United States
Securities AND Exchange Commission
 WASHINGTON, D. C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 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
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    43-1823071
(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(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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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 Loss (Unaudited)
    
    5Interim Condensed Consolidated Statements of Stockholders Equity (Unaudited)
    
    6Interim Condensed Consolidated Statements of Cash Flows (Unaudited)
    
    7Notes to Interim Condensed Consolidated Financial Statements (Unaudited)
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    38Item 4.
    
    Controls and Procedures
    
    39PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    39Item 1A.
    
    Risk Factors
    
    39Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    40Item 3.
    
    Defaults Upon Senior Securities
    
    40Item 4.
    
    [Removed and Reserved]
    
    40Item 5.
    
    Other Information
    
    40Item 6.
    
    Exhibits
    
    40SIGNATURES
    
    41
 2




---



##### 



PART I  FINANCIAL INFORMATION
 
 Part I  Item 1  Financial Statements
 
 RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 September 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCash and due from banks
    
    $
    13,882,626
    
    
    
    11,928,668Interest-earning deposits in other financial institutions
    
    
    4,157,482
    
    
    
    15,767,862Investments in available-for-sale debt securities, at fair value
    
    
    214,473,398
    
    
    
    284,119,556Loans
    
    
    1,015,272,350
    
    
    
    1,140,881,275Less  Deferred loan fees/costs
    
    
    (2,729
    )
    
    
    (84,741
    )Reserve for possible loan losses
    
    
    (39,263,008
    )
    
    
    (32,221,569
    )Net loans
    
    
    976,006,613
    
    
    
    1,108,574,965Premises and equipment, net
    
    
    40,733,224
    
    
    
    42,210,536Accrued interest receivable
    
    
    3,835,642
    
    
    
    5,647,887Other real estate owned
    
    
    35,999,751
    
    
    
    29,085,943Identifiable intangible assets, net of accumulated amortization of $119,445
and $107,229 at September 30, 2010 and December 31, 2009, respectively
    
    
    124,874
    
    
    
    137,090Goodwill
    
    
    1,149,192
    
    
    
    1,149,192Other assets
    
    
    43,745,530
    
    
    
    38,085,885$
    1,334,108,332
    
    
    
    1,536,707,584LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Noninterest-bearing
    
    $
    68,240,850
    
    
    
    71,829,581Interest-bearing
    
    
    1,002,885,544
    
    
    
    1,194,230,616Total deposits
    
    
    1,071,126,394
    
    
    
    1,266,060,197Short-term borrowings
    
    
    23,872,470
    
    
    
    12,696,932Long-term Federal Home Loan Bank borrowings
    
    
    93,000,000
    
    
    
    104,000,000Accrued interest payable
    
    
    1,429,062
    
    
    
    2,194,952Other liabilities
    
    
    4,306,848
    
    
    
    2,086,080Total liabilities
    
    
    1,193,734,774
    
    
    
    1,387,038,161Commitments and contingenciesStockholders equity:Preferred stock, no par value; 2,000,000 shares authorized:Series A, 40,000 shares issued and outstanding
    
    
    40,000,000
    
    
    
    40,000,000Series B, 2,000 shares issued and outstanding
    
    
    2,000,000
    
    
    
    2,000,000Series C, 535 and 300 shares issued and outstanding at September 30,
2010 and December 31, 2009, respectively
    
    
    535,000
    
    
    
    300,000Common stock, $0.25 par value; 40,000,000 shares authorized, 22,638,894
and 20,972,091 shares issued and outstanding at September 30, 2010 and
December 31, 2009, respectively
    
    
    5,659,724
    
    
    
    5,243,023Subscriptions receivable
    
    
    (682,500
    )
    
    
    Surplus
    
    
    125,350,291
    
    
    
    122,334,757Retained earnings
    
    
    (34,651,693
    )
    
    
    (19,796,397
    )Accumulated other comprehensive income  net unrealized
holding gains (losses) on available-for-sale debt securities
    
    
    2,162,736
    
    
    
    (411,960
    )Total stockholders equity
    
    
    140,373,558
    
    
    
    149,669,423$
    1,334,108,332
    
    
    
    1,536,707,584
  3




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##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest income:Interest and fees on loans
    
    $
    13,947,445
    
    
    
    16,705,289
    
    
    
    44,071,380
    
    
    
    51,375,259Interest on debt securities:Taxable
    
    
    1,475,110
    
    
    
    1,867,460
    
    
    
    4,982,403
    
    
    
    5,784,448Exempt from Federal income taxes
    
    
    262,589
    
    
    
    312,195
    
    
    
    863,501
    
    
    
    962,426Interest on short-term investments
    
    
    2,928
    
    
    
    7,076
    
    
    
    35,471
    
    
    
    29,817Total interest income
    
    
    15,688,072
    
    
    
    18,892,020
    
    
    
    49,952,755
    
    
    
    58,151,950Interest expense:Interest on deposits
    
    
    4,514,514
    
    
    
    7,835,261
    
    
    
    15,769,633
    
    
    
    26,017,912Interest on short-term borrowings
    
    
    33,792
    
    
    
    22,734
    
    
    
    90,543
    
    
    
    330,272Interest on long-term Federal Home Loan Bank borrowings
    
    
    952,131
    
    
    
    1,237,276
    
    
    
    2,876,132
    
    
    
    3,714,910Total interest expense
    
    
    5,500,437
    
    
    
    9,095,271
    
    
    
    18,736,308
    
    
    
    30,063,094Net interest income
    
    
    10,187,635
    
    
    
    9,796,749
    
    
    
    31,216,447
    
    
    
    28,088,856Provision for possible loan losses
    
    
    17,203,000
    
    
    
    11,450,000
    
    
    
    34,523,000
    
    
    
    27,700,000Net interest income (loss) after provision
for possible loan losses
    
    
    (7,015,365
    )
    
    
    (1,653,251
    )
    
    
    (3,306,553
    )
    
    
    388,856Noninterest income:Service charges on deposit accounts
    
    
    224,675
    
    
    
    265,069
    
    
    
    684,986
    
    
    
    713,587Net gains on sales of debt securities
    
    
    21,750
    
    
    
    807,172
    
    
    
    287,509
    
    
    
    806,931Other noninterest income
    
    
    875,073
    
    
    
    441,357
    
    
    
    1,589,178
    
    
    
    1,191,369Total noninterest income
    
    
    1,121,498
    
    
    
    1,513,598
    
    
    
    2,561,673
    
    
    
    2,711,887Noninterest expense:Other-than-temporary impairment losses on available-for-sale
securities:Total other-than-temporary impairment losses
    
    
    78,535
    
    
    
    970,749
    
    
    
    138,360
    
    
    
    60,161Portion of other-than-temporary losses
recognized in other comprehensive income
    
    
    213,944
    
    
    
    (796,905
    )
    
    
    211,936
    
    
    
    259,760Net impairment loss realized
    
    
    292,479
    
    
    
    173,844
    
    
    
    350,296
    
    
    
    319,921Salaries and employee benefits
    
    
    3,470,862
    
    
    
    3,319,920
    
    
    
    9,959,814
    
    
    
    10,635,621Other real estate owned expense
    
    
    2,080,870
    
    
    
    2,066,751
    
    
    
    4,676,698
    
    
    
    3,828,915Occupancy and equipment expense
    
    
    1,106,521
    
    
    
    1,119,182
    
    
    
    3,267,752
    
    
    
    3,331,499FDIC assessment
    
    
    678,707
    
    
    
    675,279
    
    
    
    2,217,622
    
    
    
    2,336,261Data processing
    
    
    437,829
    
    
    
    505,299
    
    
    
    1,247,409
    
    
    
    1,499,653Advertising
    
    
    13,345
    
    
    
    25,528
    
    
    
    49,096
    
    
    
    201,030Amortization of intangible assets
    
    
    4,072
    
    
    
    4,072
    
    
    
    12,216
    
    
    
    12,216Other noninterest expenses
    
    
    835,263
    
    
    
    836,886
    
    
    
    2,457,485
    
    
    
    2,500,838Total noninterest expense
    
    
    8,919,948
    
    
    
    8,726,761
    
    
    
    24,238,388
    
    
    
    24,665,954Loss before applicable income taxes
    
    
    (14,813,815
    )
    
    
    (8,866,414
    )
    
    
    (24,983,268
    )
    
    
    (21,565,211
    )Applicable income tax benefit
    
    
    (5,960,479
    )
    
    
    (3,091,023
    )
    
    
    (10,127,972
    )
    
    
    (7,507,800
    )Net loss
    
    $
    (8,853,336
    )
    
    
    (5,775,391
    )
    
