Royal Bancshares of Pennsylvania, Inc. Reports Second Quarter Profit Driven By Net Interest Margin Expansion and Continued Credit Quality Improvement

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BALA CYNWYD, PA--(Marketwired - July 26, 2017) - Royal Bancshares of Pennsylvania, Inc. ("Company") (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,
2017

At December 31,
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
Balance

Interest

Yield

Average
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
Balance

Interest

Yield

Average
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 June 30,
2017

At March 31,
2017

At December 31,
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

%

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