Kevin Tylus' work experience has aided his ongoing efforts to help Royal Bancshares of Pennsylvania (RBPAA) rediscover what it means to be a bank.

A veteran banker with turnaround experience from a stint at Deloitte, Tylus became the Narbeth company's president and chief executive late last year. Royal was hurting; it lost about $120 million between 2008 and 2012 as it dealt with bad loans, capital depletion and a bid-rigging scandal at its tax lien unit.

In the past eight months, Tylus, a former executive at Yardville National and PNC Financial Services (PNC), has aggressively cut costs and looked to exit noncore business lines.

Tylus is slowly starting to deliver results. In the first quarter, the $748 million-asset company posted its first profit since early 2008 by cutting costs. Though Royal lost money in the second quarter — tied to settling bid-rigging issues for about $1 million — Tylus seems eager to focus on growth.

"We think there's plenty of opportunity to expand within our footprint and fill in some key areas," he says.

Tylus continues to think creatively about cutting costs. Royal recently reached an agreement to transfer eight employees over to the payroll of a "well-known Philadelphia-area property management and brokerage firm," he says. The unnamed vendor will service the properties that remain in Royal's tax-lien portfolio.

The outside firm will also handle Royal's foreclosed properties, which totaled $13 million at June 30, or roughly half the amount it reported two years earlier. The foreclosed assets include $4.5 million in land and $3.6 million in commercial real estate.

"We improved shareholder value and found a home for employees who may not have had a long-term role at the bank as we become more efficient," Tylus says of the employee transfers, which will take place over the next two months.

Royal has also made progress with its credit quality. Nonaccrual loans fell 30% at June 30 compared to a year earlier, to $17.8 million, or 4.9% of total loans.

The company's overall goal is to return to its roots as a traditional Philadelphia-area community bank. Its community banking business has been profitable for two straight quarters, and management has started to focus more on ways to grow the balance sheet.

Total assets at Royal have decreased by roughly 40% since the end of 2007.

Royal is ramping up its dealings in home equity lending and is planning a return to making loans backed by the U.S. Small Business Administration, Tylus says. The company has also been making micro loans of $10,000 or less to entrepreneurs, small businesses and start-ups.

Royal does not plan to turn microlending into a significant business line, though Tylus says he hopes the program garners some favorable publicity and credit under the Community Reinvestment Act credit. "A local company should put money back into the community and this is one way we came up with to do that," he says.

Most banks offer small loans on an ad hoc basis, but not many have identified microlending as a distinct line of business, says Robert Davis, executive vice president at the American Bankers Association.

Given its small scale, Royal's microlending effort might not make it much money, though it does offer the company a way to reach out to sole proprietors and budding entrepreneurs. "It could help someone along to something bigger and to being a customer of the bank," Davis says.

In another sign that Royal has finally shifted gears from retrenchment to expansion, the company has begun scouting Bucks County, King of Prussia and other areas northeast of Philadelphia for new branches.

Founded in 1963 as the Bank of King of Prussia, the company was sold to the Tabas family in 1980. Recast as Royal Bank, the company maintained banking operations in the Philadelphia suburbs but began investing in other businesses in the early 2000s.

Within a few years, the company had gotten involved in asset-based lending, the acquisition of tax-lien properties and nationwide real estate investing. The strategy generated large profits while the economy grew — Royal earned $74 million from 2004 to 2006 — though the situation turned ugly when the 2008 recession set in.

Royal's low point came in 2009, when executives at its tax-lien subsidiary, Royal Tax Lien Services, were accused of rigging bids at auctions. The unit's president eventually pled guilty in federal court to a count of conspiracy.

More than 98% of the company's new business is coming from its branches. Tylus says that he is content to allow the remaining noncore assets to run off the balance sheet over future quarters.

The company still has plenty of challenges, and it still holds $30 million in capital from the Treasury Department's Troubled Asset Relief Program.

Royal has not disclosed a timetable for exiting Tarp, though it is slowly making progress on that front. In June, shareholders authorized the company to issue nearly 12 million new shares of common stock.

Royal plans to use the stock to raise $14 million in a private placement. The placement, paired with a shareholder rights offering, should allow the company to repay Treasury half of the funds owed under the program, Tylus says.