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            At      
                                                   March 31,   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      
                                                 At March 31,  December 31, 
                                                     2017          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       For the three months   
                                 ended                      ended           
                             March 31, 2017             March 31, 2016      
                       -------------------------  ------------------------- 
                        Average                    Average                  
                        Balance   Interest Yield   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      
                                                 At March 31,  December 31, 
                                                     2017          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%
                                                                            

Contact Information
Michael Thompson
Executive Vice President and Chief Financial Officer
mthompson@royalbankamerica.com

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