Royal Bank America Parent Co. Reports First Quarterly Profit Since Recession

Royal Bank America Parent Co. Reports First Quarterly Profit Since Recession 
NARBERTH, PA -- (Marketwired) -- 05/01/13 --  Royal Bancshares of
Pennsylvania, Inc. ("Company") (NASDAQ: RBPAA), parent company of
Royal Bank America ("Royal Bank"), today announced financial results
for the quarter ended March 31, 2013. First quarter 2013 highlights
included net income of $118,000 for the Company. Royal Bank earned
$203,000 for the quarter ended March 31, 2013. 
The Company experienced a 4% increase in loan balances for the
quarter which contributed to the revenue results. The Company battled
the challenging net interest margin environment banks are facing by
favorably changing the mix of earning assets, largely by funding
increased loan demand with a corresponding reduction in investment
securities. Earlier in the quarter, management had announced a set of
sweeping overhauls through the Company's "Profitability Improvement
Plan" (the "Plan") designed to enhance company-wide efficiency,
productivity and modernization. The Plan modestly contributed to the
decline in first quarter operating expenses, will contribute to a
reduction in operating expenses in future quarters and will improve
the expense run-rate to be more in line with peers. Additional
enhancements in credit management led to continued asset quality
improvement in the loan portfolio. 
For the three-month period ended March 31, 2013, net income
attributable to the Company was $118,000 compared to a net loss of
$869,000 for the comparable period in 2012. After accounting for the
preferred accumulated dividend, the loss per basic and diluted common
share was 3 cents for the quarter compared to a loss of 10 cents for
the comparable period in 2012. The Company earned 1 cent per share in
the first quarter of 2013 prior to accounting for the preferred
accumulated dividend (Non-GAAP). 
Company Chief Executive Officer Kevin Tylus noted, "Our announcement
today of a first quarter profit is welcomed news and a validation of
the efforts undertaken by our organization to address the challenges
that have impacted our company, the banking industry and our region
in recent years. We are encouraged by the increased demand for
quality loans, our growth in new customers and the initial success of
the profitability improvement plan. Our credit quality improvement is
a result of the ongoing efforts of our special assets and credit
teams and is a sign of a continually improving economy in the greater
Philadelphia markets." 
"The Company is evolving our brand significantly through additional
technology products designed for greater banking convenience for
commercial, consumer and retail customers. The recent launch of
mobile banking and products such as remote check capture, on-line
loan applications and expanded web features improve the customer
service experience, which has long been the hallmark of our bank.
These also add sales channels for us to grow valuable fee income."  
The nearly $1 million improvement in net income for the quarterly
period was related to $676,000 in gains on the sales of two premises,
a $335,000 decline in the provision for loan and lease losses and a
decline of a $1.6 million accrual recorded in the first quarter of
2012 for a Department of Justice (DOJ) fine related to the tax lien
subsidiaries. (After adjusting for the non-controlling interest, the
Company's 60% share of the DOJ fine amounted to $960,000.)
Additionally, other real estate owned ("OREO") expenses and
impairment associated with foreclosed properties declined $435,000
while gains on the sale of OREO increased $300,000. Partially
offsetting these positive items were a $1.2 million reduction in net
interest income, a $100,000 impairment on loans held for sale and
$87,000 in restructuring charges. The Company's leasing subsidiary
also contributed to the first quarter's profit. At March 31, 2013,
based on capital levels calculated under regulatory accounting
principles, Royal Bank's Tier 1 leverage and total risk-based capital
ratios were 8.96% and 15.92%, respectively, and continue to be above
required regulatory minimum ratios. 
Initial positive impact of profitability improvement plan 
Specific initiatives of the Plan effectuated in the first quarter of
2013 focused on adjustments to the size of the company and
discretionary expenses. These efforts, which included a 9% reduction
in workforce and an annualized reduction of approximately 10% of
discretionary expenses, were implemented and enhanced day-to-day
operations and the ability of the Company to drive new revenue. The
results of these actions are reflected both in the positive earnings
for the quarter and in the broader potential for annualized benefits. 
Pursuant to the ongoing effort to rationalize company owned real
estate, the Company sold its storage facility site in Philadelphia,
and a building in Narberth that housed a training facility. The
Company recorded gains of $676,000 as a result of these sales.
Additionally, the Company consolidated the leased Henderson Road
office between the King of Prussia and Bridgeport offices and
retained the majority of the deposits.  
As a result of the Plan, the Company recorded $87,000 in
restructuring charges during the first quarter of 2013. Salaries and
benefits, OREO expenses and impairment and professional and legal
fees declined $80,000, $435,000, and $344,000, respectively.  
Net Interest Margin 
The quarter over quarter decline in net interest income was
attributed to a $2.0 million reduction in interest income partially
offset by a reduction in interest expense of $833,000. The net
interest margin declined 36 basis points from 3.09% for the quarter
ended March 31, 2012 to 2.73% for the quarter ended March 31, 2013.
The significant decline in average loan balances; coupled with the
accelerated amortization of premiums on the investment portfolio and
the reinvestment of cash flows into lower yielding government agency
securities had a significant adverse impact on the yield on interest
earning assets.  
Management has taken steps to mitigate the decline in net interest
income including reducing funding costs through the intentional
runoff of higher priced certificates of deposit (CDs) and improving
the mix of interest earning assets by replacing lower-yielding
investment securities with higher-yielding loans. As a result of
these actions, at March 31, 2013, investment securities declined
$29.0 million and loans grew $13.9 million from year end 2012 leading
to a net interest margin increase of 10 basis points for the first
quarter 2013 compared to the net interest margin of 2.63% for the
quarter ended December 31, 2012. 
Continued decrease in non-performing assets 
At March 31, 2013, non-performing loans of $17.6 million decreased
$5.4 million from $23.0 million at December 31, 2012, reflecting a
continuation of a trend wherein non-performing loans decreased by
65.8% and non-performing assets decreased by 57.4% since December 31,
2011.  


