Royal Bancshares of Pennsylvania, Inc. Announces Results for

Royal Bancshares of Pennsylvania, Inc. Announces Results for the
Third Quarter and Nine Months Ended September 30, 2012 
NARBERTH, PA -- (Marketwire) -- 11/14/12 --  Royal Bancshares of
Pennsylvania, Inc. (NASDAQ: RBPAA) ("Royal"), parent company of Royal
Bank America, today announced its consolidated financial results for
the third quarter and nine months period ended September 30, 2012. 
For the three-month period ended September 30, 2012, net loss
attributable to Royal was $4.8 million, or 40 cents per basic and
diluted common share, as compared to a net loss of $1.9 million, or
18 cents per basic and diluted common share for the three-month
period ended September 30, 2011.  
The net loss for the current quarter was primarily attributable to
impairment charges of $2.4 million on other real estate owned (OREO),
$1.8 million in provision for loan and lease losses and $856 thousand
in impairment charges on loans held for sale. The provision for loan
and lease losses and OREO impairment charges increased $1.3 million
and $871 thousand, respectively, when comparing the third quarter of
2012 to the third quarter of 2011. Additionally, net interest income
declined $1.5 million and was associated with a 48 basis point
decline in net interest margin quarter versus quarter. The decline in
net interest margin was primarily due to two main factors: changes in
the mix of interest earning assets and a significant decline in
yields earned on investment securities. Partially offsetting these
unfavorable changes quarter versus quarter was a $1.1 million
increase in other income which was primarily associated with a $1.4
improvement in other than temporary impairment charges on investment
securities. 
For the nine month period ended September 30, 2012, net loss
attributable to Royal was $7.6 million, or 69 cents per basic and
diluted common share, which was equivalent to the net loss of $7.6
million, or 69 cents per basic and diluted common share reported for
the nine month period ended September 30, 2011.  
The year to date loss in 2012 was mainly related to a provision for
loan and lease losses of $3.4 million, impairment charges of $3.4
million on OREO, a $2.0 million loss contingency accrual for
potential Department of Justice fines and penalties related to
Royal's 
tax lien subsidiaries, an impairment charge on investment
securities of $859 thousand related to one private equity real estate
fund and an $856 thousand impairment charge on loans held for sale
related to one property. The provision for loan and lease losses and
OREO impairment improved $2.2 million and $1.2 million, respectively,
when comparing the nine months ended September 30, 2012 to the prior
year period. Partially offsetting this improvement year over year was
a decrease in net interest income of $2.3 million as a result of the
decline in net interest margin.  
Robert R. Tabas, Chairman and CEO, commented, "While we are
disappointed with the results for the quarter we remain confident
that we are doing the right things to position the bank for the
future with an eye towards improving shareholder value. The bank has
benefited from enhanced risk management processes and procedures,
capital ratios in excess of required minimums, improvements in
operations, and a renewed focus on small-to-medium-sized businesses
and consumer banking needs, traditional strengths of community banks
like ours." 
Non-Performing Assets 
Non-performing loans during the third quarter and first nine months
of 2012 decreased $4.3 million and $23.5 million respectively,
reflecting a continuation of a trend wherein non-performing loans
have decreased by 62.2% and non-performing assets have decreased by
52.0% since December 31, 2009. 
Tabas noted, "We have shown steady incremental progress, reducing
non-performing loans and non-performing assets to their lowest levels
since early 2008." 


