Regulatory Matters and Capital Adequacy

12 Months Ended

Dec. 31, 2011

Regulatory Matters and Capital Adequacy

Note 13. Regulatory Matters and Capital Adequacy

The Company and the Bank are subject to various regulatory capital requirements administered by the 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 their financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

Federal bank regulatory agencies have established certain capital-related criteria that must be met by banks and bank holding companies. The measurements which incorporate the varying degrees of risk contained within the balance sheet and exposure to off-balance sheet commitments were established to provide a framework for comparing different institutions. Regulatory guidelines require that Tier 1 capital and total risk-based capital to risk-adjusted assets must be at least 4.0% and 8.0%, respectively. In order for the Company to be considered "well capitalized" under the guidelines of the banking regulators, the Company must have Tier 1 capital and total risk-based capital to risk-adjusted assets of at least 6.0% and 10.0%, respectively. As of December 31, 2011, the Company met the criteria to be considered "well capitalized".

As of December 31, 2011, the most recent notification from the Bank's primary regulator categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed its category.

The Company's and the Bank's actual capital amounts and ratios are presented below:

	Actual					Minimum For Capital Adequacy Purposes					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions

	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollar amounts in thousands)
As of December 31, 2011:
Total Capital (to risk-weighted assets):
VIST Financial Corp.,	$	124,543		12.88	%	$	77,384		8.00	%		N/A		N/A
VIST Bank		116,351		12.17			76,509		8.00		$	95,637		10.00	%
Tier 1 capital (to risk-weighted assets):
VIST Financial Corp.,		112,426		11.62			38,692		4.00			N/A		N/A
VIST Bank		104,366		10.91			38,255		4.00			57,382		6.00
Tier 1 capital (to average assets):
VIST Financial Corp.,		112,426		7.68			58,528		4.00			N/A		N/A
VIST Bank		104,366		7.17			58,204		4.00			72,755		5.00
As of December 31, 2010:
Total Capital (to risk-weighted assets):
VIST Financial Corp.,	$	121,416		12.13	%	$	80,104		8.00	%		N/A		N/A
VIST Bank		104,565		10.53			79,429		8.00		$	99,286		10.00	%
Tier 1 capital (to risk-weighted assets):
VIST Financial Corp.,		108,872		10.87			40,052		4.00			N/A		N/A
VIST Bank		92,135		9.28			39,714		4.00			59,572		6.00
Tier 1 capital (to average assets):
VIST Financial Corp.,		108,872		8.01			54,393		4.00			N/A		N/A
VIST Bank		92,135		6.80			54,208		4.00			67,759		5.00

On December 19, 2008, the Company issued to the United States Department of the Treasury ("Treasury") 25,000 shares of Series A, Fixed Rate, Cumulative Perpetual Preferred Stock ("Series A Preferred Stock"), with a par value of $0.01 per share and a liquidation preference of $1,000 per share, and a warrant ("Warrant") to purchase 367,982 shares of the Company's common stock, par value $5.00 per share, for an aggregate purchase price of $25.0 million in cash.

The Series A Preferred Stock qualifies as Tier 1 capital and will pay cumulative dividends at a rate of 5% per annum for the first five years, and 9% per annum thereafter. Under ARRA, the Series A Preferred Stock may be redeemed at any time following consultation by the Company's primary bank regulator and Treasury, not withstanding the terms of the original transaction documents. Under FAQ's issued recently by Treasury, participants in the Capital Purchase Program desiring to repay part of an investment by Treasury must repay a minimum of 25% of the issue price of the preferred stock.

Prior to the earlier of the third anniversary date of the issuance of the Series A Preferred Stock (December 19, 2011) or the date on which the Series A Preferred Stock has been redeemed in whole or the Treasury has transferred all of the Series A Preferred Stock to third parties which are not affiliates of the Treasury, the Company cannot increase its common stock dividend from the last quarterly cash dividend per share ($0.10) declared on the common stock prior to October 14, 2008 without the consent of the Treasury.

