Other Borrowings

12 Months Ended

Dec. 31, 2011

Other Borrowings

Note 12: Other Borrowings

The Company assumed $5,000,000 in debentures as the result of an acquisition of another financial institution in 2008. In 2005, that company had formed MFBC Statutory Trust (MFBC), as a wholly owned business trust, to sell trust preferred securities. The proceeds from the sale of these trust preferred securities were used by the trust to purchase an equivalent amount of subordinated debentures from the acquired company. The junior subordinated debentures are the sole assets of MFBC and are fully and unconditionally guaranteed by the Company. The junior subordinated debentures and the trust preferred securities pay interest and dividends, respectively, on a quarterly basis. The securities bore a fixed rate of interest of 6.22% for the first five years, and the rate resets quarterly at the prevailing three-month LIBOR rate plus 170 basis points. In 2009, the Company entered into a forward interest rate swap that fixed the variable rate portion for five years at 5.15%. The Company may redeem the trust preferred securities, in whole or in part, without penalty, on or after September 15, 2010. These securities mature on September 15, 2035. The net balance of the note as of December 31, 2011 was $3,974,000 due to the fair value adjustment of the note made at the time of the acquisition.

In 2009, the Company borrowed $10,000,000 from First Tennessee Bank, N.A. The Company borrowed these funds at a fixed rate of 5.90%, with principal and interest payments made quarterly. The loan is collateralized by the Bank’s stock. The loan matures in December 2014.

The maturity of the First Tennessee note is as follows:

Principal Payments Due in Years Ending December 31: 

2012	$	848
2013		901
2014		6,687
Total note payable	$	8,436

Other borrowings consisted of the following components as of December 31:

	2011		2010
Note payable	$	8,436	$	9,236
Subordinate debentures		3,974		3,931
Total	$	12,410	$	13,167