SOURCE: Royal Bancshares of Pennsylvania, Inc.

Royal Bancshares of Pennsylvania, Inc.

July 26, 2017 08:45 ET

Royal Bancshares of Pennsylvania, Inc. Reports Second Quarter Profit Driven By Net Interest Margin Expansion and Continued Credit Quality Improvement

BALA CYNWYD, PA--(Marketwired - July 26, 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 $3.0 million, or $0.10 per diluted share, for the three months ended June 30, 2017 compared to $2.0 million, or $0.06 per diluted share, for the three months ended June 30, 2016. Excluding expenses directly related to the merger with Bryn Mawr Bank Corporation of $162 thousand, net income attributable to the Company was $3.2 million, or $0.11 per diluted share, for the three months ended June 30, 2017.

Net income attributable to the Company for the six months ended June 30, 2017 was $4.8 million, or $0.16 per diluted share, compared to $4.2 million, or $0.12 per diluted share, for the six months ended June 30, 2016. Excluding expenses directly related to the merger with Bryn Mawr Bank Corporation of $405 thousand, net income attributable to the Company was $5.2 million, or $0.17 per diluted share, for the six months ended June 30, 2017.

Kevin Tylus, the Company's President and Chief Executive Officer, noted, "The continued improvement in the net interest margin contributed to our second quarter results. We also significantly reduced our non-performing assets by 28% during the most recent quarter and 34% during 2017. 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 was approved by the Company's shareholders on May 24, 2017. The merger is subject to certain additional closing conditions, including receipt of applicable regulatory approvals.

Highlights for the three and six months ended June 30, 2017 included:

Balance Sheet Trends:

  • At June 30, 2017, total assets were $808.8 million and decreased $23.7 million, or 2.9%, from $832.5 million at December 31, 2016.
  • Total loans were $605.7 million at June 30, 2017, an increase of $3.7 million, or 0.6%, from $602.0 million at December 31, 2016.
  • Total deposits were $622.8 million at June 30, 2017, a decrease of $6.7 million, or 1.1%, from $629.5 million at December 31, 2016.

Asset Quality:

  • The ratio of non-performing loans to total loans improved significantly and was 0.73% at June 30, 2017 compared to 1.08% at March 31, 2017 and 1.00% at December 31, 2016.
  • Non-performing loans of $4.4 million at June 30, 2017 decreased $2.3 million, or 34.1%, from $6.7 million at March 31, 2017, and decreased $1.6 million, or 26.5%, from $6.0 million at December 31, 2016.
  • The ratio of non-performing assets to total assets continues to improve and was 0.78% at June 30, 2017 compared to 1.05% at March 31, 2017 and 1.15% at December 31, 2016.
  • Non-performing assets of $6.3 million at June 30, 2017 decreased $2.5 million, or 28.1%, from $8.8 million at March 31, 2017, and decreased $3.2 million, or 33.5% from $9.5 million at December 31, 2016. Other real estate owned ("OREO") has declined $1.6 million, or 45.4%, during the first six months of 2017 mostly due to sales of the properties.
  • For the three and six months ended June 30, 2017, the Company recorded a provision to the allowance for loan and lease losses of $57 thousand and $354 thousand, respectively, compared to $197 thousand and $409 thousand for the same periods in 2016, respectively. The 2017 provision was primarily attributable to the leasing subsidiary.

Income Statement and Other Highlights:

  • The return on average assets for the three and six months ended June 30, 2017 was 1.46% and 1.17%, respectively, compared to 1.02% and 1.06% for the three and six months ended June 30, 2016, respectively.
  • The return on average equity for the three and six months ended June 30, 2017 was 21.51% and 17.16%, respectively, compared to 11.55% and 11.77% for the three and six months ended June 30, 2016, respectively.
  • At June 30, 2017, the Company's Tier 1 leverage and Total Risk Based Capital ratios were 9.13% and 14.27%, respectively, compared to 8.49% and 13.30%, respectively, at December 31, 2016. The Common Equity Tier 1 ratio was 8.90% at June 30, 2017 compared to 7.99% at December 31, 2016.
  • Net interest income increased $1.1 million, or 16.9%, from $6.4 million for the three months ended June 30, 2016 to $7.5 million for the three months ended June 30, 2017. Net interest income increased $1.6 million, or 12.5%, from $12.9 million for the six months ended June 30, 2016 to $14.5 million for the six months ended June 30, 2017. The growth in net interest income was impacted by the growth in average interest-earning assets coupled with interest received from the redemption of a non-performing tax certificate and was partially offset by an increase in the average rate paid on average interest-bearing deposits and borrowings.
  • The net interest margin was 3.84% for the second quarter of 2017 compared to 3.41% for the comparable period in 2016. The net interest margin was 3.72% for the six months ended June 30, 2017 compared to 3.46% for the six months ended June 30, 2016. The increase in net interest margin was directly related to an increase in the yield on average interest-earning assets due to a change in the composition of such assets coupled with interest received from the redemption of a non-performing tax certificate.
  • Non-interest income for the second quarter of 2017 was $943 thousand and decreased $130 thousand from $1.1 million for the second quarter of 2016. Non-interest income for the six months ended June 30, 2017 was $1.5 million and decreased $826 thousand from $2.3 million for the six months ended June 30, 2016. The decrease in non-interest income was primarily related to net gains on the sales of investment securities which declined $459 thousand quarter versus quarter and $826 thousand year over year.
  • Non-interest expense was $5.2 million for the three months ended June 30, 2017 compared to $5.0 million for the same period in 2016 and increased $124 thousand. Contributing to the increase in non-interest expense for the second quarter of 2017 was $162 thousand in merger related expenses. Non-interest expense was $10.5 million for the six months ended June 30, 2017 compared to $10.3 million for the same period in 2016 and increased $279 thousand. Contributing to the increase in non-interest expense for the six months ended June 30, 2017 was $405 thousand in merger related expenses.

