<PAGE>
 
                                                                    EXHIBIT 10.4

                                     NOTE

$6,400,000.00                                                 March 18, 1997
                                                              Memphis, Tennessee

     FOR VALUE RECEIVED, the undersigned hereby promises to pay to the order of
NATIONAL BANK OF COMMERCE, Memphis, Tennessee, ("Bank") in current funds, the
principal sum of Six Million Four HundredThousand Dollars ($6,400,000.00),
together with interest from the date hereof to maturity and payable as
hereinafter provided:

     The principal and interest on this Note are payable as follows:

     (1) Interest Payments.  Commencing on March 18, 1998, and on the same day
of each consecutive year thereafter through and including March 18, 2002,
interest shall be payable on the outstanding principal balance on this Note at a
variable rate equal to the Prime Rate.  Interest shall be calculated on a 365
day year and the rate shall be adjusted on the day of any change in the Prime
Rate.

     (2) Principal.  The principal shall be payable over five (5) years
beginning on March 18, 1998, and on the same day of each consecutive year
thereafter through and including March 18, 2002

and equal installments of principal shall be due and payable on March 18, 2002.

     Borrower may prepay this Note in whole or in part without premium or
penalty.  Any prepayment shall not have the effect of suspending or deferring
the payments provided for herein, but same shall continue to be due and payable
on each due date subsequent to any such prepayment. Any payment (including any
prepayment) received hereunder may, at the option of Bank in its sole
discretion, be applied first to the payment of interest on the outstanding
principal balance and the remainder, if any, shall be applied to the principal
of this Note.  All installments, prepayments and payments of principal and
interest due hereunder are payable at the main office of Bank in Memphis,
Tennessee, or such other place as the holder hereof may designate from time to
time.

      No provision of this Note shall require the payment or permit the
collection of interest in excess of the maximum rate permitted by applicable
law.  If any excess of interest in such respect is hereby provided for, or shall
be adjudicated to be so provided, in this Note or otherwise in connection with
this loan transaction, this provision of this Note shall govern and prevail, and
neither the undersigned nor any endorser, surety or guarantor shall be obligated
to pay the excess amount to such interest, or any other excess sum paid for the
use, forbearance, or detention of sums loaned pursuant hereto.  If for any
reason interest in excess of the maximum rate of interest permitted by
applicable law shall be deemed charged, required or permitted or otherwise
should arise, any such excess shall be applied as a payment and reduction of the
principal of the Loan evidenced by this Note, and if the principal amount
thereof has been paid in full, any remaining excess shall forthwith be paid to
the undersigned.  In the event of conflict between the terms of this 
<PAGE>
 
Note and the Loan Agreement, the terms of this Note shall control.
     "Prime Rate" is a fluctuating rate and is a reference or benchmark rate of
interest established from time to time by Bank as its "Prime Rate" to be in
effect from time to time, whether or not such rate is otherwise published.

     The total debt evidenced hereby (principal and accrued interest) shall also
bear interest from and after date of maturity (whether by scheduled maturity,
acceleration or otherwise) at the maximum rate of interest which Bank, as a
national bank, is permitted to contract for and charge under applicable law in
effect on the date hereof or on the maturity date hereof, whichever is greater.

     Whenever payment of any installment of interest or principal is  received
more than ten (10) days after written notice from Bank that such payment is past
due, then Bank may assess a late charge of Two Hundred Fifty Dollars ($250.00).

     It is agreed upon any extension or renewal of the indebtedness evidenced
hereby, Bank shall have the right to fix and charge the same or a different
(higher or lower) rate of interest per annum, provided such rate shall not
exceed the maximum rate of interest which Bank, as a national bank, is permitted
to contract for and charge under applicable law in effect on the date hereof or
in the date of such extension or renewal, whichever is greater.

     The undersigned hereby agrees to pay all expenses directly related to the
loan evidenced hereby, incurred or to be incurred in its making, servicing or
collection, including court costs and reasonable attorneys' fees.

     This Note is the Note referred to in, is entitled to the benefits of, and
is subject to all terms and conditions of the Loan Agreement, of even date
herewith, between the undersigned and Bank. The Loan Agreement, among other
things, contains provisions for acceleration of the maturity of this Note upon
the happening of certain stated events and upon the terms and conditions
specified in the Loan Agreement.  This Note is secured by a Security Agreement
referred to in the Loan Agreement, reference to which is hereby made for
description of the collateral provided for under the Security Agreement and the
rights of the undersigned and Bank with respect to such collateral.

     No delay or omission on the part of Bank in exercising any right hereunder
or related to the loan evidenced hereby shall operate as a waiver of such right
or of any other right.  A waiver on any one occasion shall not be construed as a
bar to or waiver of any such right and/or remedy on any future occasion.

