##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 FORM
10-Q/A
 (Amendment
No. 1)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2010
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from to
 Commission file number: 000-52588
 RELIANCE BANCSHARES, INC.
  Missouri
    
    43-1823071(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (IRS Employer
Identification No.)10401 Clayton Road 
Frontenac, Missouri
(Address of Principal Executive Offices)
    
    63131
(Zip Code)
 (314) 569-7200
 
 þ o
  o o
  Large accelerated filer: o
    
    Accelerated filer: o
    
    Non-accelerated filer: o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### Table of Contents








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##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsInterim Condensed Consolidated Balance Sheets (Unaudited)
    
    3Interim Condensed Consolidated Statements of Operations (Unaudited)
    
    4Interim Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
    
    5Interim Condensed Consolidated Statements of Stockholders Equity (Unaudited)
    
    6Interim Condensed Consolidated Statements of Cash Flows (Unaudited)
    
    7Notes to Unaudited Interim Condensed Consolidated Financial Statements
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    34Item 4T. Controls and Procedures
    
    35PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    36Item 1A. Risk Factors
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    36Item 3. Defaults Upon Senior Securities
    
    36Item 4. [Removed and Reserved]
    
    36Item 5. Other Information
    
    36Item 6. Exhibits
    
    36Signatures
    
    37EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



Part I
 Item 1  Financial Statements
 RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 
   March 31,December 31,2010
    
    
    2009
    
    
    2009(unaudited)ASSETSCash and due from banks
    
    $
    11,488,611
    
    
    
    9,900,850
    
    
    
    11,928,668Interest-earning deposits in other financial institutions
    
    
    43,486,792
    
    
    
    2,820,878
    
    
    
    15,767,862Federal funds sold
    
    
    
    
    
    
    1,351,000
    
    
    
    Investments in available-for-sale debt and equity securities, at fair value
    
    
    238,712,309
    
    
    
    288,723,123
    
    
    
    284,119,556Loans
    
    
    1,104,653,035
    
    
    
    1,235,360,011
    
    
    
    1,140,881,275Less  Deferred loan fees/costs
    
    
    (43,964
    )
    
    
    (612,034
    )
    
    
    (84,741
    )Reserve for possible loan losses
    
    
    (32,717,084
    )
    
    
    (14,196,047
    )
    
    
    (32,221,569
    )Net loans
    
    
    1,071,891,987
    
    
    
    1,220,551,930
    
    
    
    1,108,574,965Premises and equipment, net
    
    
    41,686,176
    
    
    
    43,687,967
    
    
    
    42,210,536Accrued interest receivable
    
    
    5,290,542
    
    
    
    6,653,744
    
    
    
    5,647,887Other real estate owned
    
    
    33,451,884
    
    
    
    15,489,980
    
    
    
    29,085,943Identifiable intangible assets, net of accumulated amortization
of $111,301, $95,013 and $107,229 at March 31, 2010 and 2009,
and December 31, 2009, respectively
    
    
    133,018
    
    
    
    149,306
    
    
    
    137,090Goodwill
    
    
    1,149,192
    
    
    
    1,149,192
    
    
    
    1,149,192Other assets
    
    
    37,724,360
    
    
    
    16,681,404
    
    
    
    38,085,885$
    1,485,014,871
    
    
    
    1,607,159,374
    
    
    
    1,536,707,584LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Non-interest-bearing
    
    $
    57,287,630
    
    
    
    52,601,034
    
    
    
    71,829,581Interest-bearing
    
    
    1,155,394,912
    
    
    
    1,214,792,775
    
    
    
    1,194,230,616Total deposits
    
    
    1,212,682,542
    
    
    
    1,267,393,809
    
    
    
    1,266,060,197Short-term borrowings
    
    
    19,776,971
    
    
    
    17,157,546
    
    
    
    12,696,932Long-term Federal Home Loan Bank borrowings
    
    
    99,000,000
    
    
    
    136,000,000
    
    
    
    104,000,000Accrued interest payable
    
    
    1,954,220
    
    
    
    3,591,620
    
    
    
    2,194,952Other liabilities
    
    
    3,377,511
    
    
    
    2,771,897
    
    
    
    2,086,079Total liabilities
    
    
    1,336,791,244
    
    
    
    1,426,914,872
    
    
    
    1,387,038,160Commitments and contingenciesStockholders equity:Preferred stock, no par value; 2,000,000 shares authorized:Series A, 40,000 shares issued and outstanding
    
    
    40,000,000
    
    
    
    40,000,000
    
    
    
    40,000,000Series B, 2,000 shares issued and outstanding
    
    
    2,000,000
    
    
    
    2,000,000
    
    
    
    2,000,000Series C, 380 and 300 shares issued and outstanding at March 31, 2010
and December 31, 2009, respectively
    
    
    380,000
    
    
    
    
    
    
    
    300,000Common stock, $0.25 par value; 40,000,000 shares authorized,
20,972,091, 20,770,781, and 20,972,091 shares issued and outstanding
at March 31, 2010, March 31, 2009, and December 31, 2009, respectively
    
    
    5,243,023
    
    
    
    5,192,696
    
    
    
    5,243,023Surplus
    
    
    121,888,348
    
    
    
    122,331,181
    
    
    
    122,334,757Retained earnings (accumulated deficit)
    
    
    (22,295,101
    )
    
    
    10,753,950
    
    
    
    (19,796,396
    )Treasury stock, 24,514 shares at March 31, 2009
    
    
    
    
    
    
    (335,280
    )
    
    
    Accumulated
other comprehensive income  net unrealized
holding gains (losses) on available-for-sale debt securities
    
    
    1,007,357
    
    
    
    301,955
    
    
    
    (411,960
    )Total stockholders equity
    
    
    148,223,627
    
    
    
    180,244,502
    
    
    
    149,669,424$
    1,485,014,871
    
    
    
    1,607,159,374
    
    
    
    1,536,707,584
  3




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RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 
    (restated)
2010
    
    
    2009Interest income:Interest and fees on loans
    
    $
    15,452,027
    
    
    
    17,671,243Interest on debt securities:Taxable
    
    
    1,833,350
    
    
    
    1,955,985Exempt from Federal income taxes
    
    
    306,262
    
    
    
    340,054Interest on short-term investments
    
    
    16,555
    
    
    
    16,963Total interest income
    
    
    17,608,194
    
    
    
    19,984,245Interest expense:Interest on deposits
    
    
    5,790,589
    
    
    
    9,482,976Interest on short-term borrowings
    
    
    30,419
    
    
    
