Royal Bancshares Reports First Quarter Profit

Royal Bancshares Reports First Quarter Profit 
Core Customer Growth Continues and Improves Profitability 
NARBERTH, PA -- (Marketwired) -- 04/24/14 --  Royal Bancshares of
Pennsylvania, Inc. ("Company") (NASDAQ: RBPAA), parent company of
Royal Bank America ("Royal Bank"), is pleased to report net income of
$1.5 million and basic and diluted earnings per share of $0.06 for
the three months ended March 31, 2014. This compares to net income of
$118,000 and basic and diluted loss per share of $0.03 for the
comparable period in 2013. Royal Bank recorded net income of $1.6
million for the first quarter of 2014 compared to net income of
$203,000 for the comparable period in 2013. 
Selected Company highlights for the first quarter of 2014, explained
further below, included: 


 
--  Noteworthy improvement in net income of $1.4 million from the
    comparable 2013 period.
--  Return on average assets and return on average equity increase to 0.8%
    and 12.0%, respectively.
--  Increase in net interest income of 15.8%.
--  Non-interest expense reduction of 13.3%.
--  New retail strategy launch improves deposit composition with checking
    and money market accounts growing $11.8 million.

  
Earnings Momentum and Retail Revitalization  
The Company's Chief Executive Officer Kevin Tylus noted, "Today's
announcement illustrates further progress of our multi-faceted
strategic plan with the goal of consistent profitability. During 2013
we focused on repositioning Royal Bank by building a foundation for
sustainable quality growth and earnings. A key strategy in 2014 is to
refresh our retail products and branch network. During the first
quarter of 2014, we reorganized our retail division to better serve
our existing customers, develop our retail sales teams, and attain
new customer relationships. We held a successful 50th anniversary
campaign, offering a Kindle to new customers who met certain deposit
account opening criteria. We have relocated our Villanova and
Phoenixville branches and are in the process of relocating two
additional branches to more convenient, high-traffic locations within
similar markets. Our customers now have access to 55,000 ATMs
nationwide from a new arrangement. Overall positive financial results
have benefited from our rebranding and the ability to attract and
retain commercial and consumer customers."  
First quarter 2014 results and continued overall expense reduction  
The $1.4 million improvement in net income for the first quarter of
2014 from the same period in 2013 was mainly related to the following
items:  


 
--  Net interest income grew $754,000 or 15.8%.
--  Salaries and benefits declined $409,000 or 14.7%.
--  Credit related expenses decreased $280,000, or 46.3%.
--  The total level of non-performing assets declined from $30.8 million
    at March 31, 2013 to $18.7 million at March 31, 2014.
--  Credit for loan and lease losses increased $388,000 due to the
    continued improvement in loan credit quality.

