Royal Bancshares of Pennsylvania, Inc. Reports Profit for Second Quarter 2016

Quality Core Business and Margin Growth Boost Earnings

BALA CYNWYD, PA--(Marketwired - July 20, 2016) - 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 $2.0 million, or $0.06 per diluted share, and $4.2 million, or $0.12 per diluted share, for the three and six months ended June 30, 2016, respectively. Net income attributable to the Company was $1.5 million, or $0.03 per diluted share, and $3.1 million, or $0.07 per diluted share, for the three and six months ended June 30, 2015, respectively.

The Company's President and Chief Executive Officer, Kevin Tylus, noted, "Consistent quality loan and deposit growth drove our increase in the second quarter and 2016 year to date earnings. Our financial performance is based on lending and customer strategies focused within our local communities. We are successfully managing our balance sheet growth while faced with the challenges of low interest rates, local competition, and volatility in domestic and global markets. We continue to meet our commitment of providing a wide range of consumer and commercial products as we recently added first position residential mortgages through a new arrangement with a local mortgage company experienced in providing and servicing residential mortgages for community banks."

Highlights for the three and six months ended June 30, 2016 included:

Balance Sheet Trends:

  • Total assets were $816.5 million at June 30, 2016, an increase of $17.9 million, or 2.2%, from $798.5 million at March 31, 2016, and grew $28.2 million, or 3.6%, from $788.3 million at December 31, 2015.
  • Total loans were $547.1 million at June 30, 2016, an increase of $15.9 million, or 3.0%, from $531.1 million at March 31, 2016, and grew $48.0 million, or 9.6%, from $499.1 million at December 31, 2015. Increases were recognized in multiple commercial loan portfolio classes and the leasing portfolio.
  • Total deposits were $599.2 million at June 30, 2016, an increase of $9.9 million, or 1.7%, from $589.3 million at March 31, 2016, and grew $21.4 million, or 3.7%, from $577.9 million at December 31, 2015.

Asset Quality:

  • The ratio of non-performing loans to total loans continues to show improvement and was 0.88%, 0.98%, and 1.10% at June 30, 2016, March 31, 2016, and December 31, 2015, respectfully. Excluding tax liens, the ratio of non-performing loans to total loans was 0.68%, 0.80% and 0.88% at June 30, 2016, March 31, 2016, and December 31, 2015, respectively.
  • Non-performing loans of $4.8 million at June 30, 2016 decreased $422 thousand, or 8.1%, from $5.2 million at March 31, 2016, and decreased $691 thousand, or 12.6%, from $5.5 million at December 31, 2015.
  • The ratio of non-performing assets to total assets was 1.47%, 1.54%, and 1.64% at June 30, 2016, March 31, 2016, and December 31, 2015, respectively. Excluding tax lien assets, the ratio of non-performing assets to total assets was 0.49%, 0.56%, and 0.59% at June 30, 2016, March 31, 2016, and December 31, 2015, respectively.
  • Non-performing assets of $12.0 million at June 30, 2016, decreased $310 thousand, or 2.5%, from $12.3 million at March 31, 2016, and decreased $918 thousand, or 7.1%, from $12.9 million at December 31, 2015.
  • For the three and six months ended June 30, 2016, the Company recorded a provision to the allowance for loan and lease losses of $197 thousand and $409 thousand, respectively, compared to credits of $586 thousand and $1.2 million for same periods in 2015, respectively. The 2016 provision was primarily attributable to growth, specific reserves on the tax lien and leasing portfolios, and net charge-off activity within the leasing portfolio.

Income Statement and Other Highlights:

