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

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

Source:Royal Financial, Inc.