Royal Financial, Inc. Announces Earnings for First Quarter of Fiscal Year 2017

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| Source: Royal Financial, Inc.

CHICAGO, Nov. 21, 2016 (GLOBE NEWSWIRE) -- Royal Financial, Inc. (the “Company”) (OTCQX:RYFL), incorporated under the laws of Delaware on December 15, 2004, for the purpose of serving as the holding company of Royal Savings Bank (the “Bank”), announced earnings for the first quarter end of fiscal year 2017.

For the first quarter ended September 30, 2016, the Company reported net income of $264,000, or $.11 per common share, compared to $4.6 million in the same period of fiscal 2016, which was primarily related to the gain, net of expenses, of $4.1 million, a direct result of the PNA Bank merger which was finalized September 30, 2015.

Comparison of Financial Condition at September 30, 2016 and June 30, 2016

The Company’s total assets increased $83,000, or 0.03%, to $304.1 million at September 30, 2016, from $304.0 million at June 30, 2016.

Cash and cash equivalents increased $892,000, or 14.30%, to $7.1 million at September 30, 2016 from $6.2 million at June 30, 2016.

Securities available for sale increased $1.8 million, or 2.69%, to $68.6 million at September 30, 2016 from $66.8 million at June 30, 2016. An additional $5.2 million in municipal bonds were purchased, partially offset by the maturity of $3.5 million of government sponsored securities.   

Loans, net of allowance, decreased $1.7 million, or 0.83%, to $197.9 million at September 30, 2016 from $199.6 million at June 30, 2016 due to large commercial loans maturing within the period.

FHLB stock decreased $1.1 million, or 60.6%, to $704,000 at September 30, 2016 from $1.8 million at June 30, 2016, as excess stock, held for collateral purposes, was redeemed.

Total deposits decreased $2.7 million, or 1.0%, to $258.8 million at September 30, 2016 from $261.5 million at June 30, 2016 due to higher yielding deposits maturing within the period.

Federal Home Loan Bank advances increased $4.5 million, or 900.0%, to $5.0 million at September 30, 2016 from $500,000 at June 30, 2016. FHLB advances are limited to short term maturities.

The line of credit decreased $50,000, or 0.95%, to $5.2 million at September 30, 2016 from $5.25 million at June 30, 2016, as the Company paid down the line of credit.

Total stockholders’ equity increased $347,000, or 1.08%, to $32.5 million at September 30, 2016 from $32.1 million at June 30, 2016, which was primarily a result of the net income of $264,000 earned for the period.

In the quarter ended September 30, 2016, the Bank paid a cash dividend to the Company of $415,000.

The allowance for loan losses was $1.4 million, or 0.69% of total loans, at September 30, 2016, as compared to $1.4 million, or 0.70% of total loans, at June 30, 2016.  The acquired loans included in the loan portfolio as of September 30, 2016 were recorded at the fair value, and accordingly have a satisfactory rating. The allowance for loan losses, excluding the newly acquired loans, was at 1.25%. The Company believes, as of September 30, 2016, its allowance for loan losses was adequate to cover probable incurred losses.  Non-performing assets (non-accrual loans, restructured loans, loans past due 90 days or greater and other real estate owned) were $914,000, or 0.30%, at September 30, 2016 compared to $751,000, or 0.25%, at June 30, 2016.

The Bank is required to maintain regulatory capital sufficient to meet the Tier 1 capital leverage ratio, and the risk-based ratios, which include the required capital buffer of 0.625%, for Common Equity Tier 1 capital, Tier 1 capital and Total capital of at least 4.0%, 5.125%, 6.625% and 8.625%, respectively.  At September 30, 2016, the Bank exceeded each of its capital requirements with ratios of 8.54%, 14.91%, 14.91% and 15.74%, respectively.

At September 30, 2016, the book value per common share was $12.95 compared to the book value per common share of $12.81 at June 30, 2016, shares outstanding of 2,507,112 for both periods.  The tangible book value per common share was $12.55 at September 30, 2016.

Comparison of Results of Operation for the Three Months Ended September 30, 2016 and 2015

The Company reported net income of $264,000 for the first three months of fiscal 2016, compared to $4.6 million in the same period of fiscal 2015, a decrease of $4.3 million. The decrease is primarily related to a decrease of $5.0 million in non-interest income, a decrease of $160,000 in credit provision for loan losses, an increase of $217,500 in the provision for income taxes, an increase in non-interest expense of $483,000, partially offset by an increase in net interest income of $1.6 million.

The decrease in non-interest income is primarily related to the decrease in gain on acquisitions of $4.6 million related to the acquisition of PNA Bank, a decrease in gain on the sale of premises and equipment of $177,000, related to the sale of one acre of land located in Frankfort, Illinois, owned by the Company, and the sale of the office building in Homewood, Illinois, owned by the Bank, and a decrease of $301,000  related to the recognition of the gain on sale of other real estate owned property which was included in the bulk asset sale in the same period of 2015. The decrease in the provision (credit) for loan losses is related to a credit of $130,000 which was recorded in the same period of fiscal 2015, directly related to recoveries of previously charged off bad debt. The increase of $217,500 in the provision for income taxes was primarily related to prior period tax adjustments in the same period of fiscal 2015.

The increase in non-interest expense of $483,000 was primarily related to an increase of $409,000 in salaries and employee benefits, a result of increasing the bank staff associated with the two mergers in fiscal 2015, an increase in occupancy and equipment of $283,000, a result of acquiring five additional banking facilities, and an increase of $186,000 in data processing expense, a direct result of the Park Federal Savings Bank customer base being maintained under a separate data processing contract for the current period, partially offset by a decrease of $418,000 in acquisition expense, directly related to the merger of PNA Bank merger that occurred in the same period of fiscal 2015.

