SOURCE: Royal Bancshares of Pennsylvania, Inc.

Royal Bancshares of Pennsylvania, Inc.

October 21, 2015 16:30 ET

Royal Bancshares of Pennsylvania, Inc. Reports Third Quarter Profit

Balance Sheet Growth With Quality Loan Production Fuels Increase in Net Interest Margin and Earnings

BALA CYNWYD, PA--(Marketwired - Oct 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 $0.04 per diluted share, and $4.6 million, or $0.11 per diluted share, for the three and nine months ended September 30, 2015, respectively. This is compared to net income of $1.4 million, or $0.05 per diluted share, and $4.3 million, or $0.15 per diluted share, for the three and nine months ended September 30, 2014, respectively. Diluted earnings per share for 2015 were fully impacted by the issuance of approximately 16.7 million common shares during the third quarter of 2014 as a result of the private placement and shareholders' rights offering, which increased average common shares outstanding.

Kevin Tylus, the Company's President and Chief Executive Officer, noted, "Loan and deposit growth, coupled with the continuing trend in improved credit quality, positively contributed to third quarter and 2015 year to date earnings. Our financial performance is allowing us to expand the Royal Bank brand through our relationship based and private banking models. Net loan growth in commercial, consumer, and leasing segments and more economical delivery channels, including a loan production office, is helping drive customer growth. Our newly implemented public funds strategy is serving as a cost effective component of our multi-faceted deposit plan; helping us to meet the challenges community banks face to attract lower cost deposits."

Highlights for the three and nine months ended September 30, 2015 included:

Balance Sheet Growth:

  • At September 30, 2015, total assets were $761.7 million and grew $34.5 million, or 4.7%, from $727.2 million at June 30, 2015. Total assets were $732.6 million at December 31, 2014.

  • Total loans were $471.2 million at September 30, 2015, an increase of $23.6 million, or 5.3%, from $447.6 million at June 30, 2015, and an increase of $56.1 million, or 13.5%, from $415.1 million at December 31, 2014. Current quarter increases were recognized in multiple loan portfolio segments.

  • Total deposits were $553.8 million at September 30, 2015, an increase of $22.3 million, or 4.2%, from $531.5 million at June 30, 2015, and an increase of $23.4 million, or 4.4%, from $530.4 million at December 31, 2014. 

Asset Quality Trends:

  • The ratio of non-performing loans to total loans was 1.08%, 1.20%, and 2.36% at September 30, 2015, June 30, 2015, and December 31, 2014, respectively. Excluding tax liens, the ratio of non-performing loans to total loans was 0.84%, 0.99%, and 1.99% at September 30, 2015, June 30, 2015, and December 31, 2014, respectively.

  • Non-performing loans of $5.1 million at September 30, 2015 decreased $286,000, or 5.3%, from $5.4 million at June 30, 2015 and decreased $4.7 million, or 48.0%, from $9.8 million at December 31, 2014.

  • The decline in non-performing loans and the overall improvement in loan quality contributed to increases of $165,000 and $617,000 in the credit for loan and lease losses for the three and nine months ended September 30, 2015, respectively. 

  • The ratio of non-performing assets to total assets was 1.83%, 2.19%, and 2.67% at September 30, 2015, June 30, 2015, and December 31, 2014, respectively. Excluding tax lien assets, the ratio of nonperforming assets to total assets was 0.57%, 0.67%, and 1.19% at September 30, 2015, June 30, 2015, and December 31, 2014, respectively.

  • Non-performing assets of $13.9 million at September 30, 2015 decreased $2.0 million, or 12.4%, from $15.9 million at June 30, 2015 and decreased $5.7 million, or 28.8%, from December 31, 2014. The purposeful downsizing of the tax lien business, which is not core to Royal Bank's overall strategy, has seen a favorable reduction from a high of over $100 million in total tax lien assets in 2009 to approximately $16.0 million in total tax lien assets at September 30, 2015.

Income Statement and Other Highlights:

  • The return on average assets for the three and nine months ended September 30, 2015 increased to 0.82% and 0.84%, respectively, compared to 0.78% for the three and nine months ended September 30, 2014.

  • The return on average equity for the three and nine months ended September 30, 2015 was 9.24% and 9.45%, respectively, compared to 9.67% and 10.60% for the three and nine months ended September 30, 2014. The return on average equity for 2015 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 September 30, 2015, the Company's Tier 1 leverage and Total Risk Based Capital ratios were 12.5% and 19.0%, respectively, compared to 11.9% and 19.2%, respectively, at December 31, 2014. The Common Equity Tier 1 ratio was 9.4% at September 30, 2015.

  • Net interest income increased $594,000, or 10.7%, from $5.6 million for the three months ended September 30, 2014 to $6.2 million for the three months ended September 30, 2015. Net interest income increased $670,000, or 4.0%, from $16.7 million for the nine months ended September 30, 2014 to $17.4 million for the nine months ended September 30, 2015. The growth in the quarterly and year to date net interest income was primarily related to an increase in interest income and the average yields earned on average interest-earning assets.

