More Bad News for Dave Spence’s Bailed Out Bank: Reliance Bank Posts Another $34 Million Loss Last Year, Still Not Repaying Its $40 Million Bailout

Jefferson City, Mo. Just over one year since it announced it would stop repaying its $40 million bank bailout, Dave Spence’s former bank announced Friday it is still losing money to the tune of $34 million last year, as opposed to losses of $48.5 million during the previous year, when Spence still served on the board of directors. Spence still refuses to come clean about his role in the bank’s decision to stop paying back its $40 million bailout, how much he benefited from the bailout personally or the circumstances around his decision to leave the bank.

Missourians are still waiting for Dave Spence to explain how much he personally benefitted from his bank’s $40 million bailout and why, three years later, the bank still refuses to repay the taxpayers, said Caitlin Legacki, Missouri Democratic Party spokeswoman. For nearly six years, Spence helped drive Reliance Bank into the ground with reckless loans and bad investments, making it one of St. Louis' worst-performing banks.  Now that Spence is running for office, he may want to pretend that this bank doesn't exist  but Missourians have 40 million reasons to demand some answers.

According to the St. Louis Business Journal report Friday, Reliance Bancshares lost $34 million for full-year 2011, compared with the $48.5 million the company lost in 2010.

During Spence's time with Reliance Bancshares, federal banking regulators repeatedly admonished the bank and its subsidiaries for making bad loans and engaging in risky business practices.

Oversight of risk management was central to the role of David Spence and the rest of the Reliance Bancshares board. These board members were responsible for overseeing the Company's risk management processes, including those relating to lending, litigation and compliance risk.

BACKGROUND

“Aggressive” Expansion.  Shortly after Spence joined its Board of Directors, the St. Louis Post Dispatch reported that one of the most aggressive local banks is Reliance Bank of Des Peres Reliance also has been on a branch-building tear. Since 1999, the bank has added nine branches and expects to add three or four more this year. [St. Louis Post Dispatch, 6/3/05]

Risky Investments.  Despite the sinking state of the economy in early 2008, Reliance continued to expand [by adding bank branches] in both St. Louis and Florida. The attraction of Houston and Phoenix is faster growth, similar to southwest Florida, Reliance chairman and CEO said in late 2007. St. Louis is the market I've been in for 40 years and know best, but it is not growing like Fort Myers, Houston or Phoenix, he said.  This faster growth turned out to be a huge real estate bubble. [St. Louis Business Journal, 3/17/08; 11/5/07]

Crack Downs By Federal Regulators. In 2009 and 2010, “Reliance Bank and Fort Myers, Fla.-based Reliance Bank FSB entered into enforcement agreements with state and federal regulators.” For example, the FDIC and the Missouri Division of Finance demanded that Reliance cease making or extending any loans which might violate the Bank's written loan policy and reduce the level of risk. [Reliance Bancshares, DEF 14A, 2011; SNL Bank Weekly Southern Edition, 04/12/10]

•  Four Years of Losses. Reliance lost $319,000 in 2008, $29 million in 2009, $48.5 million in 2010, and $34 million in 2011. [St. Louis Post-Dispatch, 4/23/09, 08/10/11; St. Louis Business Journal, 2/17/12]
•  Highest Losses of Any St. Louis Bank in Q1 2011. Of the 10 largest locally chartered banks” in the St. Louis area, “only two posted a loss for the first nine months of 2011.  One of them was Reliance Bank.  In the first quarter of 2011, Spence’s last quarter on the board, the bank had “the highest loss of any St. Louis-chartered bank, at least partly due to struggles with high default rates in its commercial real estate loan portfolio. [St. Louis Post Dispatch, 5/13/11]

“Severe Financial Distress.” Reliance Bank, in March 2011, was in severe financial distress. It exhibited “significantly higher stress than the industry average, due to a negative net income earnings profile, lending default rates that are higher than industry average, [and] lower capital adequacy versus the industry. As a result, the bank received an F rating from Institutional Risk Analytics. [St. Louis Business Journal, 4/15/11; IRA Bank Rate, 5/26/11]

Risk Management Was Central to Role of Spence And Board Members. Oversight of risk management [was] central to the role of David Spence and the rest of the Reliance Bancshares board. These board members were responsible for overseeing the Company's risk management processes, including those relating to lending, litigation and compliance risk.[Reliance Bancshares, DEF 14A, 2011; Reliance Bancshares, SEC form 10-K, 3/30/11]. Courtesy of Missouri Democreats

Our addition:

Doesn't Home Economist Dave Spence look ritzy in a chef's white hat?

Millionaire Home Economist Dave Spence Don't Worry Be Happy (click this link)

(If even you are trailing Nixon by 20%, Leno has made you a national joke, and you don't know how to explain Reliance Bank debacle you've an $8,000,000 palace with a golf course and you are worth $265,000,000). But the skeletons that were hidden in your closet were flushed out! We told you on this blog when you announced your candidacy for Missouri Governor, that be prepared for the rough and tumble of politics. You are not a politician for Heaven's Sake, you are a good old Home Economist. get out of politics and start day care centers, fitness centers etc. You will make many more millions just like the plastic company you sold to the Wall Street sharks.


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