Reliance Chairman Leads $31M Investment in Missouri Bank

Reliance Bancshares (RLBS) in Des Peres, Mo., has raised $31 million in a recapitalization led by its new chairman and other investors.

The investment comes just weeks after regulators released the $974 million-asset company from an enforcement action.

Thomas Brouster, a former consultant who was named Reliance's chairman in late March, contributed $6 million of the capital. The remaining funds came from other top executives, every director and other individuals from the St. Louis area, Brouster says.

"I have had this money committed for this transaction for quite some time," Brouster says. "All we had to do was get regulatory approval."

Brouster, when hired in March 2012 as a consultant, stated that it was his intent to find a buyer for Reliance. With new capital in hand, he says Reliance will likely look to buy smaller community banks in the near term. "With no past-due loans, and minimal nonperformers and no regulatory order, the job now is to move forward and build the bank in a sound way, which is attracting deposits and soundly lending out 80 cents of that dollar," he says.

Reliance could still end up selling itself, he says. "Certainly the possibility of finding a suitable merger candidate with who we could act as one, and perhaps be double our size in this market, is an option," he says.

As part of the capital raise, Reliance will transfer $24 million to Reliance Bank, which will increase the bank's Tier 1 capital ratio to 10.16%. The Federal Deposit Insurance Corp. on March 12 terminated a consent order that had required the bank to charge off or reduce problem assets, among other things.

"We had made substantial improvements to capital even before the order was lifted," Brouster says.

Prior to the capital raise, Brouster reduced costs by combining Reliance's federally chartered commercial bank in Missouri and its federal thrift in Ft. Myers, Fla.

At one point, Brouster considered selling the Florida thrift. "We had thought about it, but we felt that we wanted customers in both locations," he says. "We have two branches in Florida and we felt like they still have some value going forward."

The company also cut costs by delisting from the Nasdaq. Its shares now trade on the OTC Markets platform. "Our trades and shares are very small, because we have a large number of small shareholders," Brouster says.

Reliance will focus on building its loan book, now that it has more capital. Brouster wants to diversify by making loans in areas that other community banks have shunned, including commercial real estate loans.

"Many banks in our area have steered away from CRE," he says. "But if we were looking at a good commercial real estate project that was 80% leased out, or more, and it had a 70% loan-to-value ratio, how is that not a good loan to look at making?"