SOURCE: Royal Bancshares of Pennsylvania

January 18, 2007 13:00 ET

Royal Bank America Parent Co. Reports 26.9% Increase in Core Earnings for the Fourth Quarter; Deposits Up 23%; Loans Up 9%; Issues 47th Consecutive Quarterly Cash Dividend

NARBERTH, PA -- (MARKET WIRE) -- January 18, 2007 --Royal Bank America President/CEO Joseph P. Campbell announced core earnings (defined as net income less non-recurring items) for the Bank's holding company, Royal Bancshares of Pennsylvania, Inc. (NASDAQ: RBPAA), for the three months ended December 31, 2006 of $5.0 million or $0.37 basic earnings per share, compared to $4.0 million or $0.29 basic earnings per share for the same period in 2005. Core earnings for the twelve months ended December 31, 2006 were $18.4 million or $1.36 basic earnings per share, compared to $16.2 million or $1.20 basic earnings per share for the same period in 2005. For the three months ended December 31, 2006, non-recurring items include: $67 thousand in distributions from variable interest entities and $75 thousand from the sale of other real estate owned. For the three months ended December 31, 2005, non-recurring items include: a $16.7 million gain from the sale of two apartment complexes, $133 thousand in distributions from variable interest entities, and $1.0 million from the sale of other real estate owned. For the twelve months ended December 31, 2006, non-recurring items include: a $1.5 million prepayment fee, $643 thousand in loan exit fees collected on two mezzanine loans, $645 thousand in distributions from variable interest entities and $2.1 million from the sale of other real estate owned. For the twelve months ended December 31, 2005, there were $1.6 million in loan exit fees collected, a $16.7 million gain from the sale of two apartment complexes, a $1.9 million equity distribution from a variable interest entity, $2.5 million from the sale of other real estate owned and a $1.7 million reduction in tax expense resulting from a reduction in a deferred tax valuation allowance. In addition, a $930 thousand expense related to the company's pension plan was recorded. A reconciliation of net income to core earnings, as well as related per share amounts, is included in a later section of this release.

Net income (including non-recurring items) for the three months ended December 31, 2006 was $5.1 million or $0.38 basic earnings per share, compared to $15.6 million or $1.16 basic earnings per share for the same period in 2005. Net income (including non-recurring items) for the twelve months ended December 31, 2006 was $21.6 million or $1.60 basic earnings per share, compared to $32.1 million or $2.39 basic earnings per share for the same period in 2005.

For the fourth quarter of 2006, interest income was $23.5 million compared to $20.3 million for the same quarter in 2005, an increase of $3.2 million. This increase is primarily due to growth in the average loan balances along with higher interest earned on our variable rate portfolio during the 4th quarter as compared to the same period in 2005. In addition, the company received a special cash dividend from the Federal Home Loan Bank of Pittsburgh of approximately $200 thousand during the fourth quarter of 2006. Net loans increased 9% or $50.2 million from December 31, 2005 to $589.5 million at December 31, 2006. This increase is primarily due to an increased demand for commercial and construction loan products that are being offered at competitive rates coupled with an increase in volume from Royal Asian Bank, Royal Bank America Leasing and the Equity/Mezzanine division.

Interest expense increased $4.3 million to $12.3 million for the quarter ended December 31, 2006 compared to the same period in 2005. For the twelve-month period ended December 31, 2006, interest expense increased $14.6 million to $46.4 million compared to the same period in 2005. The increase in interest expense was due to an increase in the average balance of deposits along with higher interest rates paid on deposits and borrowings. Total deposits increased 23% to $859.5 million at December 31, 2006 from December 31, 2005, primarily as a result of attractive certificate of deposit rates offered during 2006. During this period, brokered deposits increased $18.0 million. These funds were utilized to fund a portion of loan growth.

Net interest margin was 3.90% for the fourth quarter of 2006 compared to 3.96% for the fourth quarter of 2005. Net interest margin was 4.17% for the twelve months ended December 31, 2006, compared to 4.06% for the same period in 2005.

During the fourth quarter of 2006, $202 thousand was recorded to increase the allowance for loan losses. This additional provision was the result of loan growth in Royal Asian Bank and Royal Bank America Leasing, LP. For the twelve-month period ended December 31, 2006, $1.8 million was recorded to increase the allowance, of which $849 thousand was related to specific loans and the remainder was attributed to loan growth during 2006. Included in the reserves are mezzanine loans, which generally provide higher yields but which management has determined to have a higher level of risk compared to the remainder of the loan portfolio.

Consolidated total assets ended December 31, 2006 at $1.36 billion. Return on assets for the twelve-month period ended December 31, 2006 was 1.6%. Return on equity for the twelve-month period ended December 31, 2006 was 13.6%.

The Board of Directors of Royal Bancshares of Pennsylvania, Inc. declared its 47th consecutive quarterly cash dividend on January 17, 2007. This dividend will be twenty-eight and seventy-five hundredths cents ($.2875) per share for holders of Class A common stock and thirty-three and six hundred twenty five ten thousandths cents ($.330625) per share for holders of Class B common stock of Royal Bancshares of Pennsylvania, Inc. The record date is January 31, 2007, and the payment date is February 14, 2007.

About Royal Bancshares of Pennsylvania, Inc.