    
    (14,855,296
    )
    
    
    (14,057,411
    )Net loss
    
    $
    (8,853,336
    )
    
    
    (5,775,391
    )
    
    
    (14,855,296
    )
    
    
    (14,057,411
    )Preferred stock dividends
    
    
    (553,879
    )
    
    
    (545,000
    )
    
    
    (1,654,022
    )
    
    
    (1,102,111
    )Net loss available to common shareholders
    
    $
    (9,407,215
    )
    
    
    (6,320,391
    )
    
    
    (16,509,318
    )
    
    
    (15,159,522
    )Per share amounts:Basic loss per share
    
    $
    (0.42
    )
    
    
    (0.30
    )
    
    
    (0.77
    )
    
    
    (0.73
    )Basic weighted average shares outstanding
    
    
    22,569,372
    
    
    
    20,918,020
    
    
    
    21,593,589
    
    
    
    20,840,691Diluted loss per share
    
    $
    (0.42
    )
    
    
    (0.30
    )
    
    
    (0.77
    )
    
    
    (0.73
    )Diluted weighted average shares outstanding
    
    
    22,569,372
    
    
    
    20,918,020
    
    
    
    21,593,589
    
    
    
    20,862,858
  4




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 
    2010
    
    
    2009Net loss
    
    $
    (14,855,296
    )
    
    
    (14,057,411
    )Other comprehensive income (loss) before tax:Change in unrealized gains (losses) on available-for-sale
securities for which a portion of an other-than-temporary
impairment loss has been recognized in earnings, net of
reclassification
    
    
    (138,360
    )
    
    
    (60,161
    )Change in unrealized gains (losses) on other securities
available
for sale, net of reclassification
    
    
    3,974,858
    
    
    
    3,453,594Reclassification adjustments for:Available-for-sale security gains included in net loss
    
    
    (287,509
    )
    
    
    (806,931
    )Writedown of investment securities included in net loss
    
    
    350,296
    
    
    
    319,921Other comprehensive income before tax
    
    
    3,899,285
    
    
    
    2,906,423Income tax related to items of other comprehensive income
    
    
    1,324,589
    
    
    
    988,181Other comprehensive income, net of tax
    
    
    2,574,696
    
    
    
    1,918,242Total comprehensive loss
    
    $
    (12,280,600
    )
    
    
    (12,139,169
    )
  5




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 Accumulatedother
    
    
    TotalPreferred
    
    
    Common
    
    
    Subscriptions
    
    
    
    
    
    
    Retained
    
    
    Treasury
    
    
    comprehensive
    
    
    stockholdersstock
    
    
    stock
    
    
    receivable
    
    
    Surplus
    
    
    earnings
    
    
    stock
    
    
    income (loss)
    
    
    equityBalance at December 31, 2008
    
    $
    
    
    
    
    5,192,696
    
    
    
    
    
    
    
    124,193,318
    
    
    
    10,663,076
    
    
    
    (335,280
    )
    
    
    (104,930
    )
    
    
    139,608,880Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,057,411
    )
    
    
    
    
    
    
    
    
    
    
    (14,057,411
    )Issuance of 40,000 shares of
Series A preferred stock
    
    
    40,000,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,000,000Issuance of 2,000 shares of
Series B preferred stock
    
    
    2,000,000
    
    
    
    
    
    
    
    
    
    
    
    (2,000,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,102,111
    )
    
    
    
    
    
    
    
    
    
    
    (1,102,111
    )Stock issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,271
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,271
    )Stock options exercised 
156,000 shares (19,604 from
from treasury)
    
    
    
    
    
    
    34,098
    
    
    
    
    
    
    
    210,485
    
    
    
    
    
    
    
    158,416
    
    
    
    
    
    
    
    402,999Treasury stock purchased 
10,000 shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,000
    )
    
    
    
    
    
    
    (40,000
    )Sale of common stock in connection
with employee stock purchase
plan  25,753 shares (14,910 from
treasury)
    
    
    
    
    
    
    2,711
    
    
    
    
    
    
    
    (132,272
    )
    
    
    
    
    
    
    216,864
    
    
    
    
    
    
    
    87,303Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    391,469
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    391,469Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,125Change in valuation of available-for-sale securities, net of related
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,918,242
    
    
    
    1,918,242Balance at September 30, 2009
    
    $
    42,000,000
    
    
    
    5,229,505
    
    
    
    
    
    
    
    122,673,854
    
    
    
    (4,496,446
    )
    
    
    
    
    
    
    1,813,312
    
    
    
    167,220,225Balance at December 31, 2009
    
    $
    42,300,000
    
    
    
    5,243,023
    
    
    
    
    
    
    
    122,334,757
    
    
    
    (19,796,397
    )
    
    
    
    
    
    
    (411,960
    )
    
    
    149,669,423Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,855,296
    )
    
    
    
    
    
    
    
    
    
    
    (14,855,296
    )Subscriptions received for
1,595,517 shares of common stock
    
    
    
    
    
    
    398,879
    
    
    
    (4,786,551
    )
    
    
    4,387,672
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Payments received for subscription
receivable
    
    
    
    
    
    
    
    
    
    
    4,104,051
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,104,051Issuance of 235 shares of Series C
preferred stock
    
    
    235,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235,000Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,654,022
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,654,022
    )Stock issuance costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,654
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,654
    )Issuance of stock in connection with
employee stock purchase
plan  31,286 shares
    
    
    
    
    
    
    7,822
    
    
    
    
    
    
    
    61,566
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,388Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    197,734
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    197,734Issuance of restricted stock to
officers  40,000 shares
    
    
    
    
    
    
    10,000
    
    
    
   
    
    
    
    (10,000
    )
    

    
    
    
    
    
    
    

    
    
    
    

    
    
    Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,238
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,238Change in valuation of available-for-sale securities, net of related tax
effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,574,696
    
    
    
    2,574,696Balance at September 30, 2010
    
    $
    42,535,000
    
    
    
    5,659,724
    
    
    
    (682,500
    )
    
    
    125,350,291
    
    
    
    (34,651,693
    )
    
    
    
    
    
    
    2,162,736
    
    
    
    140,373,558
  6




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
 2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (14,855,296
    )
    
    
    (14,057,411
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization
    
    
    2,752,909
    
    
    
    3,571,080Provision for possible loan losses
    
    
    34,523,000
    
    
    
    27,700,000Net (gains) losses on sales and writedowns of debt securities
    
    
    62,787
    
    
    
    (487,010
    )Net gain on sale of bank premises and equipment
    
    
    
    
    
    
    (6,877
    )Net losses on sales and writedowns of other real estate owned
    
    
    2,863,068
    
    
    
    3,092,545Stock option compensation cost
    
    
    197,734
    
    
    
    391,469Amortization of restricted stock expense
    
    
    60,238
    
    
    
    28,125Mortgage loans originated for sale in the secondary market
    
    
    (20,859,588
    )
    
    
    (33,518,523
    )Mortgage loans sold in the secondary market
    
    
    18,778,488
    
    
    
    34,516,523Decrease in accrued interest receivable
    
    
    1,812,245
    
    
    
    214,996Decrease in accrued interest payable
    
    
    (765,890
    )
    
    
    (1,558,531
    )Other operating activities, net
    
    
    (4,765,234
    )
    
    
    (8,080,092
    )Net cash provided by operating activities
    
    
    19,804,461
    
    
    
    11,806,294Cash flows from investing activities:Purchase of available-for-sale debt securities
    
    
    (88,768,335
    )
    
    
    (205,650,276
    )Proceeds from maturities and issuer calls of available-for-sale debt securities
    
    
    140,239,309
    
    
    
    132,794,998Proceeds from sales of available-for-sale debt securities
    
    
    20,848,467
    
    
    
    36,851,707Net decrease in loans
    
    
    85,730,665
    
    
    
    41,794,755Proceeds from sale of other real estate owned
    
    
    4,618,910
    
    
    
    1,197,195Construction expenditures to finish other real estate owned
    
    
    
    
    
    
    (13,786
    )Proceeds from sale of bank premises and equipment
    
    
    
    
    
    
    36,037Purchase of bank premises and equipment
    
    
    (98,397
    )
    
    
    (300,884
    )Net cash provided by investing activities
    
    
    162,570,619
    
    
    
    6,709,746Cash flows from financing activities:Net decrease in deposits
    
    
    (194,933,803
    )
    
    
    (8,036,465
    )Net increase (decrease) in short-term borrowings
    
    
    11,175,538
    
    
    
    (49,869,892
    )Payments of long-term Federal Home Loan Bank borrowings
    
    
    (11,000,000
    )
    
