FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: JUNE 30, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from: to
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Commission file number: 0-26366
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ROYAL BANCSHARES OF PENNSYLVANIA, INC.
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(Exact name of the bank as specified in its charter)
PENNSYLVANIA 23-2812193
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State or other jurisdiction of (IRS Employer
incorporated or organization) identification No.)
732 MONTGOMERY AVENUE, NARBERTH, PA 19072
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(Address of principal Executive Offices)
(610) 668-4700
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the bank (1) has filed all reports required to be
filed by Section 13 of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the bank was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock Outstanding at June 30, 1996
-------------------- -----------------------------
$2.00 PAR VALUE 6,464,308
Class B Common Stock Outstanding at June 30, 1996
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$.10 PAR VALUE 1,609,848
ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, DEC. 31,
1996 1995
Assets
Cash and due from banks $11,171,425 9,320,012
Federal funds sold 22,825,000 37,325,000
Total cash and cash equivalents 33,996,425 46,645,012
Interest bearing deposits in banks 1,213,752 718,751
Investment securities held to maturity (market value of
$110,601,039 @
6/30/96 & $104,636,075 @ 12/31/95) 110,972,422 103,462,796
Investment securities available for sale - at market 3,620,426 970,336
value
Total loans 188,112,825 198,419,480
Less allowance for loan losses 9,655,867 9,746,559
Net loans 178,456,958 188,672,921
Other real estate, net 450,423 612,249
Premises and equipment, net 4,687,893 4,427,248
Accrued interest and other assets 11,931,217 10,754,527
$345,329,516 356,263,840
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing $39,063,501 34,113,344
Interest bearing (includes certificates of
deposit in excess
of $100,000 of $23,319,502 at June 30, 1996 and
$22,850,705 at December 31, 1995) 210,423,026 234,128,196
Total deposits 249,486,527 268,241,540
Accrued interest and other liabilities 10,473,924 7,849,273
Long-term borrowings 4,832,000 2,332,000
Mortgage payable 636,084 652,367
Total liabilities 265,428,535 279,075,180
Stockholders' equity
Common stock
Class A, par value $2 per share; authorized,
18,000,000 shares; issued,
6,464,308 @ 6/30/96 & 6,086,554 @ 12/31/95 12,928,616 12,173,108
Class B, par value $.10 per share; authorized,
2,000,000 shares; issued,
1,609,984 @ 6/30/96 & 1,529,100 @ 12/31/95 160,984 152,910
Capital surplus 12,450,320 12,450,320
Retained earnings 54,990,217 52,412,886
Accumulated unrealized loss on investment securities (47,589) (564)
available for sale
80,482,548 77,188,660
Less: Treasury stock - at cost, 56,396 - 6/30/96 of
Class A and
-0- - 12/31/95 581,567 -
79,900,981 77,188,660
$345,329,516 356,263,840
The accompanying notes are an integral part of these statements.
................................................................................
ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED,
JUNE 30
1996 1995
Interest income
Loans, including fees $5,161,126 $4,908,987
Investment securities
Taxable 1,404,896 1,342,839
Tax-exempt 14,750 200,136
Securities held for sale 105,405 11
Deposits in banks 32,142 18,901
Federal funds sold 303,289 188,854
U.S. Treasury and agencies 296,047 -
TOTAL INTEREST INCOME 7,317,655 6,659,728
Interest expense
Deposits 2,387,719 1,988,476
Mortgage payable and other 86,138 74,056
Federal funds purchased - -
TOTAL INTEREST EXPENSE 2,473,857 2,062,532
NET INTEREST INCOME 4,843,798 4,597,196
Provision for loan losses - -
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 4,843,798 4,597,196
Other income (expense)
Service charges and fees 255,029 168,589
Gain on sale of other real estate 1,771,316 396,562
Gain on sale of loans 351,150 19,858
Other income 603,967 23,052
2,981,462 608,061
Other expenses
Salaries, wages and employee benefits 3,584,759 1,042,780
Occupancy and equipment 164,207 87,875
Other operating expenses 929,982 1,186,318
4,678,948 2,316,973
INCOME BEFORE INCOME TAXES 3,146,312 2,888,284
Income taxes 943,893 717,714
NET INCOME $2,202,419 $2,170,570
Per share data
Net income $.27 $.26
Average number of shares outstanding 8,131,965 8,208,038
The accompanying notes are an integral part of these statements.
ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30,
1996 1995
Interest income
Loans, including fees $11,177,174 $9,753,813
Investment securities
Taxable 2,871,420 2,649,823
Tax-exempt 27,453 424,994
Securities held for sale 166,225 17,851
Deposits in banks 54,846 38,469
Federal funds sold 600,176 -
U.S. Treasury and agencies 590,183 394,907
TOTAL INTEREST INCOME 15,487,477 13,279,857
Interest expense
Deposits 4,864,428 3,976,281
Mortgage payable and other 140,949 129,279
Federal funds purchased - 4,854
TOTAL INTEREST EXPENSE 5,005,377 4,110,414
NET INTEREST INCOME 10,482,100 9,169,443
Provision for loan losses - -
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 10,482,100 9,169,443
Other income (expense)
Service charges and fees 508,048 334,108
Gain on sale of other real estate 1,910,955 515,448
Gain on sale of loans 402,875 27,592
Other income 659,206 62,080
3,481,084 939,228
Other expenses
Salaries, wages and employee benefits 5,249,369 2,075,954
Occupancy and equipment 329,972 193,606
Other operating expenses 2,222,912 2,306,285
7,802,253 4,575,845
INCOME BEFORE INCOME TAXES 6,160,931 5,532,826
Income taxes 1,848,279 1,508,922
NET INCOME $4,312,652 $4,023,904
Per share data
Net income $.54 $.50
Average number of shares outstanding 7,988,493 8,069,206
The accompanying notes are an integral part of these statements.
ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1996
NET
UNREALIZED
LOSS ON
SECURITIES
CLASS A COMMON STOCK CLASS B CAPITAL RETAINED TREASURY AVAILABLE
COMMON
STOCK
SHARES AMOUNT SHARES AMOUNT SURPLUS EARNINGS STOCK FOR SALE
Balance, December 31, 1995 6,086,554 $12,173,108 1,529,100 $152,910 $12,450,320 $52,412,886 $ $(564)
-
Net income for the six months ended - - - - 4,312,652 - -
June 30, 1996
Conversion of Class B common stock
to Class A common stock 12,525 25,050 (10,893) (1,089) - (23,961) - -
6% stock dividends declared 365,229 730,458 91,641 9,164 - (739,622) - -
Cash in lieu of fractional shares - - - - - (2,098) - -
Purchase of treasury stock - - - - - - (581,567) -
Cash dividends on common stock - - - - - (969,640) - -
Net unrealized loss on securities - - - - - - - (47,025)
available for sale
Balance, June 30, 1996 6,464,308 $12,928,616 1,609,848 $160,984 $12,450,320 $54,990,217 $(581,567) $(47,589)
The accompanying notes are an integral part of this statement.
ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
1996 1995
Cash flows from operating activities
Net income $4,312,652 4,023,904
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 178,836 106,620
Provision for loan losses - -
Accretion of investment securities discount (58,603) (8,662)
Amortization of investment securities premium 324,255 153,783
Amortization of deferred loan fees (55,862) (63,076)
Accretion of discount on loans purchased (1,014,846) (639,887)
(Benefit) provision for deferred income taxes - (17,542)
Loss (gain) on sale of equipment - -
(Gain) loss on other real estate (1,910,955) (515,448)
Gain on sale of loans (402,875) (27,592)
Realized gains on sale of investment - -
securities held for sale
(Increase) decrease in accrued interest (23,390) (142,332)
receivable
(Increase) decrease in other assets (978,150) 34,755
Increase (decrease) in accrued interest 440,295 362,926
payable
Increase in unearned income on loans 22,809 192,643
Increase (decrease) in other liabilities 2,184,356 588,354
Net cash provided by operating activities 3,018,522 4,048,446
Cash flows from investing activities
Net increase in interest bearing balances in (495,001) 8,410,000
banks
Proceeds from calls and maturities of
investment securities
held to maturity 8,058,108
Purchase of investment securities held to (15,833,385) (17,865,000)
maturity
Proceeds from sale of investment securities - 6,964,092
available for sale
Purchase of securities available for sale (2,650,090) -
Net decrease in loans 11,491,584 4,669,176
Purchase of premises and equipment (439,480) (108,531)
Proceeds from sale and payments on other real 2,072,780 4,447,908
estate
Net cash (used in) provided by investing 2,204,516 6,517,645
activities
Cash flows from financing activities
Net (decrease) increase in short-term - (21,000,000)
borrowings
Net increase (decrease) in non-interest
bearing and
interest bearing demand deposits and savings (11,117,587) (11,456,097)
accounts
Net increase (decrease) in certificates of (7,637,426) (6,079,624)
deposit
Mortgage payments (16,283) (18,104)
Cash dividends in lieu of fractional shares (2,098) (2,069)
Purchase of treasury stock (581,567) (843,986)
Net increase in long-term borrowings 2,500,000 -
Issuance of common stock under stock option - 41,677
plans
Cash dividends (969,640) -
Other (47,024) -
Net cash provided by (used in) financing (17,871,625) (39,358,203)
activities
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (12,648,587) (28,792,112)
Cash and cash equivalents at beginning of year 46,645,012 47,137,320
Cash and cash equivalents at end of year $33,996,425 $18,345,208
The accompanying notes are an integral part of these statements.