    260,288Interest on long-term Federal Home Loan Bank borrowings
    
    
    968,919
    
    
    
    1,231,970Total interest expense
    
    
    6,789,927
    
    
    
    10,975,234Net interest income
    
    
    10,818,267
    
    
    
    9,009,011Provision for possible loan losses
    
    
    7,692,000
    
    
    
    2,250,000Net interest income after provision for possible loan losses
    
    
    3,126,267
    
    
    
    6,759,011Noninterest income:Service charges on deposit accounts
    
    
    224,476
    
    
    
    207,638Net gains on sale of debt securities
    
    
    64,691
    
    
    
    Other noninterest income
    
    
    365,415
    
    
    
    327,131Total noninterest income
    
    
    654,582
    
    
    
    534,769Noninterest expense:Salaries and employee benefits
    
    
    3,264,982
    
    
    
    3,880,456Occupancy and equipment expense
    
    
    1,087,020
    
    
    
    1,125,932Other real estate expense
    
    
    1,373,787
    
    
    
    309,663FDIC assessments
    
    
    784,518
    
    
    
    503,533Data processing
    
    
    432,543
    
    
    
    474,674Amortization of intangible assets
    
    
    4,072
    
    
    
    4,072Other noninterest expenses
    
    
    807,590
    
    
    
    942,802Total noninterest expense
    
    
    7,754,512
    
    
    
    7,241,132Income (loss) before applicable income taxes
    
    
    (3,973,663
    )
    
    
    52,648Applicable income tax benefit
    
    
    (1,474,958
    )
    
    
    (38,226
    )Net income (loss)
    
    $
    (2,498,705
    )
    
    
    90,874Net income (loss)
    
    $
    (2,498,705
    )
    
    
    90,874Preferred
stock dividends
    
    
    (548,891
    )
    
    
    Net income
(loss) available to common shareholders
    
    
    (3,047,596
    )
    
    
    90,874Per share amounts:Basic earnings (loss) per share
    
    $
    (0.15
    )
    
    
    < 0.01Basic weighted average shares outstanding
    
    
    20,972,091
    
    
    
    20,746,267Diluted earnings (loss) per share
    
    $
    (0.15
    )
    
    
    <0.01Diluted weighted average shares outstanding
    
    
    20,972,091
    
    
    
    20,818,840
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RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 
    2010
    
    
    2009Net income (loss)
    
    $
    (2,498,705
    )
    
    
    90,874Other comprehensive income before tax:Net unrealized holding gains on available-for-sale securities
    
    
    2,215,171
    
    
    
    616,492Reclassification adjustments on available-for-sale security
gains included in net loss
    
    
    (64,691
    )
    
    
    Other comprehensive income before tax
    
    
    2,150,480
    
    
    
    616,492Income tax related to items of other comprehensive income
    
    
    731,163
    
    
    
    209,607Other comprehensive income, net of tax
    
    
    1,419,317
    
    
    
    406,885Total comprehensive income (loss)
    
    $
    (1,079,388
    )
    
    
    497,759
  5




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RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 
    Accumulated
    
    
    TotalRetained earnings
    
    
    
    
    
    
    other
    
    
    stock-Preferred
    
    
    Common
    
    
    
    
    
    
    (accumulated
    
    
    Treasury
    
    
    comprehensive
    
    
    holdersstock
    
    
    stock
    
    
    Surplus
    
    
    deficit)
    
    
    stock
    
    
    income
    
    
    equityBalance at December 31, 2008
    
    $
    
    
    
    
    5,192,696
    
    
    
    124,193,318
    
    
    
    10,663,076
    
    
    
    (335,280
    )
    
    
    (104,930
    )
    
    
    139,608,880Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,874
    
    
    
    
    
    
    
    
    
    
    
    90,874Issuance of 40,000 shares of
Series A preferred stock
    
    
    40,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,000,000Exercise of warrants for 2,000
shares of Series B preferred stock
    
    
    2,000,000
    
    
    
    
    
    
    
    (2,000,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock issuance costs
    
    
    
    
    
    
    
    
    
    
    (7,422
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,422
    )Compensation cost recognized for
stock options granted
    
    
    
    
    
    
    
    
    
    
    137,785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    137,785Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    7,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,500Change in valuation of
available-for-sale securities,
net of related tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    406,885
    
    
    
    406,885Balance at March 31, 2009
    
    $
    42,000,000
    
    
    
    5,192,696
    
    
    
    122,331,181
    
    
    
    10,753,950
    
    
    
    (335,280
    )
    
    
    301,955
    
    
    
    180,244,502Balance at December 31, 2009
    
    $
    42,300,000
    
    
    
    5,243,023
    
    
    
    122,334,757
    
    
    
    (19,796,396
    )
    
    
    
    
    
    
    (411,960
    )
    
    
    149,669,424Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,498,705
    )
    
    
    
    
    
    
    
    
    
    
    (2,498,705
    )Issuance of 80 shares of
Series C preferred stock
    
    
    80,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,000Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    (548,891
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (548,891
    )Stock issuance costs
    
    
    
    
    
    
    
    
    
    
    (8,906
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,906
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    96,857
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,857Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    14,531
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,531Change in valuation of
available-for-sale securities,
net of related tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,419,317
    
    
    
    1,419,317Balance at March 31, 2010
    
    $
    42,380,000
    
    
    
    5,243,023
    
    
    
    121,888,348
    
    
    
    (22,295,101
    )
    
    
    
    
    
    
    1,007,357
    
    
    
    148,223,627
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RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 
    2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    (2,498,705
    )
    
    
    90,874Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    946,072
    
    
    
    1,288,475Provision for possible loan losses
    
    
    7,692,000
    
    
    
    2,250,000Net gains on sale of debt securities
    
    
    (64,691
    )
    
    
    Net losses on sales and writedowns of other real estate owned
    
    
    774,301
    
    
    
    110,000Stock option compensation cost
    
    
    96,857
    
    
    
    137,785Amortization of restricted stock expense
    
    
    14,531
    
    
    
    7,500Mortgage loans originated for sale in the secondary market
    
    
    (5,082,589
    )
    
    
    (10,770,860
    )Mortgage loans sold in the secondary market
    
    
    4,802,789
    
    
    
    11,366,360Decrease (increase) in accrued interest receivable
    
    
    357,345
    
    
    
    (1,229,636
    )Decrease in accrued interest payable
    
    
    (240,732
    )
    
    
    (313,321
    )Other operating activities, net
    
    
    921,794
    
    
    
    (535,429
    )Net cash provided by operating activities
    
    
    7,718,972
    
    
    
    2,401,748Cash flows from investing activities:Purchase of available-for-sale debt securities
    