  
The rise in net income occurred in spite of $676,000 fewer gains on the
sale of Company owned real estate, which occurred in 2013 and a
$71,000 increase in marketing and advertising expenses to promote our
new and enhanced products and services. The harsh winter conditions
in our markets impacted occupancy and equipment expenses, which
increased $60,000, quarter-over-quarter. The Company's leasing
subsidiary positively contributed to the first quarter financial
results.  
Loans and leases held for investment at March 31, 2014 totaled $358.7
million compared to $366.5 million at December 31, 2013. The $7.8
million decline in loans was directly impacted by an approximate $7.0
million improvement in classified loans due to payoffs and pay downs
coupled with payoffs of out of market loans. The commercial loan
pipeline continues to strengthen. Investment securities available for
sale slightly increased $3.5 million while total cash and cash
equivalents grew $7.0 million from the levels at December 31, 2013.
Total deposits rose $3.6 million from $529.0 million at December 31,
2013 to $532.6 million at March 31, 2014. The growth in deposits was
primarily related to the 50th anniversary retail campaign targeting
new households with the aim to improve the deposit product
composition. Checking and money market accounts increased $11.8
million while certificates of deposit declined $9.0 million.  
Net Interest Margin  
For the first quarter of 2014, the net interest margin of 3.24% grew
51 basis points from the comparable quarter of 2013 and 12 basis
points from the quarter ended December 31, 2013. Net interest income
increased $754,000 from the first quarter of 2013. The growth was
primarily attributed to an increase in the interest income earned on
investments coupled with a reduction in interest expense. Despite a
$29.1 million decline in average interest-earning assets quarter over
quarter, the average yield on such assets was enhanced 34 basis
points to 4.20%. Contributing to the increase in yield were
non-recurring loan fees of approximately $130,000. Average loans
increased $13.6 million while average investments declined $22.6
million. The $22.8 million decrease in average interest-bearing
liabilities for the first quarter of 2014 from the comparable quarter
in 2013 was accompanied by a 19 basis point reduction in average
rates. Average interest-bearing deposits decreased $19.0 million
while average borrowings declined $3.8 million. For the first quarter
of 2014, the average rate paid on interest-bearing liabilities was
1.11% compared to 1.30% for the 2013 comparable quarter.  
Asset quality continues improvement  
Improved loan credit quality led to an increase in the credit for
loan and lease losses of $388,000 and a reduction in credit quality
expenses of $280,000 when compared to the first quarter of 2013.
Classified loans declined nearly $7.0 million due to pay downs and
payoffs. Additionally, professional and legal fees declined $57,000
from the first quarter of 2013. Non-performing assets were $18.7
million, $19.8 million and $30.8 million at March 31, 2014, December
31, 2013, and March 31, 2013, respectively.  
Private placement and shareholder rights offering  
The Company received regulatory approval to bid to purchase shares of
the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series
A ("preferred stock") issued in 2009 to the United States Department
of the Treasury under the TARP program in an auction of such shares
to be conducted by the Treasury. The Company expects the auction to
occur in the second quarter of 2014. If the Company is successful in
purchasing shares of the preferred stock then a shareholder rights
offering will be offered to existing shareholders. Both actions
received shareholder approval in 2013. 
Strengthening the team  
During the quarter, five highly experienced industry veterans joined
the Company. These included two commercial relationship managers, two
retails sales managers and the head of sales and product training.
Their collective experience spans community and regional banks. The
hiring of these individuals was funded through the rightsizing of the
organization and is fully integrated into the Company's budget. 
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 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, 2013. 


 
                                                                            
ROYAL BANCSHARES OF PENNSYLVANIA, INC.                                      
CONDENSED INCOME STATEMENT -unaudited                                       
                                                                            
                                            Three months ended Mar. 31st    
(in thousands, except per share data)          2014              2013       
                                         ----------------  ---------------- 
Interest Income                          $          7,151  $          6,752 
Interest Expense                                    1,625             1,980 
                                         ----------------  ---------------- 
Net Interest Income                                 5,526             4,772 
Credit for Loan and Lease Losses                     (639)             (251)
                                         ----------------  ---------------- 
Net Interest Income after Provision                 6,165             5,023 
Non Interest Income                                   772             1,408 
Non Interest Expense                                5,322             6,140 
                                         ----------------  ---------------- 
Income Before Taxes                                 1,615               291 
Income Taxes                                            -                 - 
                                         ----------------  ---------------- 
Net Income                                          1,615               291 
Less Net Income Attributable to                                             
 Noncontrolling Interest                              117               173 
                                         ----------------  ---------------- 
Net Income Attributable to Royal                                            
 Bancshares                              $          1,498  $            118 
                                         ----------------  ---------------- 
  Less Preferred Stock Series A                                             
   Accumulated Dividend and Accretion    $            664  $            515 
                                         ----------------  ---------------- 
Net Income (Loss) Available to Common                                       
 Shareholders                            $            834  $           (397)
                                         ----------------  ---------------- 
Income (Loss) per Common Share - Basic                                      
 and Diluted                             $           0.06  $          (0.03)
                                         ================  ================ 
                                                                            
                                                                            
SELECTED RATIOS:                                                            
                                                                            
                                                                            
                                             Three months ended Mar. 31st   
                                                2014              2013      
                                         ----------------  ---------------- 
Return on Average Assets                              0.8%              0.1%
Return on Average Equity                             12.0%              0.9%
Average Equity to Assets                              6.9%              7.1%
Book Value Per Share                     $           1.57  $           1.49 
                                                                            
Capital ratios (US GAAP):                 At Mar 31, 2014   At Dec 31, 2013 
                                         ----------------  ---------------- 
Royal Bank Tier I Leverage                            9.9%              9.8%
Royal Bank Total Risk Basked Capital                 17.0%             16.6%
Company Tier I Leverage                              10.0%              9.9%
Company Total Risk Basked Capital                    18.6%             18.2%
                                                                            
