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Royal Financial, Inc. Announces Second Quarter and Year to Date Earnings for Fiscal Year 2016 and Annual Meeting Results

CHICAGO, Jan. 27, 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 second quarter end of fiscal year 2016.

For the second quarter ended December 31, 2015, the Company reported net income of $794,000, or $0.32 per common share, compared to $216,000, or $0.09 per common share, for the second quarter ended December 31, 2014. Net income for the six months ended December 31, 2015 was $5.4 million, or $2.14 per common share, compared $357,000, or $0.14 per common share, for the six months ended December 31, 2014. The increase in net income for the six months ended December 31, 2015 was primarily due to the PNA Bank merger which was finalized on September 30, 2015, in which $5.0 million of negative goodwill has been recognized.

Comparison of Financial Condition at December 31, 2015 and June 30, 2015

As a result of the merger of PNA Bank into Royal Savings Bank as of December 31, 2015, the Company’s total assets increased $85.9 million, or 72.5%, to $204.5 million at December 31, 2015, from $118.5 million at June 30, 2015.

Cash and cash equivalents increased $4.2 million, or 184.1%, to $6.5 million at December 31, 2015 from $2.3 million at June 30, 2015.

Securities available for sale increased $15.5 million, or 106.7%, to $30 million at December 31, 2015 from $14.5 million at June 30, 2015.

Loans, net of allowance, increased $62.1 million, or 70.5%, to $150.2 million at December 31, 2015 from $88.1 million at June 30, 2015.

Premises and equipment increased $1.9 million, or 40.4%, to $6.6 million at December 31, 2015 from $4.7 million at June 30, 2015. As a result of the merger, two additional banking centers, in Chicago and Niles, Illinois, with a fair value of $2.5 million, were integrated into the Bank’s branch network, partially offset by the sale of the Bank owned three-story office building located in Homewood, Illinois, with a book value of $792,000 which was included in the bulk asset sale of September 30, 2015. The Bank has retained leased space in the Homewood property for its lending center and disaster recovery site.

Land held for sale decreased $265,000, or 100%, from June 30, 2015, as one acre of land located in Frankfort, Illinois, owned by the Company, was included in the bulk asset sale of September 30, 2015.

Other real estate owned decreased $1.7 million, or 94.9%, to $93,500 at December 31, 2015 from $1.8 million at June 30, 2015, as three properties were sold in the period.

Total deposits increased $74 million, or 82.0%, to $164.3 million at December 31, 2015 from $90.3 million at June 30, 2015.

The line of credit increased $5.0 million, or 100%, from June 30, 2015, as the Company initiated two draws on its line of credit with The PrivateBank. The first draw of $3.5 million, initiated in the first quarter, of which $3 million was pushed down to the Bank to supplement capital as a cushion for commercial real estate exposure, as part of the merger with PNA Bank; $500,000 was allocated for merger expenses. The second draw of $2.0 million, initiated in the second quarter, was pushed down to the Bank for strategic planning purposes. The Company paid down the line $500,000 in the period.

Total stockholders’ equity increased $5.4 million, or 20.3%, to $31.8 million at December 31, 2015 from $26.5 million at June 30, 2015, which was primarily a result of the net income of $5.4 million earned for the period.

For the six months ended December 31, 2015, the Bank paid cash dividends to the Company of $495,000.

The allowance for loan losses was $1.4 million, or 0.92% of total loans, at December 31, 2015, as compared to $1.4 million, or 1.60% of total loans, at June 30, 2015. The acquired loans included in the loan portfolio as of December 31, 2015 were recorded at the fair value, and accordingly have a satisfactory rating. The allowance for loan losses, excluding the newly acquired loans, is at 1.39%. The Company believes, as of December 31, 2015, its allowance for loan losses was adequate to cover probable incurred losses. Nonperforming assets, including restructured loans, were $983,000, or 0.49%, at December 31, 2015 compared to $2.9 million, or 2.46%, at June 30, 2015.

