Royal Bancshares of Pennsylvania, Inc. Reports Third Quarter Profit
Balance Sheet Growth With Quality Loan Production Fuels Increase in Net Interest Margin and Earnings
/EINPresswire.com/ -- BALA CYNWYD, PA -- (Marketwired) -- 10/21/15 -- 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 $0.04 per diluted share, and $4.6 million, or $0.11 per diluted share, for the three and nine months ended September 30, 2015, respectively. This is compared to net income of $1.4 million, or $0.05 per diluted share, and $4.3 million, or $0.15 per diluted share, for the three and nine months ended September 30, 2014, respectively. Diluted earnings per share for 2015 were fully impacted by the issuance of approximately 16.7 million common shares during the third quarter of 2014 as a result of the private placement and shareholders' rights offering, which increased average common shares outstanding.
Kevin Tylus, the Company's President and Chief Executive Officer, noted, "Loan and deposit growth, coupled with the continuing trend in improved credit quality, positively contributed to third quarter and 2015 year to date earnings. Our financial performance is allowing us to expand the Royal Bank brand through our relationship based and private banking models. Net loan growth in commercial, consumer, and leasing segments and more economical delivery channels, including a loan production office, is helping drive customer growth. Our newly implemented public funds strategy is serving as a cost effective component of our multi-faceted deposit plan; helping us to meet the challenges community banks face to attract lower cost deposits."
Highlights for the three and nine months ended September 30, 2015 included:
Balance Sheet Growth:
- At September 30, 2015, total assets were $761.7 million and grew $34.5 million, or 4.7%, from $727.2 million at June 30, 2015. Total assets were $732.6 million at December 31, 2014.
- Total loans were $471.2 million at September 30, 2015, an increase of $23.6 million, or 5.3%, from $447.6 million at June 30, 2015, and an increase of $56.1 million, or 13.5%, from $415.1 million at December 31, 2014. Current quarter increases were recognized in multiple loan portfolio segments.
- Total deposits were $553.8 million at September 30, 2015, an increase of $22.3 million, or 4.2%, from $531.5 million at June 30, 2015, and an increase of $23.4 million, or 4.4%, from $530.4 million at December 31, 2014.
Asset Quality Trends:
- The ratio of non-performing loans to total loans was 1.08%, 1.20%, and 2.36% at September 30, 2015, June 30, 2015, and December 31, 2014, respectively. Excluding tax liens, the ratio of non-performing loans to total loans was 0.84%, 0.99%, and 1.99% at September 30, 2015, June 30, 2015, and December 31, 2014, respectively.
- Non-performing loans of $5.1 million at September 30, 2015 decreased $286,000, or 5.3%, from $5.4 million at June 30, 2015 and decreased $4.7 million, or 48.0%, from $9.8 million at December 31, 2014.
- The decline in non-performing loans and the overall improvement in loan quality contributed to increases of $165,000 and $617,000 in the credit for loan and lease losses for the three and nine months ended September 30, 2015, respectively.
- The ratio of non-performing assets to total assets was 1.83%, 2.19%, and 2.67% at September 30, 2015, June 30, 2015, and December 31, 2014, respectively. Excluding tax lien assets, the ratio of nonperforming assets to total assets was 0.57%, 0.67%, and 1.19% at September 30, 2015, June 30, 2015, and December 31, 2014, respectively.
- Non-performing assets of $13.9 million at September 30, 2015 decreased $2.0 million, or 12.4%, from $15.9 million at June 30, 2015 and decreased $5.7 million, or 28.8%, from December 31, 2014. The purposeful downsizing of the tax lien business, which is not core to Royal Bank's overall strategy, has seen a favorable reduction from a high of over $100 million in total tax lien assets in 2009 to approximately $16.0 million in total tax lien assets at September 30, 2015.
Income Statement and Other Highlights:
- The return on average assets for the three and nine months ended September 30, 2015 increased to 0.82% and 0.84%, respectively, compared to 0.78% for the three and nine months ended September 30, 2014.
