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,  At December 31, 
                                                   2017           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                     Average                   
                      Balance   Interest  Yield   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                     Average                   
                      Balance   Interest  Yield   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 March   At December 
                                      At June 30,      31,          31,     
                                          2017         2017         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%
                                                                            

Contact Information

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

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