  • The net interest margin grew to 3.51% for the third quarter of 2015 compared to 3.25% for the comparable period in 2014 and was 3.39% for the nine months ended September 30, 2015 compared to 3.25% for the nine months ended September 30, 2014. The increase in net interest margin was directly related to an increase in the yield on average interest-earning assets.

  • Non-interest income for the quarter ended September 30, 2015 was $700,000 and decreased $504,000, or 41.9%, from $1.2 million for the quarter ended September 30, 2014. The quarterly decline in non-interest income was impacted by declines of $158,000 and $107,000 in net gains on the sale of investment securities and net gains on the sale of premises and equipment, respectively. Additionally, net gains on sales of loans and leases and net gains on sale of other real estate owned ("OREO") decreased $80,000 and $50,000, respectively.

  • Non-interest income was $2.8 million for the nine months ended September 30, 2015 and 2014 and slightly increased $38,000 in the 2015 period. Net gains on the sale of investment securities and the sale of OREO grew $322,000 and $136,000, respectively, in 2015 as compared to the 2014 period. These increases were partially offset by declines of $223,000 and $107,000 in the net gains on sales of loans and leases and net gains on the sale of premises and equipment, respectively, when compared to the 2014 period. During 2015, the Company sold lower earning investment securities to fund the loan growth, which included selling the majority of the corporate bonds in the investment portfolio.

  • Non-interest expense was $5.4 million for the quarters ended September 30, 2015 and 2014. For the third quarter of 2015, professional and legal fees and the provision for unfunded loan commitments declined $190,000 and $82,000, respectively, and were offset by a $232,000 increase in OREO expenses and impairment. During the third quarter of 2015, the unfunded loan commitments related to construction loans declined $5.5 million due to construction advances on those commitments.

  • Non-interest expense for the nine months ended September 30, 2015 was $16.5 million and increased $749,000, or 4.8%, from $15.7 million for the nine months ended September 30, 2014. The increase for the nine month period ended September 30, 2015 was related to increases of $320,000, $347,000, and $277,000 in employee salaries and benefits, occupancy and equipment costs, and the provision for unfunded loan commitments due to the growth in such commitments. Partially offsetting these increases was a $237,000 decline in the FDIC and state assessments.

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     For the nine months  
    ended September 30,     ended September 30,  
    2015     2014     2015     2014  
Interest income   $ 7,798     $ 7,191     $ 22,149     $ 21,551  
Interest expense     1,636       1,623       4,798       4,870  
Net Interest Income     6,162       5,568       17,351       16,681  
Credit for loan and lease losses     (216 )     (51 )     (1,382 )     (765 )
Net interest income after credit for loan and lease losses     6,378       5,619       18,733       17,446  
Non-interest income     700       1,204       2,830       2,792  
Non-interest expense     5,365       5,375       16,477       15,728  
Income before taxes     1,713       1,448       5,086       4,510  
Income tax expense     -       -       -       -  
Net Income     1,713       1,448       5,086       4,510  
Less net income attributable to noncontrolling interest     179       25       500       212  
Net Income Attributable to Royal Bancshares   $ 1,534     $ 1,423     $ 4,586     $ 4,298  
  Less Preferred stock Series A accumulated dividend and accretion   $ 434     $ 152     $ 1,287     $ 1,644  
Net income to common shareholders   $ 1,100     $ 1,271     $ 3,299     $ 2,654  
Income Per Common Share - Basic and Diluted   $ 0.04     $ 0.05     $ 0.11     $ 0.15  
                                 
                                 

SELECTED PERFORMANCE RATIOS:

             
    For the three months     For the nine months  
    ended September 30,     ended September 30,  
    2015     2014     2015     2014  
Return on Average Assets     0.82 %     0.78 %     0.84 %     0.78 %
Return on Average Equity     9.24 %     9.67 %     9.45 %     10.60 %
Average Equity to Average Assets     8.90 %     8.06 %     8.89 %     7.40 %
Book Value Per Share   $ 1.61     $ 1.45     $ 1.61     $ 1.45  
                                 
                                 
    At September 30,     At December 31,                  
Capital ratios (US GAAP):   2015     2014                  
Company Tier 1 Leverage     12.5 %     11.9 %                
Company Total Risk Based Capital     19.0 %     19.2 %                
Company Common Equity Tier 1     9.4 %     NA                  
                                 
                                 
                                 

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)

             
    At September 30, 2015     At December 31, 2014  
Cash and cash equivalents   $ 24,217     $ 30,790  
Investment securities, at fair value     230,344       250,368  
Other investment, at cost     2,250       2,250  
Federal Home Loan Bank stock     2,545       2,622  
Loans and leases                
  Commercial real estate and multi-family     226,105       188,861  
  Construction and land development     38,864       45,662  
  Commercial and industrial     82,414       76,489  
  Residential real estate     54,025       42,992  
  Leases     61,954       51,583  
  Tax certificates     5,294       7,191  
  Consumer     2,560       2,354  
Loans and leases     471,216       415,132  
Allowance for loan and lease losses     (9,806 )     (11,708 )
Loans and leases, net     461,410       403,424  
Bank owned life insurance     16,008       15,636  
Other real estate owned, net     8,844       9,779  
Premises and equipment, net     5,202       5,201  
Accrued interest receivable     4,336       5,270  
Other assets     6,578       7,213  
    Total Assets   $ 761,734     $ 732,553  
                 