The Bank is required to maintain regulatory capital sufficient to meet the Tier 1 capital leverage ratio, and the risk-based ratios for Common Equity Tier 1 capital, Tier 1 capital and Total capital of at least 4.0%, 4.5%, 6.0% and 8.0%, respectively. At December 31, 2015, the Bank exceeded each of its capital requirements with ratios of 15.35%, 24.78%, 24.78% and 25.91%, respectively.

At December 31, 2015, the tangible book value per common share, shares outstanding 2,507,112, was $12.57 compared to the tangible book value per common share, shares outstanding 2,507,112, was $10.55 at June 30, 2015.

Comparison of Results of Operation for the Three and Six Months Ended December 31, 2015 and 2014

The net income for the three months ended December 31, 2015 was $794,000, an increase of net income of $578,000 from the same period in 2014. The net income for the six months ended December 31, 2015 was $5.4 million, an increase of $5.0 million, from the same period in 2014.

The increase in net income for the three months ended December 31, 2015 resulted primarily from an increase in net interest income of $685,000 and a decrease in non-interest expense of $44,000, partially offset by a decrease in non-interest income of $83,000 and an increase in provision for taxes of $68,000.

The increase in net income for the six months ended December 31, 2015 was primarily related to a $4.4 million increase in non-interest income, an increase of $694,000 in net interest income, an increase of $130,000 in the credit for loan losses, a decrease of $35,000 in provision for income taxes, partially offset by an increase in non-interest expense of $268,000. The increase in non-interest income is primarily a result of the recognition of negative goodwill of $5.0 million related to the bank merger, partially offset by a decrease of $458,000 in the gain on sale of investment securities and a decrease of $147,000 in income on other real estate owned, related to the loss of rental income, a direct result of the sale of the office building in Homewood, Illinois and a bank branch building in Chicago, Illinois, both owned by the Bank. A credit for loan losses of $130,000 was recorded in the first three months of the period, which was partially related to recoveries of previously charged off bad debt, The decrease of $35,000 in the provision for income taxes was primarily related to prior period tax adjustments. The increase in non-interest expense of $268,000 was primarily related to the increase of $363,000 in professional services, in which the increase was primarily related to merger and acquisition costs incurred in the first three months of the period, an increase of $295,000 in salaries and employee benefits, a result of increasing the bank staff due to the bank merger, partially offset by a decrease of $585,000 in foreclosed asset expense, primarily due to the recognition of the gain of $229,000 on the sale of other real estate owned property included in the bulk asset sale of September 30, 2015 and the reimbursement of expenses related to those properties, which per the purchase agreement was retroactive to May 1, 2015.

The complete audited consolidated financial statements for 2015 and 2014 are available at www.royalbankweb.com

Submission of Matters to a Vote of Security Holders

At the Company’s Annual Meeting of Stockholders held on January 26, 2016, the following matters were submitted to and approved by a vote of stockholders:

1) The election of two Class II directors for a three-year term expiring at the Annual Meeting of Stockholders to be held in 2018:

Directors Votes For Votes Withheld
James A. Fitch, Jr. 1,397,800 5,200
Roger L. Hupe 1,375,000 28,000

The following directors continue to serve after the Annual Meeting:

Continuing Director Term Expires
John T. Dempsey 2016
Leonard Szwajkowski 2016
C. Michael McLaren 2017
Phillip J. Timyan 2017

2) Ratification of the appointment of Crowe Horwath LLP as the Company’s independent accountants for the fiscal year ending June 30, 2016:

