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Royal Financial, Inc. Announces Second Quarter and Year to Date Earnings for Fiscal Year 2017

CHICAGO, Jan. 26, 2017 (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 2017.

For the second quarter ended December 31, 2016, the Company reported net income of $630,000, or $0.25 per common share, compared to $794,000 or $0.32 per common share, for the second quarter ended December 31, 2015. Net income for the six months ended December 31, 2016 was $894,000, or $0.36 per common share, compared $5.4 million, or $2.14 per common share, for the six months ended December 31, 2015. The decrease in net income for the six months ended December 31, 2016 was primarily due to the PNA Bank merger which was finalized on September 30, 2015 and generated a $5.0 million bargain purchase gain.

Comparison of Financial Condition at December 31, 2016 and June 30, 2016

The Company’s total assets increased $7.5 million, or 2.5%, to $311.6 million at December 31, 2016, from $304.0 million at June 30, 2016.

Cash and cash equivalents increased $475,000, or 7.6%, to $6.7 million at December 31, 2016 from $6.2 million at June 30, 2016.

Securities available for sale increased $5.3 million, or 7.9%, to $72.1 million at December 31, 2016 from $66.8 million at June 30, 2016. During the period, the Bank purchased $5.0 million of U.S. government agency securities in order to generate additional interest income.

Loans, net of allowance for loan losses, increased $2.6 million, or 1.3%, to $202.3 million at December 31, 2016 from $199.6 million at June 30, 2016. Growth in the portfolio was the result of funding additional commercial loans, which were collateralized by commercial real estate and multi-family properties.

Federal Home Loan Bank stock decreased $1.1 million, to $0.7 million at December 31, 2016 as the Company redeemed all excess stock not required for borrowing Federal Home Loan Bank advances.

Premises and equipment increased $200,000, or 1.6%, to $12.4 million at December 31, 2016 from $12.2 million at June 30, 2016.

Other real estate owned decreased to $8,000 at December 31, 2016 from $16,000 at June 30, 2016, as the Company sold $8,000 of single-family residential properties.

Total deposits increased $2.1 million, or 0.8%, to $263.6 million at December 31, 2016 from $261.5 million at June 30, 2016. Growth in deposits was the result of increases in NOW and Money Market accounts.

The line of credit decreased $50,000, from June 30, 2016, as the Company paid down a portion of the amount outstanding during the period.

Total Federal Home Loan Bank advances increased $6.8 million, to $7.3 million at December 31, 2016, from $500,000 at June 30, 2016. The additional advances helped to fund loan and securities growth.

Total stockholders’ equity decreased $261,000, to $31.8 million at December 31, 2016 from $32.1 million at June 30, 2016, which was primarily the result of a decrease in accumulated other comprehensive income of $1.2 million for the period, offset by an increase in net income of $894,000.

For the six months ended December 2016, the Bank paid cash dividends of $588,000.

The allowance for loan losses was $1.5 million, or 0.72% of gross loans at December 31, 2016, as compared to $1.4 million, or 0.70% of gross loans at June 30, 2016. Acquired loans included in the loan portfolio as of December 31, 2016 were recorded at the fair value and reflect a purchase discount of $1.6 million. The allowance for loan losses, excluding acquired loans, is 1.21% of gross loans. The Company believes that as of December 31, 2016, its allowance for loan losses was adequate to cover probable incurred losses. Nonperforming assets, including restructured loans, were $895,000, or 0.29% of gross loans, at December 31, 2016 compared to $751,000, or 0.25% of gross loans, 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 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, 2016, the Bank exceeded each of its capital requirements with ratios of 8.80%, 15.04%, 15.04% and 15.89%, respectively.

At December 31, 2016, the tangible book value per common share based on shares outstanding of 2,507,112, was $12.32 compared to the tangible book value per common share of $12.40 at June 30, 2016.

Comparison of Results of Operation for the Three and Six Months Ended December 31, 2016 and 2015

Net income for the three months ended December 31, 2016 was $630,000, a decrease in net income of $164,000 from the same period in 2015. The net income for the six months ended December 31, 2016 was $894,000 a decrease of $4.5 million, from the same period in 2015.

The decrease in net income for the three months ended December 31, 2016 resulted primarily from increases in non-interest expense of $734,000, additional provisions for income taxes of $50,000, a decrease in non-interest income of $133,000 and an increase in the provision for loan losses of $45,000, offset by an increase in net interest income of $797,000.

The decrease in net income for the six months ended December 31, 2016 was primarily related to a $5.1 million decrease in non-interest income, an increase in non-interest expense of $1.2 million, an increase of $205,000 in the provision for loan losses, an increase of $268,000 in the provision for income taxes, partially offset by an increase of $2.4 million in net interest income.

The decrease in non-interest income is primarily a result of a $5.0 million bargain purchase gain related to the PNA Bank merger recognized in September 2015, offset by a gain of $124,000 from the sale of the two NHS loan pools, a $417,000 reduction in net income on other real estate owned, and a $29,000 reduction in gain on sale of premises and equipment. These decreases in non-interest income were partially offset by an increase of $155,000 in service charges on deposit accounts.