ROYAL BANCSHARES OF PENNSYLVANIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying unaudited consolidated financial statements include the
accounts of Royal Bancshares of Pennsylvania , Inc. (the Company) and its
wholly-owned subsidiaries: Royal Bank of Pennsylvania (the Bank), Royal Real
Estate, Inc. and Royal Investments of Delaware, Inc. These financial statements
reflect the historical information of the Company. All significant intercompany
transactions and balances have been eliminated.
1. The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. The financial information included herein
is unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which are, in opinion
of management, necessary to a fair statement of the results for the interim
periods. For further information thereto included in the Annual Report on
Form 10-K for the year ended December 31, 1995.
2. The results of operations for the three and six month periods ended June
30, 1996 are not necessarily indicative of the results to be expected for
the full year.
3. Per share data are based on the weighted average number of shares
outstanding of 8,131,965 and 8,208,038 for the three months ended, June 30,
1996 and 1995, respectively, and 7,988,493 and 8,069,206 for the six
months ended June 30, 1996 and 1995, respectively.
4. Investment Securities:
The carrying value and approximate market value of investment securities at
June 30, 1996 are as follows:
AMORTIZED
OR GROSS GROSS APPROXIMATE
PURCHASED UNREALIZ UNREALIZ MARKET CARRYING
ED ED
COST GAINS LOSSES VALUE VALUE
- - ---
Available for sale:
- - -------------------
Common stock $1,053,191 $ $750 $1,052,441 $1,052,441
Preferred stock 2,639,341 - 71,356 2,567,985 2,567,985
$3,692,532 $ $72,106 $3,620,426 $3,620,426
Held to maturity:
- - -----------------
US Treas & agencies $16,988,267 $78,203 $261,526 $16,804,944 $16,988,267
State & municipal 496,930 94,990 - 591,920 496,930
Corp debt securities 93,487,225 401,076 684,126 93,204,175 93,487,225
$110,972,422 $574,269 $945,652 $110,601,039 $110,972,422
5. Allowance for Credit Losses: Changes in the allowance for credit losses
were as follows:
THREE MONTHS ENDED JUNE 30,
1996 1995
BALANCE AT MARCH 31, $9,598,929 $8,949,233
Loans charged -off (42,734) -
Recoveries 99,672 17,585
Net charge-offs and recoveries 56,938 17,585
Provision for loan losses - -
BALANCE AT END OF PERIOD $9,655,867 $8,966,818
SIX MONTHS ENDED JUNE 30,
1996 1995
BALANCE AT BEGINNING OF YEAR $9,746,559 $8,991,617
Loans charged -off (266,481) (50,000)
Recoveries 175,789 25,201
Net charge-offs and recoveries (90,692) (24,799)
Provision for loan losses - -
BALANCE AT END OF PERIOD $9,655,867 $8,966,818
6. Loans on which the accrual of interest has been discontinued or reduced
amounted to approximately $4,856,210 and $2,642,810 at June 30, 1996 and 1995,
respectively. Loan balances past due 90 days or more that are not on a non-
accrual status, but management expects will eventually be paid in full amounted
to approximately $0 at June 30, 1996 and $391,257 at June 30, 1995. Although
the Company has non-performing loans of approximately $4,856,210 at June 30,
1996, management believes it has adequate collateral to limit its credit risks.