     Every maker, endorser, surety and guarantor of this Note or the obligations
set forth herein hereby waives presentment, demand, notice of dishonor, protest
and all other demands and notices in connection with the delivery, acceptance,
performance, default or endorsement of this Note or their respective obligations
hereon, consents to any extensions, renewals or postponements of the due date or
time of payment hereof, or any other indulgence; agrees that the indebtedness
evidenced 



                                       2
<PAGE>
 
hereby may be extended or renewed in whole or in part without notice to the
undersigned and without limitation as to the number of such extensions or the
period or periods thereof; and consents to any substitution, exchange or release
of collateral and/or to the addition or release of any other party or Person,
whether primarily or secondarily liable.

     All rights and powers of Bank hereunder shall inure to the benefit of any
subsequent holder or assignee of this Note and the owner of any part of the
indebtedness evidenced hereby.

     This instrument shall be governed and construed in accordance with the laws
of the State of Tennessee except with respect to interest which shall be
governed by and construed in accordance with applicable Federal laws in effect
from time to time.


                                           PONTOTOC BANCSHARES CORP.,
                                           a Mississippi corporation



                                           By: _________________________________
                                           Title: President


                                       3
<PAGE>
 
                              SECURITY AGREEMENT


     This Security Agreement is made and entered as of the 18th day of 
March, 1997, by and between PONTOTOC BANCSHARES CORP., Pontotoc, Mississippi
(hereinafter called "Debtor") and NATIONAL BANK OF COMMERCE, Memphis, Tennessee
(hereinafter called "Bank");

     For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Debtor does hereby assign to Bank and grant to Bank
a security interest in:

     (1)  Six Thousand Five Hundred Fifty-seven (6,557) shares of stock of First
          National Bank of Pontotoc standing in Debtor's name on the books of
          said corporation. The stock is evidenced by the following
          certificates:

                No. of Shares               Certificate Number

                  6,557                          ___________

     (2)  All of Debtor's interest in any shares of capital stock of First
          National  Bank of Pontotoc hereafter acquired by Debtor.

     Debtor represents that the shares described above are owned by Debtor on
the date hereof; that any additional shares hereafter acquired by Debtor shall
be subject to the security interest herein granted to Bank; that said shares are
unencumbered; and that Debtor has the right to grant the security interest.
Debtor herewith delivers to Bank the said stock certificates evidencing the
shares of stock described above.

     The security interest granted to Bank hereunder shall secure the payment of
(1) all indebtedness, including principal and interest, now or hereafter
incurred by Debtor pursuant to that certain Loan Agreement and that certainNote
of even date herewith between Debtor and Bank; (2) any and all renewals,
modifications or extensions thereof, in whole or in part; (3) all covenants,
representations, warranties, obligations, liabilities and agreements of the
Debtor to Bank, contained in or arising out of said Loan Agreement or any Loan
Document as therein defined; (4) all other money heretofore or hereafter
advanced by Bank to or for the account of Debtor; and (5) all other, present or
future, direct or contingent, liabilities and indebtedness of Debtor to Bank of
any nature whatsoever, and any extensions or renewals thereof..

     The rights, duties and obligations hereunder of Bank and the Debtor shall,
unless otherwise required by law, be governed by the provisions of the Uniform
Commercial Code in effect from time to time in the State of Tennessee and other
laws of the State of Tennessee.

     Prior to an event of default under said Loan Agreement, any dividend on
said stock may be paid to Debtor, but, after an event of default, any dividend
on said stock shall be paid directly to Bank.
<PAGE>
 
     This Security Agreement shall remain in full force and effect until all
debts and obligations set forth herein are paid in full.

     WITNESS the signatures of the Debtor on the day and year first above
written.


                                        PONTOTOC BANCSHARES CORP.,
                                        a Mississippi corporation
  
                                        By:  ___________________________________
    
                                        Title: _________________________________
   
ATTEST:

________________________________
Secretary



                                       2
<PAGE>
 
                                LOAN AGREEMENT
                                --------------


     THIS LOAN AGREEMENT is entered into as of the 18th day of March, 1997,
between PONTOTOC BANCSHARES CORP., Pontotoc, Mississippi, a Mississippi
corporation (the "Borrower"), and NATIONAL BANK OF COMMERCE, a national banking
association (the "Bank").


                                   ARTICLE I
                                   ---------
                        DEFINITIONS AND ACCOUNTING TERMS
                        --------------------------------

     Section 1.01.  Defined Terms.  As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):

     "Agreement" means this Loan Agreement, as amended, supplemented or modified
from time to time.

     "Capital Lease" means all leases which have been or should be capitalized
on the books of Borrower in accordance with GAAP.