- The return on average equity for the three and nine months ended September 30, 2015 was 9.24% and 9.45%, respectively, compared to 9.67% and 10.60% for the three and nine months ended September 30, 2014. The return on average equity for 2015 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 September 30, 2015, the Company's Tier 1 leverage and Total Risk Based Capital ratios were 12.5% and 19.0%, respectively, compared to 11.9% and 19.2%, respectively, at December 31, 2014. The Common Equity Tier 1 ratio was 9.4% at September 30, 2015.
- Net interest income increased $594,000, or 10.7%, from $5.6 million for the three months ended September 30, 2014 to $6.2 million for the three months ended September 30, 2015. Net interest income increased $670,000, or 4.0%, from $16.7 million for the nine months ended September 30, 2014 to $17.4 million for the nine months ended September 30, 2015. The growth in the quarterly and year to date net interest income was primarily related to an increase in interest income and the average yields earned on average interest-earning assets.
- The net interest margin grew to 3.51% for the third quarter of 2015 compared to 3.25% for the comparable period in 2014 and was 3.39% for the nine months ended September 30, 2015 compared to 3.25% for the nine months ended September 30, 2014. The increase in net interest margin was directly related to an increase in the yield on average interest-earning assets.
- Non-interest income for the quarter ended September 30, 2015 was $700,000 and decreased $504,000, or 41.9%, from $1.2 million for the quarter ended September 30, 2014. The quarterly decline in non-interest income was impacted by declines of $158,000 and $107,000 in net gains on the sale of investment securities and net gains on the sale of premises and equipment, respectively. Additionally, net gains on sales of loans and leases and net gains on sale of other real estate owned ("OREO") decreased $80,000 and $50,000, respectively.
- Non-interest income was $2.8 million for the nine months ended September 30, 2015 and 2014 and slightly increased $38,000 in the 2015 period. Net gains on the sale of investment securities and the sale of OREO grew $322,000 and $136,000, respectively, in 2015 as compared to the 2014 period. These increases were partially offset by declines of $223,000 and $107,000 in the net gains on sales of loans and leases and net gains on the sale of premises and equipment, respectively, when compared to the 2014 period. During 2015, the Company sold lower earning investment securities to fund the loan growth, which included selling the majority of the corporate bonds in the investment portfolio.
- Non-interest expense was $5.4 million for the quarters ended September 30, 2015 and 2014. For the third quarter of 2015, professional and legal fees and the provision for unfunded loan commitments declined $190,000 and $82,000, respectively, and were offset by a $232,000 increase in OREO expenses and impairment. During the third quarter of 2015, the unfunded loan commitments related to construction loans declined $5.5 million due to construction advances on those commitments.
- Non-interest expense for the nine months ended September 30, 2015 was $16.5 million and increased $749,000, or 4.8%, from $15.7 million for the nine months ended September 30, 2014. The increase for the nine month period ended September 30, 2015 was related to increases of $320,000, $347,000, and $277,000 in employee salaries and benefits, occupancy and equipment costs, and the provision for unfunded loan commitments due to the growth in such commitments. Partially offsetting these increases was a $237,000 decline in the FDIC and state assessments.