    
    (7,000,000
    )Issuance of preferred stock
    
    
    235,000
    
    
    
    40,000,000Dividends on preferred stock
    
    
    (1,654,022
    )
    
    
    (1,102,111
    )Issuance of common stock
    
    
    4,173,439
    
    
    
    33,478Purchase of treasury stock
    
    
    
    
    
    
    (40,000
    )Proceeds from sale of treasury stock
    
    
    
    
    
    
    53,825Stock options exercised
    
    
    
    
    
    
    402,999Payment of stock issuance costs
    
    
    (27,654
    )
    
    
    (17,271
    )Net cash used in financing activities
    
    
    (192,031,502
    )
    
    
    (25,575,437
    )Net decrease in cash and cash equivalents
    
    
    (9,656,422
    )
    
    
    (7,059,397
    )Cash and cash equivalents at beginning of period
    
    
    27,696,530
    
    
    
    57,745,965Cash and cash equivalents at end of period
    
    $
    18,040,108
    
    
    
    50,686,568Supplemental information:Cash paid for:Interest
    
    $
    19,502,198
    
    
    
    31,621,625Income taxes
    
    
    
    
    
    
    964,000Noncash transactions:Warrant exercise and issuance of Series B preferred stock
    
    
    
    
    
    
    2,000,000Transfers to other real estate in settlement of loans
    
    
    14,767,037
    
    
    
    4,485,100Loans made to facilitate the sale of other real estate
    
    
    371,251
    
    
    
    201,555Issuance of restricted stock
    
    
    10,000
    
    
    
    
  7




---



##### 



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




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
  Subsequent Events
  Earnings per Share
  Three-Months Ended September 30,
    
    
    Nine-Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009BasicNet loss available to common
shareholders
    
    $
    (9,407,215
    )
    
    
    (6,320,391
    )
    
    
    (16,509,318
    )
    
    
    (15,159,522
    )Weighted average common shares outstanding
    
    
    22,569,372
    
    
    
    20,918,020
    
    
    
    21,593,589
    
    
    
    20,840,691Basic loss per share
    
    $
    (0.42
    )
    
    
    (0.30
    )
    
    
    (0.77
    )
    
    
    (0.73
    )DilutedNet loss available to common
shareholders
    
    $
    (9,407,215
    )
    
    
    (6,320,391
    )
    
    
    (16,509,318
    )
    
    
    (15,159,522
    )Weighted average common shares
outstanding
    
    
    22,569,372
    
    
    
    20,918,020
    
    
    
    21,593,589
    
    
    
    20,840,691Effect of dilutive stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,167Diluted weighted average common
shares
outstanding
    
    
    22,569,372
    
    
    
    20,918,020
    
    
    
    21,593,589
    
    
    
    20,862,858Diluted loss per share
    
    $
    (0.42
    )
    
    
    (0.30
    )
    
    
    (0.77
    )
    
    
    (0.73
    )
 NOTE 2  INTANGIBLE ASSETS
   NOTE 3  STOCK OPTIONS
   9




---



##### 



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 SharesNine Months Ended September 30, 2009:Balance at December 31, 2008
    
    $
    7.61
    
    
    
    1,553,450
    
    
    $
    8.44
    
    
    
    673,000Granted
    
    
    7.50
    
    
    
    102,250
    
    
    
    7.50
    
    
    
    500Forfeited
    
    
    9.33
    
    
    
    (65,000
    )
    
    
    13.23
    
    
    
    (3,000
    )Exercised
    
    
    2.58
    
    
    
    (156,000
    )
    
    
    
    
    
    
    Balance at September 30, 2009
    
    $
    8.07
    
    
    
    1,434,700
    
    
    $
    8.42
    
    
    
    670,500Nine Months Ended September 30, 2010:Balance at December 31, 2009
    
    $
    8.05
    
    
    
    1,424,450
    
    
    $
    8.41
    
    
    
    666,816Forfeited
    
    
    10.86
    
    
    
    (17,250
    )
    
    
    10.70
    
    
    
    (26,016
    )Balance at September 30, 2010
    
    $
    8.02
    
    
    
    1,407,200
    
    
    $
    8.32
    
    
    
    640,800
   WeightedAverageGrant DateShares
    
    
    Fair ValueNonvested at December 31, 2009
    
    
    271,198
    
    
    $
    2.09Granted
    
    
    
    
    
    
    Vested
    
    
    (142,857
    )
    
    
    2.73Forfeited
    
    
    (4,250
    )
    
    
    1.14Nonvested at September 30, 2010
    
    
    124,091
    
    
    
    1.38
  10




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
  NOTE 4  INVESTMENTS IN DEBT SECURITIES
  Gross
    
    
    Grossunreal-
    
    
    unreal-
    
    
    EstimatedAmortized
    
    
    ized
    
    
    ized
    
    
    faircost
    
    
    gains
    
    
    losses
    
    
    valueSeptember 30, 2010Obligations of U.S. Government
agencies and corporations
    
    $
    67,999,924
    
    
    
    548,943
    
    
    
    
    
    
    
    68,548,867Obligations of state and
political subdivisions
    
    
    22,121,711
    
    
    
    864,340
    
    
    
    
    
    
    
    22,986,051Trust preferred securities
    
    
    3,363,681
    
    
    
    
    
    
    
    (2,285,299
    )
    
    
    1,078,382U.S. agency residential
mortgage-backed securities
    
    
    117,712,980
    
    
    
    4,147,118
    
    
    
    
    
    
    
    121,860,098$
    211,198,296
    
    
    
    5,560,401
    
    
    
    (2,285,299
    )
    
    
    214,473,398
 December 31, 2009Obligations of U.S. Government
agencies and corporations
    
    $
    116,150,389
    
    
    
    273,013
    
    
    
    (978,159
    )
    
    
    115,445,243Obligations of state and
political subdivisions
    
    
    30,012,602
    
    
    
    651,846
    
    
    
    (12,863
    )
    
    
    30,651,585Trust preferred securities
    
    
    3,697,211
    
    
    
    
    
    
    
    (2,459,474
    )
    
    
    1,237,737U.S. agency residential mortgage-backed
securities
    
    
    134,883,536
    
    
    
    2,430,220
    
    
    
    (528,765
    )
    
    
    136,784,991$
    284,743,738
    
    
    
    3,355,079
    
    
    
    (3,979,261
    )
    
    
    284,119,556
  EstimatedAmortized
    
    
    faircost
    
    
    valueDue one year or less
    
    $
    3,691,200
    
    
    
    3,707,146Due one year through five years
    
    
    19,849,400
    
    
    
    20,166,075Due five years through ten years
    
    
    58,183,722
    
    
    
    59,123,722Due after ten years
    
    
    11,760,994
    
    
    
    9,616,357U.S. agency residential mortgage-backed securities
    
    
    117,712,980
    
    
    
    121,860,098$
    211,198,296
    
    
    
    214,473,398
  11




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
   September 30, 2010Less than 12 months
    
    
    12 months or more
    
    
    TotalEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealizedfair value
    
    
    losses
    
    
    fair value
    
    
    losses
    
    
    fair value
    
    
    lossesObligations of U.S.
Government agencies
and corporations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Obligations of states
and political subdivisions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Trust preferred
securities
    
    
    
    
    
    
    
    
    
    
    1,078,382
    
    
    
    (2,285,299
    )
    
    
    1,078,382
    
    
    
    (2,285,299
    )U.S. agency residential
mortgage-backed
securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    1,078,382
    
    
    
    (2,285,299
    )
    
    
    1,078,382
    
    
    
    (2,285,299
    )
 December 31, 2009Less than 12 months
    
    
    12 months or more
    
    
    TotalEstimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealized
    
    
    Estimated
    
    
    Unrealizedfair value
    
    
    losses
    
    
    fair value
    
    
    losses
    
    
    fair value
    
    
    lossesObligations of U.S.
Government agencies
and corporations
    
    $
    76,621,565
    
    
    
    (978,159
    )
    
    
    
    
    
    
    
    
    
    
    76,621,565
    
    
    
    (978,159
    )Obligations of states and
political subdivisions
    
    
    3,663,692
    
    
    
    (12,863
    )
    
    
    
    
    
    
    
    
    
    
    3,663,692
    
    
    
    (12,863
    )Trust preferred
securities
    
    
    
    
    
    
    
    
    
    
    1,237,737
    
    
    
    (2,459,474
    )
    
    
    1,237,737
    
    
    
    (2,459,474
    )U.S. agency residential
mortgage-backed
securities
    
    
    53,124,575
    
    
    
    (528,399
    )
    
    
    54,376
    
    
    
