SOURCE: Royal Bancshares of Pennsylvania, Inc.

Royal Bancshares of Pennsylvania, Inc.

April 25, 2017 16:15 ET

Royal Bancshares of Pennsylvania, Inc. Reports First Quarter Profit Driven By Loan Growth and Improved Net Interest Margin

BALA CYNWYD, PA--(Marketwired - April 25, 2017) - 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 $1.8 million, or $0.06 per diluted share, for the three months ended March 31, 2017 compared to $2.2 million, or $0.06 per diluted share, for the three months ended March 31, 2016. Excluding expenses directly related to the merger with Bryn Mawr Bank Corporation of $243 thousand, net income attributable to the Company was $2.1 million, or $0.07 per diluted share, for the three months ended March 31, 2017.

Kevin Tylus, the Company's President and Chief Executive Officer, noted, "Loan growth positively contributed to our first quarter results. We also significantly reduced our other real estate owned assets by 40%. While we are in the midst of our merger planning activities with Bryn Mawr Bank Corporation, we remain equally focused on the daily operations of the bank and serving our customers."

The merger with Bryn Mawr Bank Corporation is subject to applicable regulatory approvals and approval by the Company's shareholders, as well as certain other closing conditions.

Highlights for the three months ended March 31, 2017 included:

Balance Sheet Trends:

  • At March 31, 2017, total assets were $836.7 million and grew $4.2 million, or 0.5%, from $832.5 million at December 31, 2016.
  • Total loans and loans held for sale were $619.0 million at March 31, 2017, an increase of $17.0 million, or 2.8%, from $602.0 million at December 31, 2016. Current quarter increases were recognized in multiple loan portfolio segments.
  • Total deposits were $644.4 million at March 31, 2017, an increase of $14.9 million, or 2.4%, from $629.5 million at December 31, 2016.

Asset Quality:

  • The ratio of non-performing loans to total loans was 1.08% at March 31, 2017 compared to 1.00% at December 31, 2016.
  • Non-performing loans of $6.0 million at December 31, 2016 increased $688 thousand, or 11.5%, to $6.7 million at March 31, 2017. During the first quarter of 2017, one commercial real estate loan with a carrying amount of $486 thousand became non-accrual because it was past its maturity date. Four loans comprise additions of $401 thousand in commercial and industrial non-accrual loans.
  • The ratio of non-performing assets to total assets was 1.05% at March 31, 2017 compared to 1.15% at December 31, 2016.
  • Non-performing assets of $8.8 million at March 31, 2017 decreased $717 thousand, or 7.5%, from $9.5 million at December 31, 2016. Other real estate owned ("OREO") declined $1.4 million, or 39.7%, during the first quarter of 2017 mostly due to sales of the properties.
  • During the first quarter of 2017, the Company recorded a provision to the allowance for loan and lease losses of $297 thousand compared to $212 thousand for the first quarter of 2016. The 2017 provision was primarily attributable to net loan growth, specific reserves and net charge-off activity.

Income Statement and Other Highlights:

  • The return on average assets for the three months ended March 31, 2017 was 0.88% compared to 1.11% for the three months ended March 31, 2016.
  • The return on average equity for the three months ended March 31, 2017 was 13.82% compared to 11.98% for the three months ended March 31, 2016.
  • At March 31, 2017, the Company's Tier 1 leverage and Total Risk Based Capital ratios were 8.529% and 13.341%, respectively, compared to 8.488% and 13.302%, respectively, at December 31, 2016. The Common Equity Tier 1 ratio was 8.125% at March 31, 2017 compared to 7.992% at December 31, 2016.
  • Net interest income increased $526 thousand, or 8.1%, from $6.5 million for the three months ended March 31, 2016 to $7.0 million for the three months ended March 31, 2017. The growth in net interest income was impacted by the growth in average interest-earning assets and was partially offset by an increase in the average rate paid on average borrowings.
  • The net interest margin was 3.60% for the first quarter of 2017 compared to 3.51% for the comparable period in 2016. The increase in net interest margin was directly related to an increase of 15 basis points in the yield on average interest-earning assets due to a change in the composition of such assets.
  • Non-interest income for the first quarter of 2017 was $511 thousand and decreased $696 thousand from $1.2 million for the first quarter of 2016. The quarterly decrease in non-interest income was impacted by a $367 thousand decline in the net gains on the sale of investment securities and a $355 thousand decrease in income from Company owned life insurance. We did not sell investment securities in the 2017 quarter.
  • Non-interest expense was $5.4 million for the three months ended March 31, 2017 compared to $5.2 million for the same period in 2016 and increased $155 thousand. Contributing to the increase in non-interest expense for the first quarter of 2017 was $243 thousand in merger expenses. During the first quarter of 2017, we recorded an $8 thousand provision for unfunded loan commitments compared to a $150 thousand credit in the first quarter of 2016. While the historical loss rates applied in the calculation of the reserve for unfunded loan commitments declined, the level of unfunded loan commitments increased quarter over quarter. Partially mitigating these increases was a $408 thousand improvement in net OREO expenses during the first quarter of 2017. Net gains on the sales of OREO, which are included in net OREO expenses, increased $405 thousand quarter over quarter.

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 twelve 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, 2016.

