Main Line bank deal: Bryn Mawr buys Royal for $128M

Bryn Mawr Bank Corp., which owns Bryn Mawr Trust Co., says it has agreed to pay $127.7 million in stock to buy Royal Bancshares of Pennsylvania Inc. and Royal Bank America branches, Bryn Mawr's smaller rival, based in nearby Narberth.

The deal works out to about $4.19 a share, or nearly 2.5 times Royal's book value, and 25 times last year's profits. That's a comfortable margin by recent bank-sale standards. But it's a fraction of the $35 a share that Royal commanded before the 2008 financial crisis. Royal lost more than $120 million in 2008-12 and hasn't nearly made that money back since it turned modestly profitable again in 2013.

Bryn Mawr said it expected to cut 40 percent of Royal's yearly expenses to make the deal profitable in its first year. Royal had 119 employees and 13 branches as of Dec. 31. Bryn Mawr has about 500 staff in 34 offices.

Acquiring banks typically close acquired banks' back offices and redundant branches. Bryn Mawr has acquired eight companies since the mid-2000s.

The merger, if approved by regulators and Royal shareholders, will add more than $600 million each in loans and deposits, boosting Bryn Mawr's assets above $4 billion and cementing its status as the largest bank based in Philadelphia's western suburbs. Bryn Mawr also manages more than $11 billion in clients' investments.

Royal "is a logical choice for Bryn Mawr Trust," Bryn Mawr CEO Frank Leto said in a statement. The deal will add Royal CEO Kevin Tylus and his team of small-business lenders to Bryn Mawr's investment-management and mortgage-lending units.

According to Leto, Bryn Mawr has picked up Philadelphia-area customers "frustrated" by poor service at the big out-of-town banks that have dominated local lending since they bought the large Center City-based lenders in the 1980s and '90s.  "We believe that there is a real opportunity for institutions like Bryn Mawr Trust to occupy a much larger space in the banking, wealth management and insurance areas," he added.

The sale will enrich the Tabas family and other owners of publicly traded Royal, including Wellington Management Co., whose clients include Vanguard mutual funds.  "The combination is a great opportunity for our shareholders and stakeholders," Royal chairman Robert Tabas said in a statement.

Royal shareholders will receive 0.1025 shares of Bryn Mawr stock per Royal class A share and 0.1179 shares of Bryn Mawr per Royal class B share. Options outstanding "will be cashed out upon the close" of the deal, Bryn Mawr said in a statement.

Investment bankers at Boenning & Scattergood Inc., West Conshohocken, and a team of lawyers led by Paul Jaskot at Reed Smith LLP, Philadelphia, advised buyer Bryn Mawr. Sandler O'Neill + Partners LP and RBC Capital Markets LLC, both of New York, and law firm Stevens & Lee PC, of King of Prussia and Reading, advised seller Royal.