12 Months Ended
Dec. 31, 2011



Notes payable consisted of the following:


    2011     2010  
FHLB advances   $ 10,000     $ 10,000  
Subordinated debentures     38,557       38,557  
Other notes payable     182       204  
  $ 48,739     $ 48,761  


The FHLB advances are secured by a blanket pledge of eligible loans and securities and require monthly interest payments. The following advances were outstanding as of December 31:


    2011     2010  
Fixed rate advances with maturity in 2013 and an interest rate of 1.35%     5,000       5,000  
Fixed rate advances with maturity in 2014 and an interest rate of 1.72%     5,000       5,000  
  $ 10,000     $ 10,000  


There are no principal payments on FHLB advances scheduled in 2012, only monthly interest payments.


In March 2008, the Bank, a wholly-owned subsidiary of BKFC, issued $20,000 of LIBOR plus 1.75% floating rate subordinated debenture to USB Capital Resources, Inc. The debenture may be redeemed after March 2013 at face value. Final maturity is March of 2018. The subordinated debentures are classified as liabilities on the balance sheet and are considered Tier 2 capital for regulatory capital purposes.


In May of 2007, The Bank of Kentucky Capital Trust II (“the Trust”), a trust subsidiary of the Company, issued $18,000 of LIBOR plus 1.47% floating rate obligated mandatory redeemable securities “Trust Preferred Securities” as part of a pooled offering. The Trust may redeem the Trust Preferred Securities, in whole but not in part, any time after May 2012 at face value. The final maturity date is May of 2037. The Trust used the proceeds from the issuance of its Trust Preferred Securities and common securities to buy $18,557 aggregate principal amount of junior subordinated debentures issued by the Company. These debentures are the Trust’s only assets, with terms similar to the Trust Preferred Securities, and mature in 2037. The subordinated debentures are classified as liabilities on the Balance Sheet are considered as Tier 1 capital for regulatory capital purposes, subject to certain limitations. The Company is not considered the primary beneficiary of this Trust (variable interest entity), therefore the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability.


Other notes payable included a capitalized lease obligation.


The Bank maintains a $175,000 letter of credit from the Federal Home Loan Bank of Cincinnati. The letter is pledged to secure public funds deposit accounts and is secured by a blanket pledge of the Bank’s residential and commercial real estate loans.