011			2010
Long-term debt
Long-term debt outstanding at end of period	$	60,577		$	70,624
Weighted average rate on outstanding long-term debt		3.33	%		3.24	%
Maximum outstanding long-term debt of any month end		60,620			70,666
Average outstanding long-term debt		61,421			70,823
Approximate average rate paid on long-term debt		3.32	%		3.22	%

Short-term borrowings
Short-term borrowings outstanding at end of period	$	-		$	816
Weighted average rate on short-term borrowings		0.00	%		0.00	%
Maximum outstanding short-term borrowings at any month end		15,703			11,322
Average outstanding short-term borrowings		2,168			2,973
Approximate average rate paid on short-term borrowings		1.91	%		1.41	%

The Bank’s fixed-rate debt generally consists of advances with monthly interest payments and principal due at maturity.

The Bank’s fixed-rate convertible long-term debt is callable by the issuer, after an initial period ranging from six months to five years. The instruments are callable at the date ending the initial period. At December 31, 2011, the Bank had $10,000,000 in fixed-rate convertible debt callable in 2013. The balance of fixed-rate convertible debt has passed its call date. All advances have a prepayment penalty, determined based upon prevailing interest rates.

Variable convertible advances have an initial variable rate based on a discount to LIBOR. Variable convertible debt is scheduled to mature in 2020. During 2010, the FHLB exercised its option to convert a $10,000,000 variable convertible advance to a fixed-rate advance at a rate of 4.0% for a term of 10 years.

At December 31, 2011, $50,576,595 or 83% of the Bank’s long-term debt is fixed for rate and term, as the conversion optionality of the advances have either been exercised or expired. The contractual maturities of long-term debt are as follows:

	December 31, 2011
	Fixed-		Fixed-Rate		Variable
	Rate		Convertible		Convertible		Total

Due in 2012	$	-	$	-	$	-	$	-
Due in 2013		5,000,000		-		-		5,000,000
Due in 2014		10,750,000		10,000,000		-		20,750,000
Due in 2015		14,000,000		-		-		14,000,000
Due in 2016		-		-		-		-
Thereafter		826,595		10,000,000		10,000,000		20,826,595
	$	30,576,595	$	20,000,000	$	10,000,000	$	60,576,595

From time to time, the Bank also has daily advances outstanding, which are classified as short-term borrowings. These advances are repayable at the Bank’s option at any time and are re-priced daily. There were no amounts outstanding at December 31, 2011 or December 31, 2010.

Under the terms of an Agreement for Advances and Security Agreement with Blanket Floating Lien (the “Agreement”), the Bank maintains collateral with the FHLB consisting of one-to-four family residential first mortgage loans, second mortgage loans, commercial real estate and securities. The Agreement limits total advances to 40% of assets or $393 million.

At December 31, 2011, $391 million of loans and securities were pledged or in safekeeping at the FHLB. Loans and securities are subject to collateral eligibility rules and are adjusted for market value and collateral value factors to arrive at lendable collateral values. At December 31, 2011, FHLB lendable collateral was valued at $289 million. At December 31, 2011, the Bank had total lendable pledged collateral at the FHLB of $145 million of which $84 million was available to borrow in addition to outstanding advances of $61 million. Unpledged lendable collateral was $144 million, bringing total available borrowing capacity to $228 million at December 31, 2011.

Additionally, the Bank has established a short-term credit facility with the Federal Reserve Bank of Richmond under its Borrower in Custody program. The Bank has segregated collateral sufficient to draw $22.4 million under this agreement. In addition, the Bank has established short-term credit facilities with other commercial banks totaling $7 million at December 31, 2011. No amounts were outstanding under the Borrower in Custody or commercial lines at December 31, 2011.

At December 31, 2011 and 2010, federal treasury tax and loan deposits were $0 and $816,422, respectively. During 2011, the Federal Reserve discontinued the treasury tax and loan program allowing financial institutions to retain funds until demanded for tax deposits processed electronically.