The Warrant has a 10-year term and is immediately exercisable upon its issuance, with an exercise price, subject to anti-dilution adjustments, equal to $10.19 per share of common stock. As a result of the sale of 644,000 shares of the Company's common stock to two institutional investors, the number of shares of common stock into which the Warrant is now exercisable is 367,984. In the event that the Company redeems the Series A Preferred Stock, the Company can repurchase the warrant at "fair value" as defined in the investment agreement with Treasury.

On April 21, 2010, the Company entered into separate stock purchase agreements with two institutional investors relating to the sale of an aggregate of 644,000 shares of the Company's authorized but unissued common stock, par value $5.00 per share, at a purchase price of $8.00 per share. The Company completed the issuance of $4.8 million of common stock, net of related offering costs, on May 12, 2010.

Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by the Bank to the Company. At December 31, 2011, the Bank had no funds available for payment of dividends to the Company. Dividends paid by the Bank to the Company would be prohibited if the effect thereof would cause the Bank's capital to be reduced below applicable minimum capital requirements.

Dividends payable by the Company are subject to guidance published by the Board of Governors of the Federal Reserve System. Consistent with the Federal Reserve guidance, companies are urged to strongly consider eliminating, deferring or significantly reducing dividends if (i) net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividend, (ii) the prospective rate of earnings retention is not consistent with the bank holding company's capital needs and overall current and prospective financial condition, or (iii) the company will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy rations. As a result of this guidance, management intends to consult with the Federal Reserve Bank of Philadelphia, and provide the Reserve Bank with information on the Company's then current and prospective earnings and capital position, on a quarterly basis in advance of declaring any cash dividends for the foreseeable future.

Loans or advances are limited to 10 percent of the Bank's capital stock and surplus on a secured basis. At December 31, 2011 and 2010, the Bank had a $1.3 million loan outstanding to VIST Insurance.

The Company paid $1.3 million in common stock cash dividends during 2011 and $1.2 million during 2010. The Company also paid $1.3 million in dividends on its Series A Preferred Stock during both 2011 and 2010.

- Definition

The entire disclosure for banks, savings institutions, and credit unions, for regulatory capital requirements imposed by the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) or for any state imposed capital requirements, as applicable. The disclosure may include (1) a description of regulatory capital requirements (a) for capital adequacy purposes and (b) established by the prompt corrective action provisions of Section 38 of the Federal Depository Insurance Act; (2) the actual or possible material effects of noncompliance with such requirements; (3) whether the entity is in compliance with the regulatory capital requirements including (a) required and actual ratios and amounts of Tier 1 leverage, Tier 1 risk-based, and total risk-based capital, tangible capital (for savings institutions), and Tier 3 capital for market risk (for certain banks and bank holding companies), (b) factors that may significantly affect capital adequacy; (4) the prompt corrective action category in which the entity was classified as of its most recent notification; (5) whether management believes any conditions or events since notification have changed the entity's category. Also may include additional information that might be disclosed in situations where substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 942

-SubTopic 505

-Section 50

-Paragraph 1G

-URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958577-112826

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 942

-SubTopic 505

-Section 50

-Paragraph 1B

-URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958570-112826

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 942

-SubTopic 505

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958568-112826

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 942

-SubTopic 505

-Section 50

-Paragraph 1E

-URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958574-112826

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 942

-SubTopic 505

-Section 50

-Paragraph 1H

-URI http://asc.fasb.org/extlink&oid=6918689&loc=d3e65071-112826

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Audit and Accounting Guide (AAG)

-Number AAG-DEP

-Chapter 17

-Paragraph 15, 16, 17

-IssueDate 2006-05-01

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 942

-SubTopic 505

-Section 50

-Paragraph 1C

-URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958572-112826

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 942

-SubTopic 505

-Section 50

-Paragraph 1F

-URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958575-112826

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 942

-SubTopic 505

-Section 50

-Paragraph 1D

-URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958573-112826

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 942

-SubTopic 505

-Section 50

-Paragraph 1A

-URI http://asc.fasb.org/extlink&oid=6918689&loc=SL5958569-112826

+ Details

VIST FINANCIAL CORP 10-K