                                                                            
                                                                            
CONDENSED BALANCE SHEET                                                     
                                                                            
(in thousands)                            At Mar 31, 2014   At Dec 31, 2013 
                                         ----------------  ---------------- 
                                                                            
Cash and Cash Equivalents                $         23,890  $         16,844 
Investment Securities                             318,466           315,181 
Loans and leases held for sale ("LHFS")                 -             1,446 
Loans and Leases                                                            
  Commercial real estate                          161,987           160,030 
  Construction and land development                45,751            45,261 
  Commercial and industrial                        68,664            79,589 
  Residential real estate                          26,465            25,535 
  Leases                                           43,644            42,524 
  Tax certificates                                 11,182            12,716 
  Other                                               965               826 
                                         ----------------  ---------------- 
Loans and Leases                                  358,658           366,481 
Allowance for loan and lease losses               (11,866)          (13,671)
                                         ----------------  ---------------- 
Loans and Leases (net)                            346,792           352,810 
Premises and Equipment (net)                        4,594             4,475 
Other Real Estate Owned (net)                       9,368             9,617 
Accrued Interest receivable                         6,675             7,054 
Other Assets                                       24,625            24,827 
                                         ----------------  ---------------- 
    Total Assets                         $        734,410  $        732,254 
                                         ================  ================ 
                                                                            
Deposits                                          532,632           528,964 
Borrowings                                        102,767           107,881 
Other Liabilities                                  21,632            21,830 
Subordinated debentures                            25,774            25,774 
Royal Bancshares Shareholders' Equity              51,270            47,534 
Noncontrolling Interest                               335               271 
                                         ----------------  ---------------- 
  Total Equity                                     51,605            47,805 
                                         ----------------  ---------------- 
  Total Liabilities and Equity           $        734,410  $        732,254 
                                         ================  ================ 
                                                                            
                                                                            
                                                                            
NET INTEREST INCOME AND MARGIN                                              
                                                                            
                  For the three months ended    For the three months ended  
                        March 31, 2014                March 31, 2013        
                 ----------------------------  ---------------------------- 
(In thousands,                                                              
 except           Average                       Average                     
 percentages)     Balance   Interest   Yield    Balance   Interest   Yield  
                 --------- --------- --------  --------- --------- -------- 
Cash equivalents $   6,393 $       5     0.32% $  15,508 $       7     0.18%
Investment                                                                  
 securities        318,171     1,922     2.45%   340,806     1,284     1.53%
Loans              366,166     5,224     5.79%   352,541     5,461     6.28%
                 --------- ---------           --------- ---------          
Total interest-                                                             
 earning assets    690,730     7,151     4.20%   708,855     6,752     3.86%
Non-earning                                                                 
 assets             42,625                        48,790                    
                 ---------                     ---------                    
  Total average                                                             
   assets        $ 733,355                     $ 757,645                    
                 =========                     =========                    
Interest-bearing                                                            
 deposits                                                                   
 NOW and money                                                              
  markets        $ 210,233       167     0.32% $ 220,813       162     0.30%
 Savings            17,874         9     0.20%    17,581         9     0.21%
 Time deposits     236,598       737     1.26%   245,267       902     1.49%
                 --------- ---------           --------- ---------          
Total interest-                                                             
 bearing                                                                    
 deposits          464,705       913     0.80%   483,661     1,073     0.90%
Borrowings         130,245       712     2.22%   134,064       907     2.74%
                 --------- ---------           --------- ---------          
Total interest-                                                             
 bearing                                                                    
 liabilities       594,950     1,625     1.11%   617,725     1,980     1.30%
Non-interest                                                                
 bearing                                                                    
 deposits           63,913                        58,373                    
Other                                                                       
 liabilities        23,750                        27,757                    
Shareholders'                                                               
 equity             50,742                        53,790                    
                 ---------                     ---------                    
  Total average                                                             
   liabilities                                                              
   and equity    $ 733,355                     $ 757,645                    
                 =========                     =========                    
  Net interest                                                              
   margin                  $   5,526     3.24%           $   4,772     2.73%
                           =========                     =========          

  
Company Contact
Marc Sanders
VP-Marketing
610.668.4700 
 
 
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