 
                                                                            
                    September 30,  December 31,  December 31,  December 31, 
                         2012          2011          2010          2009     
                    ------------- ------------- ------------- --------------
Non-performing                                                              
 loans              $27.8 million $51.3 million $65.8 million $ 73.7 million
Non-performing                                                              
 assets (which                                                              
 includes OREO)     $49.9 million $72.3 million $95.0 million $104.0 million
                                                                            
                                                                            
                                  September 30,  December 31,  December 31, 
                                       2012          2011          2010     
                                  -------------  ------------  ------------ 
Percentage of Non-Accrual Loans                                             
 to Total Loans                        8.05    %     12.02   %     12.50   %
Percentage of Non-Performing                                                
 Assets to Total Assets                6.23    %     8.53    %     9.69    %

 
Maintaining Capital Ratios 
Tabas noted, "Maintaining a strong capital base has been a strategic
focus for Royal all throughout the recent financial downturn, and
this quarter was no exception. We have managed our balance sheet to
drive capital and liquidity, and as a result, Royal continues to
benefit from our regulatory capital ratios remaining above required
minimums." 
Capital Ratios as reported under Regulatory Accounting Principles
(RAP) for Royal Bank America 


 
                                                                            
                                  September 30,  December 31,  December 31, 
                                       2012          2011          2010     
                                  -------------  ------------  ------------ 
Total capital (to risk-weighted                                             
 assets)                              17.09    %     15.04   %     13.76   %
Tier I capital (to risk-weighted                                            
 assets)                              15.81    %     13.77   %     12.49   %
Tier I capital (to average                                                  
 assets, leverage)                     9.12    %     9.09    %     8.03    %

 
Net Interest Margin Compression
 The $1.5 million decrease in net
interest income for the third quarter of 2012 was due to a 48 basis
point decline in net interest margin compared to the third quarter of
2011. Factors contributing to the margin compression include a
declining loan portfolio as evidenced by the $86.9 million decline in
the average loan balances quarter versus quarter and a corresponding
increase in the investment portfolio of $27.2 million. For the third
quarter of 2012, loans represented 49.4% of average interest earning
assets compared to 56.3% for the comparable quarter in 2011. Due to
the current historically low interest rate environment, the Company
has experienced an accelerated amortization of premiums paid on its
mortgage backed securities ("MBS") and collateralized mortgage
obligations ("CMO") portfolio as many homeowners are refinancing
their ex
isting loans to take advantage of current rates. The
accelerated amortization of premiums coupled with the replacement of
sold and called higher yielding investment securities and the
replacement of increased payments received on cash flowing investment
securities with lower yielding government agency securities during
the continued lower interest rate environment has had a significant
impact on the yield earned on investment securities, which declined
139 basis points quarter versus quarter.  
Management has taken steps to mitigate the decline in the net
interest margin including reducing the cost of interest bearing
liabilities as reflected in the 34 basis point decline quarter versus
quarter. The Company has been able to lessen the impact of the
decline in loan balances and yield on investments by reducing funding
costs through the re-pricing of retail CDs and by the run off of
higher costing brokered deposits and the repayment of FHLB advances.  
For the nine months ended September 30, 2012, net interest income
declined by $2.3 million compared to the same period of 2011, which
was associated with a 7 basis point decline in net interest margin.
The decrease was primarily driven by a decline in average loan
balances of $89.9 million, or 18.5%, year over year and a significant
decline in the yield earned on investments of 114 basis points. The
decline in the yield earned on investments was related to the
explanation in the third quarter results above. Partially offsetting
this decline was a 34 basis point improvement in the yield on loans
which is associated with improved credit quality. Loans amounted to
52.0% of the total interest earning assets in the first nine months
of 2012 versus 57.7% for the comparable period of 2011, while
investments amounted to 45.1% of total interest earning assets versus
38.0% in the comparable nine month period of 2011. 
About Royal Bancshares of Pennsylvania, Inc. 
 Royal Bancshares of
Pennsylvania, Inc., headquartered in Narberth, Pennsylvania, is the
parent company of Royal Bank America, which for the past nearly 50
years has played a lead role in the growth and development of our
region by empowering small businesses, entrepreneurs and individuals
to achieve their financial goals and enrich our communities. 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, 2011. 