The complete audited consolidated financial statements for 2016 and 2015 are available at www.royalbankweb.com

About Royal Financial, Inc.
Royal Savings Bank is a federally-insured financial institution that offers a range of checking and savings products and a full line of home and commercial lending solutions.  Royal Savings Bank has been operating continuously since 1887, and currently has seven branches in Chicagoland and lending centers in Homewood and St. Charles, Illinois. Visit Royal Financial, Inc. and Royal Savings Bank at www.royalbankweb.com.

Safe-Harbor
Forward Looking Statements: This press release may include forward-looking statements.  These forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions.  Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results may differ materially from those predicted in such forward-looking statements.  Factors that could have a material adverse effect on the operations and future prospects of the Company and the Bank include, but are not limited to, changes in interest rates; the economic health of the local real estate market; general economic conditions; continued credit deterioration in our loan portfolio that would cause us to further increase our allowance for loan losses; legislative/regulatory changes; monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board; the quality or composition of the loan and securities portfolios; demand for loan products in our market areas; deposit flows; competition; demand for financial services in our market areas; and changes in accounting principles, policies, and guidelines.  These risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements.

 
Royal Financial, Inc. and Subsidiary
Consolidated Statements of Financial Condition
September 30, 2016 and June 30, 2016
(Unaudited)
    
    
 September 30, 2016 June 30, 2016
    
Assets   
Cash and non-interest bearing balances in financial institutions$2,278,803  $2,880,807 
Interest bearing balances in financial institutions 4,775,565   3,276,628 
Federal funds sold 77,028   81,583 
Total cash and cash equivalents 7,131,396   6,239,018 
    
Investment certificates of deposit 2,591,000   2,591,000 
Securities available for sale 68,605,262   66,810,148 
Loans receivable, net of allowance for loan losses of   
   $1,391,837 at September 30, 2016 and $1,402,993 at June 30, 2016 197,945,895   199,605,997 
Federal Home Loan Bank stock, at cost 704,300   1,786,500 
Premises & equipment, net 12,396,181   12,238,322 
Accrued interest receivable 1,105,225   994,342 
Other real estate owned 21,485   15,307 
Deferred tax asset 12,183,081   12,206,928 
Core deposit intangible 998,112   1,024,612 
Other assets 449,304   536,240 
    
Total assets$304,131,241  $304,048,414 
    
Liabilities & Stockholders' Equity   
Deposits$258,809,736  $261,506,502 
Advances from borrowers for taxes and insurance 1,960,594   3,400,382 
Federal Home Loan Bank advances 5,000,000   500,000 
PrivateBank line of credit 5,200,000   5,250,000 
Accrued interest payable and other liabilities 705,785   1,283,162 
Total liabilities 271,676,115   271,940,046 
    
Stockholders' equity   
Preferred stock $0.01 par value per share, authorized   
   1,000,000 shares, no issues are outstanding   -       -   
Common stock, $0.01 par value per share, authorized 5,000,000   
   shares, 2,645,000 shares issued 26,450   26,450 
Additional paid-in capital 23,912,335   23,896,672 
Retained earnings 9,107,967   8,843,608 
Treasury stock, 137,888 shares, at cost (1,012,924)  (1,012,924)
Accumulated other comprehensive income 421,298   354,562 
Total stockholders' equity 32,455,126   32,108,368 
    
Total liabilities and stockholders' equity$304,131,241  $304,048,414 
    

This report has not been prepared in accordance with Securities and Exchange Commission ("SEC") rules applicable to SEC registrant companies and is not intended to comply with such rules. 

 
Consolidated Statements of Operations
Three Months Ended September 30, 2016 and 2015
(Unaudited)
 
    
  2016   2015 
    
Interest income   
Loans$2,743,480  $1,216,230 
Securities 288,827   89,508 
Federal funds sold and other 9,602   1,634 
Total interest income 3,041,909   1,307,372 
    
Interest expense   
Deposits 195,322   87,178 
Borrowings 55,847   1,316 
Total interest expense 251,169   88,494 
    
Net interest income 2,790,740   1,218,878 
    
Provision/(Credit) for loan losses 30,000   (130,000)
    
Net interest income after provision/(credit) for loan losses 2,760,740   1,348,878 
    
Non-interest income   
Service charges on deposit accounts 141,191   49,805 
Secondary mortgage market fees 5,355   5,370 
Gain on sale of other real estate owned -   301,339 
Income (loss) on other real estate owned, net (5,797)  - 
Gain on sale of premises and equipment -   177,049 
Gain (loss) on acquisitions (36,614)  4,578,838 
Other 310   189 
Total non-interest income 104,445   5,112,590 
    
Non-interest expense   
Salaries and employee benefits 1,089,264   680,016 
Occupancy and equipment 412,494   129,919 
Data processing 281,423   95,659 
Professional services 174,672   387,049 
Director fees 36,000   32,400 
Marketing 45,913   3,761 
FDIC insurance expense 25,239   18,600 
Insurance premiums 35,862   12,690 
Acquisition expense 26,271   444,017 
Other 267,188   106,798 
Total non-interest expense 2,394,326   1,910,909 
    
Income before income taxes 470,859   4,550,559 
    
Income tax expense (benefit) 206,500   (11,000)
    
Net income$264,359  $4,561,559 
    
    
Basic earnings per share$0.11  $1.82 
Diluted earnings per share$0.10  $1.81 
    

This report has not been prepared in accordance with Securities and Exchange Commission ("SEC") rules applicable to SEC registrant companies and is not intended to comply with such rules.

Contact:  Mr. Leonard Szwajkowski
President and CEO
Royal Financial, Inc.
Telephone:  (773) 382-2111
E-mail:  lszwajkowski@royal-bank.us