    
    (11,087,421
    )
    
    
    (153,186,749
    )Proceeds from maturities and calls of available-for-sale debt securities
    
    
    51,565,291
    
    
    
    58,177,906Proceeds from sales of available-for-sale debt securities
    
    
    6,738,269
    
    
    
    Net decrease in loans
    
    
    23,513,337
    
    
    
    16,271,700Proceeds from sale of other real estate owned
    
    
    617,199
    
    
    
    222,972Construction expenditures to finish other real estate owned
    
    
    
    
    
    
    (12,308
    )Purchase of premises and equipment, net
    
    
    (11,361
    )
    
    
    (126,296
    )Net cash provided by (used in) investing activities
    
    
    71,335,314
    
    
    
    (78,652,775
    )Cash flows from financing activities:Net increase (decrease) in deposits
    
    
    (53,377,655
    )
    
    
    39,346,510Net increase (decrease) in short-term borrowings
    
    
    7,080,039
    
    
    
    (46,761,298
    )Payments of long-term Federal Home Loan Bank borrowings
    
    
    (5,000,000
    )
    
    
    Issuance of preferred stock
    
    
    80,000
    
    
    
    40,000,000Dividends on preferred stock
    
    
    (548,891
    )
    
    
    Payment of stock issuance costs
    
    
    (8,906
    )
    
    
    (7,422
    )Net cash provided by (used in) financing activities
    
    
    (51,775,413
    )
    
    
    32,577,790Net increase (decrease) in cash and cash equivalents
    
    
    27,278,873
    
    
    
    (43,673,237
    )Cash and cash equivalents at beginning of period
    
    
    27,696,530
    
    
    
    57,745,965Cash and cash equivalents at end of period
    
    $
    54,975,403
    
    
    
    14,072,728Supplemental information:Cash paid for interest
    
    $
    7,030,659
    
    
    
    11,288,555Noncash transactions:Warrant exercise and issuance of Series B preferred stock
    
    
    
    
    
    
    2,000,000Transfers to other real estate owned in settlement of loans
    
    
    5,757,441
    
    
    
    672,985Loans made to facilitate the sale of other real estate owned
    
    
    
    
    
    
    151,511
  7




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RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 
  NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      Principles of Consolidation
  Basis of Accounting
  Cash Flow Information
  8




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RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
  Stock Issuance Costs
  Subsequent Events
  Earnings per Share
  Three Months Ended March 31,(restated)
2010
    
    
    2009BasicNet income
(loss) available to common shareholders
    
    $
    (3,047,596
    )
    
    
    90,874Weighted average common shares outstanding
    
    
    20,972,091
    
    
    
    20,746,267Basic earnings (loss) per share
    
    $
    (0.15
    )
    
    
    <      0.01DilutedNet income
(loss) available to common shareholders
    
    $
    (3,047,596
    )
    
    
    90,874Weighted average common shares outstanding
    
    
    20,972,091
    
    
    
    20,746,267Effect of dilutive stock options
    
    
    
    
    
    
    72,573Diluted weighted average common shares outstanding
    
    
    20,972,091
    
    
    
    20,818,840Diluted earnings (loss) per share
    
    $
    (0.15
    )
    
    
    <0.01
 9




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##### Table of Contents



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
  Restatement
     Three Months EndedMarch 31,2010
    
    
    2009As reported
    
    
    As restatedNoninterest ExpenseSalaries and employee benefits
    
    $
    3,264,982
    
    
    
    3,264,982
    
    
    
    3,880,456Occupancy and equipment expense
    
    
    1,087,020
    
    
    
    1,087,020
    
    
    
    1,125,932Other real estate expense
    
    
    1,373,787
    
    
    
    1,373,787
    
    
    
    309,663FDIC assessment
    
    
    784,518
    
    
    
    784,518
    
    
    
    503,533Data processing
    
    
    432,543
    
    
    
    432,543
    
    
    
    474,674Amortization of intangible assets
    
    
    4,072
    
    
    
    4,072
    
    
    
    4,072Other interest expenses
    
    
    807,590
    
    
    
    807,590
    
    
    
    942,802Total noninterest expense
    
    
    7,754,512
    
    
    
    7,754,512
    
    
    
    7,241,132Loss before income taxes
    
    
    (3,973,663
    )
    
    
    (3,973,663
    )
    
    
    52,648Applicable income tax benefit
    
    
    (1,474,958
    )
    
    
    (1,474,958
    )
    
    
    (38,226
    )Net income (loss)
    
    $
    (2,498,705
    )
    
    
    (2,498,705
    )
    
    
    90,874Net income (loss)
    
    $
    (2,498,705
    )
    
    
    (2,498,705
    )
    
    
    90,874Preferred stock dividends
    
    
    
    
    
    
    (548,891
    )
    
    
    Net loss attributed to common shareholders
    
    
    
    
    
    
    (3,047,596
    )
    
    
    90,874Per share amountsBasic loss per share
    
    $
    (0.12
    )
    
    
    (0.15
    )
    
    
    <0.01Basic weighted average shares outstanding
    
    $
    20,972,091
    
    
    
    20,972,091
    
    
    
    20,746,267Diluted loss per share
    
    $
    (0.12
    )
    
    
    (0.15
    )
    
    
    <0.01Diluted weighted average shares outstanding
    
    $
    20,972,091
    
    
    
    20,972,091
    
    
    
    20,818,840
 NOTE 2  INTANGIBLE ASSETS
   NOTE 3  STOCK OPTIONS
  10




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RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
     Options Granted Under
    
    
    Options Granted to DirectorsIncentive Stock Option Plans
    
    
    Under Nonqualified PlansWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageOption Price
    
    
    Number
    
    
    Option Price
    
    
    Numberper Share
    
    
    of Shares
    
    
    per Share
    
    
    of SharesThree Months Ended March 31, 2009:Balance at December 31, 2008
    
    $
    7.61
    
    
    
    1,553,450
    
    
    $
    7.98
    
    
    
    673,000Granted
    
    
    7.50
    
    
    
    102,250
    
    
    
    7.50
    
    
    
    500Exercised
    
    
    8.81
    
    
    
    (59,500
    )
    
    
    
    
    
    
    Balance at March 31, 2009
    
    $
    7.56
    
    
    
    1,596,200
    
    
    $
    7.98
    
    
    
    673,500Three Months Ended March 31, 2010:Balance at December 31, 2009
    
    $
    8.05
    
    
    
    1,424,450
    
    
    $
    8.41
    
    
    
    666,816Forfeited
    
    
    10.44
    
    
    