     "Collateral" means 6,557 shares of the capital stock of First National Bank
of Pontotoc, a national bank owned by Borrower.

     "Debt" means (1) indebtedness or liability for borrowed money or for the
deferred purchase price of property or services (including trade obligations);
(2) obligations as lessee under Capital Lease; (3) current liabilities in
respect to unfunded vested benefits under any Plans; and (4) all guaranties,
endorsements (other than for collection or deposit in the ordinary course of
business) and other contingent obligations to purchase, to provide funds for
payment, to supply funds to invest in any Person, or otherwise to assure a
creditor against loss.

     "Event of Default" means any of the events specified in Section 8.01,
whether or not any requirement for the giving of notice, the lapse or time, or
both, or any other condition, has been satisfied.

     "GAAP" means generally accepted accounting principles in the United States.

     "Lien" means any mortgage, deed of trust, pledge security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind.

     "Loan" shall have the meaning assigned to such term in Section 2.01.

     "Loan Documents" mean this Agreement, the Note, and the Security Agreement.

                                       6
<PAGE>
 
     "Note" shall have the meaning assigned to such term in Section 2.02.

     "Person" means an individual, partnership, corporation, limited liability
company, or other entity of whatever nature.

     "Plan" means any employee benefit or other plan established, maintained or
to which contributions have been made by Borrower or any ERISA affiliate.

     "Prime Rate" means a variable reference or benchmark rate of interest that
is established by Bank as its Prime Rate to be in effect from time to time,
whether or not such rate is otherwise published.

     "Security Agreement" means the Security Agreement in form and substance
acceptable to the Bank to be delivered by Borrower under the terms of this
Agreement.

     "Subsidiary" means First National Bank of Pontotoc and any other bank in
which Borrower hereafter acquires a controlling interest either through the
direct ownership of bank stock or indirectly through the ownership of bank
holding company stock.

     Section 1.02.  Accounting Terms.  All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in Section
4.04, and all financial data submitted pursuant to this Agreement shall be
prepared in accordance with such principles.

                                   ARTICLE II
                                   ----------
                          AMOUNT AND TERMS OF THE LOAN
                          ----------------------------

     Section 2.01.  Loan.  Bank agrees on the terms and conditions hereinafter
set forth, to make a loan to Borrower in the principal amount of $6,400,000.00
(the "Loan")to be funded in full at closing.

     Section 2.02.  Note.  Borrower's  obligation to repay the Loan shall be
evidenced by a promissory note (the "Note") in form and substance acceptable to
the Bank.

     Section 2.03  Payment of Principal and Interest.  The principal and
interest on the Note are payable as follows:

     (1) Interest Payments.  Commencing on March 18, 1998, and on the same day
of each consecutive year thereafter through and including March 18, 2002,
interest shall be payable on the outstanding principal balance on the Note at a
variable rate equal to the Prime Rate.  Interest shall be calculated on a 365
day year and the rate shall be adjusted on the day of any change in the Prime
Rate.

                                       7
<PAGE>
 
     (2) Principal Payments.  The principal shall be payable over five (5) years
beginning on March 18, 1998, and on the same day of each consecutive year
thereafter through and including March 18, 2002, equal installments of principal
shall be due and payable and on March 18, 2002 all outstanding principal and
accrued interest shall be due and payable.

     Section 2.04.  Prepayments.  Borrower may prepay the Note in whole or in
part without premium or penalty.  Any prepayment shall be applied first to
interest accrued on the outstanding principal balance and currently due and
payable and the remainder, if any, shall be applied to reduce the principal
balance of the Note.

     Section 2.05.  Use of Proceeds.  The proceeds of the Loan hereunder shall
be used by Borrower to purchase the Collateral.  Borrower will not, directly or
indirectly, use any part of such proceeds for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System or to extend credit to others for the
purpose of purchasing or carrying any margin stock.

     Section 2.06.  Collateral.  Borrower shall pledge as Collateral 6,557
shares of the capital stock of First National  Bank of Pontotoc now owned by
Borrower in accordance with the Security Agreement as herein defined.  Borrower
shall deliver to Bank physical possession of said securities together with stock
powers duly executed in blank.  In the event of stock splits or stock dividends
or any other corporate action which may result in an increase of the 6,557
shares of capital stock of First National Bank of Pontotoc, Borrower agrees that
such additional shares are to be considered as pledged as security under this
Agreement and physical possession of the certificates representing such shares
shall be promptly delivered to Bank, along with stock powers duly executed in
blank.

                                  ARTICLE III
                                  -----------
                              CONDITIONS PRECEDENT
                              --------------------

     Section 3.01.  Condition Precedent to the Loan.  The obligation of Bank to
make the Loan to Borrower is subject to the condition precedent that Bank shall
have received on or before the day of such Loan each of the following, in form
and substance satisfactory to Bank and its counsel:

     (1) Note.  The Note duly executed by Borrower.