Deposits   $ 553,764     $ 530,425  
Borrowings     91,084       92,426  
Other liabilities     23,543       21,322  
Subordinated debentures     25,774       25,774  
Royal Bancshares shareholders' equity     67,093       62,219  
Noncontrolling interest     476       387  
    Total Equity     67,569       62,606  
    Total Liabilities and Equity   $ 761,734     $ 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  
    September 30, 2015     September 30, 2014  
    Average Balance   Interest   Yield     Average Balance   Interest   Yield  
Cash and cash equivalents   $ 18,184   $ 8   0.17 %   $ 12,152   $ 6   0.20 %
Investment securities     218,767     1,334   2.42 %     280,579     1,734   2.45 %
Loans     459,543     6,456   5.57 %     386,308     5,451   5.60 %
Total interest-earning assets     696,494     7,798   4.44 %     679,039     7,191   4.20 %
Non-interest earning assets     43,722                 45,335            
    Total average assets   $ 740,216               $ 724,374            
Interest-bearing deposits                                    
  NOW and money markets   $ 210,652   $ 182   0.34 %   $ 207,731   $ 161   0.31 %
  Savings     32,589     35   0.43 %     19,449     8   0.16 %
  Certificates of deposit     216,653     751   1.38 %     225,679     731   1.29 %
Total interest-bearing deposits     459,894     968   0.84 %     452,859     900   0.79 %
Borrowings     113,767     668   2.33 %     123,743     723   2.32 %
Total interest-bearing liabilities     573,661     1,636   1.13 %     576,602     1,623   1.12 %
Non-interest bearing deposits     79,791                 66,251            
Other liabilities     20,889                 23,150            
Shareholders' equity     65,875                 58,371            
    Total average liabilities and equity   $ 740,216               $ 724,374            
    Net interest income         $ 6,162               $ 5,568      
    Net interest margin               3.51 %               3.25 %
                                         
                                         
                                         

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
NET INTEREST INCOME AND MARGIN
(Unaudited, in thousands, except percentages)

                             
    For the nine months ended     For the nine months ended  
    September 30, 2015     September 30, 2014  
    Average Balance   Interest   Yield     Average Balance   Interest   Yield  
Cash and cash equivalents   $ 16,754   $ 21   0.17 %   $ 8,964   $ 16   0.24 %
Investment securities     230,361     4,250   2.47 %     303,485     5,610   2.47 %
Loans     437,188     17,878   5.47 %     374,270     15,925   5.69 %
Total interest-earning assets     684,303     22,149   4.33 %     686,719     21,551   4.20 %
Non-interest earning assets     45,214                 46,165            
    Total average assets   $ 729,517               $ 732,884            
Interest-bearing deposits                                    
  NOW and money markets   $ 205,646   $ 508   0.33 %   $ 209,772   $ 494   0.31 %
  Savings     24,765     52   0.28 %     18,620     24   0.17 %
  Time deposits     220,564     2,236   1.36 %     230,688     2,194   1.27 %
Total interest-bearing deposits     450,975     2,796   0.83 %     459,080     2,712   0.79 %
Borrowings     116,456     2,002   2.30 %     130,452     2,158   2.21 %
Total interest-bearing liabilities     567,431     4,798   1.13 %     589,532     4,870   1.10 %
Non-interest bearing deposits     75,563                 64,832            
Other liabilities     21,646                 24,316            
Shareholders' equity     64,877                 54,204            
    Total average liabilities and equity   $ 729,517               $ 732,884            
    Net interest income         $ 17,351               $ 16,681      
    Net interest margin               3.39 %               3.25 %
                                     
                                     

ASSET QUALITY TRENDS
(Unaudited, in thousands, except percentages)

                         
    At September 30, 2015     At June 30, 2015     At March 31, 2015     At December 31, 2014  
                                 
Non-performing loans   $ 3,892     $ 4,371     $ 7,518     $ 8,113  
Non-performing tax certificates     1,206       1,013       834       1,700  
Total nonperforming loans     5,098       5,384       8,352       9,813  
                                 
Other real estate owned-loans     388       356       328       349  
Other real estate owned-tax certificates     8,456       10,175       10,213       9,430  
Total other real estate owned     8,844       10,531       10,541       9,779  
Total nonperforming assets   $ 13,942     $ 15,915     $ 18,893     $ 19,592  
                                 
Ratio of non-performing loans to total loans     1.08 %     1.20 %     1.99 %     2.36 %
Ratio of non-performing assets to total assets     1.83 %     2.19 %     2.61 %     2.67 %
Ratio of allowance for loan and lease losses to total loans     2.08 %     2.24 %     2.60 %     2.82 %
Ratio of allowance for loan and lease losses to non-performing loans     192.35 %     186.40 %     130.47 %     119.31 %

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