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   For the six months  
   ended June 30,   ended June 30,  
   2017   2016   2017   2016  
Interest income  $9,462   $8,181   $18,420   $16,395  
Interest expense   1,962    1,764    3,903    3,487  
Net Interest Income   7,500    6,417    14,517    12,908  
Provision for loan and lease losses   57    197    354    409  
Net interest income after provision for loan and lease losses   7,443    6,220    14,163    12,499  
Non-interest income   943    1,073    1,454    2,280  
Non-interest expense   5,170    5,046    10,546    10,267  
Income before taxes   3,216    2,247    5,071    4,512  
Income tax expense   52    60    52    60  
Net Income   3,164    2,187    5,019    4,452  
Less net income attributable to noncontrolling interest   157    153    200    229  
Net Income Attributable to Royal Bancshares  $3,007   $2,034   $4,819   $4,223  
 Less Preferred stock Series A accumulated dividend and accretion  $-   $338   $-   $672  
Net income to common shareholders  $3,007   $1,696   $4,819   $3,551  
Income Per Common Share - Basic and Diluted  $0.10   $0.06   $0.16   $0.12  
                      
                      
SELECTED PERFORMANCE RATIOS                     
   For the three months   For the six months  
   ended June 30,   ended June 30,  
    2017    2016    2017    2016  
Return on Average Assets   1.46 %  1.02 %  1.17 %  1.06 %
Return on Average Equity   21.51 %  11.55 %  17.16 %  11.77 %
Average Equity to Average Assets   6.77 %  8.82 %  6.80 %  9.05 %
Book Value Per Share  $1.91   $1.91   $1.91   $1.91  
                      
                      
    At June 30,    At December 31,            
Capital ratios (US GAAP):   2017    2016            
Company Tier 1 Leverage   9.13 %  8.49 %          
Company Total Risk Based Capital   14.27 %  13.30 %          
Company Common Equity Tier 1   8.90 %  7.99 %          
                 
 
NON-GAAP MEASURES:
(Unaudited, dollars in thousands, except per share data)
          
   For the three months   For the six months  
   ended June 30,   ended June 30,  
   2017   2016   2017   2016  
Net income attributable to Royal Bancshares  $3,007   $2,034   $4,819   $4,223  
Merger expenses   162    -    405    -  
Net income attributable to Royal Bancshares (non-GAAP)  $3,169   $2,034   $5,224   $4,223  
Less Preferred stock Series A accumulated dividend and accretion  $-   $338   $-   $672  
Net income to common shareholders (non-GAAP)  $3,169   $1,696   $5,224   $3,551  
Income per common share - basic and diluted (non-GAAP)  $0.11   $0.06   $0.17   $0.12  
                      
Return on Average Assets   1.53 %  1.02 %  1.27 %  1.06 %
Return on Average Equity   22.66 %  11.55 %  18.60 %  11.77 %
                 
 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
          
CONDENSED BALANCE SHEET         
          
   At June 30,
2017
  At December 31,
2016
 
Cash and cash equivalents  $31,711   $21,230  
Investment securities, at fair value   135,935    169,854  
Other investment, at cost   2,250    2,250  
Federal Home Loan Bank stock   2,276    3,216  
Loans and leases           
 Commercial real estate and multi-family   287,692    284,950  
 Construction and land development   84,910    83,369  
 Commercial and industrial   116,200    108,146  
 Residential real estate   56,363    56,899  
 Leases   56,258    61,838  
 Tax certificates   1,378    3,705  
 Consumer   2,892    3,102  
Loans and leases   605,693    602,009  
Allowance for loan and lease losses   (10,262 )  (10,420 )
Loans and leases, net   595,431    591,589  
Company owned life insurance   20,909    20,781  
Other real estate owned, net   1,932    3,536  
Premises and equipment, net   4,873    5,398  
Accrued interest receivable   3,277    3,968  
Other assets   10,161    10,663  
  Total Assets  $808,755   $832,485  
            
