SOURCE: Royal Bancshares of Pennsylvania, Inc.

Royal Bancshares of Pennsylvania, Inc.

July 20, 2016 16:15 ET

Royal Bancshares of Pennsylvania, Inc. Reports Profit for Second Quarter 2016

Quality Core Business and Margin Growth Boost Earnings

BALA CYNWYD, PA--(Marketwired - July 20, 2016) - Royal Bancshares of Pennsylvania, Inc. ("Company") (NASDAQ: RBPAA), parent company of Royal Bank America ("Royal Bank"), is pleased to report net income attributable to the Company of $2.0 million, or $0.06 per diluted share, and $4.2 million, or $0.12 per diluted share, for the three and six months ended June 30, 2016, respectively. Net income attributable to the Company was $1.5 million, or $0.03 per diluted share, and $3.1 million, or $0.07 per diluted share, for the three and six months ended June 30, 2015, respectively.

The Company's President and Chief Executive Officer, Kevin Tylus, noted, "Consistent quality loan and deposit growth drove our increase in the second quarter and 2016 year to date earnings. Our financial performance is based on lending and customer strategies focused within our local communities. We are successfully managing our balance sheet growth while faced with the challenges of low interest rates, local competition, and volatility in domestic and global markets. We continue to meet our commitment of providing a wide range of consumer and commercial products as we recently added first position residential mortgages through a new arrangement with a local mortgage company experienced in providing and servicing residential mortgages for community banks."

Highlights for the three and six months ended June 30, 2016 included:

Balance Sheet Trends:

  • Total assets were $816.5 million at June 30, 2016, an increase of $17.9 million, or 2.2%, from $798.5 million at March 31, 2016, and grew $28.2 million, or 3.6%, from $788.3 million at December 31, 2015.
  • Total loans were $547.1 million at June 30, 2016, an increase of $15.9 million, or 3.0%, from $531.1 million at March 31, 2016, and grew $48.0 million, or 9.6%, from $499.1 million at December 31, 2015. Increases were recognized in multiple commercial loan portfolio classes and the leasing portfolio.
  • Total deposits were $599.2 million at June 30, 2016, an increase of $9.9 million, or 1.7%, from $589.3 million at March 31, 2016, and grew $21.4 million, or 3.7%, from $577.9 million at December 31, 2015.

Asset Quality:

  • The ratio of non-performing loans to total loans continues to show improvement and was 0.88%, 0.98%, and 1.10% at June 30, 2016, March 31, 2016, and December 31, 2015, respectfully. Excluding tax liens, the ratio of non-performing loans to total loans was 0.68%, 0.80% and 0.88% at June 30, 2016, March 31, 2016, and December 31, 2015, respectively.
  • Non-performing loans of $4.8 million at June 30, 2016 decreased $422 thousand, or 8.1%, from $5.2 million at March 31, 2016, and decreased $691 thousand, or 12.6%, from $5.5 million at December 31, 2015.
  • The ratio of non-performing assets to total assets was 1.47%, 1.54%, and 1.64% at June 30, 2016, March 31, 2016, and December 31, 2015, respectively. Excluding tax lien assets, the ratio of non-performing assets to total assets was 0.49%, 0.56%, and 0.59% at June 30, 2016, March 31, 2016, and December 31, 2015, respectively.
  • Non-performing assets of $12.0 million at June 30, 2016, decreased $310 thousand, or 2.5%, from $12.3 million at March 31, 2016, and decreased $918 thousand, or 7.1%, from $12.9 million at December 31, 2015.
  • For the three and six months ended June 30, 2016, the Company recorded a provision to the allowance for loan and lease losses of $197 thousand and $409 thousand, respectively, compared to credits of $586 thousand and $1.2 million for same periods in 2015, respectively. The 2016 provision was primarily attributable to growth, specific reserves on the tax lien and leasing portfolios, and net charge-off activity within the leasing portfolio.