    (12,250
    )
    
    
    11.88
    
    
    
    (5,816
    )Balance at March 31, 2010
    
    $
    8.03
    
    
    
    1,412,200
    
    
    $
    8.38
    
    
    
    661,000
  NOTE 4  DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
   Financial instruments for which contractual amounts represent:Commitments to extend credit
    
    $
    117,792,139Standby letters of credit
    
    
    13,172,904$
    130,965,043
 11




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RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
     Carrying
    
    
    Estimated
    
    
    Fair valueamount
    
    
    fair value
    
    
    measurementsBalance sheet assets:Cash and due from banks
    
    $
    54,975,403
    
    
    $
    54,975,403
    
    
    Carrying valueInvestment in debt securities
    
    
    238,712,309
    
    
    
    238,712,309
    
    
    Level 2 and 3 inputsLoans, net
    
    
    1,071,891,987
    
    
    
    1,081,954,920
    
    
    Level 3 inputsAccrued interest receivable
    
    
    5,290,542
    
    
    
    5,290,542
    
    
    Carrying value$
    1,370,870,241
    
    
    $
    1,380,933,174Balance sheet liabilities:Deposits
    
    $
    1,212,682,542
    
    
    $
    1,223,712,780
    
    
    Level 3 inputsShort-term borrowings
    
    
    19,776,971
    
    
    
    19,776,971
    
    
    Carrying valueLong-term Federal HomeLoan Bank borrowings
    
    
    99,000,000
    
    
    
    120,234,818
    
    
    Level 3 inputsAccrued interest payable
    
    
    1,954,220
    
    
    
    1,954,220
    
    
    Carrying value$
    1,333,413,733
    
    
    $
    1,365,678,789
  
    
    Level 1  Valuations for assets and liabilities traded in active exchange markets, such as
the New York Stock Exchange. Level 1 also includes U.S. Treasury and federal agency
securities and federal agency mortgage-backed securities, which are traded by dealers or
brokers in active markets. Valuations are
 12




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RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
  obtained from readily available pricing sources for market transactions involving identical
assets or liabilities.
    
    Level 2  Valuations for assets and liabilities traded in less active dealer or broker
markets. Valuations are obtained from third party pricing services for identical or similar
assets or liabilities.
    
    Level 3  Valuations for assets and liabilities that are derived from other valuation
methodologies, including option pricing models, discounted cash flow models and similar
techniques, and not based on market exchange, dealer, or value assigned to such assets or
liabilities.
  Cash and Other Short-Term Instruments 
 Investments in Available-For-Sale Debt Securities
  Balance, at fair value on December 31, 2009
    
    $
    1,237,737Increase in fair value
    
    
    27,328Payments in kind
    
    
    4,572Principal payments received
    
    
    (3,550
    )Balance, at fair value on March 31, 2010
    
    $
    1,266,087
 Loans
 Deposits 
 Long-Term Borrowings 
 13




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##### Table of Contents



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
  Commitments to Extend Credit and Standby Letters of Credit 
 14




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Part I  Item 2  Managements Discussion and Analysis of Financial Condition and Results of
Operations
   Forward-Looking Statements
  Overview
     15




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16




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As of and for theQuarters Ended March 31,2010
    
    
    2009Percentage of net income to:Average total assets
    
    
    (0.67
    %)
    
    
    0.02
    %Average stockholders equity
    
    
    (6.73
    %)
    
    
    0.23
    %Percentage of common dividends declared to net income per common share
    
    
    
    
    
    
    Percentage of average stockholders equity to average total assets
    
    
    9.97
    %
    
    
    9.98
    %
 Critical Accounting Policies
  Results of Operations for the Three-Month Periods Ended March 31, 2010 and 2009
     17




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Three Months EndedMarch 312010
    
    
    2009Average deposits:Noninterest-bearing
    
    
    4.71
    %
    
    
    4.02
    %Interest-bearing:Transaction accounts
    
    
    17.08
    
    
    
    11.11Savings
    
    
    23.52
    
    
    
    12.56Time deposits of $100,000 or more
    
    
    20.01
    
    
    
    25.21Other time deposits
    
    
    26.02
    
    
    
    34.91Total average interest-bearing deposits
    
    
    86.63
    
    
    
    83.79Total average deposits
    
    
    91.34
    
    
    
    87.81Short-term borrowings
    
    
    1.02
    
    
    
    2.75Longer-term advances from Federal Home Loan Bank
    
    
    7.64
    
    
    
    9.44100.00
    %
    
    
    100.00
    %
 18




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##### Table of Contents



Amount of Increase (Decrease)Change from 2010 to 2009 Due toYield/Volume (1)
    
    
    Rate (2)
    
    
    TotalInterest income:Loans
    
    $
    (1,652,324
    )
    
    
    (566,757
    )
    
    
    (2,219,081
    )Investment securities:Taxable
    
    
    69,444
    
    
    
    (192,079
    )
    
    
    (122,635
    )Exempt from Federal income taxes
    
    
    (48,501
    )
    
    
    18,885
    
    
    
    (29,616
    )Short-term investments
    
    
    (1,330
    )
    
    
    922
    
    
    
    (408
    )Total interest income
    
    
    (1,632,711
    )
    
    
    (739,029
    )
    
    
    (2,371,740
    )Interest Expense:Interest bearing transaction accounts
    
    
    211,400
    
    
    
    (261,029
    )
    
    
    (49,629
    )Savings accounts
    
    
    663,810
    
    
    
    (915,591
    )
    
    
    (251,781
    )Time deposits of $100,000 or more
    
    
    (669,308
    )
    
    
    (717,097
    )
    
    
    (1,386,405
    )Other time deposits
    
    
    (1,207,784
    )
    
    
    (796,788
    )
    
    
    (2,004,572
    )Total deposits
    
    
    (1,001,882
    )
    
    
    (2,690,505
    )
    
    
    (3,692,387
    )Short-term borrowings
    
    
    (113,930
    )
    
    
    (115,939
    )
    
    
    (229,869
    )Long-term borrowings
    
    
    (305,072
    )
    
    
    42,021
    
    
    
    (263,051
    )Total interest expense
    
    
    (1,420,884
    )
    
    
    (2,764,423
    )
    
    
    (4,185,307
    )Net interest income
    
    $
    (211,827
    )
    
    
    2,025,394
    
    
    
    1,813,567
 
 (1)
    
    Change in volume multiplied by yield/rate of prior year.(2)
    
    Change in yield/rate multiplied by volume of prior year.    19




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Financial Condition
   20




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Recent Developments
    21




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22




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Quarter Ended March 31, 2010Percent
    