The balance of impaired loans was $2,786,617 at June 30, 1996. The Company
identified a loan impaired when it is probable that interest and principal will
not be collected according to the contractual terms of the loan agreements. The
allowance for credit loss associated with impaired loans was $60,704 at June 30,
1996. The income recognized on impaired loans during the six month period ended
June 30, 1996 was $11,056. The cash collected on impaired loans during this
three month period was $271,600, of which $260,544 was credited to the principal
balance outstanding on such loans. Interest that would have been accrued on
impaired loans during this six month period in 1996 was $84,640. The Company's
policy for interest income recognition on impaired loans is to recognize income
on currently performing restructured loans under the accrual method. The
Company recognizes income on non-accrual loans under the cash basis when the
principal payments on the loans become current and the collateral on the loan is
sufficient to cover the outstanding obligation to the Company. If these
factors do not exist, the Company does not recognize income.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULT OF OPERATIONS
The following discussion and analysis is intended to assist in
understanding and evaluating the major changes in the financial condition and
earnings performance of Royal Bancshares of Pennsylvania, ("the Company") and
its wholly owned subsidiaries for the six month period ended June 30, 1996.
FINANCIAL CONDITION
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Total assets as of June 30, 1996 were $345.3 million, a decrease of $10.3
million from the $356.3 million reported at year end, December 31, 1995. This
decrease is primarily due to decreases in cash and cash equivalents and loans of
$15.2 million and $10.3 million, respectively. These decreases are partially
offset by a $10.2 million increase in investment securities.
The decrease in cash and equivalents of $12.6 million is primarily
attributable to the purchase of investment securities and the funding of
maturing deposits in the first quarter of 1996. Total loans decreased $10.3
million to $188.1 million from $198.4 million at December 31, 1995. This
decrease is primarily due to maturities in the first and second quarter,
partially offset by originations. Investment securities increased $10.2 million
primarily due to the purchase of corporate bonds and preferred stock. Other
real estate decreased $162 thousand due to the sale of several properties in
the second quarter. The allowance for loan loss increased $91 thousand, due to
net recoveries, to $9.7 million which represents 4.6% of total loans.
Total deposits, the primary source of funds, decreased $18.8 million to
$249.5 million at June 30, 1996, from $268.2 million at December 31, 1995. This
decrease is primarily due runoff experienced in the NOW and money market
deposits in the first quarter totaling $22 million. FHLB advances increased
$2.5 million due to an advance taken in March for $2.5 million for a term of ten
years. Other liabilities increased $2.6 million primarily due to the
establishment of a reserve of $2.4 million relating to stock appreciate rights
arising from the Stock Option and Appreciation Plan. This Plan provides
employees compensation in the form of options to purchase shares of the
Company's common stock. At the time an option is granted , an identical number
of stock appreciation rights are granted, which enable the recipient on
exercise, to receive payment in cash of increases in the market value of the
stock from the date of grant. Accordingly, the Company has accrued $2.4
million in the first six months of 1996 toward the difference between current
fair market values and the values at the stock appreciation grant date.
Stockholder's equity increased $3.3 million to $79.9 million at June 30,
1996 from $77.2 million at December 31, 1995. This increase is primarily due
net income of $4.3 million for the first six months of the 1996, partially
offset by cash dividends and a stock dividend of $1 million and $.7 million,
respectively. Additionally, in 1996 there was a repurchase of 56,396 shares of
the Company's class A common stock at cost for $581 thousand to be reflected as
treasury stock, in addition to an adjustment for accumulated unrealized loss on
available for sale investment securities of $47 thousand.
LIQUIDITY & INTEREST RATE SENSITIVITY
- - -------------------------------------
Liquidity is the ability to ensure that adequate funds will be available to
meet its financial commitments as they become due. In managing its liquidity
position, all sources of funds are evaluated, the largest of which is deposits.
Also taken into consideration is the repayment of loans. These sources provide
alternatives to meet its short term liquidity needs. Longer liquidity needs may
be met by issuing longer term deposits and by raising additional capital. The
liquidity ratio is generally maintained equal to or greater than 25% of deposits
and short term liabilities.