    (366
    )
    
    
    53,178,951
    
    
    
    (528,765
    )$
    133,409,832
    
    
    
    (1,519,421
    )
    
    
    1,292,113
    
    
    
    (2,459,840
    )
    
    
    134,701,945
    
    
    
    (3,979,261
    )
  Percentage ofPV of
    
    Year to date
    
    Number of
    
    issuersAccrual
    
    Book
    
    Fair
    
    estimated
    
    2010
    
    original
    
    currentlyPool
    
    Class
    
    status
    
    value
    
    value
    
    cash flows
    
    impairment
    
    issuers
    
    performing1
    
    
    C
    
    
    Accruing
    
    
    1,000,000
    
    
    
    519,351
    
    
    
    1,004,427
    
    
    
    
    
    
    
    25
    
    
    
    96
    %2
    
    
    B
    
    
    Nonaccrual
    
    
    933,360
    
    
    
    263,203
    
    
    
    980,221
    
    
    
    
    
    
    
    56
    
    
    
    75
    %3
    
    
    B-1
    
    
    Nonaccrual
    
    
    813,880
    
    
    
    272,127
    
    
    
    813,880
    
    
    
    203,773
    
    
    
    64
    
    
    
    63
    %4
    
    
    B
    
    
    Nonaccrual
    
    
    616,441
    
    
    
    23,701
    
    
    
    616,441
    
    
    
    146,523
    
    
    
    59
    
    
    
    25
    %3,363,681
    
    
    
    1,078,382
    
    
    
    3,414,969
    
    
    
    350,296
  12




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
   Accumulated
    
    
    AccumulatedCredit Losses
    
    
    Credit LossesSeptember 30,
    
    
    September 30,2010
    
    
    2009Credit losses on trust preferred securities heldBeginning of period
    
    $
    340,957
    
    
    
    Additions related to OTTI losses not previously recognized
    
    
    203,773
    
    
    
    319,921Reductions due to sales
    
    
    
    
    
    
    Reductions due to change in intent or likelihood of sale
    
    
    
    
    
    
    Additions related to increases in previously recognized OTTI losses
    
    
    146,523
    
    
    
    Reductions due to increases in expected cash flows
    
    
    
    
    
    
    End of period
    
    $
    691,253
    
    
    
    319,921
   NOTE 5  LOANS
  September 30,
    
    
    December 31,2010
    
    
    2009Commercial:Real estate
    
    $
    752,228,053
    
    
    
    797,054,385Other
    
    
    71,769,137
    
    
    
    82,732,850Real estate:Construction
    
    
    112,934,523
    
    
    
    172,731,598Residential
    
    
    75,297,266
    
    
    
    84,657,909Consumer
    
    
    3,043,371
    
    
    
    3,704,533$
    1,015,272,350
    
    
    
    1,140,881,275
  13




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
   2010
    
    
    2009Balance, January 1
    
    $
    32,221,569
    
    
    
    14,305,822Provision charged to operations
    
    
    34,523,000
    
    
    
    27,700,000Charge-offs
    
    
    (27,797,700
    )
    
    
    (17,129,335
    )Recoveries of loans previously charged off
    
    
    316,139
    
    
    
    1,393,319Balance, September 30
    
    $
    39,263,008
    
    
    
    26,269,806
 NOTE 6  DISCLOSURES ABOUT FINANCIAL INSTRUMENTS
   Financial instruments for which contractual
amounts represent:Commitments to extend credit
    
    $
    133,076,427Standby letters of credit
    
    
    13,111,997$
    146,188,424
   14




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
   Carrying
    
    
    Estimatedamount
    
    
    fair valueBalance sheet assets:Cash and due from banks
    
    $
    18,040,108
    
    
    
    18,040,108Investments in debt
securities
    
    
    214,473,398
    
    
    
    214,473,398Loans, net
    
    
    976,006,613
    
    
    
    990,906,372Accrued interest receivable
    
    
    3,835,642
    
    
    
    3,835,642$
    1,212,355,761
    
    
    
    1,227,255,520Balance sheet liabilities:Deposits
    
    $
    1,071,126,394
    
    
    
    1,078,233,376Short-term borrowings
    
    
    23,872,470
    
    
    
    23,872,470Long-term Federal HomeLoan Bank borrowings
    
    
    93,000,000
    
    
    
    112,155,548Accrued interest payable
    
    
    1,429,062
    
    
    
    1,429,062$
    1,189,427,926
    
    
    
    1,215,690,456
  
    
    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 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 
 15




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
  Investments in Available-for-Sale Debt Securities
  Balance, at fair value on December 31, 2009
    
    $
    1,237,737Net unrealized gain arising in 2010
    
    
    174,176Impairment writedowns recognized in 2010
    
    
    (350,296
    )Accreted discount
    
    
    1,153Payments in kind during 2010
    
    
    19,694Principal payments received in 2010
    
    
    (4,082
    )Balance, at fair value on September 30, 2010
    
    $
    1,078,382
 Loans
 Deposits 
 Long-Term Borrowings 
 Commitments to Extend Credit and Standby Letters of Credit 
 16




---



##### 



RELIANCE BANCSHARES, INC. AND SUBSIDIARIES
   QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    ObservableAssets
    
    
    Inputs
    
    
    Inputs
    
    
    Total Fair(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    ValueAssetsInvestment securities:Obligations of U.S. Government agencies and
corporations
    
    $
    
    
    
    
    68,548,867
    
    
    
    
    
    
    
    68,548,867Obligations of state and political subdivisions
    
    
    
    
    
    
    22,986,051
    
    
    
    
    
    
    
    22,986,051Trust preferred collateralized debt obligations
    
    
    
    
    
    
    
    
    
    
    1,078,382
    
    
    
    1,078,382U.S. agency residential mortgage-backed securities
    
    
    
    
    
    
    121,860,098
    
    
    
    
    
    
    
    121,860,098Total investment securities available-for-sale
    
    $
    
    
    
    
    213,395,016
    
    
    
    1,078,382
    
    
    
    214,473,398
  17




---



##### 



Part I  Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
   Forward-Looking Statements
  Overview of Operations
     18




---



##### 



Executive Summary of Results of Operations and Financial Condition
  Provision and Asset Quality
   Improved Net Interest Margin
    Capital
   As of and for the
    
    As of and for thenine months ended
    
    quarters endedSeptember 30,
    
    September 30,2010
    
    2009
    
    2010
    
    2009Percentage of net loss to:Average total assets
    
    
    (1.37
    )%
    
    
    (1.19
    )%
    
    
    (2.52
    )%
    
    
    (1.49
    )%Average stockholders equity
    
    
    (13.43
    )%
    
    
    (10.97
    )%
    
    
    (24.24
    )%
    
    
    (13.27
    )%Net interest margin
    
    
    3.10
    %
    
    
    2.54
    %
    
    
    3.14
    %
    
    
    2.69
    %Percentage of average stockholders
equity to average total assets
    
    
    10.17
    %
    
    
    10.88
    %
    
    
    10.40
    %
    
    
    11.24
    %
 19




---



##### 



Critical Accounting Policies
  Results of Operations for the Three- and Nine-Month Periods Ended September 30, 2010 and 2009
       20




---



##### 



Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2010
    
    2009
    
    2010
    
    2009Average deposits:Noninterest-bearing
    
    
    5.49
    %
    
    
    4.57
    %
    
    
    4.87
    %
    
    
    4.29
    %Interest-bearing:Transaction accounts
    
    
    18.10
    
    
    
    12.37
    
    
    
    17.63
    
    
    
    11.90Savings
    
    
    26.46
    
    
    
    21.43
    
    
    
    24.94
    
    
    
    17.08Time deposits of $100,000 or more
    
    
    15.60
    
    
    
    21.30
    
    
    
    18.20
    
    
    
    23.32Other time deposits
    
    
    24.23
    
    
    
    29.52
    
    
    
    25.20
    
    
    
    32.03Total average interest-bearing deposits
    
    
    84.39
    
    
    
    84.62
    
    
    
    85.97
    
    
    
    84.33Total average deposits
    
    
    89.88
    
    
    
    89.19
    
    
    
    90.84
    
    
    
    88.62Average short-term borrowings
    
    
    2.25
    
    
    
    1.03
    
    
    
    1.47
    
    
    
    1.71Average longer-term advances from Federal Home
Loan Bank
    
    
    7.87
    
    
    
    9.78
    
    
    
    7.69
    
    
    
    9.67100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
   21




---



##### 



Nine Months Ended September 30, 2010Percent
    
    
    Interest
    
    
    AverageAverage
    
    
    of Total
    
    
    Income/
    
    
    Yield/Balance
    
    
    Assets
    
    
    Expense
    
    
    RateASSETSLoans (1) (2) (3)
    
