Royal Bancshares of Pennsylvania announced it has terminated an agreement to sell its Royal Asian Bank unit to a group of investors.
Despite raising a significant amount of capital, the Korean-American investor group pursuing the buyout of the Philadelphia subsidiary said it was unable to raise enough capital to complete the deal and secure regulatory approvals. The $1.4 billion-asset Royal Bancshares announced late Monday that the deal had been terminated.
Royal Bancshares is a two-bank holding company in Narberth, Pa., that also operates the $1.2 billion-asset Royal Bank America in Narberth.
The investor group was led by Edward Shin, Royal Asian Bank's president and CEO, who will remain with Royal Asian Bank and continue to manage its operations.
Shin formed Royal Asian Bancshares Inc. to buy the $117 million-asset bank from its parent company. The deal price was not disclosed.
In a statement, Robert R. Tabas, the chairman and CEO of Royal Bancshares, acknowledged that "the capital-raising environment today remains challenging."
This is the second bank deal to be canceled in the past week. Also, through Dec. 16, 26 bank and thrift deals have been terminated, or 22.1% of the 118 announced this year through that date, according to data from SNL Financial LC.
Though both of its bank units are well capitalized, problem loans led the parent company to report a $4.9 million loss for the third quarter. Still, that is an improvement from the $12 million loss Royal Bancshares reported a year earlier.
The Royal Bank America unit agreed to a cease-and-desist order with the Federal Deposit Insurance Corp. in July, which, among other things, requires the bank to increase its board supervision, reduce its concentration in commercial real estate loans and maintain elevated capital ratios.
The bank was required to have a minimum Tier 1 leverage ratio of 8% and a total risk-based capital ratio of 12%. At Sept. 30, Royal Bank America's Tier 1 leverage ratio was 8.8% and the total risk-based asset ratio was 13.46%.
Royal Asian Bank focuses on Korean-American communities in eastern Pennsylvania, northern New Jersey and Flushing, N.Y. Its nonperforming loans rose to 5.39% at June 30, from 1.19% a year earlier.