 
                                                                            
                                             At March 31,   At December 31, 
(in millions except percentages)                 2013        2012     2011  
                                             ------------  -------  ------- 
Non-performing loans                         $       17.6  $  23.0  $  51.3 
                                             ------------  -------  ------- 
Non-performing assets (which includes OREO)  $       30.8  $  36.4  $  72.3 
                                             ------------  -------  ------- 
Percentage of non-accrual loans to total                                    
 loans                                                4.9%     6.7%    12.0%
                                             ------------  -------  ------- 
Percentage of non-performing assets to total                                
 assets                                               4.1%     4.7%     8.5%
                                             ------------  -------  ------- 

 
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, 2012 


 
                                                                            
                                                                            
                                                                            
ROYAL BANCSHARES OF PENNSYLVANIA, INC.                                      
CONDENSED INCOME STATEMENT                                                  
                                                         Three months       
                                                        ended Mar. 31st     
(in thousands, except for loss per common share)       2013         2012    
                                                   -----------  ----------- 
                                                   (Unaudited)  (Unaudited) 
Interest Income                                    $     6,752  $     8,806 
Interest Expense                                         1,980        2,813 
                                                   -----------  ----------- 
Net Interest Income                                      4,772        5,993 
(Credit) Provision for Loan and Lease Losses              (251)          84 
                                                   -----------  ----------- 
Net Interest Income after Provision                      5,023        5,909 
Non Interest Income                                      1,408          661 
Non Interest Expense                                     6,140        8,067 
                                                   -----------  ----------- 
Income (Loss) before Taxes                                 291       (1,497)
Income Taxes                                                 0            0 
                                                   -----------  ----------- 
Net Income (Loss)                                          291       (1,497)
Less Net Income (Loss) attributable to                                      
 noncontrolling interest                                   173         (628)
Net Income (Loss) attributable to Royal Bancshares $       118  $      (869)
                                                   ===========  =========== 
  Less Preferred stock Series A accumulated                                 
   dividend and accretion                          $       515  $       506 
                                                   ===========  =========== 
Net loss available to common shareholders          $      (397) $    (1,375)
                                                   ===========  =========== 
Loss per common share - basic and diluted          $     (0.03) $     (0.10)
                                                   ===========  =========== 
SELECTED RATIOS:                                                            
Return on Average Assets                                   0.1%        -0.4%
Return on Average Equity                                   0.8%        -4.6%
Average Equity to Assets                                   7.7%         9.0%
Book Value Per Share                               $      1.85  $      3.03 
                                                                            
                                                                            
                                                                            
CONDENSED BALANCE SHEET                                                     
                                                                            
(in thousands)                               At Mar 31, 2013 At Dec 31, 2012
                                             --------------- ---------------
                                               (unaudited)     (unaudited)  
Cash and Cash Equivalents                    $        21,253 $        28,802
Investment Securities                                328,561         357,464
Loans & Leases (net)                                 344,138         328,476
Premises and Equipment (net)                           4,745           5,232
Other Real Estate Owned (net)                         13,264          13,435
Accrued Interest receivable                            9,723          10,256
Other Assets                                          29,694          30,051
                                             --------------- ---------------
  Total Assets                               $       751,378 $       773,716
                                             --------------- ---------------
                                                                            