     (2) Security Agreement.  The Security Agreement, duly executed by Borrower,
together with delivery of the stock of First National Bank of Pontotoc and with
stock powers attached duly executed in blank;

     (3) Evidence of All Corporate Action by Borrower.  Certified copies of all
corporate action taken by Borrower, including resolutions of its Board of
Directors, authorizing the execution, delivery and performance of the Loan
Documents to which it is a party and each other document to be delivered
pursuant to this Agreement.

                                       8
<PAGE>
 
     (4) Certificate of Secretary of Borrower and Each Subsidiary.  A
certificate of the Secretary of Borrower and of its Subsidiary certifying the
names and true signatures of the officers of parties authorized to sign the Loan
Documents to which it is a party and each other document to be delivered by such
party under this Agreement and certifying the accuracy of the Articles of
Incorporation, Bylaws and Resolutions (as applicable) of such party;

     (5) Opinion of Counsel for Borrower.  A favorable opinion of counsel for
Borrower in form and substance reasonably acceptable to Bank and addressing such
matters as Bank may reasonably request;

     (6) Officer's Certificate.  The following statements shall be true and Bank
shall have received a certificate in form and substance acceptable to Bank (the
"Officer's Certificate") signed by a duly authorized officer of Borrower dated
the date of the closing, stating that:

     (a) The representations and warranties contained in Article IV of this
Agreement and in the Security Agreement are correct on and as of such date, and

     (b) No Events of Default have occurred and are continuing or would result
from the Loan.

     (7) Additional Documentation.  Bank shall have received such other
approvals, opinions or documents as Bank may reasonably request.

                                   ARTICLE IV
                                   ----------
                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

     Borrower represents and warrants to Bank that:

     Section 4.01.  Incorporation, Good Standing and Due Qualification.
Borrower is a corporation duly incorporated, and each Subsidiary is a
corporation duly incorporated or a bank duly organized, and all entities are
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged in;
and is duly qualified as a foreign corporation and in good standing under the
laws of each other jurisdiction in which such qualification is required.

     Section 4.02.  Corporate Power and Authority.  The execution, delivery and
performance by Borrower of the Loan Documents have been duly authorized by all
necessary corporate action and do not and will not (1) require any consent or
approval of the stockholders of such corporation; (2) contravene such
corporation's charter or bylaws; (3) violate any provision of any law, rule,
regulation (including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to such
corporation; (4) result in a breach of or constitute a default under

                                       9
<PAGE>
 
any indenture or loan or credit agreement or any other agreement, lease or
instrument to which such corporation is a party or by which it or its properties
may be bound or affected; (5) result in, or require, the creation or imposition
of any Lien, upon or with respect to any of the properties now owned or
hereafter acquired by such corporation; and (6) cause such corporation to be in
default under any such law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, agreement, lease or
instrument.

     Section 4.03.  Legally Enforceable Agreement.  This Agreement is, and each
of the other Loan Documents when delivered under this Agreement will be, legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally.

     Section 4.04.  Financial Statements.  The financial statement of Subsidiary
of December 31, 1996, and the related statements of income and retained earnings
of Subsidiary for the fiscal year ended, and the accompanying footnotes, copies
of which have been furnished to Bank, are complete and correct and fairly
present the financial condition of Subsidiary as of such date and the results of
the operations of Subsidiary for the periods covered by such statement, all in
accordance with GAAP consistently applied, and since December 31, 1996, there
has been no material adverse change in the condition (financial or otherwise),
business or operations of Subsidiary.  No information, exhibit or report
furnished by Borrower to Bank in connection with the negotiation of this
Agreement contained any material fact necessary to make the statement contained
therein not materially misleading.

     Section 4.05.  Litigation.  There is no pending or threatened action or
proceeding against or affecting Borrower or any Subsidiary before any court,
governmental agency or arbitrator, which may, in any one case or in the
aggregate, materially adversely affect the financial condition, operations,
properties or business of Borrower or any Subsidiary.

     Section 4.06.  No Defaults on Outstanding Judgments or Orders. Borrower and
all Subsidiaries have satisfied all judgments, and, to the best of Borrower's
knowledge, neither Borrower nor any Subsidiary is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator
or federal, state, municipal or other governmental authority.

                                   ARTICLE V
                                   ---------
                             AFFIRMATIVE COVENANTS
                             ---------------------

     So long as the Note shall remain unpaid, Borrower will:

     Section 5.01.  Maintenance of Existence.  Preserve and maintain, and cause
all Subsidiaries to preserve and maintain, its corporate existence and good
standing in the jurisdiction of its incorporation, and qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is required.