Income Statement and Other Highlights:

  • The return on average assets for the three and six months ended June 30, 2016 increased to 1.02% and 1.06%, respectively, compared to 0.81% and 0.85% for the three and six months ended June 30, 2015, respectively.
  • The return on average equity for the three and six months ended June 30, 2016 grew to 11.54% and 11.77%, respectively, compared to 9.03% and 9.56% for the three and six months ended June 30, 2015.
  • At June 30, 2016, the Company's Tier 1 leverage and Total Risk Based Capital ratios were 11.70% and 17.39%, respectively, compared to 12.44% and 18.57%, respectively, at December 31, 2015. The Common Equity Tier 1 ratio was 9.28% at June 30, 2016 compared to 9.37% at December 31, 2015.
  • Net interest income increased $937 thousand, or 17.1%, from $5.5 million for the three months ended June 30, 2015 to $6.4 million for the three months ended June 30, 2016. Net interest income increased $1.7 million, or 15.4%, from $11.2 million for the six months ended June 30, 2015 to $12.9 million for the six months ended June 30, 2016. The growth in net interest income was primarily related to an increase in interest income on loans and the average yield earned on average interest-earning assets.
  • The net interest margin grew to 3.41% for the second quarter of 2016 compared to 3.26% for the second quarter in 2015 and was 3.46% for the six months ended June 30, 2016 compared to 3.33% for the six months ended June 30, 2015. The increase in net interest margin was directly related to an increase in the yield on average interest-earning assets due to a significant change in the composition of such assets.
  • Non-interest income for the second quarter of 2016 was $1.1 million and increased $156 thousand from $917 thousand for the second quarter of 2015. The quarterly improvement in non-interest income was impacted by a $350 thousand increase in net gains on the sale of investment securities and was partially offset by total other-than-temporary impairment ("OTTI") charges on investment securities of $146 thousand.
  • Non-interest income was $2.3 million for the six months ended June 30, 2016 and grew $796 thousand from $1.5 million for the six months ended June 30, 2015. Net gains on the sale of investment securities and income from Company owned life insurance increased $530 thousand and $407 thousand, respectively, from 2015. Partially offsetting these positive items was a $146 thousand OTTI charge. There was no OTTI charge in the 2015 period.
  • Non-interest expense was $5.0 million for the quarter ended June 30, 2016 and declined $325 thousand from $5.4 million for the comparable period in 2015. Contributing to the decrease in non-interest expense for the second quarter of 2016 was a $244 decline in the provision for unfunded loan commitments due to a decline in the historical loss rates applied in the calculation of the reserve for unfunded loan commitments. Additionally, net other real estate owned ("OREO") expenses and occupancy and equipment expenses declined $72 thousand and $56 thousand, respectively. Partially offsetting the decrease in non-interest expense was a planned increase of $49 thousand in salaries and benefits during the second quarter of 2016.
  • Non-interest expense was $10.3 million for the six months ended June 30, 2016 and decreased $199 thousand from $10.5 million for the comparable period in 2015. Contributing to the decrease in non-interest expense for 2016 was a $521 thousand decline in the provision for unfunded loan commitments for the reason mentioned previously and a decrease of $88 thousand in occupancy and equipment expenses. Partially offsetting the decrease in non-interest expense was a planned increase of $156 thousand in salaries and benefits. Additionally, net OREO expenses and communications and data processing expenses increased $105 thousand and $98 thousand.

About Royal Bancshares of Pennsylvania, Inc.

Royal Bancshares of Pennsylvania, Inc., headquartered in Bala Cynwyd, Pennsylvania, is the parent company of Royal Bank America, which is headquartered in Narberth, Pennsylvania. Royal Bank serves growing small and middle market businesses, commercial real estate investors, consumers, and depositors principally in Montgomery, Delaware, Chester, Bucks, Philadelphia and Berks counties in Pennsylvania, central and southern New Jersey, and Delaware. Established in 1963, Royal Bank provides an array of financial products and services through a comprehensive suite of cash management services and thirteen branches and two loan production offices. More information on Royal Bancshares of Pennsylvania, Inc., Royal Bank America, and its subsidiaries can be found at www.royalbankamerica.com.