Deposits  $622,821   $629,546  
Borrowings   81,000    104,000  
Other liabilities   20,834    20,892  
Subordinated debentures   25,774    25,774  
Royal Bancshares shareholders' equity   57,669    51,648  
Noncontrolling interest   657    625  
  Total Equity   58,326    52,273  
  Total Liabilities and Equity  $808,755   $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  
   June 30, 2017   June 30, 2016  
   Average
Balance
 Interest  Yield   Average
Balance
 Interest  Yield  
Cash and cash equivalents  $4,458  $17  1.53 % $15,183  $17  0.45 %
Investment securities   163,192   956  2.35 %  202,857   1,206  2.39 %
Loans   616,446   8,489  5.52 %  537,862   6,958  5.20 %
Total interest-earning assets   784,096   9,462  4.84 %  755,902   8,181  4.35 %
Non-interest earning assets   44,042           47,463         
 Total average assets  $828,138          $803,365         
Interest-bearing deposits                         
 NOW and money markets  $201,292  $262  0.52 % $226,286  $204  0.36 %
 Savings   87,587   133  0.61 %  72,752   128  0.71 %
 Certificates of deposit   245,296   774  1.27 %  207,825   735  1.42 %
Total interest-bearing deposits   534,175   1,169  0.88 %  506,863   1,067  0.85 %
Borrowings   116,653   793  2.73 %  116,973   697  2.40 %
Total interest-bearing liabilities   650,828   1,962  1.21 %  623,836   1,764  1.14 %
Non-interest bearing deposits   97,702           87,212         
Other liabilities   23,524           21,468         
Shareholders' equity   56,084           70,849         
 Total average liabilities and equity  $828,138          $803,365         
 Net interest income      $7,500          $6,417     
 Net interest margin          3.84 %         3.41 %
                   
  
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, 2017   June 30, 2016  
   Average
Balance
 Interest  Yield   Average
Balance
 Interest  Yield  
Cash and cash equivalents  $4,962  $33  1.34 % $13,823  $33  0.48 %
Investment securities   168,745   1,982  2.37 %  210,267   2,540  2.43 %
Loans   613,563   16,405  5.39 %  525,399   13,822  5.29 %
Total interest-earning assets   787,270   18,420  4.72 %  749,489   16,395  4.40 %
Non-interest earning assets   45,101           48,222         
 Total average assets  $832,371          $797,711         
Interest-bearing deposits                         
 NOW and money markets  $212,858  $497  0.47 % $227,228  $409  0.36 %
 Savings   85,283   255  0.60 %  67,334   235  0.70 %
 Time deposits   240,152   1,534  1.29 %  207,929   1,463  1.41 %
Total interest-bearing deposits   538,293   2,286  0.86 %  502,491   2,107  0.84 %
Borrowings   125,979   1,617  2.59 %  116,243   1,380  2.39 %
Total interest-bearing liabilities   664,272   3,903  1.18 %  618,734   3,487  1.13 %
Non-interest bearing deposits   89,775           84,390         
Other liabilities   21,689           22,413         
Shareholders' equity   56,635           72,174         
 Total average liabilities and equity  $832,371          $797,711         
 Net interest income      $14,517          $12,908     
 Net interest margin          3.72 %         3.46 %
                   
 
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
ASSET QUALITY TRENDS
(Unaudited, in thousands, except percentages)
              
   At June 30,
2017
  At March 31,
2017
  At December 31,
2016
 
                 
Non-performing loans  $3,912   $4,756   $4,100  
Non-performing loans held for sale   -    205    -  
Non-performing tax certificates   502    1,734    1,907  
Total nonperforming loans   4,414    6,695    6,007  
                 
Other real estate owned-loans   182    208    236  
Other real estate owned-tax certificates   1,750    1,923    3,300  
Total other real estate owned   1,932    2,131    3,536  
Total nonperforming assets  $6,346   $8,826   $9,543  
                 
Ratio of non-performing loans to total loans   0.73 %  1.08 %  1.00 %
Ratio of non-performing assets to total assets   0.78 %  1.05 %  1.15 %
Ratio of allowance for loan and lease losses to total loans   1.69 %  1.71 %  1.73 %
Ratio of allowance for loan and lease losses to non-performing loans   232.49 %  157.70 %  173.46 %
             

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