  • The return on average assets for the three and six months ended June 30, 2016 increased to 1.02% and 1.06%, respectively, compared to 0.81% and 0.85% for the three and six months ended June 30, 2015, respectively.
  • The return on average equity for the three and six months ended June 30, 2016 grew to 11.54% and 11.77%, respectively, compared to 9.03% and 9.56% for the three and six months ended June 30, 2015.
  • At June 30, 2016, the Company's Tier 1 leverage and Total Risk Based Capital ratios were 11.70% and 17.39%, respectively, compared to 12.44% and 18.57%, respectively, at December 31, 2015. The Common Equity Tier 1 ratio was 9.28% at June 30, 2016 compared to 9.37% at December 31, 2015.
  • Net interest income increased $937 thousand, or 17.1%, from $5.5 million for the three months ended June 30, 2015 to $6.4 million for the three months ended June 30, 2016. Net interest income increased $1.7 million, or 15.4%, from $11.2 million for the six months ended June 30, 2015 to $12.9 million for the six months ended June 30, 2016. The growth in net interest income was primarily related to an increase in interest income on loans and the average yield earned on average interest-earning assets.
  • The net interest margin grew to 3.41% for the second quarter of 2016 compared to 3.26% for the second quarter in 2015 and was 3.46% for the six months ended June 30, 2016 compared to 3.33% for the six months ended June 30, 2015. The increase in net interest margin was directly related to an increase in the yield on average interest-earning assets due to a significant change in the composition of such assets.
  • Non-interest income for the second quarter of 2016 was $1.1 million and increased $156 thousand from $917 thousand for the second quarter of 2015. The quarterly improvement in non-interest income was impacted by a $350 thousand increase in net gains on the sale of investment securities and was partially offset by total other-than-temporary impairment ("OTTI") charges on investment securities of $146 thousand.
  • Non-interest income was $2.3 million for the six months ended June 30, 2016 and grew $796 thousand from $1.5 million for the six months ended June 30, 2015. Net gains on the sale of investment securities and income from Company owned life insurance increased $530 thousand and $407 thousand, respectively, from 2015. Partially offsetting these positive items was a $146 thousand OTTI charge. There was no OTTI charge in the 2015 period.
  • Non-interest expense was $5.0 million for the quarter ended June 30, 2016 and declined $325 thousand from $5.4 million for the comparable period in 2015. Contributing to the decrease in non-interest expense for the second quarter of 2016 was a $244 decline in the provision for unfunded loan commitments due to a decline in the historical loss rates applied in the calculation of the reserve for unfunded loan commitments. Additionally, net other real estate owned ("OREO") expenses and occupancy and equipment expenses declined $72 thousand and $56 thousand, respectively. Partially offsetting the decrease in non-interest expense was a planned increase of $49 thousand in salaries and benefits during the second quarter of 2016.
  • Non-interest expense was $10.3 million for the six months ended June 30, 2016 and decreased $199 thousand from $10.5 million for the comparable period in 2015. Contributing to the decrease in non-interest expense for 2016 was a $521 thousand decline in the provision for unfunded loan commitments for the reason mentioned previously and a decrease of $88 thousand in occupancy and equipment expenses. Partially offsetting the decrease in non-interest expense was a planned increase of $156 thousand in salaries and benefits. Additionally, net OREO expenses and communications and data processing expenses increased $105 thousand and $98 thousand.

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 thirteen 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, 2015.

                                                                            
ROYAL BANCSHARES OF PENNSYLVANIA, INC.                                      
CONSOLIDATED INCOME STATEMENTS                                              
(Unaudited, dollars in thousands, except per share data)                    
                                            For the three     For the six   
                                             months ended     months ended  
                                               June 30,         June 30,    
                                           ---------------- ----------------
                                              2016    2015     2016    2015 
                                           ------- -------- ------- --------
Interest income                            $ 8,181 $ 7,071  $16,395 $14,351 
Interest expense                             1,764   1,591    3,487   3,162 
                                           ------- -------- ------- --------
Net Interest Income                          6,417   5,480   12,908  11,189 
Provision (credit) for loan and lease                                       
 losses                                        197    (586)     409  (1,166)
                                           ------- -------- ------- --------
Net interest income after provision                                         
 (credit) for loan and lease losses          6,220   6,066   12,499  12,355 
Non-interest income                          1,073     917    2,280   1,484 
Non-interest expense                         5,046   5,371   10,267  10,466 
                                           ------- -------- ------- --------
Income before taxes                          2,247   1,612    4,512   3,373 
Income tax expense                              60       -       60       - 
                                           ------- -------- ------- --------
Net Income                                   2,187   1,612    4,452   3,373 
Less net income attributable to                                             
 noncontrolling interest                       153     151      229     321 
                                           ------- -------- ------- --------
Net Income Attributable to Royal                                            
 Bancshares                                $ 2,034 $ 1,461  $ 4,223 $ 3,052 
                                           ======= ======== ======= ========
  Less Preferred stock Series A                                             
   accumulated dividend and accretion      $   338 $   429  $   672 $   853 
                                           ======= ======== ======= ========
Net income to common shareholders          $ 1,696 $ 1,032  $ 3,551 $ 2,199 
                                           ======= ======== ======= ========
Income Per Common Share - Basic and                                         
 Diluted                                   $  0.06 $  0.03  $  0.12 $  0.07 
                                           ======= ======== ======= ========
                                                                            