The liquidity ratio of the Company remains strong at approximately 45% and
exceeds the Company's peer group levels and target ratio set forth in the
Asset/Liability Policy. The Company's level of liquidity is provided by funds
invested primarily in corporate bonds, US Treasuries and agencies, and to a
lesser extent, obligations of state and political subdivisions and federal funds
sold. The overall liquidity position is monitored on a monthly basis.
Interest rate sensitivity is a function of the repricing characteristics of
the Company's assets and liabilities. These include the volume of assets and
liabilities repricing, the timing of the repricing, and the interest rate
sensitivity gaps is a continual challenge in a changing rate environment. The
following table shows separately the interest sensitivity of each category of
interest earning assets and interest bearing liabilities as of June 30, 1996:
INTEREST SENSITIVITY ANALYSIS
(in thousands) REPRICING PERIODS
---------------------------------
NON RATE
ONE YEAR SENSITIVE
WITHIN THRU AND OVER
ASSETS ONE YEAR FIVE YEARS FIVE YEARS TOTAL
Interest bearing deposits
with banks $3.8 $ $ $3.8
- -
Federal funds sold 22.8 - - 22.8
Securities available for sale 3.6 - - 3.6
Securities held to maturity 40.4 64.9 5.7 111.0
Loans 64.3 90.8 36.7 191.8
Other assets - - 12.3 12.3
TOTAL ASSETS $134.9 $155.7 $54.7 $345.3
LIABILITIES AND CAPITAL
Non-interest bearing deposits $ - - $39.1 $39.1
Interest bearing deposits: 100.0 55.5 54.8 210.3
Borrowed funds 1.3 1.6 2.6 5.5
Other liabilities - - 10.5 10.5
Stockholders' equity - - 79.9 79.9
TOTAL LIABILITIES AND CAPITAL $101.3 $57.1 $186.9 $345.3
Interest rate sensitivity gap $33.6 $98.6 $(132.2) $ -
Cumulative interest rate
sensitivity gap $33.6 $132.2 $
-
The Company's exposure to interest rate risk is somewhat mitigated by a
significant portion of the Company's loan portfolio consisting of floating rate
loans, which are tied to the prime lending rate but which have interest rate
floors and no interest rate ceilings. Although the Company is originating fixed
rate loans, a significant portion of the loan portfolio continues to be
comprised of floating rate loans with interest rate floors.
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RESULTS OF OPERATIONS
- - ---------------------
Net income for the three months ended, June 30, 1996 was $2,202,419 or $.27
per share, as compared to net income of $2,170,570 or $.26 per share, for the
same three month period in 1995. Net income for the six months ended June 30,
1996 was $4,312,652, or $.54 per share, as compared to $4,023,904 for the same
six month period in 1995. These increases are primarily attributable to an
increase in net interest income in addition to income relating to loan payoffs
and gains on sale of other real estate recorded in 1996.
Net interest income increased $.2 million to $4.8 million for the second
quarter of 1996 as compared to $4.6 million for the same period ended, 1995.
For the comparative six month period, net interest income increased $1.3 million
to $10.5 million as compared to $9.2 million for the same period in 1995. These
increases are primarily attributable to an increase in interest earning assets
relating to the acquisition of Knoblauch State Bank ("KSB") in July of 1995.
These increases are comprised of $.3 million and $1.4 million in interest income
and fees on loans for the respective three and six month periods. The year to
date average balance of loans for the three and six months ended June 30, 1996
were approximately and $192.0 million and $199.2 million, respectively, as
compared to $162.4 and $164.5 for the same periods in 1995. Additionally, there
was a $.5 million and $.8 million increase in interest and dividends on
investment securities and interest bearing time deposits at banks for the
respective three and six month periods. These increases were partially offset
by a $.5 million and $.9 million increase in interest expense on deposits for
the respective three and six month periods. The year to date average balance of
deposits for the three and six months ended June 30, 1996 were approximately
$254.3 million and $256.1 million, respectively, as compared to $190.8 and
$191.9 million for same periods in 1995.
There was no provision for loan loss recorded for the respective
periods of 1996 and 1995 primarily due to Management's assessment that the level
of reserves to be adequate for the respective periods.