    $
    1,088,718,081
    
    
    
    74.83
    %
    
    $
    44,088,809
    
    
    
    5.41
    %Investment securities:Taxable
    
    
    221,460,781
    
    
    
    15.22
    
    
    
    4,982,403
    
    
    
    3.01Exempt from Federal income taxes (3)
    
    
    27,840,414
    
    
    
    1.91
    
    
    
    1,234,870
    
    
    
    5.93Short-term investments
    
    
    25,082,428
    
    
    
    1.73
    
    
    
    35,471
    
    
    
    0.19Total earning assets
    
    
    1,363,101,704
    
    
    
    93.69
    
    
    
    50,341,553
    
    
    
    4.94
    %Nonearning assets:Cash and due from banks
    
    
    5,310,275
    
    
    
    0.36Reserve for possible loan losses
    
    
    (35,654,686
    )
    
    
    (2.45
    )Premises and equipment
    
    
    41,508,278
    
    
    
    2.85Other assets
    
    
    78,294,660
    
    
    
    5.39Available-for-sale investment market valuation
    
    
    2,351,012
    
    
    
    0.16Total nonearning assets
    
    
    91,809,539
    
    
    
    6.31Total assets
    
    $
    1,454,911,243
    
    
    
    100.00
    %LIABILITIESInterest-bearing liabilities:Interest-bearing transaction accounts
    
    $
    229,389,564
    
    
    
    15.77
    %
    
    
    1,526,456
    
    
    
    0.89
    %Savings
    
    
    324,538,835
    
    
    
    22.31
    
    
    
    2,884,150
    
    
    
    1.19Time deposits of $100,000 or more
    
    
    236,831,419
    
    
    
    16.28
    
    
    
    4,368,278
    
    
    
    2.47Other time deposits
    
    
    327,854,502
    
    
    
    22.52
    
    
    
    6,990,749
    
    
    
    2.85Total interest-bearing deposits
    
    
    1,118,614,320
    
    
    
    76.88
    
    
    
    15,769,633
    
    
    
    1.88Long-term borrowings
    
    
    100,062,127
    
    
    
    6.88
    
    
    
    2,876,132
    
    
    
    3.84Funds purchased and securities sold under
repurchase agreements
    
    
    19,151,519
    
    
    
    1.32
    
    
    
    90,543
    
    
    
    0.63Total interest-bearing liabilities
    
    
    1,237,827,966
    
    
    
    85.08
    
    
    
    18,736,308
    
    
    
    2.02Noninterest-bearing deposits
    
    
    63,405,125
    
    
    
    4.36Other liabilities
    
    
    5,785,969
    
    
    
    0.39Total liabilities
    
    
    1,307,019,060
    
    
    
    89.83STOCKHOLDERS EQUITY
    
    
    147,892,183
    
    
    
    10.17Total liabilities and stockholders equity
    
    $
    1,454,911,243
    
    
    
    100.00
    %Net interest income
    
    
    
    
    
    
    
    
    
    $
    31,605,245Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.10
    %
  22




---



##### 



Nine Months Ended September 30, 2009Percent
    
    
    Interest
    
    
    AverageAverage
    
    
    of Total
    
    
    Income/
    
    
    Yield/Balance
    
    
    Assets
    
    
    Expense
    
    
    RateASSETSLoans (1) (2) (3)
    
    $
    1,226,372,271
    
    
    
    77.85
    %
    
    $
    51,392,428
    
    
    
    5.60
    %Investment securities:Taxable
    
    
    220,729,461
    
    
    
    14.01
    
    
    
    5,784,448
    
    
    
    3.50Exempt from Federal income taxes (3)
    
    
    31,035,822
    
    
    
    1.97
    
    
    
    1,335,948
    
    
    
    5.76Short-term investments
    
    
    22,710,559
    
    
    
    1.44
    
    
    
    29,817
    
    
    
    0.18Total earning assets
    
    
    1,500,848,113
    
    
    
    95.27
    
    
    
    58,542,641
    
    
    
    5.22
    %Nonearning assets:Cash and due from banks
    
    
    5,171,632
    
    
    
    0.33Reserve for possible loan losses
    
    
    (16,645,273
    )
    
    
    (1.06
    )Premises and equipment
    
    
    43,536,302
    
    
    
    2.76Other assets
    
    
    41,433,140
    
    
    
    2.63Available-for-sale investment market valuation
    
    
    862,440
    
    
    
    0.07Total nonearning assets
    
    
    74,358,241
    
    
    
    4.73Total assets
    
    $
    1,575,206,354
    
    
    
    100.00
    %LIABILITIESInterest-bearing liabilities:Interest-bearing transaction accounts
    
    $
    166,222,457
    
    
    
    10.55
    %
    
    
    1,616,712
    
    
    
    1.30
    %Savings
    
    
    238,560,261
    
    
    
    15.14
    
    
    
    5,069,880
    
    
    
    2.84Time deposits of $100,000 or more
    
    
    325,684,306
    
    
    
    20.68
    
    
    
    7,617,809
    
    
    
    3.13Other time deposits
    
    
    447,364,036
    
    
    
    28.40
    
    
    
    11,713,511
    
    
    
    3.50Total interest-bearing deposits
    
    
    1,177,831,060
    
    
    
    74.77
    
    
    
    26,017,912
    
    
    
    2.95Long-term borrowings
    
    
    134,917,563
    
    
    
    8.57
    
    
    
    3,714,910
    
    
    
    3.68Funds purchased and securities sold under
repurchase agreements
    
    
    23,914,007
    
    
    
    1.52
    
    
    
    330,272
    
    
    
    1.85Total interest-bearing liabilities
    
    
    1,336,662,630
    
    
    
    84.86
    
    
    
    30,063,094
    
    
    
    3.01Noninterest-bearing deposits
    
    
    59,971,718
    
    
    
    3.81Other liabilities
    
    
    7,244,134
    
    
    
    0.45Total liabilities
    
    
    1,403,878,482
    
    
    
    89.12STOCKHOLDERS EQUITY
    
    
    171,327,872
    
    
    
    10.88Total liabilities and stockholders equity
    
    $
    1,575,206,354
    
    
    
    100.00
    %Net interest income
    
    
    
    
    
    
    
    
    
    $
    28,479,547Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.54
    %
  23




---



##### 



Quarter Ended September 30, 2010Percent
    
    
    Interest
    
    
    AverageAverage
    
    
    of Total
    
    
    Income/
    
    
    Yield/Balance
    
    
    Assets
    
    
    Expense
    
    
    RateASSETSLoans (1) (2) (3)
    
    $
    1,050,647,121
    
    
    
    75.45
    %
    
    $
    13,953,314
    
    
    
    5.27
    %Investment securities:Taxable
    
    
    214,230,958
    
    
    
    15.38
    
    
    
    1,475,110
    
    
    
    2.73Exempt from Federal income taxes (3)
    
    
    25,396,012
    
    
    
    1.82
    
    
    
    379,914
    
    
    
    5.94Short-term investments
    
    
    10,987,950
    
    
    
    0.79
    
    
    
    2,928
    
    
    
    0.11Total earning assets
    
    
    1,301,262,041
    
    
    
    93.44
    
    
    
    15,811,266
    
    
    
    4.82Nonearning assets:Cash and due from banks
    
    
    5,194,702
    
    
    
    0.37Reserve for possible loan losses
    
    
    (40,501,497
    )
    
    
    (2.91
    )Premises and equipment
    
    
    41,008,354
    
    
    
    2.94Other assets
    
    
    81,806,110
    
    
    
    5.88Available-for-sale investment market valuation
    
    
    3,756,147
    
    
    
    0.28Total nonearning assets
    
    
    91,263,816
    
    
    
    6.56Total assets
    
    $
    1,392,525,857
    
    
    
    100.00
    %LIABILITIESInterest-bearing liabilities:Interest-bearing transaction accounts
    
    $
    224,701,967
    
    
    
    16.14
    %
    
    
    446,272
    
    
    
    0.79
    %Savings
    
    
    328,564,851
    
    
    
    23.59
    
    
    
    833,606
    
    
    
    1.01Time deposits of $100,000 or more
    
    
    193,654,294
    
    
    
    13.91
    
    
    
    1,226,390
    
    
    
    2.51Other time deposits
    
    
    300,788,791
    
    
    
    21.60
    
    
    
    2,008,246
    
    
    
    2.65Total interest-bearing deposits
    
    
    1,047,709,903
    
    
    
    75.24
    
    
    
    4,514,514
    
    
    
