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Royal Financial, Inc. Announces Second Quarter and Year to Date Earnings for Fiscal Year 2015

CHICAGO, Feb. 1, 2015 (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 second quarter and for the first six months of fiscal year 2015.

For the second quarter ended December 31, 2014, the Company reported net income of $216,000, or $0.09 per common share, compared to $235,000, or $0.09 per common share, for the second quarter ended December 31, 2013. Net income for the six months ended December 31, 2014 was $357,000, or $0.14 per common share, compared to $7.4 million, or $2.97 per common share, for the first six months ended December 31, 2013. The decrease in net income for the six months ended December 31, 2014 was primarily the result of the Company's reversal of its deferred tax asset ("DTA") valuation allowance of $6.9 million in the first quarter of fiscal year 2014.

Comparison of Financial Condition at December 31, 2014 and June 30, 2014

The Company's total assets remained level at $128.0 million for the periods ended December 31, 2014 and June 30, 2014.

Securities available for sale decreased $11.6 million, or 36.0%, to $20.6 million at December 31, 2014 from $32.2 million at June 30, 2014. The decrease in the securities portfolio was due to the sale of $19.0 million of investment bonds sold for liquidity purposes to fund the growing loan portfolio, partially offset by the purchase of $8.0 million of government sponsored agency bonds. Security sales consisted of $6.0 million of government sponsored agency bonds and $13.0 million of municipal securities. Bonds sold were strategically selected to shorten the duration of the portfolio.

Loans, net of allowance, increased $10.5 million, or 13.2%, to $89.7 million at December 31, 2014, from $79.3 million at June 30, 2014. The loan portfolio continues to increase as a result of funding loans that are locally originated commercial loan growth, primarily consisting of commercial real estate and multi-family properties.

The purchase contract for the sale of the branch building located on the southeast side of Chicago has mutually lapsed due to the national developer's inability to obtain a single home site required for the necessary assemblage. The Bank intends to continue in its efforts to sell the building and remains in contact with the developer as well as a new developer who has expressed interest. The Bank still plans to close the banking office as the replacement micro-branch is now fully operational. The target closure date is set for June 30, 2015 and the Bank is actively seeking regulatory approvals.

Total deposits increased $3.6 million, or 4.4%, to $85.4 million at December 31, 2014 from $81.8 million at June 30, 2014, primarily related to the growth in local commercial deposits.

Federal Home Loan Bank advances decreased $4.0 million, or 21.1%, to $15.0 million at December 31, 2014 from $19.0 million at June 30, 2014. FHLB advances are all short term, not exceeding three months.

Total stockholders' equity increased $164,000, or 0.6%, to $25.9 million at December 31, 2014 from $25.7 million at June 30, 2014. The increase is primarily a result of net income of $357,000 partially offset by a decrease of $208,000 in accumulated other comprehensive income.

For the quarter ended December 31, 2014, the Bank paid a cash dividend to the Company of $120,000, in addition to the $120,000 paid in the quarter ended September 30, 2014. The funds will allow the Company to pay merger and acquisition costs associated with the acquisition of PNA Bank, pending regulatory approval, as announced in the press release dated December 23, 2014.

The allowance for loan losses was $1.38 million, or 1.50% of total loans, at December 31, 2014, as compared to $1.4 million, or 1.75% of total loans, at June 30, 2014. The Company believes, as of December 31, 2014, its allowance for loan losses was adequate to cover probable incurred losses. Nonperforming assets were $2.8 million, or 2.20%, at December 31, 2014 compared to $3.2 million, or 2.56%, at June 30, 2014.

The Bank is required to maintain regulatory capital sufficient to meet Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios of at least 4.0%, 4.0%, and 8.0%, respectively. At December 31, 2014, the Bank exceeded each of its capital requirements with ratios of 15.08%, 24.73%, and 25.99%, respectively.

At December 31, 2014, the book value per common share, shares outstanding 2,507,112, was $10.32 compared to the book value per common share, shares outstanding 2,507,112, of $10.25 at June 30, 2014.

The complete audited consolidated financial statements for 2014 and 2013 are available at www.royal-bank.us.

For liquidity enhancement, Royal Financial, Inc. secured a $4.0 million line of credit with The PrivateBank, located in Chicago, IL. The line was fully executed on November 13, 2014.

Comparison of Results of Operation for the Three and Six Months Ended December 31, 2014 and 2013

The net income for the three months ended December 31, 2014 was $216,000, a decrease in net income of $18,000, from the same period in 2013. The net income for the six months ended December 31, 2014 was $357,000, a decrease of net income of $7.1 million, from the same period in 2013.

The decrease in net income for the three months ended December 31, 2014 resulted primarily from an increase in non-interest expense of $494,000 and an increase in the provision for income taxes of $91,000, partially offset by an increase in net interest income of $126,000, an increase in non-interest income of $426,000 and a decrease in the provision for loan losses of $15,000.

The decrease in net income for the six months ended December 31, 2014 was primarily related to an increase in the provision for income taxes of $6.8 million, a direct result of the one-time recognition of the reversal of the tax valuation allowance against deferred tax assets of $6.9 million in fiscal year 2014, a decrease in credit for loan losses of $355,000, an increase in non-interest expense of $626,000, partially offset by an increase in net interest income of $210,000, and an increase in non-interest income of $463,000.