Forward-Looking Statements

The foregoing material may contain forward-looking statements. We caution that such statements may be subject to a number of uncertainties, and actual results could differ materially; therefore, readers should not place undue reliance on any forward-looking statements. Royal Bancshares of Pennsylvania, Inc. does not undertake, and specifically disclaims, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. For a discussion of the factors that could cause actual results to differ from the results discussed in any such forward-looking statements, see the filings made by Royal Bancshares of Pennsylvania, Inc. with the Securities and Exchange Commission, including its Annual Report - Form 10-K for the year ended December 31, 2015.

 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited, dollars in thousands, except per share data)
  For the three months ended June 30,   For the six months ended June 30,  
   2016  2015   2016  2015  
Interest income  $8,181  $7,071   $16,395  $14,351  
Interest expense   1,764   1,591    3,487   3,162  
Net Interest Income   6,417   5,480    12,908   11,189  
Provision (credit) for loan and lease losses   197   (586 )  409   (1,166 )
Net interest income after provision (credit) for loan and lease losses   6,220   6,066    12,499   12,355  
Non-interest income   1,073   917    2,280   1,484  
Non-interest expense   5,046   5,371    10,267   10,466  
Income before taxes   2,247   1,612    4,512   3,373  
Income tax expense   60   -    60   -  
Net Income   2,187   1,612    4,452   3,373  
Less net income attributable to noncontrolling interest   153   151    229   321  
Net Income Attributable to Royal Bancshares  $2,034  $1,461   $4,223  $3,052  
 Less Preferred stock Series A accumulated dividend and accretion  $338  $429   $672  $853  
Net income to common shareholders  $1,696  $1,032   $3,551  $2,199  
Income Per Common Share - Basic and Diluted  $0.06  $0.03   $0.12  $0.07  
                
 
SELECTED PERFORMANCE RATIOS:
  For the three months
ended June 30,
  For the six months
ended June 30,
 
   2016   2015   2016   2015  
Return on Average Assets   1.02 %  0.81 %  1.06 %  0.85 %
Return on Average Equity   11.54 %  9.03 %  11.77 %  9.56 %
Average Equity to Average Assets   8.82 %  9.00 %  9.05 %  8.89 %
Book Value Per Share  $1.91   $1.53   $1.91   $1.53  
            
            
   At June 30,   At December 31,  
Capital ratios (US GAAP):  2016   2015  
Company Tier 1 Leverage   11.70 %       12.44 %
Company Total Risk Based Capital   17.39 %       18.57 %
Company Common Equity Tier 1   9.28 %       9.37 %
                      
 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
   At June 30, 2016   At December 31, 2015  
Cash and cash equivalents  $26,603   $25,420  
Investment securities, at fair value   204,058    224,067  
Other investment, at cost   2,250    2,250  
Federal Home Loan Bank stock   2,778    2,545  
Loans and leases           
 Commercial real estate and multi-family   260,786    241,928  
 Construction and land development   65,385    47,984  
 Commercial and industrial   97,270    85,980  
 Residential real estate   50,104    51,588  
 Leases   66,898    64,341  
 Tax certificates   4,390    4,755  
 Consumer   2,254    2,527  
Loans and leases   547,087    499,103  
Allowance for loan and lease losses   (10,008 )  (9,689 )
Loans and leases, net   537,079    489,414  
Bank owned life insurance   16,370    16,133  
Premises and equipment, net   4,346    3,959  
Other real estate owned, net   7,208    7,435  
Accrued interest receivable   4,065    4,149  
Other assets   11,695    12,911  
  Total Assets  $816,452   $788,283  
            
Deposits  $599,244   $577,892  
Borrowings   95,744    90,970  
Other liabilities   22,743    21,349  
Subordinated debentures   25,774    25,774  
Royal Bancshares shareholders' equity   72,427    71,904  
Noncontrolling interest   520    394  
  Total Equity   72,947    72,298  
  Total Liabilities and Equity  $816,452   $788,283  
            
