Regulatory Matters (Notes)

9 Months Ended

Sep. 30, 2012

Banking and Thrift [Abstract]

Regulatory Matters

Regulatory Matters

Federal banking regulations require that the Bank maintain certain cash reserves based on a percent of deposits. This requirement was $4.224 million at September 30, 2012 and $2.258 million at December 31, 2011. The reserve requirements were covered by vault cash of $13.364 million at September 30, 2012 and $12.311 million at December 31, 2011. The Company is also required to hold a clearing balance of $2.000 million with the Federal Reserve. This clearing balance was included in interest bearing bank balances at September 30, 2012 and December 31, 2011.

The Company and its subsidiary bank are subject to various regulatory capital requirements administered by Federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, specific capital requirements that involve quantitative measures of assets, liabilities and certain off-balance-sheet items, calculated under regulatory accounting practices must be met. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Total Capital and Tier I Capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I Capital (as defined) to average assets (as defined). Management believes, as of September 30, 2012, that all capital adequacy requirements have been met.

As of September 30, 2012, the most recent notification by the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank's category.

Note 11:  (Continued)

The Company's and Bank's actual capital amounts and ratios as of September 30, 2012, and December 31, 2011, are also presented in the table:

(Dollars in thousands)	Actual				Minimum Capital				Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2012:
Total capital (to risk weighted assets):
Company	$	149,994	12.76	%	$	94,239	8.00	%	$	—	—	%
Bank	147,353		12.56	%	93,881		8.00	%	117,352		10.00	%
Tier I capital (to risk weighted assets):
Company	135,277		11.51	%	47,119		4.00	%	—		—	%
Bank	132,659		11.30	%	46,941		4.00	%	70,411		6.00	%
Tier I capital (to average assets):
Company	135,277		8.81	%	61,414		4.00	%	—		—	%
Bank	132,659		8.67	%	61,175		4.00	%	76,469		5.00	%
December 31, 2011:
Total capital (to risk weighted assets):
Company	$	141,434	12.09	%	$	93,564	8.00	%	$	—	—	%
Bank	141,088		12.08	%	93,410		8.00	%	116,762		10.00	%
Tier I capital (to risk weighted assets):
Company	126,810		10.84	%	46,782		4.00	%	—		—	%
Bank	126,488		10.83	%	46,705		4.00	%	70,057		6.00	%
Tier I capital (to average assets):
Company	126,810		8.17	%	62,072		4.00	%	—		—	%
Bank	126,488		8.17	%	61,933		4.00	%	77,416		5.00	%

Dividends paid by the Bank are the primary source of funds available to the Company for payment of dividends to its shareholders and other cash needs. Applicable Federal and state statutes and regulations impose restrictions on the amounts of dividends that may be declared by the Bank. The Bank may also be restricted in its ability to pay dividends due to regulatory violations cited in an examination. In addition to the formal statutes and regulations, regulatory authorities also consider the Bank’s ability to produce current earnings and the adequacy of the Bank's total capital in relation to its assets, deposits and other such items, and as a result, capital adequacy considerations could further limit the availability of dividends from the Bank.

The Bank is required to obtain prior approval from its primary regulators – the Federal Deposit Insurance Corporation and the State of Mississippi Department of Banking and Consumer Finance – to pay dividends to the Company.

In November 2009, the Company entered into an informal agreement with the Federal Reserve Bank of St. Louis (the “Federal Reserve”). The agreement requires prior approval by the Federal Reserve of (1) the declaration or payment by the Company of dividends to shareholders and (2) the payment of interest on outstanding trust preferred securities and the payment of dividends on outstanding TARP preferred stock and (3) the incurrence of additional debt. The agreement is not a “written agreement” for purposes of Section 8 of the Federal Deposit Insurance Act, as amended. The Federal Reserve approved, pursuant to the informal agreement, the common dividends payable to shareholders, the interest payment on the trust preferred securities and the dividends payable on the TARP preferred stock for the first nine months of 2012.

Under the terms of the Exchange Agreement related to the Company's participation in the TARP Community Development Capital Initiative, the Company may not pay common dividends in excess of the current rate of $.01 per share per quarter ($.04 per share per year) through the earlier of September 2018 or the date the preferred stock is redeemed.