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Note 8 - Borrowings

12 Months Ended

Dec. 31, 2013

Note 8 – Borrowings

Information relating to short-term and long-term borrowings is as follows for the years ended December 31:

	2013					2012					2011
(dollars in thousands)	Amount		Rate			Amount		Rate			Amount		Rate
Short-term:
At Year-End:
Customer repurchase agreements and federal funds purchased repurchase	$	80,471		0.28	%	$	101,338		0.31	%	$	103,362		0.43	%
Total	$	80,471				$	101,338				$	103,362

Average Daily Balance:
Customer repurchase agreements and federal funds purchased repurchase	$	94,566		0.27	%	$	96,141		0.34	%	$	116,367		0.59	%
Federal Home Loan Bank – current portion		-		-			503		0.41	%		-		-

Maximum Month-end Balance:
Customer repurchase agreements and federal funds purchased repurchase	$	106,975		0.23	%	$	111,580		0.34	%	$	147,671		0.53	%
Federal Home Loan Bank – current portion		-		-			10,000		2.98	%		-		-

Long-term:
At Year-End:
Federal Home Loan Bank	$	30,000		2.46	%	$	30,000		2.43	%	$	40,000		2.96	%
Subordinated Notes		9,300		8.50	%		9,300		10.00	%		9,300		10.00	%
United Bank Line of Credit		-		-			-		-			-		-

Average Daily Balance:
Federal Home Loan Bank	$	30,000		2.46	%	$	37,404		2.90	%	$	40,000		2.96	%
Subordinated Notes		9,300		9.64	%		9,300		10.00	%		9,300		10.00	%
United Bank Line of Credit		-		-			-		-			-		-

Maximum Month-end Balance:
Federal Home Loan Bank	$	30,000		2.46	%	$	40,000		2.96	%	$	40,000		2.96	%
Subordinated Notes		9,300		10.00	%		9,300		10.00	%		9,300		10.00	%
United Bank Line of Credit		-		-			-		-			-		-

The Company offers its business customers a repurchase agreement sweep account in which it collateralizes these funds with U.S. Government agency and mortgage backed securities segregated in its investment portfolio for this purpose. By entering into the agreement, the customer agrees to have the Bank repurchase the designated securities on the business day following the initial transaction in consideration of the payment of interest at the rate prevailing on the day of the transaction.

The Bank has commitments from correspondent banks under which it can purchase up to $127.5 million in federal funds on an unsecured basis, against which there were no amounts outstanding at December 31, 2013 and can borrow unsecured funds under one-way Certificates of Deposit Account Registry Service (“CDARS”) brokered deposits in the amount of $555.6 million, against which there was $7.7 million outstanding at December 31, 2013. The Bank has a commitment at December 31, 2013 from the Promontory Interfinancial Network to place up to $300.0 million of brokered deposits from its Insured Network Deposit (“IND”) program with the Bank in amounts requested by the Bank, against which there was $159.3 million outstanding at December 31, 2013. At December 31, 2013, the Bank was also eligible to make advances from the FHLB up to $427.7 million based on collateral at the FHLB, of which $30.0 million was outstanding at December 31, 2013. The Bank may enter into repurchase agreements as well as obtain additional borrowing capabilities from the FHLB provided adequate collateral exists to secure these lending relationships. The Bank also has a back-up borrowing facility through the Discount Window at the Federal Reserve Bank of Richmond (“Federal Reserve Bank”). This facility, which amounts to approximately $375.0 million, is collateralized with specific loan assets identified to the Federal Reserve Bank. It is anticipated that, except for periodic testing, this facility would be utilized for contingency funding only.

In December 2013, the Company renewed its Loan Agreement and related Stock Security Agreement and Promissory Note (the “credit facility”) with a regional bank, pursuant to which the Company may borrow, on a revolving basis, up to $50 million for working capital purposes, or to finance capital contributions to the Bank in whole and to ECV in part. This facility was originally entered into in August 2008 and has been renegotiated over the past five years to its current terms. The credit facility is secured by a first lien on a portion of the stock of the Bank, and bears interest at a floating rate equal to the Wall Street Journal Prime Rate minus 0.25% with a floor interest rate of 3.50%. Interest is payable on a monthly basis. The term of the credit facility expires on September 30, 2014. There were no amounts outstanding under this credit at December 31, 2013 or 2012.

On September 3, 2013 the Company amended the terms of the $9.3 million of subordinated notes dated August 30, 2010. Under the amendment, the maturity date is extended from September 30, 2016 to September 30, 2021 and the interest rate is changed from 10%, to a fixed interest rate of 8.5% until August 30, 2016 and thereafter at a fixed rate of interest equal to the then current yield on the 5 year U.S. Treasury Note plus 7.03%. The notes are intended to qualify as Tier 2 capital for regulatory purposes to the fullest extent permitted under the currently applicable capital regulations. It is not anticipated that the notes will qualify for capital treatment upon implementation of recently adopted Basel III capital requirements. The payment of principal on the notes may only be accelerated upon the occurrence of certain bankruptcy or receivership related events relating to the Company or, to the extent permitted under capital rules to be adopted by the Federal Reserve Board pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, a major bank subsidiary of the Company.

Under current capital rules, the capital treatment of the notes must be phased out, at a rate of 20% of the original principal amount per year during the last five years of the term of the notes, commencing on October 1, 2016. Currently, $9.3 million of subordinated notes are includible as Tier 2 capital.

- 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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