Macatawa Bank Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

OTHER BORROWED FUNDS

OTHER BORROWED FUNDS

9 Months Ended

Sep. 30, 2012

OTHER BORROWED FUNDS [Abstract]

OTHER BORROWED FUNDS

NOTE 7 - OTHER BORROWED FUNDS

Other borrowed funds include advances from the Federal Home Loan Bank and borrowings from the Federal Reserve Bank.

Federal Home Loan Bank Advances

At period-end, advances from the Federal Home Loan Bank were as follows (dollars in thousands):

Principal Terms	Advance Amount		Range of Maturities	Weighted Average Interest Rate

September 30, 2012
Single maturity fixed rate advances	$	80,000	May 2015 to September 2016		1.70	%
Amortizable mortgage advances		11,822	March 2018 to July 2018		3.78	%
	$	91,822

Principal Terms	Advance Amount		Range of Maturities	Weighted Average Interest Rate

December 31, 2011
Single maturity fixed rate advances	$	135,000	March 2012 to September 2016		1.79	%
Amortizable mortgage advances		13,603	March 2018 to July 2018		3.77	%
	$	148,603

Each advance is subject to a prepayment penalty if paid prior to its maturity date. Fixed rate advances are payable at maturity. Amortizable mortgage advances are fixed rate advances with scheduled repayments based upon amortization to maturity. These advances were collateralized by residential and commercial real estate loans totaling $409.0 million under a blanket lien arrangement at September 30, 2012 and $389.8 million under a physical loan collateral delivery arrangement at December 31, 2011.

On September 28, 2012, advances totaling $20 million were paid off early, resulting in a prepayment penalty of $322,000 which is included in other expense for the quarter ended September 30, 2012. The trasaction settled on October 12, 2012 so the prepayment penalty and the advance payment were carried in other iabilities at September 30, 2012.

Scheduled repayments of FHLB advances as of September 30, 2012 were as follows (in thousands):

2012	$	---
2013		1,831
2014		1,884
2015		21,938
2016		61,996
Thereafter		4,173
	$	91,822

- 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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