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 For the nine months
ended September 30, ended September 30,
2015 2014 2015 2014
--------- --------- --------- ---------
Interest income $ 7,798 $ 7,191 $ 22,149 $ 21,551
Interest expense 1,636 1,623 4,798 4,870
--------- --------- --------- ---------
Net Interest Income 6,162 5,568 17,351 16,681
Credit for loan and lease losses (216) (51) (1,382) (765)
--------- --------- --------- ---------
Net interest income after credit
for loan and lease losses 6,378 5,619 18,733 17,446
Non-interest income 700 1,204 2,830 2,792
Non-interest expense 5,365 5,375 16,477 15,728
--------- --------- --------- ---------
Income before taxes 1,713 1,448 5,086 4,510
Income tax expense - - - -
--------- --------- --------- ---------
Net Income 1,713 1,448 5,086 4,510
Less net income attributable to
noncontrolling interest 179 25 500 212
--------- --------- --------- ---------
Net Income Attributable to Royal
Bancshares $ 1,534 $ 1,423 $ 4,586 $ 4,298
========= ========= ========= =========
Less Preferred stock Series A
accumulated dividend and
accretion $ 434 $ 152 $ 1,287 $ 1,644
========= ========= ========= =========
Net income to common
shareholders $ 1,100 $ 1,271 $ 3,299 $ 2,654
========= ========= ========= =========
Income Per Common Share - Basic
and Diluted $ 0.04 $ 0.05 $ 0.11 $ 0.15
========= ========= ========= =========
SELECTED PERFORMANCE RATIOS:
For the three months For the nine months
ended September 30, ended September 30,
2015 2014 2015 2014
--------- --------- --------- ---------
Return on Average Assets 0.82% 0.78% 0.84% 0.78%
Return on Average Equity 9.24% 9.67% 9.45% 10.60%
Average Equity to Average Assets 8.90% 8.06% 8.89% 7.40%
Book Value Per Share $ 1.61 $ 1.45 $ 1.61 $ 1.45
At September 30, At December 31,
Capital ratios (US GAAP): 2015 2014
---------------- ---------------
Company Tier 1 Leverage 12.5% 11.9%
Company Total Risk Based
Capital 19.0% 19.2%
Company Common Equity
Tier 1 9.4% NA
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
At September At December
30, 2015 31, 2014
-------------- --------------
Cash and cash equivalents $ 24,217 $ 30,790
Investment securities, at fair value 230,344 250,368
Other investment, at cost 2,250 2,250
Federal Home Loan Bank stock 2,545 2,622
Loans and leases
Commercial real estate and multi-family 226,105 188,861
Construction and land development 38,864 45,662
Commercial and industrial 82,414 76,489
Residential real estate 54,025 42,992
Leases 61,954 51,583
Tax certificates 5,294 7,191
Consumer 2,560 2,354
-------------- --------------
Loans and leases 471,216 415,132
Allowance for loan and lease losses (9,806) (11,708)
-------------- --------------
Loans and leases, net 461,410 403,424
Bank owned life insurance 16,008 15,636
Other real estate owned, net 8,844 9,779
Premises and equipment, net 5,202 5,201
Accrued interest receivable 4,336 5,270
Other assets 6,578 7,213
-------------- --------------
Total Assets $ 761,734 $ 732,553
============== ==============
Deposits $ 553,764 $ 530,425
Borrowings 91,084 92,426
Other liabilities 23,543 21,322
Subordinated debentures 25,774 25,774
Royal Bancshares shareholders' equity 67,093 62,219
Noncontrolling interest 476 387
-------------- --------------
Total Equity 67,569 62,606
-------------- --------------
Total Liabilities and Equity $ 761,734 $ 732,553
============== ==============
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
NET INTEREST INCOME AND MARGIN
(Unaudited, in thousands, except percentages)
For the three months For the three months
ended ended
September 30, 2015 September 30, 2014
----------------------- -----------------------
Average Average
Balance Interest Yield Balance Interest Yield
-------- -------- ----- -------- -------- -----
Cash and cash equivalents $ 18,184 $ 8 0.17% $ 12,152 $ 6 0.20%