Total votes for 1,403,000
Total votes against 0
Total votes abstaining 0

About Royal Financial, Inc.
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 four 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
Consolidated Statements of Financial Condition
December 31, 2015 and June 30, 2015
(Unaudited)
December 31, 2015 June 30, 2015
Assets
Cash and non-interest bearing balances in financial institutions$ 1,307,814 $ 928,925
Interest bearing balances in financial institutions 5,061,098 1,311,552
Federal funds sold 129,358 46,624
Total cash and cash equivalents 6,498,270 2,287,101
Securities available for sale 30,047,856 14,533,805
Loans receivable, net of allowance for loan losses of $1,394,257 at December 31, 2015, $1,431,680 at June 30, 2015 150,201,951 88,074,812
Federal Home Loan Bank stock, at cost 1,441,000 415,500
Premises & equipment, net 6,550,624 4,665,200
Land held for sale - 265,000
Accrued interest receivable 633,040 370,314
Other real estate owned 93,500 1,829,000
Deferred tax asset 8,185,912 5,712,589
Core deposit intangible 295,644 -
Other assets 516,745 385,300
Total assets$ 204,464,542 $ 118,538,621
Liabilities & Stockholders' Equity
Deposits$ 164,294,878 $ 90,254,560
Advances from borrowers for taxes and insurance 2,578,624 1,118,905
Federal Home Loan Bank advances - -
PrivateBank line of credit 5,000,000 -
Accrued interest payable and other liabilities 773,375 709,876
Total liabilities 172,646,877 92,083,341
Stockholders' equity
Preferred stock $0.01 par value per share, authorized 1,000,000 shares, no issues are outstanding - -
Common stock, $0.01 par value per share, authorized 5,000,000 shares, 2,645,000 shares issued 26,450 26,450
Additional paid-in capital 23,865,346 23,834,020
Retained earnings 8,807,581 3,451,689
Treasury stock, 137,888 shares, at cost (1,012,924) (1,012,924)
Accumulated other comprehensive income 131,213 156,045
Total stockholders' equity 31,817,665 26,455,280
Total liabilities and stockholders' equity$ 204,464,542 $ 118,538,621
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, 2015 and 2014
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2015 2014 2015 2014
Interest income
Loans$ 1,989,479 $ 1,160,791 $ 3,205,710 $ 2,229,426
Securities 126,273 199,258 215,781 420,014
Federal funds sold and other 9,556 5,864 11,189 9,199
Total interest income 2,125,308 1,365,914 3,432,680 2,658,640
Interest expense
Deposits 130,889 78,079 218,067 150,336
Borrowings 30,820 9,588 32,136 19,951
Total interest expense 161,709 87,668 250,203 170,287
Net interest income 1,963,599 1,278,246 3,182,477 2,488,353
Provision/(Credit) for loan losses - - (130,000) -
Net interest income after provision/ (credit) for loan losses 1,963,599 1,278,246 3,312,477 2,488,353
Non-interest income
Service charges on deposit accounts 69,968 56,226 119,773 106,193
Secondary mortgage market fees 5,542 7,948 10,911 12,949
Income on other real estate owned (16,534) 59,322 (32,948) 114,298
Negative goodwill 392,859 - 4,971,697 -
Gain on sale of premises and equipment - - 29,202 -
Gain on sale of investment securities 455 412,364 455 458,709
Other 799 149 988 416
Total non-interest income 453,089 536,009 5,100,078 692,566
Non-interest expense
Salaries and employee benefits 671,956 561,635 1,351,971 1,057,021
Occupancy and equipment 238,187 193,763 368,105 391,443
Data processing 165,133 89,771 260,792 181,364
Professional services 54,068 339,277 885,134 522,202
Director fees 32,400 32,400 64,800 64,800
Marketing 16,431 3,607 20,192 4,035
FDIC insurance expense 25,711 24,553 44,311 41,054
Insurance premiums 18,020 17,649 30,710 34,008
Foreclosed asset expense 20,421 115,163 (445,178) 140,240
Other 170,028 78,154 276,827 153,576
Total non-interest expense 1,412,355 1,455,973 2,857,664 2,589,743
Income before income taxes 1,004,333 358,282 5,554,891 591,176
Provision (Benefit) for income taxes 210,000 142,000 199,000 234,100
Net income$ 794,333 $ 216,282 $ 5,355,891 $ 357,076
Basic and diluted earnings per share$ 0.32 $ 0.09 $ 2.14 $ 0.14
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

Source:Royal Financial, Inc.