The Federal Reserve has reached a written agreement with Commerce Bancshares Inc. in Franklin, Tenn.

Under terms of the agreement, the company agreed to serve as a source of strength to its $225 million-asset Peoples State Bank of Commerce, which has been operating under a consent order with the Federal Deposit Insurance Corp. since Nov. 4.

Commerce Bancshares was barred from paying dividends without regulatory approval. The company was also prohibited from paying principal or interest on its subordinated debt and trust preferred stock without first getting the Fed’s blessing.

The agreement also requires Commerce Bancshares to provide the Fed with a  cash-flow projection for 2012, along with quarterly progress reports.

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