SOURCE: Royal Bancshares of Pennsylvania, Inc.

Royal Bancshares of Pennsylvania, Inc.

July 21, 2015 16:30 ET

Royal Bancshares of Pennsylvania, Inc. Reports Second Quarter Profit

Commercial Loan and Customer Growth Produce Results Ahead of Last Year; Retail Strategy Boosted by Branch Acquisition Announcement

BALA CYNWYD, PA--(Marketwired - Jul 21, 2015) - 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 $1.5 million, or $.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, compared to net income of $1.4 million, or $.04 per diluted share, and $2.9 million, or $0.10 per diluted share, for the three and six months ended June 30, 2014, respectively. Diluted earnings per share for 2015 were impacted by the increase in average common shares outstanding as a result of the private placement and shareholders' rights offering which closed in the third quarter of 2014.

Kevin Tylus, the Company's President and Chief Executive Officer, noted, "Loan and customer growth, coupled with the continuing trend in improved credit quality, positively contributed to second quarter and 2015 year to date earnings. Portfolio growth from our leasing subsidiary also added to earnings. Our multi-faceted retail plan to attract and retain consumer deposits continued with the relocation from Jenkintown to the bustling new Willow Grove branch site. And upon regulatory approval of our entry into contiguous Delaware County, PA, the acquisition of our new branch in the county seat of Media will add approximately $38 million, or 7%, to our deposit base and $10 million, or 2%, in commercial loans."

The Company continues its focus on modernizing the ways customers can access its products and services. A new custom branded "smart phone" application is now available and provides a simpler on-line banking experience, while on-line loan applications are increasing. The suite of cash management products, together with improved physical locations and the Princeton, NJ loan production office, are helping to drive the growth within the Company's attractive geography. 

Highlights for the three and six months ended June 30, 2015 included:

  • Total loans were $447.6 million at June 30, 2015, an increase of $29.0 million, or 6.9%, from $418.7 million at March 31, 2015, and an increase of $32.5 million, or 7.8%, from $415.1 million at December 31, 2014. The majority of the increase was in the commercial real estate portfolio which grew $25.6 million, or 11.1%, from $230.5 million at March 31, 2015 to $256.1 million at June 30, 2015.
  • Non-performing loans of $5.4 million at June 30, 2015 decreased $3.0 million, or 35.5%, from $8.4 million at March 31, 2015 and decreased $4.4 million, or 45.1% from $9.8 million at December 31, 2014. The ratio of non-performing loans to total loans was 1.20%, 1.99%, and 2.36% at June 30, 2015, March 31, 2015, and December 31, 2014, respectively. Excluding tax liens, the ratio of non-performing loans to total loans was 0.99%, 1.82%, and 1.99% at June 30, 2015, March 31, 2015 and December 31, 2014, respectively.
  • Non-performing assets of $15.9 million at June 30, 2015 decreased $3.0 million, or 15.8%, from $18.9 million at March 31, 2015 and decreased $3.7 million, or 18.8%, from December 31, 2014. The ratio of non-performing assets to total assets was 2.19%, 2.61%, and 2.67% at June 30, 2015, March 31, 2015, and December 31, 2014, respectively. Excluding tax liens, the ratio of nonperforming assets to total assets was 0.67%, 1.11%, and 1.19% at June 30, 2015, March 31, 2015, and December 31, 2014, respectively. The purposeful downsizing of the tax lien business, which is not core to Royal Bank's strategy, has seen a favorable reduction from a high of over $100 million in tax lien assets in 2009 to less than $18.0 million in assets at June 30, 2015.
  • The return on average assets for the three and six months ended June 30, 2015 was 0.81% and 0.85%, respectively, compared to 0.75% and 0.79% for the three and six months ended June 30, 2014.
  • The return on average equity for the three and six months ended June 30, 2015 was 9.03% and 9.56%, respectively, compared to 10.35% and 11.13% for the three and six months ended June 30, 2014. The return on average equity was impacted by the increase in average common equity as a result of the private placement and shareholders' rights offering which closed in the third quarter of 2014.
  • At June 30, 2015, the Company's Tier 1 leverage and Total Risk Based Capital ratios were 12.5% and 18.8%, respectively, compared to 11.9% and 19.2%, respectively, at December 31, 2014. The Common Equity Tier 1 ratio was 9.2% at June 30, 2015.
  • Net interest income increased $76,000, or 0.7%, from $11.1 million for the six months ended June 30, 2014 to $11.2 million for the six months ended June 30, 2015, but declined $107,000, or 1.9%, from $5.6 million for the three months ended June 30, 2014 to $5.5 million for the three months ended June 30, 2015. The decrease in the quarterly net interest income was related to a decline in the average yields earned on average investment securities and average loans, which was partially offset by an increase in the average loan balances.
  • The net interest margin was 3.26% for the second quarter of 2015 compared to 3.25% for the comparable period in 2014 and was 3.33% for the six months ended June 30, 2015 compared to 3.24% for the six months ended June 30, 2014. The six month increase of 9 basis points was directly related to an increase in the yield on average interest-earning assets.
  • Non-interest income for the quarter ended June 30, 2015 was $1.3 million and increased $467,000, or 57.2%, from $816,000 for the quarter ended June 30, 2014. Non-interest income for the six months ended June 30, 2015 was $2.1 million and increased $542,000, or 34.1%, from $1.6 million for the six months ended June 30, 2014. The increases for the three and six month periods ended June 30, 2015 were related to increases of $293,000 and $480,000, respectively, in net gains on the sale of investment securities. During 2015, the Company sold investment securities to fund the loan growth.
  • Non-interest expense for the quarter ended June 30, 2015 was $5.7 million and increased $706,000, or 14.0%, from $5.0 million for the quarter ended June 30, 2014. Non-interest expense for the six months ended June 30, 2015 was $11.1 million and increased $759,000, or 7.3%, from $10.4 million for the six months ended June 30, 2014. The increases for the three and six month periods ended June 30, 2015 were related to increases of $138,000 and $369,000, respectively, in employee salaries and benefits and increases of $311,000 and $359,000, respectively, in the provision for unfunded loan commitments due to the growth in such commitments. 

