Royal Bancshares of Pennsylvania, Inc. Reports Second Quarter Profit

BALA CYNWYD, PA--(Marketwired - Jul 21, 2015) - 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 $1.5 million, or $.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, compared to net income of $1.4 million, or $.04 per diluted share, and $2.9 million, or $0.10 per diluted share, for the three and six months ended June 30, 2014, respectively. Diluted earnings per share for 2015 were impacted by the increase in average common shares outstanding as a result of the private placement and shareholders' rights offering which closed in the third quarter of 2014.

Kevin Tylus, the Company's President and Chief Executive Officer, noted, "Loan and customer growth, coupled with the continuing trend in improved credit quality, positively contributed to second quarter and 2015 year to date earnings. Portfolio growth from our leasing subsidiary also added to earnings. Our multi-faceted retail plan to attract and retain consumer deposits continued with the relocation from Jenkintown to the bustling new Willow Grove branch site. And upon regulatory approval of our entry into contiguous Delaware County, PA, the acquisition of our new branch in the county seat of Media will add approximately $38 million, or 7%, to our deposit base and $10 million, or 2%, in commercial loans."

The Company continues its focus on modernizing the ways customers can access its products and services. A new custom branded "smart phone" application is now available and provides a simpler on-line banking experience, while on-line loan applications are increasing. The suite of cash management products, together with improved physical locations and the Princeton, NJ loan production office, are helping to drive the growth within the Company's attractive geography.

Highlights for the three and six months ended June 30, 2015 included:

• Total loans were $447.6 million at June 30, 2015, an increase of $29.0 million, or 6.9%, from $418.7 million at March 31, 2015, and an increase of $32.5 million, or 7.8%, from $415.1 million at December 31, 2014. The majority of the increase was in the commercial real estate portfolio which grew $25.6 million, or 11.1%, from $230.5 million at March 31, 2015 to $256.1 million at June 30, 2015.

• Non-performing loans of $5.4 million at June 30, 2015 decreased $3.0 million, or 35.5%, from $8.4 million at March 31, 2015 and decreased $4.4 million, or 45.1% from $9.8 million at December 31, 2014. The ratio of non-performing loans to total loans was 1.20%, 1.99%, and 2.36% at June 30, 2015, March 31, 2015, and December 31, 2014, respectively. Excluding tax liens, the ratio of non-performing loans to total loans was 0.99%, 1.82%, and 1.99% at June 30, 2015, March 31, 2015 and December 31, 2014, respectively.

• Non-performing assets of $15.9 million at June 30, 2015 decreased $3.0 million, or 15.8%, from $18.9 million at March 31, 2015 and decreased $3.7 million, or 18.8%, from December 31, 2014. The ratio of non-performing assets to total assets was 2.19%, 2.61%, and 2.67% at June 30, 2015, March 31, 2015, and December 31, 2014, respectively. Excluding tax liens, the ratio of nonperforming assets to total assets was 0.67%, 1.11%, and 1.19% at June 30, 2015, March 31, 2015, and December 31, 2014, respectively. The purposeful downsizing of the tax lien business, which is not core to Royal Bank's strategy, has seen a favorable reduction from a high of over $100 million in tax lien assets in 2009 to less than $18.0 million in assets at June 30, 2015.

• The return on average assets for the three and six months ended June 30, 2015 was 0.81% and 0.85%, respectively, compared to 0.75% and 0.79% for the three and six months ended June 30, 2014.

• The return on average equity for the three and six months ended June 30, 2015 was 9.03% and 9.56%, respectively, compared to 10.35% and 11.13% for the three and six months ended June 30, 2014. The return on average equity was impacted by the increase in average common equity as a result of the private placement and shareholders' rights offering which closed in the third quarter of 2014.

• At June 30, 2015, the Company's Tier 1 leverage and Total Risk Based Capital ratios were 12.5% and 18.8%, respectively, compared to 11.9% and 19.2%, respectively, at December 31, 2014. The Common Equity Tier 1 ratio was 9.2% at June 30, 2015.

• Net interest income increased $76,000, or 0.7%, from $11.1 million for the six months ended June 30, 2014 to $11.2 million for the six months ended June 30, 2015, but declined $107,000, or 1.9%, from $5.6 million for the three months ended June 30, 2014 to $5.5 million for the three months ended June 30, 2015. The decrease in the quarterly net interest income was related to a decline in the average yields earned on average investment securities and average loans, which was partially offset by an increase in the average loan balances.