    
    Interest
    
    
    AverageAverage
    
    
    of Total
    
    
    Income/
    
    
    Yield/Balance
    
    
    Assets
    
    
    Expense
    
    
    RateASSETSLoans (1) (2) (3)
    
    $
    1,125,419,848
    
    
    
    74.53
    %
    
    $
    15,458,032
    
    
    
    5.57
    %Investment securities:Taxable
    
    
    230,871,686
    
    
    
    15.29
    %
    
    
    1,833,350
    
    
    
    3.22
    %Exempt from Federal income taxes (3)
    
    
    29,616,664
    
    
    
    1.96
    %
    
    
    435,462
    
    
    
    5.96
    %Short-term investments
    
    
    32,759,765
    
    
    
    2.17
    %
    
    
    16,555
    
    
    
    0.20
    %Total earning assets
    
    
    1,418,667,963
    
    
    
    93.95
    %
    
    
    17,743,399
    
    
    
    5.07
    %Nonearning assets:Cash and due from banks
    
    
    4,923,591
    
    
    
    0.33
    %Reserve for possible loan losses
    
    
    (32,373,486
    )
    
    
    (2.14
    )%Premises and equipment
    
    
    42,020,773
    
    
    
    2.78
    %Other assets
    
    
    75,688,483
    
    
    
    5.00
    %Available-for-sale investment market valuation
    
    
    1,132,714
    
    
    
    0.08
    %Total nonearning assets
    
    
    91,392,075
    
    
    
    6.05
    %Total assets
    
    $
    1,510,060,038
    
    
    
    100.00
    %LIABILITIESInterest-bearing liabilities:Interest-bearing transaction accounts
    
    $
    231,257,766
    
    
    
    15.31
    %
    
    
    545,609
    
    
    
    0.96
    %Savings
    
    
    318,459,696
    
    
    
    21.09
    %
    
    
    1,024,281
    
    
    
    1.30
    %Time deposits of $100,000 or more
    
    
    270,925,947
    
    
    
    17.94
    %
    
    
    1,640,112
    
    
    
    2.46
    %Other time deposits
    
    
    352,455,081
    
    
    
    23.34
    %
    
    
    2,580,587
    
    
    
    2.97
    %Total interest-bearing deposits
    
    
    1,173,098,490
    
    
    
    77.68
    %
    
    
    5,790,589
    
    
    
    2.00
    %Long-term borrowings
    
    
    103,462,366
    
    
    
    6.85
    %
    
    
    968,919
    
    
    
    3.80
    %Short-term borrowings
    
    
    13,783,129
    
    
    
    0.91
    %
    
    
    30,419
    
    
    
    0.90
    %Total interest-bearing liabilities
    
    
    1,290,343,985
    
    
    
    85.44
    %
    
    
    6,789,927
    
    
    
    2.13
    %Noninterest-bearing deposits
    
    
    63,826,553
    
    
    
    4.23
    %Other liabilities
    
    
    5,268,643
    
    
    
    0.36
    %Total liabilities
    
    
    1,359,439,181
    
    
    
    90.03
    %STOCKHOLDERS EQUITY
    
    
    150,620,857
    
    
    
    9.97
    %Total liabilities and stockholders equity
    
    $
    1,510,060,038
    
    
    
    100.00
    %Net interest income
    
    
    
    
    
    
    
    
    
    $
    10,953,472Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.13
    %
  23




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##### Table of Contents



Quarter Ended March 31, 2009Percent
    
    
    Interest
    
    
    AverageAverage
    
    
    of Total
    
    
    Income/
    
    
    Yield/Balance
    
    
    Assets
    
    
    Expense
    
    
    RateASSETSLoans (1) (2) (3)
    
    $
    1,245,164,434
    
    
    
    77.45
    %
    
    $
    17,677,113
    
    
    
    5.76
    %Investment securities:Taxable
    
    
    222,727,051
    
    
    
    13.85
    %
    
    
    1,955,985
    
    
    
    3.56
    %Exempt from Federal income taxes (3)
    
    
    32,950,327
    
    
    
    2.05
    %
    
    
    465,078
    
    
    
    5.72
    %Short-term investments
    
    
    35,736,960
    
    
    
    2.22
    %
    
    
    16,963
    
    
    
    0.19
    %Total earning assets
    
    
    1,536,578,772
    
    
    
    95.57
    %
    
    
    20,115,139
    
    
    
    5.31
    %Nonearning assets:Cash and due from banks
    
    
    5,117,201
    
    
    
    0.32
    %Reserve for possible loan losses
    
    
    (14,929,468
    )
    
    
    (0.93
    )%Premises and equipment
    
    
    44,025,461
    
    
    
    2.74
    %Other assets
    
    
    37,297,792
    
    
    
    2.32
    %Available-for-sale investment market valuation
    
    
    (396,148
    )
    
    
    (0.02
    )%Total nonearning assets
    
    
    71,114,838
    
    
    
    4.43
    %Total assets
    
    $
    1,607,693,610
    
    
    
    100.00
    %LIABILITIESInterest-bearing liabilities:Interest-bearing transaction accounts
    
    $
    160,063,425
    
    
    
    9.96
    %
    
    
    595,238
    
    
    
    1.51
    %Savings
    
    
    180,935,049
    
    
    
    11.25
    %
    
    
    1,276,062
    
    
    
    2.86
    %Time deposits of $100,000 or more
    
    
    363,195,741
    
    
    
    22.59
    %
    
    
    3,026,517
    
    
    
    3.38
    %Other time deposits
    
    
    502,836,694
    
    
    
    31.28
    %
    
    
    4,585,159
    
    
    
    3.70
    %Total interest-bearing deposits
    
    
    1,207,030,909
    
    
    
    75.08
    %
    
    
    9,482,976
    
    
    
    3.19
    %Long-term borrowings
    
    
    136,000,000
    
    
    
    8.46
    %
    
    
    1,231,970
    
    
    
    3.67
    %Short-term borrowings
    
    
    39,541,894
    
    
    
    2.46
    %
    
    
    260,288
    
    
    
    2.67
    %Total interest-bearing liabilities
    
    
    1,382,572,803
    
    
    
    86.00
    %
    
    
    10,975,234
    
    
    
    3.22
    %Noninterest-bearing deposits
    
    
    57,886,059
    
    
    
    3.60
    %Other liabilities
    
    
    6,719,860
    
    
    
    0.42
    %Total liabilities
    
    
    1,447,178,722
    
    
    
    90.02
    %STOCKHOLDERS EQUITY
    
    
    160,514,888
    
    
    