    1.71Long-term borrowings
    
    
    97,724,014
    
    
    
    7.02
    
    
    
    952,131
    
    
    
    3.87Funds purchased and securities sold under
repurchase agreements
    
    
    27,949,686
    
    
    
    2.01
    
    
    
    33,792
    
    
    
    0.48Total interest-bearing liabilities
    
    
    1,173,383,603
    
    
    
    84.27
    
    
    
    5,500,437
    
    
    
    1.86Noninterest-bearing deposits
    
    
    68,220,782
    
    
    
    4.90Other liabilities
    
    
    6,043,428
    
    
    
    0.43Total liabilities
    
    
    1,247,647,813
    
    
    
    89.60STOCKHOLDERS EQUITY
    
    
    144,878,044
    
    
    
    10.40Total liabilities and stockholders equity
    
    $
    1,392,525,857
    
    
    
    100.00
    %Net interest income
    
    
    
    
    
    
    
    
    
    $
    10,310,829Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.14
    %
  24




---



##### 



Quarter Ended September 30, 2009Percent
    
    
    Interest
    
    
    AverageAverage
    
    
    of Total
    
    
    Income/
    
    
    Yield/Balance
    
    
    Assets
    
    
    Expense
    
    
    RateASSETSLoans (1) (2) (3)
    
    $
    1,203,337,792
    
    
    
    78.29
    %
    
    $
    16,710,982
    
    
    
    5.51
    %Investment securities:Taxable
    
    
    211,114,675
    
    
    
    13.74
    
    
    
    1,867,460
    
    
    
    3.51Exempt from Federal income taxes (3)
    
    
    30,264,332
    
    
    
    1.97
    
    
    
    436,030
    
    
    
    5.72Short-term investments
    
    
    17,870,889
    
    
    
    1.16
    
    
    
    7,076
    
    
    
    0.16Total earning assets
    
    
    1,462,587,688
    
    
    
    95.16
    
    
    
    19,021,548
    
    
    
    5.16Nonearning assets:Cash and due from banks
    
    
    4,343,811
    
    
    
    0.28Reserve for possible loan losses
    
    
    (20,972,655
    )
    
    
    (1.36
    )Premises and equipment
    
    
    43,057,314
    
    
    
    2.80Other assets
    
    
    46,355,645
    
    
    
    3.01Available-for-sale investment market valuation
    
    
    1,620,549
    
    
    
    0.11Total nonearning assets
    
    
    74,404,664
    
    
    
    4.84Total assets
    
    $
    1,536,992,352
    
    
    
    100.00
    %LIABILITIESInterest-bearing liabilities:Interest-bearing transaction accounts
    
    $
    167,744,078
    
    
    
    10.91
    %
    
    
    472,430
    
    
    
    1.12
    %Savings
    
    
    290,696,634
    
    
    
    18.91
    
    
    
    2,056,821
    
    
    
    2.81Time deposits of $100,000 or more
    
    
    288,977,087
    
    
    
    18.80
    
    
    
    2,023,528
    
    
    
    2.78Other time deposits
    
    
    400,364,321
    
    
    
    26.05
    
    
    
    3,282,482
    
    
    
    3.25Total interest-bearing deposits
    
    
    1,147,782,120
    
    
    
    74.67
    
    
    
    7,835,261
    
    
    
    2.71Long-term borrowings
    
    
    132,752,688
    
    
    
    8.64
    
    
    
    1,237,276
    
    
    
    3.70Funds purchased and securities sold under
repurchase agreements
    
    
    13,953,999
    
    
    
    0.91
    
    
    
    22,734
    
    
    
    0.65Total interest-bearing liabilities
    
    
    1,294,488,807
    
    
    
    84.22
    
    
    
    9,095,271
    
    
    
    2.79Noninterest-bearing deposits
    
    
    61,952,867
    
    
    
    4.03Other liabilities
    
    
    7,828,447
    
    
    
    0.51Total liabilities
    
    
    1,364,270,121
    
    
    
    88.76STOCKHOLDERS EQUITY
    
    
    172,722,231
    
    
    
    11.24Total liabilities and stockholders equity
    
    $
    1,536,992,352
    
    
    
    100.00
    %Net interest income
    
    
    
    
    
    
    
    
    
    $
    9,926,277Net yield on earning assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.69
    %
 
 (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 30, 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. 25




---



##### 



Amount of Increase (Decrease)Third Quarter
    
    
    First Nine MonthsChange From 2009 to 2010 Due toYield/
    
    
    
    
    
    
    
    
    
    
    Yield/Volume (1)
    
    
    Rate (2)
    
    
    Total
    
    
    Volume (1)
    
    
    Rate (2)
    
    
    TotalInterest income:Loans
    
    $
    (2,052,953
    )
    
    
    (704,715
    )
    
    
    (2,757,668
    )
    
    
    (5,608,365
    )
    
    
    (1,695,254
    )
    
    
    (7,303,619
    )Investment securities:Taxable
    
    
    27,267
    
    
    
    (419,617
    )
    
    
    (392,350
    )
    
    
    18,862
    
    
    
    (820,907
    )
    
    
    (802,045
    )Exempt from Federal income taxes
    
    
    (72,375
    )
    
    
    16,259
    
    
    
    (56,116
    )
    
    
    (139,899
    )
    
    
    38,821
    
    
    
    (101,078
    )Short-term investments
    
    
    (2,290
    )
    
    
    (1,858
    )
    
    
    (4,148
    )
    
    
    3,691
    
    
    
    1,963
    
    
    
    5,654Total interest income
    
    
    (2,100,351
    )
    
    
    (1,109,931
    )
    
    
    (3,210,282
    )
    
    
    (5,725,711
    )
    
    
    (2,475,377
    )
    
    
    (8,201,088
    )Interest expense:Interest-bearing transaction
accounts
    
    
    135,401
    
    
    
    (161,559
    )
    
    
    (26,158
    )
    
    
    507,786
    
    
    
    (598,042
    )
    
    
    (90,256
    )Savings accounts
    
    
    239,053
    
    
    
    (1,462,268
    )
    
    
    (1,223,215
    )
    
    
    1,417,464
    
    
    
    (3,603,194
    )
    
    
    (2,185,730
    )Time deposits of $100,000 or more
    
    
    (615,820
    )
    
    
    (181,318
    )
    
    
    (797,138
    )
    
    
    (1,832,887
    )
    
    
    (1,416,644
    )
    
    
    (3,249,531
    )Other time deposits
    
    
    (731,359
    )
    
    
    (542,877
    )
    
    
    (1,274,236
    )
    
    
    (2,785,977
    )
    
    
    (1,936,785
    )
    
    
    (4,722,762
    )Total deposits
    
    
    (972,725
    )
    
    
    (2,348,022
    )
    
    
    (3,320,747
    )
    
    
    (2,693,614
    )
    
    
    (7,554,665
    )
    
    
    (10,248,279
    )Funds purchased and securities
sold
under repurchase agreements
    
    
    18,256
    
    
    
    (7,198
    )
    
    
    11,058
    
    
    
    (55,604
    )
    
    
    (184,125
    )
    
    
    (239,729
    )Long-term borrowings
    
    
    (339,752
    )
    
    
    54,607
    
    
    
    (285,145
    )
    
    
    (994,349
    )
    
    
    155,571
    
    
    
    (838,778
    )Total interest expense
    
    
    (1,294,221
    )
    
    
    (2,300,613
    )
    
    
    (3,594,834
    )
    
    
    (3,743,567
    )
    
    
    (7,583,219
    )
    
    
    (11,326,786
    )Net interest income
    
    $
    (806,130
    )
    
    
    1,190,682
    
    
    
    384,552
    
    
    
    (1,982,144
    )
    
    
    5,107,842
    
    
    
    3,125,698
 
 (1)
    
    Change in volume multiplied by yield/rate of prior year.(2)
    
    Change in yield/rate multiplied by volume of prior year. NOTE:
    
    The change in interest due to both rate and volume has been allocated to volume and rate
changes in proportion to the relationship of the absolute dollar amounts of the change in
each.
   26




---



##### 



27




---



##### 



Financial Condition
       Risk Management
      28




---



##### 



Originated InFlorida
    
    All other
    
    TotalNet charge-offs (quarter ended 9/30/10)
    
    $5.4 million
    
    $8.7 million
    
    $14.1 millionNet charge-offs (quarter ended 9/30/09)
    
    $7.3 million
    
    $1.9 million
    
    $9.2 millionNon-performing loans (9/30/2010)
    
    $18.8 million
    
    $100.4 million
    
    $119.2 millionNon-performing loans (12/31/2009)
    
    $25.4 million
    
    $46.7 million
    
    $72.1 millionNon-performing loans (9/30/2009)
    
    $46.0 million
    
    $44.5 million
    
    $90.5 millionNon-performing assets* (9/30/2010)
    
    $39.3 million
    
    $116.4 million
    
    $155.7 millionNon-performing assets* (12/31/2009)
    
    $44.5 million
    
    $56.7 million
    
    $101.2 millionNon-performing assets* (9/30/2009)
    
    $52.0 million
    
    $53.8 million
    
    $105.8 millionOutstanding loans originated in
respective markets (9/30/10)
    
    $59.6 million
    
    $955.7 million
    
    $1.015 billion
 
 *
    
    Non-performing assets are comprised of non-performing loans, non-performing investments, and
other real estate owned.    29




---



##### 




    
    A loan for approximately $2.0 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 with the borrower on a
strategy for repayment, resolution of the project, or obtaining a signed deed for the property
in lieu of foreclosure.
 