 
 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited, dollars in thousands, except per share data)
 
   For the three months
   ended March 31,
   2017  2016
Interest income  $8,958  $8,214
Interest expense   1,941   1,723
Net Interest Income   7,017   6,491
Provision for loan and lease losses   297   212
Net interest income after provision for loan and lease losses   6,720   6,279
Non-interest income   511   1,207
Non-interest expense   5,376   5,221
Income before taxes   1,855   2,265
Income tax expense   -   -
Net Income   1,855   2,265
Less net income attributable to noncontrolling interest   43   76
Net Income Attributable to Royal Bancshares  $1,812  $2,189
 Less Preferred stock Series A accumulated dividend and accretion  $-  $334
Net income to common shareholders  $1,812  $1,855
Income Per Common Share - Basic and Diluted  $0.06  $0.06
         
       
SELECTED PERFORMANCE RATIOS: 
  
   For the three months  
   ended March 31,  
   2017   2016  
Return on Average Assets   0.88 %  1.11 %
Return on Average Equity   13.82 %  11.98 %
Average Equity to Average Assets   6.36 %  9.28 %
Book Value Per Share  $1.80   $1.83  
            
          
   At
March 31,
  At
December 31,
 
Capital ratios (US GAAP):  2017   2016  
Company Tier 1 Leverage   8.529 %  8.488 %
Company Total Risk Based Capital   13.341 %  13.302 %
Company Common Equity Tier 1   8.125 %  7.992 %
         
         
NON-GAAP MEASURES: 
(Unaudited, dollars in thousands, except per share data) 
  
   For the three months  
   ended March 31,  
   2017   2016  
Net income attributable to Royal Bancshares  $1,812   $2,189  
 Merger expenses   243    -  
Net income attributable to Royal Bancshares (non-GAAP)  $2,055   $2,189  
 Less Preferred stock Series A accumulated dividend and accretion  $-   $334  
Net income to common shareholders (non-GAAP)  $2,055   $1,855  
Income per common share-basic and diluted (non-GAAP)  $0.07   $0.06  
Return on Average Assets   1.00 %  1.11 %
Return on Average Equity   15.67 %  11.98 %
         
         
ROYAL BANCSHARES OF PENNSYLVANIA, INC. 
CONSOLIDATED BALANCE SHEETS 
(Unaudited, in thousands) 
  
   At March 31, 2017   At
December 31, 2016
 
Cash and cash equivalents  $15,274   $21,230  
Investment securities, at fair value   163,737    169,854  
Other investment, at cost   2,250    2,250  
Federal Home Loan Bank stock   3,145    3,216  
Loans and leases held for sale   205    -  
Loans and leases           
 Commercial real estate and multi-family   293,490    284,950  
 Construction and land development   88,561    83,369  
 Commercial and industrial   115,131    108,146  
 Residential real estate   56,790    56,899  
 Leases   58,733    61,838  
 Tax certificates   3,114    3,705  
 Consumer   2,965    3,102  
Loans and leases   618,784    602,009  
Allowance for loan and lease losses   (10,558 )  (10,420 )
Loans and leases, net   608,226    591,589  
Company owned life insurance   21,069    20,781  
Premises and equipment, net   5,026    5,398  
Other real estate owned, net   2,131    3,536  
Accrued interest receivable   3,810    3,968  
Other assets   11,829    10,663  
  Total Assets  $836,702   $832,485  
            
Deposits  $644,425   $629,546  
Borrowings   91,000    104,000  
Other liabilities   20,676    20,892  
Subordinated debentures   25,774    25,774  
Royal Bancshares shareholders' equity   54,267    51,648  
Noncontrolling interest   560    625  
  Total Equity   54,827    52,273  
  Total Liabilities and Equity  $836,702   $832,485  
            
         
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  
   March 31, 2017   March 31, 2016  
   Average Balance  Interest  Yield   Average Balance  Interest  Yield  
Cash and cash equivalents  $5,471  $16  1.19 % $12,462  $16  0.52 %
Investment securities   174,359   1,026  2.39 %  217,677   1,334  2.46 %
Loans   610,648   7,916  5.26 %  512,937   6,864  5.38 %
Total interest-earning assets   790,478   8,958  4.60 %  743,076   8,214  4.45 %
Non-interest earning assets   46,171           48,981         
Total average assets  $836,649          $792,057         
Interest-bearing deposits                         
 Interest checking and money markets  $224,552  $235  0.42 % $228,170  $206  0.36 %
 Savings   82,954   122  0.60 %  61,915   106  0.69 %
 Certificates of deposit   234,950   760  1.31 %  208,033   728  1.41 %
Total interest-bearing deposits   542,456   1,117  0.84 %  498,118   1,040  0.84 %
Borrowings   135,409   824  2.47 %  115,513   683  2.38 %
Total interest-bearing liabilities   677,865   1,941  1.16 %  613,631   1,723  1.13 %
Non-interest bearing deposits   81,759           81,568         
Other liabilities   23,855           23,358         
Shareholders' equity   53,170           73,500         
Total average liabilities and equity  $836,649          $792,057         
  Net interest income      $7,017          $6,491     
  Net interest margin          3.60 %         3.51 %
                          
ROYAL BANCSHARES OF PENNSYLVANIA, INC. 
ASSET QUALITY TRENDS 
(Unaudited, in thousands, except percentages) 
  
   At March 31, 2017   At
December 31, 2016
 
            
Non-performing loans  $4,756   $4,100  
Non-performing loans held for sale   205    -  
Non-performing tax certificates   1,734    1,907  
Total non-performing loans   6,695    6,007  
            
Other real estate owned-loans   208    236  
Other real estate owned-tax certificates   1,923    3,300  
Total other real estate owned   2,131    3,536  
Total non-performing assets  $8,826   $9,543  
            
Ratio of non-performing loans to total loans   1.08 %  1.00 %
Ratio of non-performing assets to total assets   1.05 %  1.15 %
Ratio of allowance for loan and lease losses to total loans   1.71 %  1.73 %
Ratio of allowance for loan and lease losses to non-performing loans   157.70 %  173.46 %
            

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