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, 2014.

 
 
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,
 
 
    2015     2014     2015     2014  
Interest income   $ 7,071     $ 7,209     $ 14,351     $ 14,360  
Interest expense     1,591       1,622       3,162       3,247  
Net Interest Income     5,480       5,587       11,189       11,113  
Credit for loan and lease losses     (586 )     (75 )     (1,166 )     (714 )
Net interest income after credit for loan and lease losses     6,066       5,662       12,355       11,827  
Non-interest income     1,283       816       2,130       1,588  
Non-interest expense     5,737       5,031       11,112       10,353  
Income before taxes     1,612       1,447       3,373       3,062  
Income tax expense     -       -       -       -  
Net Income     1,612       1,447       3,373       3,062  
Less net income attributable to noncontrolling interest     151       69       321       187  
Net Income Attributable to Royal Bancshares   $ 1,461     $ 1,378     $ 3,052     $ 2,875  
  Less Preferred stock Series A accumulated dividend and accretion   $ 429     $ 829     $ 853     $ 1,493  
Net income to common shareholders   $ 1,032     $ 549     $ 2,199     $ 1,382  
Income Per Common Share - Basic and Diluted   $ 0.03     $ 0.04     $ 0.07     $ 0.10  
                                 
 
 
SELECTED PERFORMANCE RATIOS:
                         
    For the three months
ended June 30,
    For the six months
ended June 30,
 
    2015     2014     2015     2014  
Return on Average Assets     0.81 %     0.75 %     0.85 %     0.79 %
Return on Average Equity     9.03 %     10.35 %     9.56 %     11.13 %
Average Equity to Average Assets     9.00 %     7.22 %     8.89 %     7.07 %
Book Value Per Share   $ 1.53     $ 1.84     $ 1.53     $ 1.84  
                                 
                                 
    At June 30,     At December 31,              
Capital ratios (US GAAP):   2015     2014              
Company Tier 1 Leverage     12.5 %     11.9 %                
Company Total Risk Based Capital     18.8 %     19.2 %                
Company Common Equity Tier 1     9.2 %     NA                  
                                 
 
 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
   
    At June 30, 2015     At December 31, 2014  
Cash and cash equivalents   $ 28,015     $ 30,790  
Investment securities, at fair value     212,022       250,368  
Other investment, at cost     2,250       2,250  
Federal Home Loan Bank stock     2,585       2,622  
Loans and leases                
  Commercial real estate and multi-family     222,311       188,861  
  Construction and land development     33,786       45,662  
  Commercial and industrial     83,825       76,489  
  Residential real estate     42,166       42,992  
  Leases     58,090       51,583  
  Tax certificates     4,804       7,191  
  Consumer     2,665       2,354  
Loans and leases     447,647       415,132  
Allowance for loan and lease losses     (10,036 )     (11,708 )
Loans and leases, net     437,611       403,424  
Bank owned life insurance     15,884       15,636  
Other real estate owned, net     10,531       9,779  
Premises and equipment, net     5,279       5,201  
Accrued interest receivable     4,459       5,270  
Other assets     8,568       7,213  
    Total Assets   $ 727,204     $ 732,553  
                 