    
    A loan for approximately $1.5 million to a single purpose entity secured by unimproved
property in Florida that is in default. The Company has determined no mutually agreeable
solution is likely and is moving forward with foreclosure.
 
    
    A loan for approximately $1.5 million to two Florida investors for future commercial
development. Development has not started. The borrower is currently operating under a
forbearance agreement against Lee County, Florida and the Company.
 
    
    A loan for approximately $1.7 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.
 
    
    A loan for approximately $3.0 million to a group of Florida investors secured by unimproved
property in Florida. After multiple quarters of performance by some of the guarantors,
payments have stopped and the parties have engaged counsel. The Company has initiated
foreclosure.
 
    
    A loan for approximately $1.6 million to a group of investors secured by an improved
commercial lot. The borrower and Bank were unable to reach agreement on further development
of the site. Negotiations continue with the possibility of foreclosure increasing.
 
    
    A loan for approximately $11 million, secured by an individual warehouse in St. Louis,
Missouri. The loan is currently in forbearance as the borrower restructures its business
operations. The warehouse is experiencing high vacancy.
 
    
    A loan totaling approximately $1.8 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
Company reached an agreement with the borrower to move the project forward with a new home
builder.
 
    
    A $16.7 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.
 
    
    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.
 
    
    A loan for approximately $4.5 million to a commercial real estate developer for the
development of a shopping center. The center has a long-term lease in place with a grocery
store. The owner is actively marketing the center to get the vacant space leased.
 
    
    Loans totaling approximately $3.2 million to build out a day spa in Missouri. The spa was
paying as agreed until recently. The borrower continues to keep interest payments current and
is working on a plan to turn around or liquidate the assets.
 
    
    A loan for approximately $1.1 million of a 30,000 sq. ft. office warehouse in St. Charles,
Missouri. The warehouse is partially occupied by the owner. The loan is secured by the
building and assignment of rents. The Company has retained counsel to seek payment in full.
 30




---



##### 




    
    A loan for approximately $2.9 million for the purchase of a 35,500 sq. ft. retail strip
center. The center has experienced high vacancy and slow leasing. Outside counsel has been
engaged for collection.
 
    
    A loan for approximately $1 million to a golf course in Florida. The course contains 342
acres with a clubhouse, swimming pool, fitness center, and other amenities. The slow economy
in Florida has caused the borrower to have less than expected bookings for tee times and a
drop in membership. This is a Small Business Administration loan and the Bank is working with
the SBA on liquidation of assets and legal action.
 
    
    A loan for approximately $7 million to a commercial real estate developer for the
construction of medical office buildings in Arizona. The loan is secured by 10 acres. The
borrower had a successful background in commercial real estate development and a strong
financial background. The development has been struggling with the recent economic conditions.
The Company has engaged counsel to seek payment in full.
 
    
    A loan for approximately $2.2 million for a 64,000 sq. ft. industrial warehouse is used as
a sports complex. The owner operates indoor soccer and inline hockey throughout the year. The
Company is pursuing various collection opportunities.
 
    
    A refinance of approximately $11.7 million on a 61,000 sq. ft. medical office building that
in St. Louis County, Missouri. A new professional management company has been put in place to
take over day-to-day operations.
 
    
    A loan for approximately $7.9 million to refinance and provide additional capital to
complete phase II of a land development in St. Charles, Missouri. The development has slowed
significantly and experienced difficult times due to the continuing slow economy, industry and
nature of the transaction.
 
    
    A loan for approximately $1.9 million for the development of eight condominium buildings in
St. Louis County, Missouri. Since originated, one building is under construction. The
development of the land is fully completed. Borrower has experienced difficulties. The
Company is working on a plan to secure the property and prepare the building for the winter
months.
 
    
    A loan for approximately $2.4 million for the purchase of two single tenant warehouse
properties in Plymouth, Minnesota. The tenant has consolidated space and moved out of one
building, leaving it vacant. The borrower is working to sell the vacant building and pay down
the loan.
 
    
    A loan for approximately $2.4 million to refinance a commercial building in St. Louis
County, Missouri. The building was formerly occupied by a national chain but they have
vacated. The borrower and investor are currently working on transforming the property into a
sports complex.
 
    
    A loan for approximately $8.7 million to refinance a commercial office property located in
Phoenix, Arizona. The building has experienced vacancies. Borrower is developing a plan to
increase occupancy and bring the loan current.
 
    
    A loan for approximately $2.8 million to finance the purchase of a retail center in
OFallon, Missouri. The center is currently experiencing high vacancy in an overdeveloped
area. The borrower is continuing to make monthly interest payments and is seeking capital
from investors to pay down the loan and fund the payment of real estate taxes.
 31




---



##### 



Balance at December 31, 2009
    
    $
    29,085,943Foreclosures
    
    
    14,767,037Cash proceeds from sales
    
    
    (4,618,910
    )Loans made to facilitate sales of other real estate
    
    
    (371,251
    )Losses and writedowns
    
    
    (2,863,068
    )Balance at September 30, 2010
    
    $
    35,999,751
      
    
    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.
    32




---



##### 



Nine-Month PeriodsEnded September 30,2010
    
    
    2009Average loans outstanding
    
    $
    1,088,718,081
    
    
    $
    1,226,372,271Reserve at beginning of year
    
    $
    32,221,569
    
    
    $
    14,305,822Provision for possible loan losses
    
    
    34,523,000
    
    
    
    27,700,00066,744,569
    
    
    
    42,005,822Charge-offs:Commercial loans:Real estate
    
    
    (9,799,087
    )
    
    
    (7,611,361
    )Other
    
    
    (318,596
    )
    
    
    (589,985
    )Real estate:Construction, land development and other land loans
    
    
    (16,602,003
    )
    
    
    (7,294,721
    )Residential
    
    
    (1,056,871
    )
    
    
    (1,602,409
    )Consumer
    
    
    (21,143
    )
    
    
    (30,344
    )Overdrafts
    
    
    
    
    
    
    (515
    )Total charge-offs
    
    
    (27,797,700
    )
    
    
    (17,129,335
    )Recoveries:Commercial loans:Real estate
    
    
    83,968
    
    
    
    865,106Other
    
    
    159,321
    
    
    
    3,823Real estate:Construction
    
    
    26,029
    
    
    
    360,700Residential
    
    
    38,247
    
    
    
    145,514Consumer
    
    
    8,574
    
    
    
    18,176Overdrafts
    
    
    
    
    
    
    Total recoveries
    
    
    316,139
    
    
    
    1,393,319Reserve at end of period
    
    $
    39,263,008
    
    
    $
    26,269,806Net charge-offs to average loans (annualized)
    
    
    3.37
    %
    
    
    1.72
    %Ending reserve to net outstanding loans at end of period
    
    
    3.87
    %
    
    
    2.20
    %
   33




---



##### 



34




---



##### 




    
    Changes in lending policies and procedures, including changes in underwriting standards and
collection, charge-off, and recovery practices not considered elsewhere in estimating credit
losses.
    
    Changes in international, national, regional, and local economic and business conditions and
developments that affect the collectibility of the portfolio, including the condition of
various market segments.
    
    Changes in the nature and volume of the portfolio and in the terms of loans.
    
    Changes in the experience, ability, and depth of lending management and other relevant staff.
    
    Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the
volume and severity of adversely classified or graded loans.
    
    Changes in the quality of the Banks loan review systems.
    
    Changes in the value of underlying collateral for collateral-dependent loans.
    
    The existence and effect of any concentrations of credit, and changes in the level of such
concentrations.
    
