Royal Bancshares of Pennsylvania Comments on Consent Agreement With FDIC and Pennsylvania Department of Banking
16 July 2009 - 10:30PM
Marketwired
Royal Bank America (Royal), the primary banking subsidiary of Royal
Bancshares of Pennsylvania, Inc. (NASDAQ: RBPAA), today announced
that it has agreed to voluntarily enter into a consent agreement
with the Federal Deposit Insurance Corporation (FDIC) and the
Pennsylvania Department of Banking. The consent agreement results
from findings of a joint examination by the FDIC and the
Pennsylvania Department of Banking. Royal believes it has already
addressed many of the matters highlighted in the consent agreement,
having taken proactive steps since the beginning of 2008 to manage
credit quality and financial performance in light of deteriorating
macroeconomic conditions.
In commenting on the consent agreement, Robert Tabas, Chairman
and Chief Executive Officer, said, "We appreciate the input and
direction from the FDIC and the Department of Banking. Our
partnership with our regulators is a prescription for Royal's
continued health, and will make us an even stronger bank as the
plan is executed. Despite the challenges of the recession and its
impact on our real estate borrowers, Royal meets all regulatory
requirements for a well-capitalized bank, including those outlined
in the consent agreement. The agreement will not impact our ability
to support our customers, as it pertains to a limited number of our
activities and we have already initiated a strategic plan to
mitigate the specific concerns expressed by the FDIC and the
Department of Banking."
Mr. Tabas continued, "Our balance sheet is sound, and we have
over $130 million of liquidity, which we believe is sufficient to
meet our financial obligations for the foreseeable future. Over the
past 19 months, we have taken the hard action needed to enhance our
management team and board reporting, increase oversight of troubled
credits, strengthen our capital base and liquidity, and position
the bank for long term growth and stability. We believe these
actions will enable us to quickly comply with the terms outlined in
the consent agreement. At the same time, we are actively supporting
our local community, lending to small businesses that will be the
cornerstone of the region's economic recovery through our
SpurTheEconomy.com initiative, which continues to generate new
business traction."
The consent agreement addresses the following areas:
Capital Maintenance
Royal must maintain a leverage ratio equal to or greater than 8
percent, and a total risk-based capital ratio equal to or greater
than 12 percent. At March 31, 2009, the date of the bank's most
recent quarter end, leverage ratio was 10.27% and total risk-based
capital ratio was 13.11%. The bank expects to exceed both of these
ratio milestones when the quarterly results for the period ended
June 30, 2009 are announced.
Management and Board of Directors
The consent agreement makes specific recommendations regarding
the bank's management team, as well as Board of Directors
oversight. Royal believes it is already in compliance with these
provisions, due to steps that have been taken since the beginning
of 2008 to enhance management and Board of Directors resources. The
bank replaced its former president and CEO in December, and divided
responsibilities between two experienced banking executives. It
also hired a new Chief Lending Officer, Chief Credit Officer, and
Chief Financial Officer; enhanced its financial staff and special
assets team; and hired a new head of small business lending. Two
new directors were elected in 2008, one with an extensive
background in accounting and finance and the other with broad
experience in banking and strategic planning; additionally the
Board of Directors has taken several steps to enhance corporate
governance, including establishing a formal Corporate Governance
and Nominating Committee.
Classified Assets
The consent agreement provides for Royal to reduce classified
assets and restricts additional advances to classified borrowers.
Since the beginning of 2008, the bank has enhanced staffing levels
in its special assets division and proactively managed classified
loans. The bank continues to carefully monitor its classified loans
and work with borrowers to establish repayment plans. Since 2008,
Royal has added $8 million to its loan loss reserves and written
off approximately $16.8 million of troubled credits, while
maintaining its leverage and risk-based capital ratios above the
regulatory standards for a well-capitalized bank.
Other provisions
The consent agreement also addresses the bank's budgeting and
strategic planning process, use of brokered deposits as a funding
source, payment of dividends, and payments by the bank to its
holding company. Management believes it is already in compliance
with most aspects of these provisions.
Robert Tabas concluded, "The recessionary economic environment
has hurt all banks and financial institutions, and Royal was not
immune. With our historic emphasis on real estate, the downturn in
new and existing home sales and real estate values negatively
impacted our loan portfolio. That said, we have redirected our
efforts towards small business lending and believe that there is a
significant opportunity for us to grow in this arena. The entire
Royal team is committed to meeting all terms of the consent
agreement as quickly as possible."
About Royal Bancshares of Pennsylvania, Inc.
Royal Bancshares of Pennsylvania, Inc., headquartered in
Narberth, Pennsylvania, is a two-bank holding company operating the
Royal Bank America and Royal Asian Bank brands throughout
Pennsylvania, New Jersey and New York. Royal Bank America has
played a lead role in the growth and development of our area for
the past 40+ years. Royal Asian Bank enjoys a distinctive niche
serving the financing and banking needs of the growing
Asian-American population. More information on Royal Bancshares of
Pennsylvania, our banks and subsidiaries is available 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, 2008.
Media Contact: Joseph Crivelli Senior Vice President Gregory FCA
Communications Office: 610-228-2100 Cell: 610-299-6700 Company
Contact: Marc Sanders Director of Marketing Royal Bank America
Office: 610-668-4700 Cell: 484-802-1944
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