                                                                            
SELECTED PERFORMANCE RATIOS:                                                
                                           For the three      For the six   
                                              months            months      
                                          ended June 30,    ended June 30,  
                                         ----------------  ---------------- 
                                            2016     2015     2016     2015 
                                         -------  -------  -------  ------- 
Return on Average Assets                    1.02%    0.81%    1.06%    0.85%
Return on Average Equity                   11.54%    9.03%   11.77%    9.56%
Average Equity to Average Assets            8.82%    9.00%    9.05%    8.89%
Book Value Per Share                     $  1.91  $  1.53  $  1.91  $  1.53 
                                                                            
                                                                            
                                            At June 30,     At December 31, 
Capital ratios (US GAAP):                            2016              2015 
                                         ----------------  ---------------- 
Company Tier 1 Leverage                             11.70%            12.44%
Company Total Risk Based Capital                    17.39%            18.57%
Company Common Equity Tier 1                         9.28%             9.37%
                                                                            
                                                                            
ROYAL BANCSHARES OF PENNSYLVANIA, INC.                                      
CONSOLIDATED BALANCE SHEETS                                                 
(Unaudited, in thousands)                                                   
                                                          At December 31,   
                                     At June 30, 2016           2015        
                                   -------------------- --------------------
Cash and cash equivalents             $         26,603     $         25,420 
Investment securities, at fair                                              
 value                                         204,058              224,067 
Other investment, at cost                        2,250                2,250 
Federal Home Loan Bank stock                     2,778                2,545 
Loans and leases                                                            
  Commercial real estate and                                                
   multi-family                                260,786              241,928 
  Construction and land                                                     
   development                                  65,385               47,984 
  Commercial and industrial                     97,270               85,980 
  Residential real estate                       50,104               51,588 
  Leases                                        66,898               64,341 
  Tax certificates                               4,390                4,755 
  Consumer                                       2,254                2,527 
                                   -------------------- --------------------
Loans and leases                               547,087              499,103 
Allowance for loan and lease                                                
 losses                                        (10,008)              (9,689)
                                   -------------------- --------------------
Loans and leases, net                          537,079              489,414 
Bank owned life insurance                       16,370               16,133 
Premises and equipment, net                      4,346                3,959 
Other real estate owned, net                     7,208                7,435 
Accrued interest receivable                      4,065                4,149 
Other assets                                    11,695               12,911 
                                   -------------------- --------------------
    Total Assets                      $        816,452     $        788,283 
                                   ==================== ====================
                                                                            
Deposits                              $        599,244     $        577,892 
Borrowings                                      95,744               90,970 
Other liabilities                               22,743               21,349 
Subordinated debentures                         25,774               25,774 
Royal Bancshares shareholders'                                              
 equity                                         72,427               71,904 
Noncontrolling interest                            520                  394 
                                   -------------------- --------------------
    Total Equity                                72,947               72,298 
                                   -------------------- --------------------
    Total Liabilities and Equity      $        816,452     $        788,283 
                                   ==================== ====================
                                                                            
