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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