 
                                                                            
                                                                            
ROYAL BANCSHARES OF PENNSYLVANIA, INC.                                      
CONDENSED INCOME STATEMENT                                                  
                                                                            
(in thousands, except                                                       
 for loss per common           Three Months              Nine Months        
 share)                       Ended Sep. 30th           Ended Sep. 30th     
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
                         (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited) 
Interest Income          $     7,761  $    10,049  $    24,990  $    30,623 
Interest Expense               2,379        3,217        7,709       11,076 
                         -----------  -----------  -----------  ----------- 
Net Interest Income            5,382        6,832       17,281       19,547 
Provision for Loan                                                          
 Losses                        1,761          428        3,360        5,568 
                         -----------  -----------  -----------  ----------- 
Net Interest Income                                                         
 after Provision               3,621        6,404       13,921       13,979 
Non Interest Income            1,151           73        3,757        4,224 
Non Interest Expense           9,409        8,109       26,068       24,863 
                         -----------  -----------  -----------  ----------- 
Loss before Taxes             (4,637)      (1,632)      (8,390)      (6,660)
Income Taxes                       0            0            0            0 
                         -----------  -----------  -----------  ----------- 
Net Loss                      (4,637)      (1,632)      (8,390)      (6,660)
Less Net Income (Loss)                                                      
 attributable to                                                            
 noncontrolling interest         175          261         (759)         969 
Net Loss attributable to                                                    
 Royal Bancshares        $    (4,812) $    (1,893) $    (7,631) $    (7,629)
                         ===========  ===========  ===========  =========== 
Loss per common share -                                                     
 basic and diluted       $     (0.40) $     (0.18) $     (0.69) $     (0.69)
                         ===========  ===========  ===========  =========== 
SELECTED RATIOS:                                                            
Return on Average Assets        -2.3%        -0.8%        -1.2%        -1.1%
Return on Average Equity       -26.3%        -9.4%       -13.7%       -12.4%
Average Equity to Assets         8.9%         9.0%         8.9%         8.9%
Book Value Per Share     $      2.60  $      3.26  $      2.60  $      3.26 
                                                                            
                                                                            
                                                                            
CONDENSED BALANCE SHEET                                                     
                                                                            
(in thousands)                                   Sep. 30, 2012 Dec. 31, 2011
                                                  (unaudited)   (unaudited) 
Cash and Cash Equivalents                        $      39,450 $      24,506
Investment Securities                                  367,621       339,018
Loans & Leases (net)                                   328,350       410,432
Premises and Equipment (net)                             5,313         5,394
Other Real Estate Owned 
(net)                           22,080        21,016
Accrued Interest receivable                             10,893        15,463
Other Assets                                            27,974        32,619
                                                 ------------- -------------
    Total Assets                                 $     801,681 $     848,448
                                                 ------------- -------------
                                                                            
Deposits                                               571,250       575,916
Borrowings                                             108,446       148,000
Other Liabilities                                       27,211        22,813
Subordinated debentures                                 25,774        25,774
Royal Bancshares Shareholders' Equity                   64,894        71,080
Noncontrolling Interest                                  4,106         4,865
                                                 ------------- -------------
    Total Equity                                        69,000        75,945
                                                 ------------- -------------
    Total Liabilities and Equity                 $     801,681 $     848,448
                                                 ------------- -------------
                                                                            
                                                                            
                                                                            
AVERAGE BALANCE SHEET                                                       
Net Interest Margin - 3Q                                                    
                                                                            