                                                                            
ROYAL BANCSHARES OF PENNSYLVANIA, INC.                                      
NET INTEREST INCOME AND MARGIN                                              
(Unaudited, in thousands, except percentages)                               
                             For the three months     For the three months  
                              ended June 30, 2016      ended June 30, 2015  
                           ------------------------ ------------------------
                            Average                  Average                
                            Balance Interest  Yield  Balance Interest  Yield
                           -------- -------- ------ -------- -------- ------
Cash and cash equivalents  $ 15,183 $     17  0.45% $ 20,278 $      8  0.16%
Investment securities       202,857    1,206  2.39%  223,012    1,340  2.41%
Loans                       537,862    6,958  5.20%  431,957    5,723  5.31%
                           -------- --------        -------- --------       
Total interest-earning                                                      
 assets                     755,902    8,181  4.35%  675,247    7,071  4.20%
Non-interest earning                                                        
 assets                      47,463                   46,056                
                           --------                 --------                
Total average assets       $803,365                 $721,303                
                           ========                 ========                
Interest-bearing deposits                                                   
  NOW and money markets    $226,286 $    204  0.36% $201,292 $    168  0.33%
  Savings                    72,752      128  0.71%   22,268       10  0.18%
  Certificates of deposit   207,825      735  1.42%  220,376      742  1.35%
                           -------- --------        -------- --------       
Total interest-bearing                                                      
 deposits                   506,863    1,067  0.85%  443,936      920  0.83%
Borrowings                  116,973      697  2.40%  117,493      671  2.29%
                           -------- --------        -------- --------       
Total interest-bearing                                                      
 liabilities                623,836    1,764  1.14%  561,429    1,591  1.14%
Non-interest bearing                                                        
 deposits                    87,212                   73,831                
Other liabilities            21,468                   21,135                
Shareholders' equity         70,849                   64,908                
                           --------                 --------                
Total average liabilities                                                   
 and equity                $803,365                 $721,303                
                           ========                 ========                
    Net interest income             $  6,417                 $  5,480       
                                    ========                 ========       
    Net interest margin                       3.41%                    3.26%
                                                                            
                                                                            
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, 2016            June 30, 2015     
                           ------------------------ ------------------------
                            Average                  Average                
                            Balance Interest  Yield  Balance Interest  Yield
                           -------- -------- ------ -------- -------- ------
Cash and cash equivalents  $ 13,823 $     33  0.48% $ 16,028 $     13  0.16%
Investment securities       210,267    2,540  2.43%  236,253    2,916  2.49%
Loans                       525,399   13,822  5.29%  425,826   11,422  5.41%
                           -------- --------        -------- --------       
Total interest-earning                                                      
 assets                     749,489   16,395  4.40%  678,107   14,351  4.27%
Non-interest earning                                                        
 assets                      48,222                   45,971                
                           --------                 --------                
Total average assets       $797,711                 $724,078                
                           ========                 ========                
Interest-bearing deposits                                                   
  NOW and money markets    $227,228 $    409  0.36% $203,102 $    326  0.32%
  Savings                    67,334      235  0.70%   20,788       18  0.18%
  Certificates of deposit   207,929    1,463  1.41%  222,552    1,484  1.34%
                           -------- --------        -------- --------       
Total interest-bearing                                                      
 deposits                   502,491    2,107  0.84%  446,442    1,828  0.83%
Borrowings                  116,243    1,380  2.39%  117,823    1,334  2.28%
                           -------- --------        -------- --------       
Total interest-bearing                                                      
 liabilities                618,734    3,487  1.13%  564,265    3,162  1.13%
Non-interest bearing                                                        
 deposits                    84,390                   73,413                
Other liabilities            22,413                   22,031                
Shareholders' equity         72,174                   64,369                
                           --------                 --------                
Total average liabilities                                                   
 and equity                $797,711                 $724,078                
                           ========                 ========                
    Net interest income             $ 12,908                 $ 11,189       
                                    ========                 ========       
    Net interest margin                       3.46%                    3.33%
                                                                            
                                                                            
ROYAL BANCSHARES OF PENNSYLVANIA, INC.                                      
ASSET QUALITY TRENDS                                                        
(Unaudited, in thousands, except percentages)                               
                                          At June   At March At December 31,
                                          30, 2016  31, 2016       2015     
                                         --------- --------- ---------------
                                                                            
Non-performing loans                     $   3,691 $   4,185   $       4,367
Non-performing tax certificates              1,110     1,038           1,125
                                         --------- --------- ---------------
Total non-performing loans                   4,801     5,223           5,492
                                                                            
Other real estate owned-loans                  243       243             220
Other real estate owned-tax certificates     6,965     6,853           7,215
                                         --------- --------- ---------------
Total other real estate owned                7,208     7,096           7,435
                                         --------- --------- ---------------
Total non-performing assets              $  12,009 $  12,319   $      12,927
                                         ========= ========= ===============
                                                                            
Ratio of non-performing loans to total                                      
 loans                                       0.88%     0.98%           1.10%
Ratio of non-performing assets to total                                     
 assets                                      1.47%     1.54%           1.64%
Ratio of allowance for loan and lease                                       
 losses to total loans                       1.83%     1.87%           1.94%
Ratio of allowance for loan and lease                                       
 losses to non-performing loans            208.46%   190.33%         176.42%
                                                                            

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

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.