                                       10
<PAGE>
 
     Section 5.02.  Maintenance of Records.  Keep, and cause all Subsidiaries to
keep, adequate records and books of account, in which complete entries will be
made in accordance with GAAP consistently applied reflecting all financial
transactions of Borrower and all Subsidiaries.

     Section 5.03.  Compliance with Laws.  Comply, and cause all Subsidiaries to
comply, in all respects with all applicable laws, rules, regulations and orders,
such compliance to include, without limitation, paying before the same become
delinquent, all taxes, assessments and governmental charges imposed upon it or
upon its property.

     Section 5.04  Right of Inspection.  At any reasonable time and from time to
time, permit Bank or any agent or representative thereof to examine and make
copies of and abstracts from the records and books of account of, and visit the
properties of, Borrower and all Subsidiaries, and to discuss the affairs,
finances and accounts of Borrower and all Subsidiaries with any of their
respective officers and directors and Borrower's independent accountants;
provided, however, that all information and records obtained by Bank shall be
treated and maintained in strict confidence.

     Section 5.05.  Reporting Requirements.  Furnish to Bank:

     (1) Quarterly Financial Statements.  As soon as available and in any event
within forty-five (45) days after the end of each of the first three (3)
quarters of each fiscal year, a copy of the call reports filed with the
regulatory authority for Borrower and all Subsidiaries certified by the chief
financial officer of Borrower that such call reports are true and correct copies
of the call reports filed by Borrower and any Subsidiary with the regulatory
authority.

     (2) Annual Financial Statements.  As soon as available and in any event
within ninety (90) days after the end of each fiscal year of Borrower, a balance
sheet of Borrower and all Subsidiaries at the end of such fiscal year and a
statement of income and retained earnings of Borrower and all Subsidiaries for
such fiscal year and a statement of cash flow of Borrower and all Subsidiaries
for such fiscal year, all in figures for the corresponding date and period in
the prior fiscal year and all prepared in accordance with GAAP consistently
applied thereon.

     (3) Reports.  Promptly upon the filing thereon, copies of the Uniform Bank
Performance Report and copies of all Reports of Condition and Reports of Income
of all Subsidiaries filed with the Federal Deposit Insurance Corporation, or any
other reports filed with any other regulatory authority of Borrower or of any
Subsidiary.

     (4) Notice of Litigation.  Promptly after the commencement thereof, notice
of all actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, affecting
Borrower or any Subsidiary which, if determined adversely to Borrower or such
Subsidiary, could have a material adverse effect on the financial condition,
properties or operation of Borrower or such Subsidiary.

                                       11
<PAGE>
 
     (5) Notice of Defaults and Events of Default.  As soon as possible and in
any event within thirty (30) days after the occurrence of each Event of Default,
a written notice setting forth the details of such Event of Default and the
action which is proposed to be taken by Borrower with respect thereto.

     (6) General Information.  Such other information respecting the condition
or operations, financial or otherwise, of Borrower or any of its Subsidiaries as
Bank may from time to time reasonably request.

                                   ARTICLE VI
                                   ----------
                               NEGATIVE COVENANTS
                               ------------------

     So long as the Note and/or any other indebtedness of Borrower to Bank shall
remain unpaid, Borrower, without the prior written consent of Bank, will not:

     Section 6.01.  Liens.  Create, incur, assume, or suffer to exist, or permit
any Subsidiary to create, incur, assume, or suffer to exist, any Lien upon or
with respect to any of its properties, now owned or hereafter acquired, except:

     (1)  Liens in favor of Bank;

     (2) Liens for taxes or assessments or other government charges or levies if
not yet due and payable or, if due and payable, if they are being contested in
good faith by appropriate proceedings and for which appropriate reserves are
maintained;

     (3) Liens imposed by law, such as mechanics' materialmen's, landlords',
warehousemen's, and carriers' Liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which are not past due
for more than thirty (30) days or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;

     (4) Liens under workmen's compensation, unemployment insurance, social
security, or similar legislation;

     (5) Liens, deposits, or pledges to secure the performance of bids, tenders,
contracts (other than contracts for the payment of money), leases (permitted
under the terms of this Agreement), or public or statutory obligations; surety,
stay, appeal, indemnity, performance, or other similar bonds; or other similar
obligations arising in the ordinary course of business;

     (6) Judgment and other similar Liens arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings;

     (7) Easements, rights-of-way, restrictions, and other similar encumbrances
which, in the

                                       12
<PAGE>
 
aggregate, do not materially interfere with the occupation, use, and enjoyment
by Borrower or any Subsidiary of the property or assets encumbered thereby in
the normal course of its business or materially impair the value of the property
subject thereto;

     (8) Liens securing obligations of a Subsidiary to Borrower or another
Subsidiary; and