 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
NET INTEREST INCOME AND MARGIN
(Unaudited, in thousands, except percentages)
   For the three months ended June 30, 2016  For the three months ended June 30, 2015
   Average Balance  Interest  Yield  Average Balance  Interest  Yield
Cash and cash equivalents  $15,183  $17  0.45%  $20,278  $8  0.16%
Investment securities   202,857   1,206  2.39%   223,012   1,340  2.41%
Loans   537,862   6,958  5.20%   431,957   5,723  5.31%
Total interest-earning assets   755,902   8,181  4.35%   675,247   7,071  4.20%
Non-interest earning assets   47,463          46,056       
Total average assets  $803,365         $721,303       
Interest-bearing deposits                      
 NOW and money markets  $226,286  $204  0.36%  $201,292  $168  0.33%
 Savings   72,752   128  0.71%   22,268   10  0.18%
 Certificates of deposit   207,825   735  1.42%   220,376   742  1.35%
Total interest-bearing deposits   506,863   1,067  0.85%   443,936   920  0.83%
Borrowings   116,973   697  2.40%   117,493   671  2.29%
Total interest-bearing liabilities   623,836   1,764  1.14%   561,429   1,591  1.14%
Non-interest bearing deposits   87,212          73,831       
Other liabilities   21,468          21,135       
Shareholders' equity   70,849          64,908       
Total average liabilities and equity  $803,365         $721,303       
  Net interest income      $6,417         $5,480   
  Net interest margin          3.41%          3.26%
                       
 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
NET INTEREST INCOME AND MARGIN
(Unaudited, in thousands, except percentages)
   For the six months ended June 30, 2016  For the six months ended June 30, 2015
   Average Balance  Interest  Yield  Average Balance  Interest  Yield
Cash and cash equivalents  $13,823  $33  0.48%  $16,028  $13  0.16%
Investment securities   210,267   2,540  2.43%   236,253   2,916  2.49%
Loans   525,399   13,822  5.29%   425,826   11,422  5.41%
Total interest-earning assets   749,489   16,395  4.40%   678,107   14,351  4.27%
Non-interest earning assets   48,222          45,971       
Total average assets  $797,711         $724,078       
Interest-bearing deposits                      
 NOW and money markets  $227,228  $409  0.36%  $203,102  $326  0.32%
 Savings   67,334   235  0.70%   20,788   18  0.18%
 Certificates of deposit   207,929   1,463  1.41%   222,552   1,484  1.34%
Total interest-bearing deposits   502,491   2,107  0.84%   446,442   1,828  0.83%
Borrowings   116,243   1,380  2.39%   117,823   1,334  2.28%
Total interest-bearing liabilities   618,734   3,487  1.13%   564,265   3,162  1.13%
Non-interest bearing deposits   84,390          73,413       
Other liabilities   22,413          22,031       
Shareholders' equity   72,174          64,369       
Total average liabilities and equity  $797,711         $724,078       
  Net interest income      $12,908         $11,189   
  Net interest margin          3.46%          3.33%
                       
 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
ASSET QUALITY TRENDS
(Unaudited, in thousands, except percentages)
   At June 30, 2016  At March 31, 2016  At December 31, 2015
             
Non-performing loans  $3,691  $4,185  $4,367
Non-performing tax certificates   1,110   1,038   1,125
Total non-performing loans   4,801   5,223   5,492
             
Other real estate owned-loans   243   243   220
Other real estate owned-tax certificates   6,965   6,853   7,215
Total other real estate owned   7,208   7,096   7,435
Total non-performing assets  $12,009  $12,319  $12,927
             
Ratio of non-performing loans to total loans   0.88%   0.98%   1.10%
Ratio of non-performing assets to total assets   1.47%   1.54%   1.64%
Ratio of allowance for loan and lease losses to total loans   1.83%   1.87%   1.94%
Ratio of allowance for loan and lease losses to non-performing loans   208.46%   190.33%   176.42%
         

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