Royal Bancshares of Pennsylvania, Inc. Announces Financial Results for the Second Quarter and Six Months Ended June 30, 2012
08/14/12
NARBERTH, PA--(Marketwire - Aug 14, 2012) - Royal Bancshares of Pennsylvania, Inc. (NASDAQ: RBPAA) ("Royal"), parent company of Royal Bank America, today announced its consolidated financial results for the second quarter and six months ended June 30, 2012.
For the three-month period ended June 30, 2012, net loss attributable to Royal was $1.95 million or 19 cents per basic and diluted common share, as compared to a net loss of $4.2 million, or 36 cents per basic and diluted common share for the three-month period ended June 30, 2011.
The $2.3 million, or 54% improvement year over year relating to the three-month periods was primarily a result of a $1.5 million decrease in the provision for loan and lease losses which was mainly related to a reduction in loan balances and an improvement in credit quality, and a $1.2 million reduction in other expenses which was partially offset by a decline in other income of $842 thousand.
The reduction in other income was comprised of a $1.1 million decline in net gains on the sale of investment securities, a $645 thousand decline in net gains on the sales of other real estate owned ("OREO") and an increase in other than temporary impairment losses on investment securities of $478 thousand. Partially offsetting these unfavorable items was a $2.0 million increase in gains on the sales of loans and leases, which was largely due to the sale of one non-performing loan. The reduction in other expenses was related to a $1.8 million reduction in OREO impairment, which was partially offset by a legal contingency accrual of $400 thousand.
For the six-month period ended June 30, 2012, the net loss attributable to Royal was $2.8 million or 29 cents per basic and diluted common share, as compared to a net loss of $5.7 million, or 51 cents per basic and diluted common share for the six-month period ended June 30, 2011.
The $2.9 million, or 51% improvement year over year relating to the six-month periods was primarily a result of a $3.5 million decrease in the provision for loan and lease losses which was mainly related to the decline in the loan portfolio and improvement in credit quality, and an improvement in noncontrolling interest of $1.6 million which was primarily driven by losses within the tax lien subsidiaries.
This favorable change was offset by a reduction in other income of $1.5 million and lower net interest income of $816 thousand. The reduction in other income was primarily driven by a $1.2 million decrease in net gains on the sales of OREO, a $942 thousand decrease in net gains on the sales of investment securities and a $478 thousand increase in other-than-temporary impairment losses on investment securities which was related to one private equity real estate fund. Partially offsetting these unfavorable items was a $2.0 million increase in gains on the sales of loans and leases, as previously noted.
The year over year decline in net interest income was attributed to a reduction in total interest income, which was partially offset by a reduction in total interest expense. For the six months ended June 30, 2012, total interest income declined by $3.3 million, or 16.3%, year over year. The decrease was primarily driven by a decline in average loan balances of $91.5 million, or 18.2%, year over year and a decline in the yield on investments of 101 basis points mostly related to the current lower interest rate environment, which were partially offset by an increased yield of 39 basis points on loans associated with improved credit quality. This was partially offset by a decline in total interest expense of $2.5 million, or 32.2%, from the comparable period in 2011. The decline was due to an $88.8 million, or 11.4%, decline in average interest bearing liabilities relative to the comparable six month period of 2011 and a 48 basis point decline in the interest rates paid on interest bearing liabilities year over year. The Company continued to pay down maturing brokered CDs throughout 2011 and was also able to lower retail deposit costs through the re-pricing of maturing CDs at lower interest rates.
Other expenses in total remained relatively flat year over year. Included in other expenses was a $2.0 million legal contingency accrual related to tax liens which was offset by a $2.1 million reduction in OREO impairment.
As previously disclosed, two subsidiaries of Royal Bank America, Crusader Servicing Corporation ("CSC") and Royal Tax Lien Services ("RTLS"), were advised in 2009 that they were subjects, but not targets, of an investigation by the Department of Justice ("DOJ") involving tax lien auctions in New Jersey. Based on recent developments, including discussions with the DOJ and in light of the guilty plea entered in February 2012 by the former President of CSC and RTLS to one count of bid rigging, Royal believes that the outcome of the investigation will result in fines and penalties being assessed against both CSC and RTLS, and has accrued $400 thousand for the quarter ended June 30, 2012 and a total of $2.0 million for the six month period ended June 30, 2012, of which $240 thousand and $1.2 million represents the Company's 60% share for the quarter and six month period ended June 30, 2012 respectively, as a reasonable estimate relating to this matter. The remaining 40% is reflected as a reduction to noncontrolling interest. The DOJ investigation does not involve the operations of Royal Bank America.
Robert R. Tabas, Chairman and CEO, noted, "A stronger, more vibrant Royal Bank America, as envisioned in our strategic plan, is now markedly closer to fruition as once again this quarter we have demonstrated significant improvements in the following key areas."
