Royal Bancshares of Pennsylvania, Inc. Reports Profit for First Quarter 2016
Quality Loan and Core Deposit Growth, Margin Expansion Boost Earnings and Assets; Repurchased 21% of Outstanding Series A Preferred Shares
BALA CYNWYD, PA -- (Marketwired) -- 04/21/16 -- 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 $2.2 million, or $0.06 per diluted share, for the three months ended March 31, 2016 compared to $1.6 million, or $0.04 per diluted share, for the three months ended March 31, 2015.
Kevin Tylus, the Company's President and Chief Executive Officer, noted, "Our momentum from 2015 carried into the first quarter with robust loan and core deposit growth. Growth and changes in our balance sheet positively contributed to our first quarter results. In March, due to our consistent performance, we received approval from the Federal Reserve Bank to repurchase $4.0 million, or 21%, of our Series A preferred stock, which helps improve our balance sheet and eliminates future dividend payments on the repurchased shares. Our positive financial performance demonstrates our ability to meet the challenges of low interest rates, local competition, and uncertainty from domestic and global market volatility. We remain strongly focused on opportunities that may continue to strengthen the balance sheet and on high quality, in footprint strategies to continue our earnings momentum."
Highlights for the three months ended March 31, 2016 included:
Balance Sheet Trends:
At March 31, 2016, total assets were $798.5 million and grew $10.2 million, or 1.3%, from $788.3 million at December 31, 2015.
Total loans were $531.1 million at March 31, 2016, an increase of $32.0 million, or 6.4%, from $499.1 million at December 31, 2015. Current quarter increases were recognized in multiple loan portfolio segments.
Total deposits were $589.3 million at March 31, 2016, an increase of $11.4 million, or 2.0%, from $577.9 million at December 31, 2015.
During the first quarter of 2016, the Company repurchased 4,000 shares of its Series A preferred stock.
Asset Quality:
The ratio of non-performing loans to total loans continues to show improvement and decreased to 0.98% at March 31, 2016 from 1.10% at December 31, 2015. Excluding tax liens, the ratio of non-performing loans to total loans was 0.80% and 0.88% at March 31, 2016 and December 31, 2015, respectively.
Non-performing loans were $5.2 million at March 31, 2016 compared to $5.5 million at December 31, 2015.
The ratio of non-performing assets to total assets was 1.54% at March 31, 2016 compared to 1.64% at December 31, 2015. Excluding tax lien assets, the ratio of non-performing assets to total assets was 0.56% and 0.59% at March 31, 2016 and December 31, 2015, respectively.
Non-performing assets of $12.3 million at March 31, 2016 decreased $608 thousand, or 4.7%, from $12.9 million at December 31, 2015.
During the first quarter of 2016, the Company recorded a provision to the allowance for loan and lease losses of $212 thousand compared to a credit of $580 thousand for the first quarter of 2015. The 2016 provision was primarily attributable to growth and net charge-off activity within the leasing portfolio.
Income Statement and Other Highlights:
The return on average assets for the three months ended March 31, 2016 was 1.11% compared to 0.89% for the three months ended March 31, 2015.
The return on average equity for the three months ended March 31, 2016 was 11.98% compared to 10.11% for the three months ended March 31, 2015.
At March 31, 2016, the Company's Tier 1 leverage and Total Risk Based Capital ratios were 11.51% and 17.30%, respectively, compared to 12.44% and 18.57%, respectively, at December 31, 2015. The Common Equity Tier 1 ratio was 9.38% at March 31, 2016 compared to 9.37% at December 31, 2015.
Net interest income increased $782 thousand, or 13.7%, from $5.7 million for the three months ended March 31, 2015 to $6.5 million for the three months ended March 31, 2016. The growth in net interest income was primarily related to an increase in interest income and the average yield earned on average interest-earning assets. Additionally in the first quarter of 2016, we recorded $169 thousand in interest income from the satisfaction of a loan that had been previously charged-off.
The net interest margin grew to 3.51% for the first quarter of 2016 compared to 3.40% for the comparable period in 2015. The increase in net interest margin was directly related to an increase in the yield on average interest-earning assets due to a change in the composition of such assets and the $169 thousand transaction stated previously.
Non-interest income for the first quarter of 2016 was $1.2 million and increased $640 thousand from $567 thousand for the first quarter of 2015. The quarterly improvement in non-interest income was impacted by a $341 thousand increase in income from Company owned life insurance and a $180 thousand increase in net gains on the sale of investment securities.
Non-interest expense was $5.2 million for the quarter ended March 31, 2016 and increased $126 thousand from $5.1 million for the comparable period in 2015. Contributing to the increase in non-interest expense for 2016 was an increase of $177 thousand in other real estate owned expenses and impairment charges and $107 thousand increase in salaries and benefits. Partially mitigating the increase in non-interest expense was a $150 thousand credit for unfunded loan commitments due to a decline in such commitments compared to a $127 thousand provision for unfunded loan commitments during the first quarter of 2015.
In March 2016, we requested and were granted approval from the Federal Reserve Bank to repurchase 4,000 shares, or 21%, of our outstanding Series A preferred stock. We have reduced the total outstanding of Series A preferred stock by 51% from the original outstanding amount of $30.4 million to $14.9 million as a result of the private placement in 2014 and the repurchase completed this quarter. We used existing cash on-hand to complete this quarter's repurchase and eliminated approximately $225 thousand in undeclared dividends. This transaction will eliminate $360 thousand per annum in future cumulative dividends when such dividends are declared.