     (9) Purchase-money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such acquisition, or
a Lien incurred in connection with any conditional sale or other title retention
agreement or a Capital Lease; provided that

     (a) Any property subject to any of the foregoing is acquired by Borrower or
any Subsidiary in the ordinary course of its respective business and the Lien on
any such property is created contemporaneously with such acquisition;

     (b) The obligation secured by any Lien so created, assumed, or existing
shall not exceed the lesser of cost or fair market value as of the time of
acquisition of the property covered thereby to Borrower or Subsidiary acquiring
the same;

     (c) Each such Lien shall attach only to the property so acquired and fixed
improvements thereon;

     Section 6.02.  Debt.  Create, incur, assume, or suffer to exist or permit
any Subsidiary to create, incur, assume , or suffer to exist, any Debt, except:

     (1) Debt of Borrower under this Agreement or the Note;

     (2) Debt of Borrower subordinated on terms satisfactory to Bank to
Borrower's obligations under this Agreement and the Note;

     (3) Debt of Borrower to any Subsidiary or of any Subsidiary to Borrower or
another Subsidiary;

     (4) Accounts payable to trade creditors for goods or services in each case
incurred in the ordinary course of business and paid within the specified time,
unless contested in good faith and by appropriate proceedings;

     (5) Debt of Borrower or any Subsidiary secured by purchase-money Liens
permitted by Section 6.01(9);

     (6) Debt of any Subsidiary to the Federal Home Loan Bank Board or to the
Federal Reserve Board.

     (7) Debt of any Subsidiary to purchase overnight funds from Bank.

                                       13
<PAGE>
 
     Section 6.03.  Mergers, Etc.  Merge or consolidate with, or sell, assign,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person or entity, or acquire all or substantially all
of the assets or the business of any Person or entity, or permit any Subsidiary
to do so without the prior written consent of Bank, which consent shall not be
unreasonably withheld.

     Section 6.04.  Leases.  Create, incur, assume or suffer to exist, or permit
any Subsidiary to create, incur, assume or suffer to exist, any obligation as
lessee for the rental or hire of any real or personal property, except:  (1)
Capital Leases permitted under Section 6.01; (2) leases existing on the date of
this Agreement and any extensions or renewals thereof; (3) leases (other than
Capital Leases) which do not in the aggregate require Borrower and any
Subsidiary on a consolidated basis to make payments (including taxes, insurance,
maintenance and similar expense which Borrower or any Subsidiary is required to
pay under the terms of any lease) in any fiscal year of Borrower in excess of
One Hundred Fifty Thousand Dollars ($150,000.00); and (4) leases between
Borrower and any Subsidiary.

     Section 6.05.  Sale and Leaseback.  Sell, transfer or otherwise dispose of
any real or personal property to any Person or entity and thereafter directly or
indirectly lease back the same or similar property or permit any Subsidiary to
do so.

     Section 6.06.  Dividends.  Declare or pay any dividends; or purchase,
redeem, retire or otherwise acquire for value any of its capital stock now or
hereafter outstanding; or make any distribution of assets to its stockholders as
such whether in cash, assets or obligations of Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption or retirement of, any shares of its capital
stock; or make any other distribution by reduction of capital or otherwise in
respect of any shares of its capital stock, except that any Subsidiary may
declare dividends to its shareholders, including Borrower, in amounts necessary
to pay the indebtedness of Borrower to Bank and Borrower's reasonable operating
expenses; provided, however, that if payments of principal and interest are
current, any Subsidiary shall be permitted to pay dividends to stockholders not
exceeding forty percent (40%) of net earnings.

     Section 6.07.  Sale of Assets.  Sell, lease, assign, transfer or otherwise
dispose of, or permit any Subsidiary to sell, lease, assign, transfer or
otherwise dispose of, any of its now owned or hereafter acquired assets except
for the sale or other disposition of assets no longer used or useful in the
conduct of its business; provided, however, any Subsidiary other than First
National Bank of Pontotoc or any Subsidiary of a Subsidiary may be sold in the
ordinary course of business for a fair value.

     Section 6.08.  Stock of Subsidiary, Etc.  Sell or otherwise dispose of any
shares of capital stock of any Subsidiary.

                                       14
<PAGE>
 
     Section 6.09.  Management.  Change or permit to be changed the management
position of Buddy R. Montgomery as President of First National Bank of Pontotoc.

                                  ARTICLE VII
                                  -----------
                              FINANCIAL COVENANTS
                              -------------------

     So long as the Note shall remain unpaid:

     Section 7.01.  Minimum Primary Capital.  Borrower will cause all
Subsidiaries each to maintain at all times their capital ratio in the "well
capitalized" category as defined by the Office of the Comptroller.

