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Reliance Bancshares announces $20 million payment to satisfy outstanding TARP dividends

 

ST. LOUIS – Reliance Bancshares, Inc. the holding company of Reliance Bank said Tuesday that it had paid $20 million in back dividends that it accrued since suspending payments on the company’s $42 million TARP debt in February 2011.

Additionally, the company announced plans to fund future dividend payments and eliminate the remaining obligations relating to TARP.

In making the announcement, Chairman Thomas H. Brouster Sr. said, “The action we have taken to eliminate our TARP obligation is the second most critical transaction we have made since my investor group recapitalized the bank in March 2013. We have secured senior debt financing at a favorable interest rate that allows us to stay current on future quarterly dividend payments. Beginning in the first quarter of 2017 we intend to begin retiring this former TARP obligation with a goal of eliminating it over three years.”

The company plans to fund future dividend payments and reduce the TARP obligations with senior debt financing and future earnings. The terms of the financing substantially reduces the interest the company pays under the original terms of the TARP offering.

Reliance Bank recently reported pre-tax income for the first six months of 2016 of $7.1 million. This represents a 41 percent increase from the first half of 2015 and comes as a result of increased loans, operating efficiencies and further realization of expense controls. As of August 31, the bank had no loans past due 30 days or more for 54 consecutive months and no nonperforming loans. The bank’s capital ratios are classified as “well capitalized” by the Federal Reserve and its Texas ratio was 6.11 as of Aug. 31, 2016.

“Considering the bank’s financial strength and earning potential, coupled with the favorable financing terms we obtained, the time was right to begin to resolve our TARP liability,” Brouster said. “This debt restructuring allows us to further capitalize on the operational efficiencies and financial stability we established during the past three years.”

Historical timeline:

October 2008
Reliance Bancshares applies for TARP assistance from the U.S. Treasury.

February 2009
The company completes the sale of $42 million of preferred stock and warrants to the
U.S. Treasury, aka TARP: $40 million of 5 percent Series A Fixed Rate Cumulative Perpetual
Preferred Stock and $2 million of 9 percent Series B Fixed Rate Cumulative Preferred Stock.

May 2009 – November 2010
The company makes seven quarterly TARP dividend payments to shareholders.

January 2011
The company’s board elects to defer the payment of dividends on all
preferred shares including Series A & B TARP shares. This action was taken to conserve
cash and meet terms of the company’s regulatory agreements.

March 2013
An investor group led by Brouster raises $31 million in new capital and
recapitalizes Reliance Bank.

August 2013
The U.S. Treasury auctions the preferred stock issued under TARP to 12 private
investors at a premium. Reliance Bancshares is one of only 13 banks in the country
whose TARP portfolio is sold above par which was an indication of the confidence public
markets have placed in the turnaround of Reliance Bank.

February 2014
The dividend rate on the $40 million Series A preferred stock increases from 5% to 9%.

September 2016
After securing $40 million in senior debt financing, the company pays $20 million to
satisfy back dividends due investors leaving $42 million remaining on its TARP related
obligations. At the same time, the company announces plans to remain current on
future dividend payments and intends to substantially reduce the remaining TARP
obligations starting in 2017, with a goal of eliminating it in 3 years.

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