Royal Bancshares of Pennsylvania, Inc. Reports First

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News Desk 2018
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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 March 31,     At 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 March 31, 2017     At December 31, 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 ended     For the three months ended  
    March 31, 2017     March 31, 2016  
    Average Balance   Interest   Yield     Average 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 March 31, 2017     At December 31, 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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