Royal Bank America says its addressing problems

Federal and state banking regulators ordered Royal Bank America yesterday to strengthen management and board oversight, to reduce the level of troubled loans on its books, and to tighten its lending practices.

The Narberth bank, which has 15 branches in the region, said it had already dealt with many of the problems addressed in the voluntary consent decree with the Federal Deposit Insurance Corp. and the Pennsylvania Department of Banking.

"The agreement will not impact our ability to support our customers, as it pertains to a limited number of our activities," said Robert Tabas, the bank's chairman and chief executive officer.

James McSwiggan, Royal's president and chief operating officer, attributed the bank's run-in with regulators to the economy and the bank's specialty: "We were in the niche that was hit hardest. That's commercial real estate, particularly housing, apartment, and condo development."

Since the beginning of last year, Royal has written off $16.8 million in troubled credits. At the end of March, the bank reported that its nonperforming loans amounted to 10.8 percent of its assets. That was among the worst figures for any bank based in the Philadelphia region.

"I think we are hopeful that, at this point, we have reached bottom," helped by the prospect that the economy has reached or is nearing a bottom, McSwiggan said.

The consent decree also ordered the bank to rein in lending outside the area where it has branches. Royal Bancshares of Pennsylvania Inc., the bank holding company for Royal Bank, said in its most recent quarterly report that it had loans in 26 states, even though most of its branches are in Southeastern Pennsylvania.

Lending outside their home base got many banks in trouble when the real estate bubble burst. Royal, with net loans of $680 million and $1.25 billion in assets on March 31, had about $100 million in out-of-market loans.

Tabas, whose family bought the bank in 1980, said this was the second time the bank had operated under a written order from regulators. But in the early 1990s, amid a commercial real estate meltdown, things were worse. "We effectively shut down lending back then and had the entire staff focused on loan workouts," he said.

This time around, it has been able to pursue new programs, such as a small-business lending effort that had made $30 million in loans averaging in the $400,000s as of March 31.

The company's shares were down 4 cents on Nasdaq today, at $1.77.

Royal is the third bank in the region since the beginning of June to reach a restrictive agreement with regulators. The others are Harleysville National Corp. and Roebling Financial Corp.