     Section 7.02.  Loan Losses.  Borrower agrees that the loan loss reserve
shall at all times be in compliance with any requirements established by any of
its Subsidiaries' regulatory authorities.

     Section 7.03.  Classified Assets.  Borrower will cause each Subsidiary not
to allow the ratio of classified assets to gross capital to exceed such ratios
required to be maintained by any of its Subsidiaries' regulatory authorities.

     Section 7.04.  Nonperforming Assets.  Borrower will cause the loan loss
reserve of any Subsidiary at all times to be not less than the percent of the
nonperforming assets of such Subsidiary allowed by the Subsidiary's appropriate
regulatory authority.  Nonperforming assets shall exclude those assets that are
well secured and in the process of collection pursuant to FFIEC Call Report
Instructions.

     Section 7.05.  Identified Losses.  Borrower will not permit any Subsidiary
to have loans in its loan portfolio that would be classified as "losses" in
excess of such Subsidiary's loan loss reserve.

                                 ARTICLE VIII
                                 ------------
                               EVENTS OF DEFAULT
                               -----------------

     Section 8.01.  Events of Default.  If any of the following events ("Events
of Default") shall occur:

     (1) Borrower should fail to pay the principal of, or interest on, the Note,
as and when due and payable, and such failure shall continue for ten (10) days
after written notice thereof from Bank;

     (2) Any representation or warranty made or deemed made by Borrower in this
Agreement or the Security Agreement or which is contained in any certificate,
document, opinion or financial or other statement furnished at any time under or
in connection with any Loan Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made, and such
representation or warranty shall continue to be incorrect for thirty (30) days
after written notice thereof from Bank;

                                       15
<PAGE>
 
     (3) Borrower shall fail to perform or observe any term, covenant or
agreement contained in any Loan Document (other than payment of principal or
interest pursuant to the Note) to which it is a party on its part to be
performed or observed and such failure shall continue for thirty (30) days after
written notice thereof from Bank;

     (4) Borrower or any Subsidiary shall (a) fail to pay any indebtedness for
borrowed money (other than the Note) of Borrower or such Subsidiary, as the case
may be, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), or (b) fail
to perform or observe any term, covenant or condition on its part to be
performed or observed under any agreement or instrument relating to any such
indebtedness, when required to be performed or observed, if the effect of such
failure to perform or observe is to accelerate, or to permit the acceleration
after the giving of notice or passage of time, or both, of the maturity of such
indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof;

     (5) Borrower or any Subsidiary (a) shall generally not, or shall be unable
to, or shall admit in writing its inability to pay its debts as such debts
become due; or (b) shall make an assignment for the benefit of creditors,
petition or apply to any tribunal for the appointment of a custodian, receiver
or trustee for it or a substantial part of its assets; or (c) shall commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect; or (d) shall have any such petition or application filed
or any such proceeding commenced against it in which an order for relief is
entered or adjudication or appointment is made and which remains undismissed for
a period of thirty (30) days or more; or (e) by any act or omission shall
indicate its consent to, approval of, or acquiescence in any such petition,
application or proceeding or order for relief for the appointment of a
custodian, receiver of a custodian, receiver or trustee for all or any
substantial part of its properties; or (f) shall suffer any such custodianship,
receivership or trusteeship to continue undischarged for a period of thirty (30)
days or more;

     (6) One or more judgments, decrees or orders for the payment of money in
excess of Twenty Five Thousand Dollars ($25,000.00) in the aggregate shall be
rendered against Borrower or any Subsidiary and such judgments, decrees or
orders shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days without being vacated, discharged, satisfied or stayed or
bonded pending appeal;

     (7) The Security Agreement shall at any time after its execution and
delivery and for any reason cease (a) except as a result of the actions of Bank,
to create a valid and perfected first priority security interest in and to the
property purported to be subject to such Security Agreement; or (b) to be in
full force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by Borrower, or Borrower shall deny it
has any further liability or obligation under the Security Agreement, or
Borrower shall fail to perform any of its obligations under the Security
Agreement;

                                       16
<PAGE>
 
     (8) Borrower or any Subsidiary shall be found guilty of an unsafe or
unsound banking practice by any regulatory agency having jurisdiction over the
Borrower or any Subsidiary; or

     (9) Borrower or any Subsidiary  shall fail to observe any term, covenant or
agreement contained in any loan to such entity by Bank, or otherwise be in
default of any agreement with Bank;

then, and in such event, Bank may, by notice to Borrower, declare the Note, all
interest thereon, and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Note, all such interest, and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by Borrower.