The decrease in credit for loan losses was related to the recognition of a credit provision of $370,000 in fiscal year 2014, which is directly related to a recovery of previously charged off bad debt. The increase in non-interest expense is primarily due to the increase in professional services of $259,000, which is primarily related to merger and acquisition costs, an increase in salaries and benefits of $200,000, primarily due to additional staff costs incurred in relation to the retail micro-branch which opened during the period, and an increase in foreclosed asset expense of $96,000, related to a write down valuation on other real estate owned property. The increase in net interest income is primarily related to the increase in loan interest income of $149,000 resulting from the growth of the loan portfolio. The increase in non-interest income is primarily related to the $412,000 gain recognized on the sale of investment securities in the period.

About Royal Financial, Inc.

Royal Financial, Inc. is the holding company for Royal Savings Bank which was founded in 1887. Royal Savings Bank 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 in the south and southeast communities of Chicago since 1887, and currently has three branches in Chicago, with lending centers in Homewood and St. Charles, Illinois.

Visit Royal Financial, Inc. and Royal Savings Bank at www.royal-bank.us

Safe–Harbor

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
December 31, 2014 and June 30, 2014
(Unaudited)
December 31, 2014 June 30, 2014
Assets
Cash and non-interest bearing balances in financial institutions $ 1,204,232 $ 871,687
Interest bearing balances in financial institutions 2,001,373 743,302
Federal funds sold 190,758 180,281
Total cash and cash equivalents 3,396,363 1,795,270
Securities available for sale 20,604,206 32,205,458
Loans receivable, net of allowance for loan losses of $1,365,599 at December 31, 2014, $1,416,899 at June 30, 2014 89,738,500 79,259,804
Federal Home Loan Bank stock, at cost 750,000 975,000
Premises & equipment, net 4,692,544 4,443,309
Land held for sale 265,000 265,000
Accrued interest receivable 363,325 500,561
Other real estate owned 1,750,000 1,986,850
Deferred tax asset 6,114,920 6,349,020
Other assets 368,184 226,574
Total assets $ 128,043,042 $ 128,006,846
Liabilities & Stockholders' Equity
Deposits 85,365,612 $ 81,782,980
Advances from borrowers for taxes and insurance 1,186,023 976,456
Federal Home Loan Bank advances 15,000,000 19,000,000
Accrued interest payable and other liabilities 625,116 545,559
Total liabilities 102,176,751 102,304,995
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 23,817,946 23,801,866
Retained earnings 2,867,564 2,510,488
Treasury stock, 137,888 shares, at cost (1,012,924) (1,012,924)
Accumulated other comprehensive income 167,255 375,971
Total stockholders' equity 25,866,291 25,701,851
Total liabilities and stockholders' equity $ 128,043,042 $ 128,006,846
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.
Royal Financial, Inc. and Subsidiary
Consolidated Statements of Operations
Three and Six months ended December 31, 2014 and 2013
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2014 2013 2014 2013
Interest income
Loans $ 1,160,791 $ 1,011,689 $ 2,229,426 $ 2,015,407
Securities 199,258 193,187 420,014 355,805
Federal funds sold and other 5,864 2,745 9,199 4,508
Total interest income 1,365,914 1,207,621 2,658,640 2,375,720
Interest expense
Deposits 78,079 49,825 150,336 86,489
Borrowings 9,588 5,151 19,951 10,949
Total interest expense 87,668 54,976 170,287 97,438
Net interest income 1,278,246 1,152,645 2,488,353 2,278,282
Provision/(Credit) for loan losses -- 15,000 -- (354,785)
Net interest income after provision/ (credit) for loan losses 1,278,246 1,137,645 2,488,353 2,633,067
Non-interest income
Service charges on deposit accounts 56,226 42,740 106,193 85,609
Secondary mortgage market fees 7,948 24,497 12,949 57,926
Income on other real estate owned 59,322 42,429 114,298 85,680
Gain on sale of investment securities 412,364 -- 458,709 --
Other 149 174 416 401
Total non-interest income 536,009 109,840 692,566 229,616
Non-interest expense
Salaries and employee benefits 561,635 439,647 1,057,021 856,742
Occupancy and equipment 193,763 175,039 391,443 322,639
Data processing 89,771 65,548 181,364 151,563
Professional services 339,277 116,057 522,202 262,839
Director fees 32,400 28,800 64,800 57,600
Marketing 3,607 3,299 4,035 8,024
FDIC insurance expense 24,553 18,282 41,054 51,041
Insurance premiums 17,649 17,792 34,008 35,250
Foreclosed asset expense 115,163 23,548 140,240 44,008
Other 78,154 74,020 153,576 173,888
Total non-interest expense 1,455,973 962,032 2,589,743 1,963,595
Income before income taxes 358,282 285,453 591,176 899,088
Provision (Benefit) for income taxes 142,000 50,800 234,100 (6,536,020)
Net income $ 216,282 $ 234,653 $ 357,076 $ 7,435,108
Basic and diluted earnings per share $ 0.09 $ 0.09 $ 0.14 $ 2.97
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 Telephone: (773) 382-2111 E-mail: lszwajkowski@royal-bank.usSource:Royal Financial, Inc.