Federal Home Loan Bank Advances and Other Borrowings

12 Months Ended

Dec. 31, 2012

Federal Home Loan Banks [Abstract]

Federal Home Loan Bank Advances, Disclosure [Text Block]

Note 10. Federal Home Loan Bank Advances and Other Borrowings

The Bank has agreements with the Federal Home Loan Bank of Cincinnati (FHLB) that can provide advances to the Bank in an amount up to $35,000,000. All of the Bank’s loans secured by first mortgages on 1-4 family residential, multi-family properties and commercial properties are pledged as collateral for these advances. Additionally, the Bank had pledged securities with a carrying amount of approximately $27,897,000 as of December 31, 2011. No securities were pledged to the FHLB at December 31, 2012.

At December 31, 2012 and 2011, FHLB advances consist of the following: 

	2012		2011
Long-term advance dated February 9, 2005, requiring  monthly interest payments, fixed at 3.86%, convertible on February 2010, principal due in February 2015	$	5,000,000	$	5,000,000
Long-term advance dated January 22, 2008, requiring monthly interest payments, fixed at 3.59%, until maturity, principal due in January 2013		5,000,000		5,000,000
Long-term advance dated May 15, 2007, requiring monthly interest payments, fixed at 4.58%, with a put option exercisable in May 2008 and then quarterly thereafter, principal due in May 2012		-		5,000,000
Long-term advance dated August 1, 2007, requiring monthly interest payments, fixed at 4.50%, with a put option exercisable in July 2008 and then quarterly thereafter, principal due in August 2013		5,000,000		5,000,000

	2012		2011
Long-term advance dated August 13, 2007, requiring monthly interest payments, fixed at 4.43%, with a put option exercisable in February 2009 and then quarterly thereafter, principal due in August 2014	$	5,000,000	$	5,000,000
Long-term advance dated January 7, 2008, requiring monthly interest payments, fixed at 3.52%, with a put option exercisable in January 2011 and then quarterly thereafter, principal due in January 2015		5,000,000		5,000,000
Long-term advance dated January 20, 2006, requiring monthly interest payments, fixed at 4.18%, with a put option exercisable in January 2009 and then quarterly thereafter, principal due in January 2016		5,000,000		5,000,000
Long-term advance dated January 10, 2007, requiring monthly interest payments, fixed at 4.25%, with a put option exercisable in January 2008 and then quarterly thereafter, principal due in January 2017		5,000,000		5,000,000
	$	35,000,000	$	40,000,000

During the fixed rate term, the advances may be prepaid subject to a prepayment penalty as defined in the agreements. On convertible agreements, the FHLB has the right to convert the fixed rate on the above advances at the end of the initial fixed rate period and on a quarterly basis thereafter. If the conversion option is exercised, the advances will bear interest at the three-month London Interbank Offered Rate (LIBOR) adjusted quarterly at a spread of zero basis points to the LIBOR index. Subsequent to any conversion, the Bank has the option to prepay the advances, in full or in part, without penalty on the conversion date or any subsequent quarterly repricing date. On agreements with put options, the FHLB has the right, at its discretion, to terminate only the entire advance prior to the stated maturity date. The termination option may only be exercised on the expiration date of the predetermined lockout period and on a quarterly basis thereafter.

As of December 31, 2011, Cornerstone had a borrowing outstanding of $3,045,000 with the Federal Deposit Insurance Corporation (FDIC) after Silverton Bank (subsequently known as Silverton Bride Bank, N.A.) was placed into receivership. The borrowing agreement contained financial covenants that Cornerstone was not in compliance with as of December 31, 2011. Cornerstone obtained a waiver from the FDIC of the covenant compliance requirements through December 31, 2012. As of December 31, 2012, the outstanding balance was $2,175,000.

In March 2013, Cornerstone refinanced the existing debt with a correspondent financial institution. The new loan does not include financial covenants, but is secured with cash collateral of approximately $1.7 million and bears interest at an annual rate of two percent.

The primary source of liquidity for Cornerstone is the payment of dividends from the Bank. As of December 31, 2012, the Bank was under a dividend restriction that requires regulatory approval prior to the payment of a dividend from the Bank to Cornerstone.

At December 31, 2012, scheduled maturities of the Federal Home Loan Bank advances and other borrowings are as follows:

2013	$	10,870,000
2014		6,305,000
2015		10,000,000
2016		5,000,000
2017		5,000,000
Total	$	37,175,000