• The net interest margin was 3.26% for the second quarter of 2015 compared to 3.25% for the comparable period in 2014 and was 3.33% for the six months ended June 30, 2015 compared to 3.24% for the six months ended June 30, 2014. The six month increase of 9 basis points was directly related to an increase in the yield on average interest-earning assets.

• Non-interest income for the quarter ended June 30, 2015 was $1.3 million and increased $467,000, or 57.2%, from $816,000 for the quarter ended June 30, 2014. Non-interest income for the six months ended June 30, 2015 was $2.1 million and increased $542,000, or 34.1%, from $1.6 million for the six months ended June 30, 2014. The increases for the three and six month periods ended June 30, 2015 were related to increases of $293,000 and $480,000, respectively, in net gains on the sale of investment securities. During 2015, the Company sold investment securities to fund the loan growth.

• Non-interest expense for the quarter ended June 30, 2015 was $5.7 million and increased $706,000, or 14.0%, from $5.0 million for the quarter ended June 30, 2014. Non-interest expense for the six months ended June 30, 2015 was $11.1 million and increased $759,000, or 7.3%, from $10.4 million for the six months ended June 30, 2014. The increases for the three and six month periods ended June 30, 2015 were related to increases of $138,000 and $369,000, respectively, in employee salaries and benefits and increases of $311,000 and $359,000, respectively, in the provision for unfunded loan commitments due to the growth in such commitments.

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, 2014.

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited, dollars in thousands, except per share data)
			For the three months ended June 30,								For the six months ended June 30,
			2015				2014				2015				2014
Interest income			$	7,071			$	7,209			$	14,351			$	14,360
Interest expense				1,591				1,622				3,162				3,247
Net Interest Income				5,480				5,587				11,189				11,113
Credit for loan and lease losses				(586	)			(75	)			(1,166	)			(714	)
Net interest income after credit for loan and lease losses				6,066				5,662				12,355				11,827
Non-interest income				1,283				816				2,130				1,588
Non-interest expense				5,737				5,031				11,112				10,353
Income before taxes				1,612				1,447				3,373				3,062
Income tax expense				-				-				-				-
Net Income				1,612				1,447				3,373				3,062
Less net income attributable to noncontrolling interest				151				69				321				187
Net Income Attributable to Royal Bancshares			$	1,461			$	1,378			$	3,052			$	2,875
	Less Preferred stock Series A accumulated dividend and accretion		$	429			$	829			$	853			$	1,493
Net income to common shareholders			$	1,032			$	549			$	2,199			$	1,382
Income Per Common Share - Basic and Diluted			$	0.03			$	0.04			$	0.07			$	0.10

SELECTED PERFORMANCE RATIOS:
		For the three months ended June 30,								For the six months ended June 30,
		2015				2014				2015				2014
Return on Average Assets			0.81	%			0.75	%			0.85	%			0.79	%
Return on Average Equity			9.03	%			10.35	%			9.56	%			11.13	%
Average Equity to Average Assets			9.00	%			7.22	%			8.89	%			7.07	%
Book Value Per Share		$	1.53			$	1.84			$	1.53			$	1.84
		At June 30,				At December 31,
Capital ratios (US GAAP):		2015				2014
Company Tier 1 Leverage			12.5	%			11.9	%
Company Total Risk Based Capital			18.8	%			19.2	%
Company Common Equity Tier 1			9.2	%			NA

ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
				At June 30, 2015				At December 31, 2014
Cash and cash equivalents				$	28,015			$	30,790
Investment securities, at fair value					212,022				250,368
Other investment, at cost					2,250				2,250
Federal Home Loan Bank stock					2,585				2,622
Loans and leases
	Commercial real estate and multi-family				222,311				188,861
	Construction and land development				33,786				45,662
	Commercial and industrial				83,825				76,489
	Residential real estate				42,166				42,992
	Leases				58,090				51,583
	Tax certificates				4,804				7,191
	Consumer				2,665				2,354
Loans and leases					447,647				415,132
Allowance for loan and lease losses					(10,036	)			(11,708	)
Loans and leases, net					437,611				403,424
Bank owned life insurance					15,884				15,636
Other real estate owned, net					10,531				9,779
Premises and equipment, net					5,279				5,201
Accrued interest receivable					4,459				5,270
Other assets					8,568				7,213
		Total Assets		$	727,204			$	732,553
Deposits				$	531,510			$	530,425
Borrowings					82,198				92,426
Other liabilities					22,435				21,322
Subordinated debentures					25,774				25,774
Royal Bancshares shareholders' equity					64,869				62,219
Noncontrolling interest					418				387
		Total Equity			65,287				62,606
		Total Liabilities and Equity		$	727,204			$	732,553

