Note 9 - Other Borrowings and Unused Lines of Credit

12 Months Ended

Dec. 31, 2011

Debt Disclosure [Text Block]

Note 9.                 Other Borrowings and Unused Lines of Credit

Other borrowings as of December 31, 2011 and 2010 are summarized as follows:

	2011		2010
Wholesale repurchase agreements	$	130,000,000	$	135,000,000
364-day revolving note		3,600,000		2,500,000
Series A subordinated notes		2,631,663		2,624,033
Secured borrowings - loan participations sold		-		9,936,379
Other		-		10,373
	$	136,231,663	$	150,070,785

Maturity and interest rate information concerning wholesale repurchase agreements is summarized as follows:

	December 31, 2011					December 31, 2010
			Weighted					Weighted
			Average					Average
			Interest Rate					Interest Rate
	Amount Due		at Year-End			Amount Due		at Year-End
Maturity:
Year ending December 31:
2011	$	-		-	%	$	5,000,000		3.35	%
2015		45,000,000		3.11			45,000,000		3.11
2016		35,000,000		3.67			35,000,000		3.67
Thereafter		50,000,000		3.82			50,000,000		3.82
Total Wholesale Repurchase Agreements	$	130,000,000		3.54		$	135,000,000		3.53

Each wholesale repurchase agreement has a one-time put option, at the discretion of the counterparty, to terminate the agreement and require the subsidiary bank to repay at predetermined dates prior to the stated maturity date of the agreement.

As of December 31, 2011 and 2010, embedded within $65,000,000 of the wholesale repurchase agreements are interest rate cap options with varying terms.  Of this $65,000,000, $35,000,000 matures in 2016 with the caps expiring in 2013 in conjunction with the one-time put option, and $30,000,000 matures in 2019 with the caps expiring in 2014 in conjunction with the one-time put option.  The interest rate cap options are effected when the 3-month LIBOR rate increases to certain levels.  If that situation occurs, the rate paid will be decreased by the difference between the 3-month LIBOR rate and the particular cap level.  In no case will the rate paid fall below 0.00%.

At December 31, 2010, the Company had a single $20,000,000 secured revolving credit note which matures every 364 days.  At December 31, 2010, the note carried a balance outstanding of $2,500,000.  Interest was payable monthly at the effective LIBOR rate plus 3.00% per annum, as defined by the credit agreement.  As of December 31, 2010, the interest rate on the note was 3.30%.  The note renewed on April 1, 2011.    At December 31, 2011, the note carried a balance outstanding of $3,600,000.  Interest is payable monthly at the effective LIBOR rate plus 3.00% per annum, as defined in the credit agreement.  As of December 31, 2011, the interest rate on the note was 3.27%.

The current revolving note agreement contains certain covenants that place restrictions on additional debt and stipulate minimum capital and various operating ratios.

On March 19, 2010, the Company closed a private placement offering resulting in the issuance of 2,700 units (each, a “Unit”) to accredited investors for an aggregate purchase price of $2,700,000, or $1,000 per Unit.  Each Unit consists of a 6.00% Series A Subordinated Note, due September 1, 2018 (collectively, the “Subordinated Notes”), $1,000 principal amount, and a detachable warrant (collectively, the “Warrants”) to acquire 20 shares of the Company’s common stock, par value $1.00 per share (the “Common Stock”), at a per share exercise price equal to $10.00 per share, subject to normal adjustments, as set forth in the Warrants.

The Subordinated Notes have a maturity date of September 1, 2018.  The Subordinated Notes bear interest payable semi-annually, in arrears, on June 30 and December 30 of each year, at a fixed interest rate of 6.00% per year.  Beginning on March 19, 2011, or any earlier date if the Subordinated Notes cease to be deemed to be Tier 2 capital, the Company may, at its option, subject to regulatory approvals, redeem some or all of the Subordinated Notes at a redemption price equal to 100% of the principal amount of the redeemed notes, plus any accrued but unpaid interest.

The Warrants will expire on March 19, 2015.  On or after March 19, 2011, the Warrants may be exercised at any time prior to their expiration date, at the holder’s option, by payment of the cash exercise price.  The Company may require holders of the Warrants to convert each Warrant into 20 shares of Common Stock, if at any time after the first anniversary of their date of issuance, the volume weighted-average per share price of the common stock equals or exceeds 130% of the exercise price for at least 20 trading days in a period of 30 consecutive trading days.  The Warrants are detachable from the Subordinated Notes and, subject to any limitations imposed by applicable securities laws, may be transferred separately from the Subordinated Notes at any time after March 19, 2012.

The Subordinated Notes are intended to qualify as Tier 2 capital of the Company for regulatory purposes.  The Company used the net proceeds from the sale of the Units to further strengthen the capital positions of the Company and specifically RB&T.

As a result of the new accounting pronouncement related to transfers of financial assets, effective January 1, 2010, the Company recorded $9,936,379 of secured borrowings and $561,053 of deferred gains (recorded in other liabilities on the consolidated balance sheet) related to sales of the government guaranteed portion of certain loans as of December 31, 2010.  These secured borrowings do not bear interest and will mature within 90 days of the sales in conjunction with the expiration of the recourse period.  At that time, the transfers are accounted for as sales and the gains recognized.

Effective in the second quarter of 2011, the government entities guaranteeing the portions of loans the Company typically sells removed the recourse provisions for future sales which allows for sale accounting treatment at the time of sale.  As a result, the Company was able to recognize gains at the time of sale for the sales during the second quarter and in subsequent periods.  In addition, the Company did not have any related secured liabilities at December 31, 2011.

Unused lines of credit of the subsidiary banks as of December 31, 2011 and 2010 are summarized as follows:

	2011		2010
Secured	$	72,929,607	$	55,035,769
Unsecured		152,500,000		98,500,000
	$	225,429,607	$	153,535,769

The Company pledges the eligible portion of its municipal securities portfolio and select commercial and industrial and commercial real estate loans to the Federal Reserve Bank of Chicago for borrowing at the Discount Window.