Deposits   $ 531,510     $ 530,425  
Borrowings     82,198       92,426  
Other liabilities     22,435       21,322  
Subordinated debentures     25,774       25,774  
Royal Bancshares shareholders' equity     64,869       62,219  
Noncontrolling interest     418       387  
    Total Equity     65,287       62,606  
    Total Liabilities and Equity   $ 727,204     $ 732,553  
                 
 
 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
NET INTEREST INCOME AND MARGIN
(Unaudited, in thousands, except percentages)
                             
    For the three months ended     For the three months ended  
    June 30, 2015     June 30, 2014  
    Average Balance   Interest   Yield     Average Balance   Interest   Yield  
Cash and cash equivalents   $ 20,278   $ 8   0.16 %   $ 8,284   $ 5   0.24 %
Investment securities     223,012     1,340   2.41 %     312,118     1,954   2.51 %
Loans     431,957     5,723   5.31 %     370,116     5,250   5.69 %
Total interest-earning assets     675,247     7,071   4.20 %     690,518     7,209   4.19 %
Non-interest earning assets     46,056                 49,365            
    Total average assets   $ 721,303               $ 739,883            
Interest-bearing deposits                                    
  NOW and money markets   $ 201,292   $ 168   0.33 %   $ 211,381   $ 166   0.31 %
  Savings     22,268     10   0.18 %     18,520     7   0.15 %
  Certificates of deposit     220,376     742   1.35 %     229,906     726   1.27 %
Total interest-bearing deposits     443,936     920   0.83 %     459,807     899   0.78 %
Borrowings     117,493     671   2.29 %     137,441     723   2.11 %
Total interest-bearing liabilities     561,429     1,591   1.14 %     597,248     1,622   1.09 %
Non-interest bearing deposits     73,831                 64,702            
Other liabilities     21,135                 24,517            
Shareholders' equity     64,908                 53,416            
    Total average liabilities and equity   $ 721,303               $ 739,883            
    Net interest income         $ 5,480               $ 5,587      
    Net interest margin               3.26 %               3.25 %
 
 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
NET INTEREST INCOME AND MARGIN
(Unaudited, in thousands, except percentages)
                             
    For the six months ended     For the six months ended  
    June 30, 2015     June 30, 2014  
    Average Balance   Interest   Yield     Average Balance   Interest   Yield  
Cash and cash equivalents   $ 16,028   $ 13   0.16 %   $ 7,344   $ 10   0.27 %
Investment securities     236,253     2,916   2.49 %     315,128     3,876   2.48 %
Loans     425,826     11,422   5.41 %     368,152     10,474   5.74 %
Total interest-earning assets     678,107     14,351   4.27 %     690,624     14,360   4.19 %
Non-interest earning assets     45,971                 46,014            
    Total average assets   $ 724,078               $ 736,638            
Interest-bearing deposits                                    
  NOW and money markets   $ 203,102   $ 326   0.32 %   $ 210,810   $ 333   0.32 %
  Savings     20,788     18   0.17 %     18,199     16   0.18 %
  Time deposits     222,552     1,484   1.34 %     233,233     1,463   1.26 %
Total interest-bearing deposits     446,442     1,828   0.83 %     462,242     1,812   0.79 %
Borrowings     117,823     1,334   2.28 %     133,863     1,435   2.16 %
Total interest-bearing liabilities     564,265     3,162   1.13 %     596,105     3,247   1.10 %
Non-interest bearing deposits     73,413                 64,310            
Other liabilities     22,031                 24,137            
Shareholders' equity     64,369                 52,086            
    Total average liabilities and equity   $ 724,078               $ 736,638            
    Net interest income         $ 11,189               $ 11,113      
    Net interest margin               3.33 %               3.24 %
                                         
 
 
ASSET QUALITY TRENDS
(Unaudited, in thousands, except percentages)
                   
    At June 30, 2015     At March 31, 2015     At December 31, 2014  
                         
Non-performing loans   $ 4,371     $ 7,518     $ 8,113  
Non-performing tax certificates     1,013       834       1,700  
Total nonperforming loans     5,384       8,352       9,813  
                         
Other real estate owned-loans     356       328       349  
Other real estate owned-tax certificates     10,175       10,213       9,430  
Total other real estate owned     10,531       10,541       9,779  
Total nonperforming assets   $ 15,915     $ 18,893     $ 19,592  
                         
Ratio of non-performing loans to total loans     1.20 %     1.99 %     2.36 %
Ratio of non-performing assets to total assets     2.19 %     2.61 %     2.67 %
Ratio of allowance for loan and lease losses to total loans     2.24 %     2.60 %     2.82 %
Ratio of allowance for loan and lease losses to non-performing loans     186.40 %     130.47 %     119.31 %
                         

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