Royal Bancshares of Pennsylvania, Inc. headquartered in Narberth, Pennsylvania, operates seventeen full-service branch offices throughout southeastern Pennsylvania and New Jersey under the name Royal Bank America and four locations under the name Royal Asian Bank. Together, Royal Bank America and Royal Asian Bank, along with Royal's other affiliates, offer a wide variety of products and services, including commercial real estate loans, asset based lending, structured financing, equipment leasing, equity/mezzanine lending, high-yielding CDs & MMAs and Internet Banking solutions at www.royalbankamerica.com and www.royalasianbank.com.

The foregoing material is unaudited and 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.

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONDENSED INCOME STATEMENT

                                  Three Months             Twelve Months
(dollars in thousands,           Ended Dec. 31st          Ended Dec. 31st
except for earnings per share)   2006        2005        2006        2005
                            ----------- ----------- ----------- -----------

                            (Unaudited) (Unaudited) (Unaudited)
Interest Income             $    23,475 $    20,281 $    93,006 $    76,460
Interest Expense                 12,279       7,984      46,372      31,796
                            ----------- ----------- ----------- -----------
Net Interest Income              11,196      12,297      46,634      44,664
Provision for Loan Losses           202           0       1,803           1
                            ----------- ----------- ----------- -----------
Net Interest Income after
 Provision                       10,994      12,297      44,831      44,663

Non Interest Income               2,137      15,039      11,971      24,826
Non Interest Expense              5,562       3,345      25,219      24,799
                            ----------- ----------- ----------- -----------
Income before Taxes               7,569      23,991      31,583      44,690
Income Taxes                      2,448       8,405      10,015      12,637
                            ----------- ----------- ----------- -----------
Net Income                        5,121      15,586      21,568      32,053
                            =========== =========== =========== ===========

Earnings per share – basic  $      0.38 $      1.16 $      1.60 $      2.39



SELECTED RATIOS:
Return on Average Assets           1.5%       4.8%     1.6%     2.5%
Return on Average Equity          12.4%      40.4%    13.6%    22.0%
Average Equity to Assets          12.4%      11.9%    12.1%    11.6%
Book Value Per Share           $ 12.10    $ 11.57



CONDENSED BALANCE SHEET

(in thousands)                                         Dec. 31,   Dec. 31,
                                                        2006       2005
                                                    ----------- -----------
                                                    (unaudited)
                                                    ----------- -----------
Cash and Cash Equivalents                           $    82,436 $    30,895
Investment Securities                                   568,742     598,730
Loans Held for Sale                                       1,959         803
Loans (net)                                             589,545     539,360
Premises and Equipment (net)                             50,280      66,581
Accrued Interest receivable                              16,494      14,843
Other Assets                                             46,855      49,807
                                                    ----------- -----------
          Total Assets                              $ 1,356,311 $ 1,301,019
                                                    =========== ===========

Deposits                                                859,457     697,409
Borrowings                                              275,429     401,356
Other Liabilities                                        29,247      18,485
Subordinated debentures                                  25,774      25,774
Minority Interest                                         3,150       2,487
Shareholders’ Equity                                    163,254     155,508
                                                    ----------- -----------
          Total Liabilities and Shareholders’
           Equity                                   $ 1,356,311 $ 1,301,019
                                                    =========== ===========

The above condensed financial information includes consolidation of Equity
Real Estate Investments, owned by Royal Bancshares of Pennsylvania, Inc.,
which are required as a result of FIN 46(R) "Variable Interest Entities."

NOTE: This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Management uses the non-GAAP measure of core earnings from core earnings or operating earnings in its analysis of the company's performance. This measure, as used by the company, adjusts net income determined in accordance with GAAP to exclude the effects of certain non-recurring special items, including significant gains or losses that are unusual in nature. Because certain of these items and their impact on the company's performance are difficult to predict, management believes presentation of financial measures excluding the impact of such items provides useful supplemental information in evaluating the operating results of the company's core businesses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. The following table reconciles our GAAP net income to core earnings for the periods presented:

                                        For the Three      For the Twelve
                                        Months Ended        Months Ended
                                         Dec. 31st           Dec. 31st
                                        (unaudited)         (unaudited)
(amounts in thousands, except for
 per share data)                       2006     2005      2006      2005
                                    --------  --------  --------  --------
Net Income                          $  5,121  $ 15,586  $ 21,568  $ 32,053

Changes
     Loan exit fees                       --        --      (643)   (1,568)
     Prepayment fees                      --        --    (1,500)       --
     Distributions from variable
      interest entities                  (67)     (133)     (645)   (1,925)
     Gains from the sale of
      variable interest entities          --   (16,746)       --   (16,746)
     Pension plan expense                 --        --        --       930
     Gains on other real estate
      owned                              (75)   (1,003)   (2,129)   (2,494)
                                    --------  --------  --------  --------
Total Changes                           (142)  (17,882)   (4,917)  (21,803)

Tax effect                                50     6,259     1,721     7,631

Reduction in tax expense                  --        --        --    (1,700)

Net impact of changes                    (92)  (11,623)   (3,196)  (15,872)
                                    --------  --------  --------  --------

Net income adjusted (core earnings) $  5,029  $  3,963  $ 18,372  $ 16,181
                                    ========  ========  ========  ========

Basic earnings per share            $   0.38  $   1.16  $   1.60  $   2.39
Adjusted earnings per share         $   0.37  $   0.29  $   1.36  $   1.20

Contact Information

  • For additional information:
    Marc Sanders
    Director of Marketing
    610-668-4700 x269
    Email Contact