                     For the three months ended  For the three months ended 
                         September 30, 2012          September 30, 2011     
                     --------------------------  -------------------------- 
(In thousands,        Average                     Average                   
 except percentages)  Balance   Interest  Yield   Balance   Interest  Yield 
                     --------- --------- ------  --------- --------- ------ 
Cash equivalents     $  24,381 $      10   0.16% $  27,112 $      19   0.28%
Investment                                                                  
 securities            352,336     1,453   1.64%   325,114     2,485   3.03%
Loans                  367,664     6,298   6.81%   454,516     7,545   6.59%
                     --------- --------- ------  --------- --------- ------ 
Total interest                                                              
 earning assets        744,381     7,761   4.15%   806,742    10,049   4.94%
Non-earning assets      73,323                      80,138                  
                     ---------                   ---------                  
    Total average                                                           
     assets          $ 817,704                   $ 886,880                  
                     =========                   =========                  
Interest-bearing                                                            
 deposits                                                                   
  NOW and money                                                             
   markets           $ 224,898       292   0.52% $ 228,269       475   0.83%
  Savings               16,901        14   0.33%    15,689        21   0.53%
  Time deposits        277,878     1,134   1.62%   297,939     1,436   1.91%
                     --------- --------- ------  --------- --------- ------ 
Total interest                                                              
 bearing deposits      519,677     1,440   1.10%   541,897     1,932   1.41%
Borrowings             135,864       939   2.75%   176,677     1,285   2.89%
                     --------- --------- ------  --------- --------- ------ 
Total interest                                                              
 bearing liabilities   655,541     2,379   1.44%   718,574     3,217   1.78%
Non-interest bearing                                                        
 deposits               56,963                      55,236                  
Other liabilities       32,461                      33,173                  
Shareholders' equity    72,739                      79,897                  
                     ---------                   ---------                  
    Total average                                                           
     liabilities and                                                        
     equity          $ 817,704                   $ 886,880                  
                     =========                   =========                  
    Net interest                                                            
     margin                    $   5,382   2.88%           $   6,832   3.36%
                               =========                   =========        
                                                                            
                                                                            
                                                                            
AVERAGE BALANCE SHEET                                                       
Net Interest Margin - YTD                                                   
                                                                            
                      For the nine months ended   For the nine months ended 
                         September 30, 2012          September 30, 2011     
                     --------------------------  -------------------------- 
(In thousands,        Average                     Average                   
 except percentages)  Balance   Interest  Yield   Balance   Interest  Yield 
                     --------- --------- ------  --------- --------- ------ 
Cash equivalents     $  22,091 $      28   0.17% $  35,890 $      70   0.26%
Investments                                                                 
 securities            343,622     5,196   2.02%   320,129     7,567   3.16%
Loans                  396,526    19,766   6.66%   486,377    22,986   6.32%
                     --------- --------- ------  --------- --------- ------ 
    Total interest                                                          
     earning assets    762,239    24,990   4.38%   842,396    30,623   4.86%
Non-earning assets      72,340                      81,597                  
                     ---------                   ---------                  
    Total average                                                           
     assets          $ 834,579                   $ 923,993                  
                     =========                   =========                  
Interest-bearing                                                            
 deposits                                                                   
  NOW and money                                                             
   markets           $ 227,008     1,126   0.66% $ 219,296     1,506   0.92%
  Savings               16,911        57   0.45%    15,710        65   0.55%
  Time deposits        279,154     3,458   1.65%   344,306     5,635   2.19%
                     --------- --------- ------  --------- --------- ------ 
    Total interest                                                          
     bearing                                                                
     deposits          523,073     4,641   1.19%   579,312     7,206   1.66%
Borrowings             154,533     3,068   2.65%   178,393     3,870   2.90%
                     --------- --------- ------  --------- --------- ------ 
    Total interest                                                          
     bearing                                                                
     liabilities       677
,606     7,709   1.52%   757,705    11,076   1.95%
Non-interest bearing                                                        
 deposits               54,663                      58,022                  
Other liabilities       27,723                      26,028                  
Shareholders' equity    74,587                      82,238                  
                     ---------                   ---------                  
    Total average                                                           
     liabilities and                                                        
     equity          $ 834,579                   $ 923,993                  
                     =========                   =========                  
    Net interest                                                            
     margin                    $  17,281   3.03%           $  19,547   3.10%
                               =========                   =========        

  
Contact: 
Marc Sanders 
Vice President - Marketing 
610-668-4700 
marcsanders@royalbankamerica.com 
 
 
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