Total non interest income for the three months ended June 30, 1996 was $3.0
million, an increase of $2.4 as compared to $.6 million for the same period in
1995. For the comparative six month period, non interest income was $3.5
million, an increase of $2.5 million as compared to $.9 million for the same six
month period in 1995. These increases are primarily due to an increase in gains
on sale of other real estate and loans for the respective three and six month
periods in 1996. Additionally, there was an increase on service charges and
fees on deposit accounts primarily due to the acquisition of KSB.
Total non interest expenses for the three months ended June 30, 1996 was
$4.7 million, an increase of $2.4 million, as compared to $2.3 million for the
same period in 1995. For the comparative six month period ended June 30, 1996,
non-interest expense was $7.8 million as compared to $4.6 million for the same
six month period in 1995. This increase is primarily due to an increase in
staffing attributable to the KSB acquisition, in addition to an expense recorded
relating to the Stock Option and Appreciation Right Plan.
The number of full time and full time equivalent employees were 123 at June
30, 1996 versus 84 for the same period ended in 1995.
The Company has a Stock Option and Appreciation Right Plan which provides
employees compensation in the form of options to purchase shares of the
Company's common stock. At the time an option is granted, an identical number
of stock appreciation rights are granted, which enable the recipient on
exercise, to receive payment in cash of increases in the market value of the
stock from the date of grant. Accordingly, the Company accrued $2.4 million
relating to these stock appreciation rights as employee benefits expense in the
current period toward the difference between current market values and the
values at the grant date.
Occupancy expenses increased $.1 million for both respective three and six
month periods due to the additional expenses associated with the newly acquired
office locations in the KSB acquisition. Other operating expenses decreased $.3
million and $.1 million for the respective three and six month periods ended
June 30, 1996. These decreases in other operating expenses are partially
attributable to a decrease in FDIC insurance expense due to the reduction of the
deposit insurance assessment rate for "well capitalized" banks.
CAPITAL ADEQUACY
- - ----------------
The company is required to maintain minimum amounts of capital to total
"risk weighted" assets and a minimum Tier 1 leverage ratio, as defined by the
banking regulators. At June 30, 1996, the Company was required to have a
minimum Tier 1 and total capital ratios of 4% and 8%, respectively, and a
minimum Tier 1 leverage ratio of 3% plus an additional cushion of 100 to 200
basis points.
The table below provides a comparison of Royal Bancshares of Pennsylvania's
risk-based capital ratios and leverage ratios:
JUNE 30, 1996 DECEMBER 31, 1995
CAPITAL LEVELS
Tier 1 leverage ratio 23.13% 22.2%
Tier 1 risk-based ratio 30.22% 27.7%
Total risk-based ratio 31.52% 29.0%
CAPITAL PERFORMANCE
Return on average assets 2.5%(1) 2.6%
Return on average equity 11.%(1) 11.1%
(1) annualized
The Company's ratios compare favorably to the minimum required amounts of
Tier 1 and total capital to "risk weighted" assets and the minimum Tier 1
leverage ratio, as defined by banking regulators. The Company currently meets
the criteria for a well capitalized institution, and management believes that
the Company will continue to meets its minimum capital requirements. At
present, the Company has no commitments for significant capital expenditures.
The Company is not under any agreement with regulatory authorities nor is
the Company aware of any current recommendations by the regulatory authorities
which, if such recommendations were implemented, would have a material effect on
liquidity, capital resources or operations of the Company.
PART II - OTHER INFORMATION
----------------------------
ITEM 1. LEGAL PROCEEDINGS
- - -------------------------
None
ITEM 2. CHANGES IN SECURITIES
- - ------------------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- - ---------------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE SECURITY HOLDERS
- - ------------------------------------------------------
None
ITEM 5. OTHER INFORMATION
- - -------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - ----------------------------------------
None
SIGNATURES
----------
Pursuant to the requirements of the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ROYAL BANCSHARES OF PENNSYLVANIA, INC.
(Registrant)
Dated:August 12th, 1996
------------------------------------------------------
James J. McSwiggan, Chief Financial Officer & Treasurer
Dated: August 12th, 1996
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- - -
David J. Greenfield, Controller