For the six months ended December 31, 2016, the provision for loan losses was increased by $75,000 to address growth in the loan portfolio. For the same period ended December 31, 2015, a credit for loan losses of $130,000 was recorded, resulting from an increase in the allowance for loan losses related to recoveries of previously charged off loans. The increase of $268,000 in the provision for income taxes for the six months ended December 31, 2016 is primarily related to increased core earnings of the Bank. The bargain purchase gain recognized in 2015 was non-taxable.

The increase in non-interest expense of $1.2 million for the six months ended December 31, 2016 was primarily the result of having PNA Bank and Park Federal Savings Banks’ expenses incorporated into the consolidated results for a full period. The PNA Bank merger was effective September 2015 and the Park Federal Savings Bank merger was effective in April 2016. For the six months ended December 31, 2016, salaries and employee benefits increased $694,000, occupancy and equipment increased $477,000, data processing charges increased $219,000, and other expenses increased of $248,000 resulting in increased operating expense from five new banking locations. The increase in non-interest expense was offset by a decrease of $635,000 in professional services. This decrease is related the merger expenses that were incurred in 2015.

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

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 five branches in Chicagoland, one branch in Westmont, one branch in Niles, 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, 2016 and June 30, 2016
(Unaudited)
December 31, 2016 June 30, 2016
Assets
Cash and non-interest bearing balances in financial institutions$2,570,573 $2,880,807
Interest bearing balances in financial institutions 4,062,874 3,276,628
Federal funds sold 80,447 81,583
Total cash and cash equivalents 6,713,894 6,239,018
Investment Certificates of Deposit 2,591,000 2,591,000
Securities available for sale 72,114,877 66,810,148
Loans receivable, net of allowance for loan losses of
$1,462,365 at December 31, 2016, $1,402,993 at June 30, 2016 202,253,243 199,605,997
Federal Home Loan Bank stock, at cost 704,300 1,786,500
Premises & equipment, net 12,437,166 12,238,322
Accrued interest receivable 1,022,321 994,342
Other real estate owned 7,608 15,307
Deferred tax asset 12,351,263 12,206,928
Core deposit intangible 971,613 1,024,612
Other assets 404,586 536,240
Total assets$311,571,870 $304,048,414
Liabilities & Stockholders' Equity
Deposits$263,588,345 $261,506,502
Advances from borrowers for taxes and insurance 2,995,509 3,400,382
Federal Home Loan Bank advances 7,250,000 500,000
Line of Credit 5,200,000 5,250,000
Accrued interest payable and other liabilities 690,189 1,283,162
Total liabilities 279,724,043 271,940,046
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 23,927,998 23,896,672
Retained earnings 9,737,481 8,843,608
Treasury stock, 137,888 shares, at cost (1,012,924) (1,012,924)
Accumulated other comprehensive income (deficit) (831,177) 354,562
Total stockholders' equity 31,847,827 32,108,368
Total liabilities and stockholders' equity$311,571,870 $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.


Royal Financial, Inc. and Subsidiary
Consolidated Statements of Operations
Three and Six months ended December 31, 2016 and 2015
(Unaudited)
Three Months Ended
December 31,

Six Months Ended
December 31,

2016 2015 2016 2015
Interest income
Loans, including fees$2,714,420 $1,989,479 $5,457,900 $3,205,710
Securities 301,066 126,273 589,893 215,781
Federal funds sold and other 7,418 9,556 17,020 11,189
Total interest income 3,022,904 2,125,308 6,064,813 3,432,680
Interest expense
Deposits 208,541 130,889 403,863 218,067
Borrowings 53,606 30,820 109,453 32,136
Total interest expense 262,147 161,709 513,316 250,203
Net interest income 2,760,757 1,963,599 5,551,497 3,182,477
Provision/(Credit) for loan losses 45,000 - 75,000 (130,000)
Net interest income after provision/ (credit) for loan losses 2,715,757 1,963,599 5,476,497 3,312,477
Non-interest income
Service charges on deposit accounts 133,416 69,968 274,607 119,773
Secondary mortgage market fees 4,142 5,542 9,497 10,911
Income (loss) on other real estate owned, net 1,329 (36,955) (4,468) 412,230
Gain on acquisitions 160,146 392,859 123,532 4,971,697
Gain on sale of premises and equipment - - - 29,202
Gain on sale of securities available for sale - 455 - 455
Other 340 799 650 988
Total non-interest income 299,372 432,668 403,817 5,545,256
Non-interest expense
Salaries and employee benefits 956,288 671,956 2,045,552 1,351,971
Occupancy and equipment 432,158 238,187 844,652 368,105
Data processing 198,738 165,133 480,161 260,792
Professional services 110,873 54,068 249,656 885,134
Director fees 36,000 32,400 72,000 64,800
Marketing 6,884 16,431 52,798 20,192
FDIC insurance expense 15,077 25,711 40,316 44,311
Insurance premiums 37,890 18,020 73,752 30,710
Acquisition Expense 74,269 - 136,429 -
Other 257,440 170,028 524,627 276,827
Total non-interest expense 2,125,617 1,391,934 4,519,942 3,302,842
Income before income taxes 889,513 1,004,333 1,360,372 5,554,891
Provision for income taxes 260,000 210,000 466,500 199,000
Net income$629,513 $794,333 $893,872 $5,355,891
Basic and diluted earnings per share$0.25 $0.32 $0.36 $2.14
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.