    9.98
    %Total liabilities and stockholders equity
    
    $
    1,607,693,610
    
    
    
    100.00
    %Net interest income
    
    
    
    
    
    
    
    
    
    $
    9,139,905Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.41
    %
 
 (1)
    
    Interest includes loan fees, recorded as discussed in Note 1 to our consolidated financial
statements for the year ended December 31, 2009, included in our annual report on Form 10-K,
which was filed March 26, 2010.(2)
    
    Average balances include nonaccrual loans. The income on such loans is included in interest,
but is recognized only upon receipt.(3)
    
    Interest yields are presented on a tax-equivalent basis. Nontaxable income has been adjusted
upward by the amount of Federal income tax that would have been paid if the income had been
taxed at a rate of 34%, adjusted downward by the disallowance of the interest cost to carry
nontaxable loans and securities. Risk Management
  24




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25




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##### Table of Contents



Originated InFlorida
    
    
    All other
    
    
    TotalNet Charge-offs (quarter ended 3/31/2010)
    
 $
   2.1 million
    
 $
   5.1 million
    
 $
   7.2 millionNet Charge-offs (quarter ended 3/31/2009)
    
 $
   2.0 million
    
 $
   0.4 million
    
 $
   2.4 millionNonperforming Loans (3/31/2010)
    
 $
   26.9 million
    
 $
   50.0 million
    
 $
   76.9 millionNonperforming Loans (12/31/2009)
    
 $
   25.4 million
    
 $
   46.7 million
    
 $
   72.1 millionNonperforming Loans (3/31/2009)
    
 $
   31.4 million
    
 $
   7.8 million
    
 $
   39.2 millionNonperforming Assets* (3/31/2010)
    
 $
   46.5 million
    
 $
   63.8 million
    
 $
   110.3millionNonperforming Assets* (12/31/2009)
    
 $
   44.5 million
    
 $
   56.7 million
    
 $
   101.2millionNonperforming Assets* (3/31/2009)
    
 $
   39.3 million
    
 $
   15.4 million
    
 $
   54.7 millionOutstanding Loans Originated InRespective Markets (3/31/10)
    
 $
   75.2 million
    
 $
   1.030 billion
    
 $
   1.105 billionOutstanding Loans Originated InRespective Markets (3/31/09)
    
 $
   120.0 million
    
 $
   1.115 billion
    
 $
   1.235 billion
 
 *
    
    Included in nonperforming assets are nonperforming loans and other real estate owned    
    
    A loan for approximately $1.4 million to an individual Florida investor that is in
default and in the process of foreclosure prior to being suspended by a forbearance
agreement. The loan is secured by an undeveloped real estate parcel in southwestern
Florida.
    
    A loan for approximately $1.5 million to a single purpose entity controlled by a group
of investors that is in default. The loan is secured by a building and improved commercial
lots in Florida. The Company is negotiating with the borrower and guarantors to develop a
plan for the property. Recent interest has been expressed by several potential lessees of
the building.
    
    A loan for approximately $2.2 million to an individual, secured by the individuals
primary residence in Florida, that is in default. The borrower entered into a forbearance
agreement but has now defaulted under that negotiated plan. Foreclosure proceedings have
been initiated again.
 26




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##### Table of Contents




    
    A loan for approximately $1.4 million to a single purpose entity, secured by six
improved commercial lots in Florida. The Company continues to negotiate with the borrower
and guarantor to develop a marketing plan for the lots.
    
    A loan for approximately $2.0 million to a single purpose entity secured by unimproved
property in Florida that is in default. The Company has been negotiating with the
borrower and guarantor to determine the best course of action.
    
    Loans totaling approximately $2.0 million to entities controlled by a Florida real
estate investor that were in default and for which foreclosure proceedings have commenced.
Foreclosure is now moving forward uncontested based on an agreement reached among the
Bank, borrowers and guarantors. These loans are secured by commercial real estate
properties in southwestern Florida.
    
    A loan for approximately $1.4 million to an individual investor for future residential
and commercial development. Development has not been started as planned. The loan is
secured by approximately 240 acres of ground in Florida currently in agricultural
production. The Company is in the process of foreclosure. Concurrent with the
foreclosure, the Company has negotiated a sale of the note and mortgage to the junior lien
holder.
    
    A loan for approximately $2.2 million to two Florida investors for future commercial
development. Development has not started, as recent changes in FEMA flood maps have
impacted the value and future development options. The borrower is currently operating
under a forbearance agreement as it works through its options for the property, which now
include action against Lee County, Florida for damages.
    
    A loan for approximately $1.4 million to a single purpose entity for commercial
development, which has been delayed. The loan is secured by 3.4 acres of ground in
Florida. The Company, borrower, and guarantors continue to negotiate a resolution to the
delay in development.
    
    A loan for approximately $2.9 million for ground development of a proposed commercial
retail strip center and self-storage facility in southwestern Florida. The entity was
established by an experienced real estate developer; however, with the deterioration of the
real estate market, the project did not begin construction, and the real estate downturn
has affected the cash flow of the guarantor. The Company is working on obtaining a signed
deed for the property in lieu of foreclosure.
    
    A loan for approximately $13.2 million to acquire a manufacturing/distribution center
and to provide funding for a future addition to the facility. Due to the low current
occupancy, the Company is in discussion with the borrower to determine the best plan of
action.
    
    A loan for approximately $1.3 million to a corporation for the development of a
commercial real estate parcel. The loan is secured by 6.2 acres of ground in Florida. The
borrower and guarantor are negotiating with the Company and two other financial
institutions to resolve all claims.
    
    A $4.5 million loan to a single purpose entity. The operation is a retail commercial
center in St Charles, Missouri. Exterior construction of the building is complete;
interior configuration continues and is dictated by tenant needs. The borrower continues to
work to find new tenants to fill up unleased space. The borrower is currently working on
getting three new potential tenants to move in. Also, the Company and borrower are working
on collecting past due rents from a select few tenants.
    
    A loan for approximately $1.2 million to a Texas limited partnership. The loan is
secured by a newly constructed retail commercial property in Dallas, Texas. The borrower
has entered into bankruptcy protection. The Company is seeking a dismissal of the case in
court so that it can foreclose on the property. Court hearings have occurred and will
continue through the second quarter of 2010. The Company is still working through the
legal issues with the bankruptcy and is waiting on the courts decision.
 27




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##### Table of Contents




    
    A loan participation totaling approximately $2.5 million to entities controlled by a
group of Missouri real estate investors for the purchase and development of a parcel of
land in St. Charles, Missouri. The majority of the proposed entitlements and development
have been completed. The loans are secured by the property. The lead bank reached an
agreement with the borrower to move the project forward with a new home builder. The new
builder has a good reputation and is qualified for the project, and has already completed
five inventory homes. The Company and the builder are developing a marketing plan to
increase sales prospects.
    