                                  ARTICLE IX
                                  ----------
                                 MISCELLANEOUS
                                 -------------

     Section 9.01.  Amendments, Etc.  No amendment, modification, termination or
waiver of any provision of any Loan Document to which Borrower is a party, nor
consent to any departure by Borrower from any Loan Document to which it is a
party, shall in any event be effective unless the same shall be in writing and
signed by Bank, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which is given.

     Section 9.02.  Notices, Etc.  All notices and other communications provided
for under this Agreement and under the other Loan Documents to which Borrower is
a party shall be in writing (including faxed communication) and mailed or faxed
or delivered, if to Borrower, at its address at 19 South Main Street, P. O. Box
29, Pontotoc, Mississippi 38863-0029, Attention: Buddy R. Montgomery, and if to
Bank, at its address at One Commerce Square, Memphis, Tennessee 38150,
Attention: Correspondent Banking Division; or, as to each in a written notice to
the other party complying as to delivery with the terms of this Section 9.02.
All such notices and communications shall, when mailed or faxed, be effective
when deposited in the mails or received by fax, respectively, addressed as
aforesaid, except that notices to Bank pursuant to the provision of Article II
shall not be effective until received by Bank.

     Section 9.03.  No Waiver; Remedies.  No failure on the part of Bank to
exercise, and no delay in exercising, any right, power or remedy under any Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any Loan Documents preclude any other or further
exercise thereof or the exercise of any other right.  No waiver by Bank shall be
construed as a waiver of a subsequent similar right, power or remedy.  The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.

     Section 9.04.  Successors and Assigns.  This Agreement shall be binding
upon and inure to the benefit of Borrower and Bank and their respective
successors and assigns, except that Borrower may not assign or transfer any of
its rights under any Loan Document to which Borrower is a party 

                                       17
<PAGE>
 
without the prior written consent of Bank.

     Section 9.05.  Costs and Expenses.  Borrower agrees to pay on demand all
costs and expenses incurred in connection with the preparation, execution,
delivery, filing, recording, and administration of any of the Loan Documents,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for Bank, and local counsel who may be retained by said counsel, with
respect thereto and with respect to advising Bank as to its rights and
responsibilities under any of the Loan Documents, and all costs and expenses, if
any, in connection with the enforcement of any of the Loan Documents.  In
addition, Borrower shall pay any and all stamp and other taxes and fees payable
or determined to be payable in connection with the execution, delivery, filing
and recording of any of the Loan Documents and any other documents to be
delivered under any such Loan Documents, and agrees to save Bank harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and fees.

     Section 9.06.  Right of Setoff.  Upon the occurrence and during the
continuance of any Event of Default, Bank is hereby authorized at any time and
from time to time, without notice to Borrower (any such notice being expressly
waived by Borrower) to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Bank to or for the credit or the account of
Borrower against any and all of the obligations of Borrower now or hereafter
existing under this Agreement or the Note or any other Loan Document,
irrespective of whether or not Bank shall have made any demand under this
Agreement or the Note or such other Loan Document and although such obligations
may be unmatured.  Bank agrees promptly to notify Borrower after any such setoff
and application, provided that the failure to give such notice shall not affect
the validity of such setoff and application.  The rights of Bank under this
Section 9.06 are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which Bank may have.

     Section 9.07.  Governing Law.  This Agreement and the Note shall be
governed by, and construed in accordance with, the laws of the State of
Tennessee, except with respect to interest which shall be governed by and
construed in accordance with applicable Federal laws in effect from time to
time.

     Section 9.08.  Severability of Provisions.  Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.

     Section 9.09.  Headings.  Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.

     Section 9.10.  Maximum Interest Rate.  No provision of this Agreement or of
the Note shall require the payment or permit the collection of interest in
excess of the maximum rate permitted by 

                                       18
<PAGE>
 
applicable law. If any excess of interest in such respect is hereby provided
for, or shall be adjudicated to be so provided, in the Note or otherwise in
connection with this loan transaction, the provisions of this Section 9.10 shall
govern and prevail, and neither Borrower nor the successors or assigns of
Borrower shall be obligated to pay the excess amount of such interest, or any
other excess sum paid for the use, forbearance or detention of sums loaned
pursuant hereto. If for any reason interest in excess of the maximum rate
interest permitted or otherwise should arise, any such excess shall be applied
as a payment and reduction of the principal of the Loan evidenced by the Note,
and if the principal amount thereof has been paid in full, any remaining excess
shall forthwith be paid to Borrower. In the event of conflict between the terms
of this Agreement and the Note, the terms of the Note shall control.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                                        PONTOTOC BANCSHARES CORP.,  
                                        Pontotoc, Mississippi,
                                        a Mississippi corporation


                                        By:________________________________

                                        Title:_____________________________

ATTEST:

___________________________
Secretary


                                        NATIONAL BANK OF COMMERCE


                                        By:________________________________

                                        Title:_____________________________

                                       19