Deposits                                             531,370         554,917
Borrowings                                           108,221         108,333
Other Liabilities                                     27,001          26,277
Subordinated debentures                               25,774          25,774
Royal Bancshares Shareholders' Equity                 54,979          54,555
Noncontrolling Interest                                4,033           3,860
                                             --------------- ---------------
  Total Equity                                        59,012          58,415
                                             --------------- ---------------
  Total Liabilities and Equity               $       751,378 $       773,716
                                             --------------- ---------------
                                                                            
                                                                            
                                                                            
                           For the three months      For the three months   
                                   ended                     ended          
                              March 31, 2013            March 31, 2012      
                         ------------------------  ------------------------ 
(In thousands, except     Average                   Average                 
 percentages)             Balance  Interest Yield   Balance  Interest Yield 
                         --------- -------- -----  --------- -------- ----- 
Cash equivalents         $  15,508 $      7  0.18% $  19,727 $      9  0.18%
Investment securities      340,806    1,284  1.53%   338,946    1,980  2.35%
Loans                      352,541    5,461  6.28%   421,674    6,817  6.50%
                         --------- -------- -----  --------- -------- ----- 
Total interest earning                                                      
 assets                    708,855    6,752  3.86%   780,347    8,806  4.54%
Non-earning assets          53,637                    69,494                
                         ---------                 ---------                
    Total average assets $ 762,492                 $ 849,841                
                         =========                 =========                
Interest-bearing                                                            
 deposits                                                                   
  NOW and money markets  $ 220,813      162  0.30% $ 226,189      424  0.75%
  Savings                   17,581        9  0.21%    16,700       22  0.53%
  Time deposits            245,267      902  1.49%   282,304    1,182  1.68%
                         --------- -------- -----  --------- -------- ----- 
Total interest bearing                                                      
 deposits                  483,661    1,073  0.90%   525,193    1,628  1.25%
Borrowings                 134,064      907  2.74%   171,971    1,185  2.77%
                         --------- -------- -----  --------- -------- ----- 
Total interest bearing                                                      
 liabilities               617,725    1,980  1.30%   697,164    2,813  1.62%
Non-interest bearing                                                        
 deposits                   58,373                    54,670                
Other liabilities           27,757                    21,625                
Shareholders' equity        58,637                    76,382                
                         ---------                 ---------                
    Total average                                                           
     liabilities and                                                        
     equity              $ 762,492                 $ 849,841                
                         =========                 =========                
    Net interest margin            $  4,772  2.73%           $  5,993  3.09%
                                   ========                  ========       

 
Reconciliation of Non-GAAP Financial Measures           
The
press release contains certain financial information that is not
measured in accordance with generally accepted accounting principles
in the United States (GAAP). This information consists of "Basic and
diluted earnings per share, prior to accounting for the preferred
accumulated dividend." This non-GAAP disclosure has limitations as an
analytical tool and should not be considered in isolation or as a
substitute for analysis of the Company's results as reported under
GAAP, nor is it necessarily comparable to non-GAAP performance
measures that may be presented by other companies. Our management
uses these non-GAAP measures in its analysis of our performance
because it believes these measures are material and will be used as a
measure of our performance by investors. 


 
                                                                            
                                                                            
                                                                            
                                                       Three Months         
                                                      Ended Mar. 31st       
(in thousands, except for earnings per share)       2013           2012     
                                               -------------  ------------- 
                                                (Unaudited)    (Unaudited)  
Net Income (Loss) attributable to Royal                                     
 Bancshares                                    $         118  $        (869)
                                               =============  ============= 
  Less preferred accumulated dividend          $         515  $         506 
Net Loss available to common shareholders      $        (397) $      (1,375)
Loss per share - basic and diluted             $       (0.03) $       (0.10)
                                               =============  ============= 
                                                                            
Net Income (Loss) attributable to Royal                                     
 Bancshares                                    $         118  $        (869)
                                               =============  ============= 
Weighted average shares outstanding                   13,256         13,257 
                                                                            
Basic and diluted earnings (loss) per share                                 
 prior to accounting for the preferred                                      
 accumulated dividend                          $        0.01  $       (0.07)
                                               =============  ============= 

  
Marc Sanders
Vice President - Marketing
Royal Bank America
Office: 610-668-4700 
 
 
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