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, 2015									June 30, 2014
				Average Balance			Interest			Yield			Average Balance			Interest			Yield
Cash and cash equivalents				$	20,278		$	8		0.16	%		$	8,284		$	5		0.24	%
Investment securities					223,012			1,340		2.41	%			312,118			1,954		2.51	%
Loans					431,957			5,723		5.31	%			370,116			5,250		5.69	%
Total interest-earning assets					675,247			7,071		4.20	%			690,518			7,209		4.19	%
Non-interest earning assets					46,056									49,365
		Total average assets		$	721,303								$	739,883
Interest-bearing deposits
	NOW and money markets			$	201,292		$	168		0.33	%		$	211,381		$	166		0.31	%
	Savings				22,268			10		0.18	%			18,520			7		0.15	%
	Certificates of deposit				220,376			742		1.35	%			229,906			726		1.27	%
Total interest-bearing deposits					443,936			920		0.83	%			459,807			899		0.78	%
Borrowings					117,493			671		2.29	%			137,441			723		2.11	%
Total interest-bearing liabilities					561,429			1,591		1.14	%			597,248			1,622		1.09	%
Non-interest bearing deposits					73,831									64,702
Other liabilities					21,135									24,517
Shareholders' equity					64,908									53,416
		Total average liabilities and equity		$	721,303								$	739,883
		Net interest income					$	5,480								$	5,587
		Net interest margin								3.26	%								3.25	%

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, 2015									June 30, 2014
				Average Balance			Interest			Yield			Average Balance			Interest			Yield
Cash and cash equivalents				$	16,028		$	13		0.16	%		$	7,344		$	10		0.27	%
Investment securities					236,253			2,916		2.49	%			315,128			3,876		2.48	%
Loans					425,826			11,422		5.41	%			368,152			10,474		5.74	%
Total interest-earning assets					678,107			14,351		4.27	%			690,624			14,360		4.19	%
Non-interest earning assets					45,971									46,014
		Total average assets		$	724,078								$	736,638
Interest-bearing deposits
	NOW and money markets			$	203,102		$	326		0.32	%		$	210,810		$	333		0.32	%
	Savings				20,788			18		0.17	%			18,199			16		0.18	%
	Time deposits				222,552			1,484		1.34	%			233,233			1,463		1.26	%
Total interest-bearing deposits					446,442			1,828		0.83	%			462,242			1,812		0.79	%
Borrowings					117,823			1,334		2.28	%			133,863			1,435		2.16	%
Total interest-bearing liabilities					564,265			3,162		1.13	%			596,105			3,247		1.10	%
Non-interest bearing deposits					73,413									64,310
Other liabilities					22,031									24,137
Shareholders' equity					64,369									52,086
		Total average liabilities and equity		$	724,078								$	736,638
		Net interest income					$	11,189								$	11,113
		Net interest margin								3.33	%								3.24	%

ASSET QUALITY TRENDS
(Unaudited, in thousands, except percentages)
		At June 30, 2015				At March 31, 2015				At December 31, 2014
Non-performing loans		$	4,371			$	7,518			$	8,113
Non-performing tax certificates			1,013				834				1,700
Total nonperforming loans			5,384				8,352				9,813
Other real estate owned-loans			356				328				349
Other real estate owned-tax certificates			10,175				10,213				9,430
Total other real estate owned			10,531				10,541				9,779
Total nonperforming assets		$	15,915			$	18,893			$	19,592
Ratio of non-performing loans to total loans			1.20	%			1.99	%			2.36	%
Ratio of non-performing assets to total assets			2.19	%			2.61	%			2.67	%
Ratio of allowance for loan and lease losses to total loans			2.24	%			2.60	%			2.82	%
Ratio of allowance for loan and lease losses to non-performing loans			186.40	%			130.47	%			119.31	%