Investment securities 218,767 1,334 2.42% 280,579 1,734 2.45%
Loans 459,543 6,456 5.57% 386,308 5,451 5.60%
-------- -------- -------- --------
Total interest-earning
assets 696,494 7,798 4.44% 679,039 7,191 4.20%
Non-interest earning
assets 43,722 45,335
-------- --------
Total average assets $740,216 $724,374
======== ========
Interest-bearing deposits
NOW and money markets $210,652 $ 182 0.34% $207,731 $ 161 0.31%
Savings 32,589 35 0.43% 19,449 8 0.16%
Certificates of deposit 216,653 751 1.38% 225,679 731 1.29%
-------- -------- -------- --------
Total interest-bearing
deposits 459,894 968 0.84% 452,859 900 0.79%
Borrowings 113,767 668 2.33% 123,743 723 2.32%
-------- -------- -------- --------
Total interest-bearing
liabilities 573,661 1,636 1.13% 576,602 1,623 1.12%
Non-interest bearing
deposits 79,791 66,251
Other liabilities 20,889 23,150
Shareholders' equity 65,875 58,371
-------- --------
Total average
liabilities and
equity $740,216 $724,374
======== ========
Net interest income $ 6,162 $ 5,568
======== ========
Net interest margin 3.51% 3.25%
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
NET INTEREST INCOME AND MARGIN
(Unaudited, in thousands, except percentages)
For the nine months For the nine months
ended ended
September 30, 2015 September 30, 2014
----------------------- -----------------------
Average Average
Balance Interest Yield Balance Interest Yield
-------- -------- ----- -------- -------- -----
Cash and cash equivalents $ 16,754 $ 21 0.17% $ 8,964 $ 16 0.24%
Investment securities 230,361 4,250 2.47% 303,485 5,610 2.47%
Loans 437,188 17,878 5.47% 374,270 15,925 5.69%
-------- -------- -------- --------
Total interest-earning
assets 684,303 22,149 4.33% 686,719 21,551 4.20%
Non-interest earning
assets 45,214 46,165
-------- --------
Total average assets $729,517 $732,884
======== ========
Interest-bearing deposits
NOW and money markets $205,646 $ 508 0.33% $209,772 $ 494 0.31%
Savings 24,765 52 0.28% 18,620 24 0.17%
Time deposits 220,564 2,236 1.36% 230,688 2,194 1.27%
-------- -------- -------- --------
Total interest-bearing
deposits 450,975 2,796 0.83% 459,080 2,712 0.79%
Borrowings 116,456 2,002 2.30% 130,452 2,158 2.21%
-------- -------- -------- --------
Total interest-bearing
liabilities 567,431 4,798 1.13% 589,532 4,870 1.10%
Non-interest bearing
deposits 75,563 64,832
Other liabilities 21,646 24,316
Shareholders' equity 64,877 54,204
-------- --------
Total average
liabilities and
equity $729,517 $732,884
======== ========
Net interest income $ 17,351 $ 16,681
======== ========
Net interest margin 3.39% 3.25%
ASSET QUALITY TRENDS
(Unaudited, in thousands, except percentages)
At At
September At June At March December
30, 2015 30, 2015 31, 2015 31, 2014
---------- ---------- ---------- ----------
Non-performing loans $ 3,892 $ 4,371 $ 7,518 $ 8,113
Non-performing tax
certificates 1,206 1,013 834 1,700
---------- ---------- ---------- ----------
Total nonperforming loans 5,098 5,384 8,352 9,813
Other real estate owned-
loans 388 356 328 349
Other real estate owned-tax
certificates 8,456 10,175 10,213 9,430
---------- ---------- ---------- ----------
Total other real estate
owned 8,844 10,531 10,541 9,779
---------- ---------- ---------- ----------
Total nonperforming assets $ 13,942 $ 15,915 $ 18,893 $ 19,592
========== ========== ========== ==========
Ratio of non-performing
loans to total loans 1.08% 1.20% 1.99% 2.36%
Ratio of non-performing
assets to total assets 1.83% 2.19% 2.61% 2.67%
Ratio of allowance for loan
and lease losses to total
loans 2.08% 2.24% 2.60% 2.82%
Ratio of allowance for loan
and lease losses to non-
performing loans 192.35% 186.40% 130.47% 119.31%
Michael S. Thompson
CFO
mthompson@royalbankamerica.com
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