    The effect of other external factors such as competition and legal and regulatory
requirements on the level of estimated credit losses in the Banks existing portfolios.
  Specifically identifiable exposure on impaired loans:
 Loan Type
    
    # of credits
    
    
    Loan balance
    
    
    ExposureReal estate construction
    
    
    27
    
    
    $
    33,643
    
    
    $
    5,663Residential real estate
    
    
    15
    
    
    
    2,980
    
    
    
    621Commercial real estate
    
    
    50
    
    
    
    122,784
    
    
    
    13,298Commercial and industrial
    
    
    11
    
    
    
    1,367
    
    
    
    462Consumer
    
    
    2
    
    
    
    26
    
    
    
    9$
    160,800
    
    
    $
    20,053
 General reserve for non-impaired credits:
 Historical
    
    
    Adjustedcharge-off
    
    
    charge-off
    
    
    Non-impaired
    
    
    CalculatedLoan Type
    
    percentage
    
    
    percentage
    
    
    loan balance
    
    
    reserveReal estate construction
    
    
    6.41
    %
    
    
    8.29
    %
    
    $
    79,292
    
    
    $
    6,574Residential real estate
    
    
    1.27
    %
    
    
    2.28
    %
    
    
    72,317
    
    
    
    1,650Commercial real estate
    
    
    1.35
    %
    
    
    1.59
    %
    
    
    629,444
    
    
    
    9,983Commercial and industrial
    
    
    0.33
    %
    
    
    1.30
    %
    
    
    70,402
    
    
    
    913Consumer
    
    
    1.15
    %
    
    
    2.98
    %
    
    
    3,017
    
    
    
    90$
    854,472
    
    
    
    19,210Total reserve calculated
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    39,263
   35




---



##### 



Real Estate Loan Balances as a Percentageof Total Regulatory Capital9/30/2009
    
    12/31/2009
    
    9/30/2010Construction, land development and other
other land loans
    
    
    103
    %
    
    
    112
    %
    
    
    92
    %Nonfarm nonresidential:Owner occupied
    
    
    66
    %
    
    
    112
    %
    
    
    144
    %Non-owner occupied
    
    
    310
    %
    
    
    340
    %
    
    
    368
    %1-4 family closed end loans
    
    
    37
    %
    
    
    40
    %
    
    
    46
    %Multi-family
    
    
    71
    %
    
    
    86
    %
    
    
    97
    %Other
    
    
    17
    %
    
    
    22
    %
    
    
    19
    %
  Liquidity and Capital Resources
     36




---



##### 



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
    
    $
    122,810
    
    
    
    10.76
    %
    
    $
    91,306
    
    
    
    38.0
    %
    
    $
    N/A
    
    
    
    N/AReliance Bank
    
    
    108,691
    
    
    
    10.03
    %
    
    
    86,721
    
    
    
    38.0
    %
    
    
    108,401
    
    
    
    310.0
    %Reliance Bank, FSB
    
    
    8,751
    
    
    
    15.07
    %
    
    
    4,645
    
    
    
    38.0
    %
    
    
    5,807
    
    
    
    310.0
    %Tier 1 capital (to risk-weighted
assets):Consolidated
    
    $
    107,700
    
    
    
    9.44
    %
    
    $
    45,653
    
    
    
    34.0
    %
    
    $
    N/A
    
    
    
    N/AReliance Bank
    
    
    94,899
    
    
    
    8.75
    %
    
    
    43,360
    
    
    
    34.0
    %
    
    
    65,040
    
    
    
    36.0
    %Reliance Bank, FSB
    
    
    7,995
    
    
    
    13.77
    %
    
    
    2,323
    
    
    
    34.0
    %
    
    
    3,484
    
    
    
    36.0
    %Tier 1 capital (to average assets):Consolidated
    
    $
    107,700
    
    
    
    7.92
    %
    
    $
    54,386
    
    
    
    34.0
    %
    
    $
    N/A
    
    
    
    N/AReliance Bank
    
    
    94,899
    
    
    
    7.42
    %
    
    
    51,137
    
    
    
    34.0
    %
    
    
    63,921
    
    
    
    35.0
    %Reliance Bank, FSB
    
    
    7,995
    
    
    
    9.89
    %
    
    
    3,234
    
    
    
    34.0
    %
    
    
    4,043
    
    
    
    35.0
    %
  Total
    
    Tier 1
    
    Tier 1Risk-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.  37




---



##### 



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
    
    $
    7,390,918
    
    
    
    722,723
    
    
    
    2,052,843
    
    
    
    4,615,352Time deposits
    
    
    463,329,177
    
    
    
    316,686,288
    
    
    
    134,700,413
    
    
    
    11,942,476Federal Home Loan Bank
borrowings
    
    
    93,000,000
    
    
    
    1,000,000
    
    
    
    25,000,000
    
    
    
    67,000,000Commitments to extend credit
    
    
    133,076,427
    
    
    
    68,771,472
    
    
    
    27,162,114
    
    
    
    37,142,841Standby letters of credit
    
    
    13,111,997
    
    
    
    12,428,448
    
    
    
    683,549
    
    
    
    
 Impact of New and Not Yet Adopted Accounting Pronouncements
  
 Part I  Item 3  Quantitative and Qualitative Disclosures About Market Risk
   Remaining Maturity if Fixed Rate;Earliest Possible Repricing Interval if Floating RateOver 3 months
    
    
    Over 1 year3 months
    
    
    through
    
    
    through
    
    
    Overless
    
    
    12 months
    
    
    5 years
    
    
    5 years
    
    
    TotalInterest-earning assets:Loans
    
    $
    426,774,214
    
    
    
    150,980,608
    
    
    
    405,918,855
    
    
    
    31,598,673
    
    
    
    1,015,272,350Investment securities, at amortized cost
    
    
    65,636,825
    
    
    
    56,938,332
    
    
    
    82,280,042
    
    
    
    6,343,097
    
    
    
    211,198,296Other interest-earnings assets
    
    
    4,157,482
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,157,482Total interest-earning assets
    
    $
    496,568,521
    
    
    
    207,918,940
    
    
    
    488,198,897
    
    
    
    37,941,770
    
    
    
    1,230,628,128Interest-bearing liabilities:Savings and interest-bearing transaction accounts
    
    $
    539,510,503
    
    
    
    45,864
    
    
    
    
    
    
    
    
    
    
    
    539,556,367Time certificates of deposit of $100,000 or more
    
    
    51,431,227
    
    
    
    80,143,889
    
    
    
    44,825,038
    
    
    
    5,416,705
    
    
    
    181,816,859All other time deposits
    
    
    47,719,560
    
    
    
    137,391,612
    
    
    
    89,875,375
    
    
    
    6,525,771
    
    
    
    281,512,318Nondeposit interest-bearing liabilities
    
    
    20,466,362
    
    
    
    2,406,108
    
    
    
    27,000,000
    
    
    
    67,000,000
    
    
    
    116,872,470Total interest-bearing liabilities
    
    $
    659,127,652
    
    
    
    219,987,473
    
    
    
    161,700,413
    
    
    
    78,942,476
    
    
    
    1,119,758,014Gap by period
    
    $
    (162,559,131
    )
    
    
    (12,068,533
    )
    
    
    326,498,484
    
    
    
    (41,000,706
    )
    
    
    110,870,114Cumulative gap
    
    $
    (162,559,131
    )
    
    
    (174,627,664
    )
    
    
    151,870,820
    
    
    
    110,870,114
    
    
    
    110,870,114Ratio of interest-sensitive assets to interest-
sensitive liabilities
    
    
    0.75
    x
    
    
    0.95
    x
    
    
    3.02
    x
    
    
    0.48
    x
    
    
    1.10
    xCumulative ratio of interest-sensitive assets to
interest-sensitive liabilities
    
    
    0.75
    x
    
    
    0.80
    x
    
    
    1.15
    x
    
    
    1.10
    x
    
    
    1.10
    x
 38




---



##### 



Part I  Item 4  Controls and Procedures
     
 PART II  OTHER INFORMATION
 
 Part II  Item 1  Legal Proceedings
  
 Part II  Item 1A  Risk Factors
 Financial reforms and related regulations may affect our business activities, financial position and profitability.
   39




---



##### 



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
 (a)
    
    None.(b)
    
    There have been no material changes to the procedures by which security holders may recommend
nominees to the Companys Board of Directors implemented during the period covered by this
Quarterly Report on Form 10-Q.
 
 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 2002.32.1
    
    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.
 40




---



##### 



SIGNATURES
  RELIANCE BANCSHARES, INC.By:
    /s/ Allan D. Ivie, IVAllan D. Ivie, IVChief Executive OfficerBy:
    /s/ Dale E. OberkfellDale E. OberkfellChief Financial Officer  41