Royal Bancshares Reports First Quarter Profit
Core Customer Growth Continues and Improves Profitability
NARBERTH, PA--(Marketwired - Apr 24, 2014) - 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.
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ROYAL BANCSHARES OF PENNSYLVANIA, INC. |
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CONDENSED INCOME STATEMENT -unaudited |
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|
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 |
|
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$ |
118 |
|
|
Less
Preferred Stock Series A Accumulated Dividend and Accretion |
|
$ |
664 |
|
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$ |
515 |
|
Net Income (Loss) Available to Common Shareholders |
|
$ |
834 |
|
|
$ |
(397 |
) |
Income (Loss) per Common Share - Basic and Diluted |
|
$ |
0.06 |
|
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$ |
(0.03 |
) |
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SELECTED RATIOS: |
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Three months ended Mar. 31st |
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2014 |
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|
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 |
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Capital ratios (US GAAP): |
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|
At Mar 31, 2014 |
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|
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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 |
% |
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|
9.9 |
% |
Company Total Risk Basked Capital |
|
|
18.6 |
% |
|
|
18.2 |
% |
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CONDENSED BALANCE SHEET |
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(in thousands) |
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At Mar 31, 2014 |
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At Dec 31, 2013 |
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|
|
|
|
|
|
|
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 |
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Construction and land development |
|
|
45,751 |
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|
|
45,261 |
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Commercial and industrial |
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|
68,664 |
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|
79,589 |
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Residential real estate |
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|
26,465 |
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|
25,535 |
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Leases |
|
|
43,644 |
|
|
|
42,524 |
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Tax certificates |
|
|
11,182 |
|
|
|
12,716 |
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Other |
|
|
965 |
|
|
|
826 |
|
Loans and Leases |
|
|
358,658 |
|
|
|
366,481 |
|
Allowance for loan and lease losses |
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|
(11,866 |
) |
|
|
(13,671 |
) |
Loans and Leases (net) |
|
|
346,792 |
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|
|
352,810 |
|
Premises and Equipment (net) |
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|
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 |
|
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Total
Assets |
|
$ |
734,410 |
|
|
$ |
732,254 |
|
|
|
|
|
|
|
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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 |
|
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Total Equity |
|
|
51,605 |
|
|
|
47,805 |
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Total Liabilities and Equity |
|
$ |
734,410 |
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$ |
732,254 |
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NET INTEREST INCOME AND MARGIN |
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For the three months ended |
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For the three months ended |
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|
March 31, 2014 |
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March 31, 2013 |
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(In thousands, except percentages) |
|
Average Balance |
|
Interest |
|
Yield |
|
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Average 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 |
|
|
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|
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|
Net
interest margin |
|
|
|
|
$ |
5,526 |
|
3.24 |
% |
|
|
|
|
$ |
4,772 |
|
2.73 |
% |
|
|
|
|
|
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Company Contact Marc Sanders VP-Marketing 610.668.4700
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