    A $17.2 million loan to a commercial real estate developer in Houston, Texas. The loan
is secured by three office buildings and developed commercial land. The borrower recently
refinanced a tract of land that provided a principal loan reduction, payment of past due
interest and real estate taxes. Additionally, the borrower has another tract of ground
that is bank collateral under contract to a national home builder. Home building and sales
are expected to be positive for the overall development.
    
    A loan for approximately $4.0 million to a non-profit organization for the purchase of
482 acres and a 7,000 square foot residence in St. Louis, Missouri. The property is well
located in a natural setting that abuts a river. The nonprofit organization has
experienced financial setbacks, most notably a decline in contributions. Additional fund
raising has started from friends of conservation for the purchase of the collateral.
    
    A loan of approximately $1.1 million, the proceeds of which were used for the purchase
of a commercial real estate property that is located in Fairview Heights, Illinois. The
building is occupied by a credit union under a long-term lease. The Company financed the
purchase and improvements of the building.
  Balance at December 31, 2009
    
    $
    29,085,943Foreclosures
    
    
    5,757,441Cash proceeds from sales
    
    
    (617,199
    )Losses and writedowns
    
    
    (774,301
    )Balance at March 31, 2010
    
    $
    33,451,884
     28




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##### Table of Contents




    
    Delinquency of a scheduled loan payment;
    
    Deterioration in the borrowers financial condition identified in a review of periodic
financial statements;
    
    Decrease in the value of collateral securing the loan; or
    
    Change in the economic environment in which the borrower operates.
      29




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##### Table of Contents



Three-Month PeriodsEnded March 31,(in thousands of dollars)
    
    2010
    
    
    2009Average loans outstanding
    
    $
    1,125,420
    
    
    $
    1,245,164Reserve at beginning of year
    
    $
    32,221
    
    
    $
    14,306Provision for possible loan losses
    
    
    7,692
    
    
    
    2,25039,913
    
    
    
    16,556Charge-offs:Commercial loans:Real estate
    
    
    (1,999
    )
    
    
    (409
    )Other
    
    
    (27
    )
    
    
    (28
    )Real estate:Construction
    
    
    (4,962
    )
    
    
    (2,031
    )Residential
    
    
    (307
    )
    
    
    (250
    )Consumer
    
    
    
    
    
    
    (14
    )Overdrafts
    
    
    
    
    
    
    Total charge-offs
    
    
    (7,295
    )
    
    
    (2,732
    )Recoveries:Commercial loans:Real estate
    
    
    36
    
    
    
    Other
    
    
    32
    
    
    
    Real estate:Construction
    
    
    14
    
    
    
    364Residential
    
    
    9
    
    
    
    2Consumer
    
    
    8
    
    
    
    6Overdrafts
    
    
    
    
    
    
    Total recoveries
    
    
    99
    
    
    
    372Reserve at end of period
    
    $
    32,717
    
    
    $
    14,196Net charge-offs to average loans
    
    
    2.59
    %
    
    
    0.77
    %Ending reserve to net outstanding loans at end of period
    
    
    2.96
    %
    
    
    1.15
    %
   
    
    Specific allocations based upon probable losses identified during a quarterly review of
the loan portfolio;
 
    
    Allocations based principally on the Companys risk rating formulas; and
 
    
    An unallocated allowance based on subjective factors.
    30




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##### Table of Contents




    
    General economic and business conditions affecting our key lending areas;
    
    Credit quality trends (including trends in nonperforming loans expected to result from
existing conditions);
    
    Collateral values;
    
    Loan volumes and concentrations;
    
    Competitive factors resulting in shifts in underwriting criteria;
    
    Specific industry conditions within portfolio segments;
    
    Recent loss experience in particular segments of the portfolio;
    
    Bank regulatory examination results; and
    
    Findings of our internal loan review department.
        31




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##### Table of Contents




    
    There is a level of imprecision necessarily inherent in the estimates of expected loan
losses, and the unallocated reserve gives reasonable assurance that this level of
imprecision in our formula methodologies is adequately provided for.
 
    
    Pressures to maintain and grow the loan portfolio with increasing competition from de
novo institutions and larger competitors have to some degree affected credit granting
criteria adversely. The Company monitors the disposition of all credits, which have been
approved through its Executive Loan Committee, in order to better understand competitive
shifts in underwriting criteria.
  Real Estate Loan Balances as a Percentageof Total Regulatory Capital3/31/2010
    
    
    12/31/2009
    
    
    3/31/2009Construction, land development and other
other land loans
    
    
    96
    %
    
    
    112
    %
    
    
    97
    %Nonfarm nonresidential:Owner occupied
    
    
    130
    %
    
    
    112
    %
    
    
    71
    %Non-owner occupied
    
    
    331
    %
    
    
    340
    %
    
    
    296
    %1-4 family closed end loans
    
    
    39
    %
    
    
    40
    %
    
    
    45
    %Multi-family
    
    
    85
    %
    
    
    86
    %
    
    
    61
    %Other
    
    
    22
    %
    
    
    22
    %
    
    
    19
    %
   Liquidity and Capital Resources
    32




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##### Table of Contents



To Be a WellCapitalized Bank UnderFor Capital
    
    
    
    
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    
    
    
    
    Action Provision(in thousands of dollars)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital (to risk-weighted assets)Consolidated
    
    $
    142,998
    
    
    
    11.47
    %
    
    $
    99,725
    
    
    
    3
8.0
    %
    
    
    N/A
    
    
    
    N/AReliance Bank
    
    
    122,611
    
    
    
    10.41
    %
    
    
    94,233
    
    
    
    3
8.0
    %
    
    $
    117,791
    
    
    
    3
10.0
    %Reliance Bank, FSB
    
    
    12,173
    
    
    
    16.03
    %
    
    
    6,076
    
    
    
    3
8.0
    %
    
    
    7,596
    
    
    
    3
10.0
    %Tier 1 capital (to risk-weighted assets)Consolidated
    
    $
    126,824
    
    
    
    10.17
    %
    
    $
    49,862
    
    
    
    3
4.0
    %
    
    
    N/A
    
    
    
    N/AReliance Bank
    
    
    107,746
    
    
    
    9.15
    %
    
    
    47,116
    
    
    
    3
4.0
    %
    
    $
    70,675
    
    
    
