Three weeks ago, I posted an article that asked the question, “Is TARP good or bad?” We are being fed a steady diet of information on TARP, including a front page article on the December 23 edition of The Tennessean, and even the auto makers have managed to get a piece of an expanding government pie.

 

TARP or Troubled Asset Relief Program, has taken on many different forms. Some call it “Bailout Money” while others spin it more positively as the “Capital Purchase Program”. No matter how you slice it, when it’s all said and done, it is still the same dish: federal money designated to help those financial institutions who need assistance with additional capital in order to lend money to consumers and businesses. 

 

Many banks have decided that TARP is good, that it helps those banks that need the assistance get back on track, but just as importantly, many have said “No thanks!” After careful consideration, Reliant Bank’s Board of Directors decided that we would not participate in the program. The decision was based on three key factors. First, Reliant completed a successful secondary stock offering earlier this year which resulted in over $11 million in new capital. Second, 400,000 warrants, or options, were issued to our shareholders when the bank was organized. The warrants expire in January, 2009 and we anticipate that we will raise over $3.0 million from the exercise of those warrants. Finally, we do not believe it is in the best interest of our shareholders to issue preferred stock to the U.S. Treasury which would be preferential to all other stock classes in dividends and liquidation.

 

Some have suggested that banks that choose not to participate in TARP could receive negative publicity. We at Reliant are taking the opposite position. We believe that our decision not to participate sends the message that our capital position is strong, our loan quality is good, and that we have the resources to continue to meet the credit needs of our Middle Tennessee customers. 

 

So thanks, but no thanks, to TARP, Bailout Money and the Capital Purchase Program. This is one bank that isn’t taking a piece of the pie. I welcome your comments, opinions and questions.