11. Borrowed Funds

The following table summarizes the Corporation’s borrowed funds as of and for the year ended December 31:


	2011							2010
(Dollar amounts in thousands)	Balance		Average Balance		Average Rate			Balance		Average Balance		Average Rate
Due within 12 months	$	—	$	3,414		4.66	%	$	5,000	$	5,022		4.80	%
Due beyond 12 months but within 5 years		15,000		17,068		4.63	%		5,000		11,466		4.13	%
Due beyond 5 years but within 10 years		5,000		5,000		4.09	%		20,000		20,000		4.64	%
	$	20,000	$	25,482				$	30,000	$	36,488

Short-term borrowed funds at December 31, 2010 consisted of a $5.0 million advance on a line of credit with a correspondent bank. During 2011, the Corporation repaid the entire outstanding balance on the line but maintains the line’s availability. The line of credit has an interest rate equal to the greater of 4.75% or prime plus 0.5%.

Long-term borrowed funds at December 31, 2011 consisted of four, $5.0 million FHLB term advances. The term advances mature between June 2016 and October 2017. If these advances convert to adjustable rate borrowings, the Corporation has the opportunity to repay the advances without penalty at or after the conversion date. All borrowings from the FHLB are secured by a blanket lien of qualified collateral. Qualified collateral at December 31, 2011 totaled $248.3 million.

The four $5.0 million 10 year term FHLB advances are at initial interest rates of 4.98%, 4.83%, 4.68% and 4.09%, respectively. Two of these borrowings were fixed for the first two years of the term after which the rates may adjust at the option of the FHLB to the then three month LIBOR rate plus 24 basis points. The third borrowing was also fixed for the first two years of the initial term after which the rates may adjust at the option of the FHLB to the then three month LIBOR plus 24 basis points, but only if the three month LIBOR exceeds 6.0%. The final borrowing was fixed for the first three years of the term after which the rates may adjust at the option of the FHLB to the then three month LIBOR rate plus 13 basis points.

Scheduled maturities of borrowed funds for the next five years are as follows:


(Dollar amounts in thousands)	Amount
2012	$	—
2013		—
2014		—
2015		—
2016		15,000
Thereafter		5,000
	$	20,000

In addition to the four, $5.0 million FHLB advances described above, the Corporation’s long-term borrowed funds at December 31, 2010 consisted of an additional $5.0 million term advance with a rate of 4.04%, and an original maturity date of June 2013. During 2011, the Corporation elected to payoff this borrowing. In connection with the early retirement of this advances, the Corporation incurred a prepayment penalty of $336,000.

The Bank maintains a credit arrangement with the FHLB as a source of additional liquidity. The total maximum borrowing capacity with the FHLB, excluding loans outstanding, at December 31, 2011 was $139.3 million. In addition, the Corporation has $5.5 million and the Bank has $2.0 million of funds available on unused lines of credit through another correspondent bank.

- 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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