    3
6.0
    %Reliance Bank, FSB
    
    
    11,186
    
    
    
    14.73
    %
    
    
    3,038
    
    
    
    3
4.0
    %
    
    
    4,557
    
    
    
    3
6.0
    %Tier 1 capital (to average assets)Consolidated
    
    $
    126,824
    
    
    
    8.52
    %
    
    $
    59,559
    
    
    
    3
4.0
    %
    
    
    N/A
    
    
    
    N/AReliance Bank
    
    
    107,746
    
    
    
    7.71
    %
    
    
    55,879
    
    
    
    3
4.0
    %
    
    $
    69,849
    
    
    
    3
5.0
    %Reliance Bank, FSB
    
    
    11,186
    
    
    
    12.13
    %
    
    
    3,689
    
    
    
    3
4.0
    %
    
    
    4,611
    
    
    
    35.0
    %
  Total
    
    
    Tier 1
    
    
    Tier 2Risk-Based
    
    
    Risk-Based
    
    
    LeverageRatio
    
    
    Ratio
    
    
    RatioWell capitalized
    
    
    10
    %
    
    
    6
    %
    
    
    5
    %Adequately capitalized
    
    
    8
    
    
    
    4
    
    
    
    4Undercapitalized
    
    
    <8
    
    
    
    <4
    
    
    
    <4Significantly undercapitalized
    
    
    <6
    
    
    
    <3
    
    
    
    <3Critically undercapitalized
    
    
    *
    
    
    
    *
    
    
    
    *
 
 *
    
    A critically undercapitalized institution is defined as having a tangible equity to total
assets ratio of 2% or less. 33




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##### Table of Contents



Contractual Obligations, Off-Balance Sheet Risk, and Contingent Liabilities
   Over 1 YearTotal Cash
    
    
    Less Than 1
    
    
    Less Than 5
    
    
    Over 5Commitment
    
    
    Year
    
    
    Years
    
    
    YearsOperating leases
    
    $
    7,757,611
    
    
    $
    716,022
    
    
    $
    2,208,765
    
    
    $
    4,832,824Time deposits
    
    
    593,445,592
    
    
    
    402,076,716
    
    
    
    183,074,140
    
    
    
    8,294,736Federal Home Loan Bank borrowings
    
    
    99,000,000
    
    
    
    6,000,000
    
    
    
    26,000,000
    
    
    
    67,000,000Commitments to extend credit
    
    
    117,792,139
    
    
    
    60,375,663
    
    
    
    25,712,325
    
    
    
    31,704,151Standby letters of credit
    
    
    13,172,904
    
    
    
    4,679,750
    
    
    
    8,493,154
    
    
    
    
 Impact of New and Not Yet Adopted Accounting Pronouncements
  
 Part I  Item 3  Quantitative and Qualitative Disclosures About Market Risk
  34




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##### Table of Contents



Remaining Maturity if Fixed Rate;Earliest Possible Repricing Interval if Floating RateOver 3 months
    
    
    Over 1 year3 months
    
    
    through
    
    
    throughor less
    
    
    12 months
    
    
    5 years
    
    
    Over 5 years
    
    
    TotalInterest-earning assetsLoans
    
    $
    441,805,666
    
    
    
    135,471,944
    
    
    
    490,330,237
    
    
    
    37,045,188
    
    
    
    1,104,653,035Investment securities, at amortized cost
    
    
    44,377,578
    
    
    
    48,912,265
    
    
    
    120,930,098
    
    
    
    22,966,069
    
    
    
    237,186,010Other interest-earnings assets
    
    
    43,486,792
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,486,792Total interest-earning assets
    
    $
    529,670,036
    
    
    
    184,384,209
    
    
    
    611,260,335
    
    
    
    60,011,257
    
    
    
    1,385,325,837Interest bearing-liabilitiesSavings and interest bearing transaction accounts
    
    $
    561,917,746
    
    
    
    31,574
    
    
    
    
    
    
    
    
    
    
    
    561,949,320Time certificates of deposit of $100,000 or more
    
    
    59,122,375
    
    
    
    129,761,23
    
    
    
    66,081,184
    
    
    
    3,490,799
    
    
    
    258,455,589All other time deposits
    
    
    63,616,380
    
    
    
    149,576,730
    
    
    
    116,992,956
    
    
    
    4,803,937
    
    
    
    334,990,003Nondeposit interest-bearing liabilities
    
    
    19,645,803
    
    
    
    6,131,168
    
    
    
    26,000,000
    
    
    
    67,000,000
    
    
    
    118,776,971Total interest-bearing liabilities
    
    $
    704,302,304
    
    
    
    285,500,703
    
    
    
    209,074,140
    
    
    
    75,294,736
    
    
    
    1,274,171,883Gap by period
    
    $
    (174,632,268
    )
    
    
    (101,116,494
    )
    
    
    402,186,195
    
    
    
    (15,283,479
    )
    
    
    111,153,954Cumulative gap
    
    $
    (174,632,268
    )
    
    
    (275,748,762
    )
    
    
    126,437,433
    
    
    
    111,153,954
    
    
    
    111,153,954Ratio of interest-sensitive assets to interest-
sensitive liabilities
    
    
    0.75x
    
    
    
    0.65x
    
    
    
    2.92x
    
    
    
    0.80x
    
    
    
    1.09xCumulative ratio of interest-sensitive assets to
interest-sensitive liabilities
    
    
    0.75x
    
    
    
    0.72x
    
    
    
    1.11x
    
    
    
    1.09x
    
    
    
    1.09x
   
 Part I  Item 4T  Controls and Procedures
      35




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Part II  Item 1  Legal Proceedings
  
 Part II  Item 1A  Risk Factors
  
 Part II  Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
  
 Part II  Item 3  Defaults Upon Senior Securities
  
 Part II  Item 4  [Removed and Reserved]
 
 Part II  Item 5  Other Information
   
 Part II  Item 6  Exhibits
 ExhibitNumber
    
    Description31.1
    
    Chief Executive Officers Certification pursuant to Rules
13a-14(a) and 15d-14(a) under the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Chief Financial Officers Certification pursuant to Rules
13a-14(a) and 15d-14(a) under the Securities Exchange Act of
1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
 36




---



##### Table of Contents



ExhibitNumber
    
    Description32.1
    
    Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 SIGNATURES
  RELIANCE BANCSHARES, INC.By:
    /s/ Allan D. Ivie, IVAllan D. Ivie, IVChief Executive OfficerBy:
    /s/ Dale E. OberkfellDale E. OberkfellChief Financial Officer  37